FOR THE CONSERVATION, CARE, CUSTODY, PROTECTION, AND OPERATION OF THE NAVAL PETROLEUM AND OIL-SHALE RESERVES, AND FOR OTHER PURPOSES

JUNE 30, 1930.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. HALE, from the Committee on Naval Affairs, submitted the

following

REPORT

[To accompany H. R. 13158]

The Committee on Naval Affairs of the House of Representatives, to whom was referred the bill (H. R. 13158) for the conservation, care, custody, protection, and operation of the naval petroleum and oil-shale reserves, and for other purposes, having had the same under consideration, report favorably thereon without amendment, and with the recommendation that the bill do pass.

In accordance with Rule XIII, section 2a, of the Rules of the House of Representatives, the following report is submitted to accompany the bill "For the conservation, care, custody, protection, and operation of the naval petroleum reserves, and for other purposes."

That part of the report in ordinary type is existing law; that part of the report in italics is added to existing law by this bill:

That the Secretary of the Navy is directed to take possession of all properties within the naval petroleum reserves as are or may become subject to the control and use by the United States, for naval purposes, and on which there are no pending claims or applications for permits or leases under the provisions of an act of Congress approved February 25, 1920, entitled "An act to provide for the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain," or pending application for United States patents under any law; to conserve, develop, use, and operate the same in his discretion, directly, or by contract, lease, or otherwise, and to use, store, exchange, or sell the oil and gas products thereof and those from all royalty oil from lands in the naval reserves for the benefit of the United States; and the Secretary of the Navy is authorized to contract with owners and lessees of land within or adjoining such reserves for conservation in the ground of oil and gas and/or for compensation for estimated drainage in lieu of drilling or operating offset wells, and to exchange Government land in naval petroleum reserve numbered 1 and/or the right to royalty production from any of the naval petroleum reserves for privately owned land or leases within naval petroleum reserve numbered 1 in order to consolidate and protect the oil lands owned by the Government: Provided, That no lease of any

portion of the naval petroleum reserves nor any contract alienating the use, control, or possession thereof from the United States Government nor any contract for conservation and/or for compensation for estimated drainage, nor any exchange of land or the right to royalty production herein authorized shall be made except with the approval of the President; and no agreement covering any exchange of land or the right to royalty production for undrilled land shall be made until after suitable test wells have been drilled; and the Secretary of the Navy shall report annually to the Congress all agreements entered into under this authority: Provided further, That should it be impossible to make exchanges of land or agreements for the conservation of naval petroleum with the private owners of land or leases within naval petroleum reserve numbered 1, as provided for in this act, the Secretary of the Navy, with the approval of the President, is authorized to acquire such privately owned lands or leases in naval petroleum reserve numbered 1 by purchase or condemnation: And provided further, That any provisions of the act of June 4, 1920, and of this act which refer to naval petroleum reserves shall apply, where applicable, with equal force and effect to any oil shale or other naval fuel reserves: And provided further, That citizens of another country, or corporations controlled by citizens of another country, the laws, customs, or regulations of which deny the privilege of leasing their public lands to citizens or corporations of this country, shall not by contract made hereafter, or by stock ownership, holding, or control, acquire or own any interest in or right to any benefit of any lease of land in the naval petroleum or other naval fuel reserves heretofore or hereafter made under the provisions of the Mineral Leasing act of February 25, 1920, or of the naval appropriation act of June 4, 1920, relating to the naval petroleum reserves, or of this act, under penalty of the immediate cancellation of such lease by the Secretary of the Navy.

The provisions of this bill are considered essential in order to carry out the policy of the United States as adopted by Congress to maintain an adequate naval petroleum reserve in the ground, and to safeguard the Government's interests in all the naval fuel reserves. The bill is strongly indorsed by the Secretary of the Navy.

The various clauses of this bill are in accord with recommendations which have been made by the President's Naval Oil Reserve Commission.

At the present time the Government has four naval petroleum reserves and three naval oil-shale reserves.

Naval petroleum reserves Nos. 1 and 2 are in Kern County, Calif., reserve No. 3 is in Natrona County, Wyo.; and reserve No. 4 is in Alaska. Naval oil shale reserves Nos. 1 and 3 are in Garfield County, Colo., and naval oil-shale reserve No. 2 is in Uintah and Carbon Counties, Utah.

Naval petroleum reserve No. 1, known as the Elk Hills reserve, is considered to be by far the most valuable of the naval petroleum reserves, due to the great amount of oil which the geologists estimate it contains, and to the fact that the Government now holds 30,996 acres of the 38,068 total acreage in the reserve. The geologists estimate that the original recoverable content of petroleum in this reserve was 600,000,000 barrels, of which about 6 per cent has been taken out to date.

When the areas included within naval petroleum reserves Nos. 1 and 2 were withdrawn from public entry on September 27, 1909, and created naval reserves by Executive orders of September 2, 1912, and December 13, 1912, respectively, private individuals or companies having valid leases or patents to land retained title to their land, even though their holdings were within the outside limits of the naval petroleum reserves.

In naval petroleum reserve No. 1 at the present time there are 5,982 acres of land patented by private interests and 1,090 acres leased by the Government to private interests.

The Standard Oil Co. of California possesses 5,262 acres of patented land in reserve No. 1, including sections 36, 31, 29, and 33 near the center of the reserve.

