correctly determine the value of this property. But we know that it is just common knowledge that this property has tremendous value.

I might give you a little illustration or some background. My home county, I noticed a few days ago, is estimated to be one of the poorest counties in the Commonwealth of Kentucky. If the local citizens were the owners of that mineral, we would be one of the wealthiest counties in the Commonwealth of Kentucky. But unfortunately our forefathers in the eighties, nineties, maybe 1901, 1902, and 1903-and I have done considerable abstracting so I know something about the titles-sold a considerable portion of those mineral rights for 5 and 10 and 25 cents an acre, and now those mineral rights are owned by people in Chicago, Philadelphia, Pittsburgh, Cleveland, and of course they are being developed. But the majority of those mineral rights are outlying and will not be developed from the standpoint of the good coal existing there maybe for 50 or 100 years. Outlying minerals, of course, the court of appeals has held, do not have too much value. So we are caught in that predicament. In many of these same sales the oil and gas went along with the mineral, I might use that word, but the courts have held that mineral includes oil and gas.

I know we have many wells throughout eastern Kentucky and, in my home county, 20 years ago in one section of Knott County you could buy oil and gas for practically nothing. We thought it would never be any good for development from the standpoint of oil and gas, but it has turned out to be excellent territory for oil and gas.

At that time they had been drilling in eastern Kentucky, I would say, for 10 or 15 years or longer, and it is just one of these things that you cannot tell about. It is going to take time to explore these submerged lands, to see just what they prove out to be. But we know they will prove out to be very valuable.

Miss THOMPSON. I have some more questions, but I will defer to Mr. Wilson, because I know he has some things on his mind.

Mr. WILSON. Did you indicate that Kentucky should reserve all the mineral rights to all the land it originally owned and the private owners even under private property should not drill or lease oil?

Mr. PERKINS. I do not advocate any such thing, and did not make any such statement.

Mr. WILSON. I took from what you said that if the State had held onto the oil and mineral rights

Mr. PERKINS. The State did not own the oil and gas rights that I mentioned. I mentioned the properties that belonged to the citizens in my county in the 1880's, 1890's, and the early 1900's.

Mr. WILSON. Private developers developed that territory or nobody would yet know there was any oil there?

Mr. PERKINS. Private developers did develop that territory.

Mr. WILSON. You made the statement a moment ago that we give this territory all away to the States, and then buy the oil back. Would it not be necessary if the Federal Government gets all this that they lease it and give seven-eighths of it to the developer? Is that not the common form for leases?

Mr. PERKINS. I have had a little experience with oil and gas, in fact I own a very little interest in oil and gas development myself, and it has been the common practice and the general rule that the parties that drill the well on a lease that belongs to another party, that the lessor

will receive one-eighth of the oil, or a certain stimulated amount estimated to be equivalent to one-eighth of the oil.

Mr. WILSON. Which is the royalty.

Mr. PERKINS. Yes.

Mr. WILSON. And the lease carries with it seven-eighths of the oil. Therefore, if the Federal Government owned it all and they leased it to operators to drill, they would have to buy the oil back.

Mr. PERKINS. No.

Mr. WILSON. Why would they not?

Mr. PERKINS. I disagree with your interpretation of that. The bill that I introduced here provides that to any person who leases we pay a certain percent and the leases would be let out on competitive bidding.

Mr. WILSON. Very true. The same thing is done in Texas.

Mr. PERKINS. But we set the limit which shall not exceed 12 percent. Mr. WILSON. But in any case, the operator or developer gets seveneighths of the oil that comes out of the ground.

Mr. PERKINS. That is true as a general rule in private drilling. In these instances in many cases, I feel that the Government will be able to get one-half or more in proven territory, where the drilling cost will be light on account of shallow depth.

Mr. WILSON. Private drillers would have to do this. You do not advocate that the Government go into the drilling business?

Mr. PERKINS. I do not. I see nothing wrong with the Government or the Navy exploring the territory with Government money.

Mr. WILSON. Private drillers would have to drill it and they would get 7 barrels out of 8. If the Federal Government backed a tanker up there and took it and sold it on the open market, the Federal Government would have to bid against the other bidders for the oil. Mr. PERKINS. Not necessarily.

Mr. WILSON. If they took one-eighth of the revenue-that is all they would be entitled to-that would be just 1 barrel in 8.

Mr. PERKINS. Of course, if you just take it on a one-eighth basis, in my judgment that would still run into the billions of dollars for income for the Federal Government.

Mr. WILSON. Of course, there has been a lot of guessing about what this territory would produce. You know that the companies who have had leases from the various States have spent some $275 million drilling now; do you not?

Mr. PERKINS. It has been a considerable sum.

Mr. WILSON. And the States have gotten but a little over $100 million back. That is less than the money spent.

Mr. PERKINS. I do not think that is a fair statement.

Mr. WILSON. I will ask you if you think this is fair. The record shows that Texas has gotten $8 million over a period of 20 years. That is bonuses, leases, rentals, everything that is paid into the school fund. The Texas school fund gets all the money that comes from the offshore leasing in Texas. Now, they have gotten $8 million. Let us divide that among 48 States, and we get about $160,000 per State of that $8 million if Texas were required to account for the $8 million they have got. That is $160,000 for each State in the Union. That would not contribute materially to building new schools and hiring new schoolteachers.

Mr. PERKINS. Here is the reason I think your statement is not correct. During the past 40 or 50 years Texas has been opening up new fields within its own inland borders on dry land.

Mr. WILSON. Constantly.

Mr. PERKINS. All the way along, constantly and continuously, and throughout Texas today new fields are just now proving themselves on dry land, and very little exploration has been made of this offshore oil off the coast of Texas because it has not been necessary. The people who are in the drilling business, as long as they are getting along well and making ample money and have access to proven territory, why should they go offshore and explore? This is something new. in Texas, and this has only been explored to a limited degree. For that reason, I say that your estimate would not be in accordance with the proven facts.

Mr. WILSON. I disagree, of course. Now, you believe that the Federal Government ought to keep its treaties, do you not?

Mr. PERKINS. I certainly do.

Mr. WILSON. When they are written in plain, unadulterated language. Have you read the annexation resolution by the Congress when Texas was admitted into the Union?

Mr. PERKINS. I have read the Supreme Court decision thoroughly, and I think that is the best evidence. I want to answer you on that,

too.

Mr. WILSON. I want you to answer me if you can.

Mr. PERKINS. The case is reported in 339 United States Reports, and on page 714 the Texas case, the joint resolution annexing Texas provided in part:

Said State when admitted into the Union after ceding to the United State all public edifices, fortifications, parks, ports and harbors, navy and navy yards, docks, magazines, arms, armaments, and all other property and means pertaining to the public defense belonging to said Republic of Texas.

Mr. WILSON. Now read the rest of it.

Mr. PERKINS. All right. The latter part where it is public lands. But I cannot think of anything more appropriate to maintaining the public defense than these submerged oil lands, and that is what the court holds.

Mr. WILSON. They became very appropriate when they became worth a lot of money. Now, read a little further after where you read. Mr. PERKINS. All right, and then we will discuss the decision. Mr. WILSON. All right.

Mr. PERKINS (reading):

Then it is agreed that Texas shall retain all the public lands, debts, taxes and dues of every kind which may belong or be due and owing said Republic, and shall also retain all the vacant and unappropriated lands lying within its limits to be applied to the payment of the debts and liabilities of said Republic of Texas and the residue of said lands after discharging said debts and liabilities to be disposed of as said State may direct. But in no event are said debts and liabilities to become a charge upon the Government of the United States.

Mr. WILSON. At that time nobody knew there was any oil out there. Therefore, they were willing for Texas to have it providing they would pay their $10,000,000 in debts.

Mr. PERKINS. No.

Mr. WILSON. After that time they found there might be a little oil back there and a lot of people want to go back on it.

Mr. PERKINS. I agree with with the Supreme Court in striking your argument down.

Mr. WILSON. I do not think they ever touched top, side, or bottom of the facts or the law myself.

Mr. PERKINS. I disagree with you and I think the opinion is perfectly clear on every point you have raised.

Mr. WILSON. Do you not think, as a lawyer, that specific language in a contract should supersede and take the place of the general term of equal footing?