If the privately held land near the center of the reserve could be obtained by the Government in exchange for land in the eastern end of the reserve, or for other valuable considerations, such as leases of land in the eastern end of reserve No. 1, or the right to royalty production from any of the naval petroleum reserves, the Government holdings would be consolidated and only at the eastern end would it be necessary to attempt to stop or minimize the loss by drainage due to operations of adjacent landowners or leaseholders.

This bill authorizes the Secretary of the Navy to make such exchanges, subject to the safeguarding provisos that the approval of the President must be had before any agreements are made, and that suitable test wells be drilled to establish the relative values of the lands or leases involved.

The royalty production mentioned is the income received from the leases issued by the Government in naval petroleum reserves Nos.

1 and 2.

Reserve No. 2 was so checkerboarded by privately owned land that practically all of the Government holdings were leased to prevent this land being drained of oil by adjoining private operators without compensation to the Government.

There are 30,181 acres in this reserve, of which 19,620 acres are patented to private companies, 9,991 acres are leased by the Government and 510 acres of unproductive land are held by the Government.

It is considered that the provisions of this bill will permit the Secretary of the Navy to take any steps necessary to conserve the oil in the ground within the naval petroleum reserves.

The protective provisos of the bill insure that the interests of the Government will be properly safeguarded. These require:

(a) That the approval of the President be obtained before any lease or contract be entered into under the provisions of this bill.

(b) That suitable test wells be drilled to determine the relative values before any agreement be made covering any exchange of land or right to royalty production.

(c) That the Secretary of the Navy report annually to the Congress all agreements entered into under this authority.

Another proviso extends the provisions of this act and of the act of June 4, 1920, referring to naval petroleum reserves which are applicable to the naval oil shale or other naval fuel reserves. At present, by Executive order, these oil-shale reserves are "held for the exclusive use or benefit of the United States Navy." The provisions and limitations covered by this bill will define more clearly the authority and duties of the Secretary of the Navy with regard to these reserves, and will place all naval fuel reserves in the same

status.

The so-called leasing act of February 25, 1920 (41 Stat. 437) limits leasing of public lands to citizens of such countries as permit similar or like privileges to citizens of the United States. The first paragraph of the above-mentioned leasing act excludes from its provisions various lands such as national parks, etc., and land withdrawn or reserved for military or naval uses or purposes. A proviso of this act will make these protective limitations applicable to the naval fuel reserves.

At present American interests are barred from obtaining petroleum concessions in Japan, Italy, Persia, British India, British Borneo (Sarawak), and in France.

The committee has had legislation for the conservation, care, custody, protection, and operation of the naval fuel reserves under consideration for many months, and it is believed that this measure is essential to carry out the policy of the United States to maintain an adequate naval petroleum reserve in the ground.

The following initiatory letters from the Secretary and Acting Secretary of the Navy, respectively, addressed to the chairman of the Committee on Naval Affairs of the House of Representatives, are hereby made a part of this report.

NAVY DEPARTMENT, Washington, December 18, 1929.

The CHAIRMAN COMMITTEE ON NAVAL AFFAIRS,

House of Representatives, Washington, D. C.

MY DEAR MR. CHAIRMAN: There is inclosed a copy of a letter, together with a copy of a proposed bill for the conservation, care, custody, protection, and operation of the naval petroleum and oil-shale reserves, and for other purposes, this day forwarded to the Speaker of the House of Representatives.

Sincerely yours,

C. F. ADAMS, Secretary of the Navy.

DECEMBER 18, 1929.

The SPEAKER OF THE HOUSE OF REPRESENTATIVES. MY DEAR MR. SPEAKER: I have the honor to transmit herewith the draft of a proposed bill "For the conservation, care, custody, protection, and operation of the naval petroleum and oil-shale reserves, and for other purposes." This draft is submitted in place of that transmitted to the Speaker under date of February 28, 1928, and introduced in the Seventieth Congress as H. R. 11617. Hearings were held on that measure by the Committee on Naval Affairs of the House. As a result of these hearings an agreement was reached by the subcommittee of the House Committee on Naval Affairs and the Navy Department on a substitute bill that was introduced by Congressman Hale in the second session of the Seventieth Congress on December 6, 1928, as H. R. 14933 and referred to the Committee on Naval Affairs. It is understood that the pressure of other legislation prevented consideration of this bill by that committee during the short session of Congress.

The need for the greatest practicable protection of naval petroleum reserve No. 1 in California from drainage makes it necessary and desirable that legislation be enacted for this purpose at as early a date as possible.

The draft of bill herewith is similar to H. R. 14933, above referred to with the following additions:

The present bill is drafted to cover not only the naval petroleum reserves but the naval oil-shale reserves and any other fuel reserves that may be established. There has also been included the provision recommended by the committee appointed by the Secretary of the Navy to consider the general subject and remedial legislation advisable to cover the disposition of petroleum from the naval petroleum reserves. This additional provision that aims to extend to naval fuel reserves the protection granted to public lands by the act of February 25, 1920 (41 Stat. 437-438, title 30, U. S. Code, sec. 181), reads as follows:

"Citizens of another country, or corporations controlled by citizens of another country, the laws, customs, or regulations of which deny the privilege of leasing their public lands to citizens or corporations of this country, shall not by contract made hereafter, or by stock ownership, holdings, or control, acquire or own any interest in or right to any benefit of any lease of land in the naval petroleum or other naval fuel reserves heretofore or hereafter made under the provisions of the mineral leasing act of February 25, 1920, or of the naval appropriation act of June 4, 1920, relating to the naval petroleum reserves, or of this act, under penalty of the immediate cancellation of such lease by the Secretary of thẹ Navy."