Mr. PERKINS. I believe in all countries keeping their treaties and all governments keeping their contracts, but in this instance, Texas was admitted to the Union on an equal footing with all the other States, and as a result the Federal Government assumed the national responsibilities, the offshore territories became the national concern of the Federal Government after Texas was admitted to the Union. We were interested in maintaining the peace of the Nation, maintaining the peace for Texas, and no one else can do these things, other than the Government of the United States. This submerged oil, and the oil that has recently become an issue as a result of the development of the submerged lands clearly pertains to the public defense of this country. Mr. WILSON. Of course, when you talk about the public defense of this country, you are talking about the water surface, and the right to control navigation and the right to move its Navy or anything else it wanted to do for the purpose of protecting the Nation. That has nothing to do with the floor of the ocean, does it?

Mr. PERKINS. The Federal Government only claims the right to be sovereign in this field from the standpoint of national defense, national concern, and any inconsistent acts with this sovereignty have been struck down by the Supreme Court of the United States.

Mr. WILSON. All these bills, Mr. Perkins, I might say-I think I am right about this, I have not read them all, but I think most are patterned after the Holland bill, which is titles 1 and 2 of the original Walter bill-protect the Federal Government in the movement of its Navy and the regulation of commerce and navigation. There is no question about that. Title is settled in the Government to the water surface rights to that extent, or as far as they want to go. Could not the Federal Government, if these lands were developed by private contractors, which they would have to be developed by the Federal Government the same way-probably the same leaser, there would be no difference in the leases because the leases are confirmed, and if they sell new leases the same companies would probably buy them and probably pay less for them on the Federal Government level than to the States under the Federal Government Leasing Act of 50 cents

an acre.

Mr. PERKINS. I think better concessions will be obtained from the States, and I think that is the main reason for this fight to be carried

on.

Mr. WILSON. You are wrong. Texas has gotten as high as $15 or $20 an acre, and in some instances, even more, whereas the Federal Leasing Act provides that 50 cents an acre is the price. And any man that puts up the 50 cents an acre gets the lease if he comes first.

Mr. PERKINS. I think we have this precedent where oil and gas has been developed on the public lands throughout the Nation. I have

not run this down, but I heard this statement made on the floor or read it somewhere, that we have as a matter of policy given the States 372 percent. I think that is on the inland lands.

Mr. WILSON. That is right.

Mr. PERKINS. Of course, that is where the precedent is set for the oil-for-education amendment introduced by Senator Hill. I imagine that is the reason he mentions 372 percent of the marginal-sea royalties that the States would get.

Mr. WILSON. We have no general Federal aid in this country. As you stated a moment ago, it is for some particular purpose. Most of it is because of the fact that the Federal Government for defense, either war plants or Army installations where they have loaded school districts down with thousands of pupils, has gone in and aided those districts in trying to meet that bad situation.

Mr. PERKINS. That is Federal aid.

Mr. WILSON. That is not general Federal aid, is it?

Mr. PERKINS. That is Federal aid. The only difference is that we have the same conditions existing in the poorer States. For instance, take several of the counties in my district. I want to cite my home county. The mineral and the profits from much of the mineral, the income taxes are paid in other States from this coal, Illinois, Ohio, and so forth, and the Federal tax base has been broadened to such an extent that the States do not have the tax base, and cannot afford to go higher, and in view of the fact that these inequalities exist, we should have some equalizing agent, and the only party that can do that is the Federal Government.

Mr. WILSON. Do you not think right at that point a better plan would be to retract the base of the Federal tax and let the States preempt some fields of taxation now used by the Federal Government?

Mr. PERKINS. If we had access to the tax base, then you would have something there. I would agree to that.

Mr. WILSON. I say that is what is causing the lack of funds in the States.

Mr. PERKINS. I will agree with that. But I want to make this point clear. Conceding the fact that it is the primary responsibility of the States and the local governments to maintain satisfactory elementary and secondary schools for the children, nevertheless we find today conditions do not exist the same as they did in the days of our forefathers. We have lost the tax base that we have just been speaking about and today we are all more or less one community. Conditions have changed entirely along that line.

Mr. WILSON. I am in favor of retracting the Federal tax base, and withdrawing it to a reasonable extent so that the States and localities can increase theirs.

Mr. PERKINS. I want to make my position clear. I am in favor of Federal aid to education for elementary and secondary schools as conditions exist today, and I think we are derelict in our duty when we do not do something about the inequities that exist.

Mr. WILSON. I may say that I am against general Federal aid, first, last, and all the time to schools except where conditions are created by the Federal Government where I think they have responsibilities to aid in those particular cases where reasons can be shown for them. Miss THOMPSON. I agree with you, Mr. Wilson.