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You will notice that the royalty rates increase on the average of 1 percent per incremental increase. For example, a lease averaging 50 barrels of oil per well per day pays a royalty of 12% percent whereas if the same well averaged 51 barrels of oil per well per day the next month the applicable royalty rate would be 13 percent and for 61 barrels daily average production the royalty rate would be 14 percent of the total production, etc. There is no deduction as in slidingscale royalty rates under the step-scale leases for royalty paid on lower brackets at a fixed rate. The aggregate lease production is subject to a fixed royalty determined by the total established daily average production.

The final computation of the amount of royalty due the United States is complicated. The oil and gas operating regulations, effective June 1, 1942, copy attached, explains under section 221.49, pages 12 and 13, some of the many factors that are considered. However, in general it may be said that all wells that produced an average of 15 days or more per month are combined in obtaining a daily well average and each such well is considered as producing each day of the applicable calendar month. For instance, if a lease contained four wells producing daily 300, 100, 50, and 30 barrels each for a 30-day month, the average production per day would be 120 barrels and the rate of applicable royalty would not be computed on each well's production but on the average production for the leasehold. The following table furnishes comparative information on the royalty applicable to the different daily rates of production for sliding-scale and step-scale rates:

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It may be noted that the step-scale royalty is in practically all instances less than the sliding-scale royalty applicable to certain types of leases issued prior to August 21, 1935.

Unit royalties.-Under unitization the Department has in certain instances made a concession in the royalty rate applicable to Federal lands to promote development and in the interest of conservation and increased ultimate recovery. The royalty rate may be reduced below 12% percent depending upon the average production per well of all wells subject to the unit agreement whether on Federal, State, or fee acreage. However, even without unitization all leases provide that when the lessee cannot successfully operate a lease at a profit the royalty rate may be reduced. Under departmental policy this is usually equal to 1 percent for each barrel per day per month produced from the lease. This feature of reducing royalty below 121⁄2 percent is not ordinarily found in leases applicable to State and fee acreage. Ordinarily, the royal rate applicable on Federal production in a unit is somewhat lower than if computed on a lease basis since the production for all wells subject to the unit is averaged in obtaining the daily production allocated to each well.

Sincerely yours,

OSCAR L. CHAPMAN, Under Secretary.

Mr. COVERT. At this point in the record I would like to present a letter of January 7, 1948, from Mr. Jerold E. Weil, secretary of the State bar of California, enclosing a resolution of the State bar of California, dated December 1947, and request that the letter and resolution be made a part of the record.

Senator MOORE. The letter and resolution will be made a part of the record.

(The letter and resolution referred to follow :)

JANUARY 7, 1948. To the Members of the Senate and House of Representatives of the Congress. GENTLEMEN: Enclosed please find copy of resolution expressing the views of the State bar of California favorable to tidelands legislation.

It is respectfully requested that this legislation have you favorable consideration.

Yours very truly,

JEROLD E. WEIL, Secretary.

RESOLUTION OF THE STATE BAR OF CALIFORNIA (DECEMBER 1947)

Whereas the decision of the United States Supreme Court in the case of United States v. California has the effect of depriving the State of California of lands and natural resources of enormous value within its constitutional boundaries, to wit, the lands and resources along its entire coast line within the 3-mile belt; and

Whereas California, since its admission to the Union, has exercised full powers of ownership and dominion over such lands and resources as a sovereign State, and the Federal Government, at all times prior to 1937, both by its courts, its executive departments, and its Congress, has recognized and acquiesced in California's ownership thereof; and

Whereas the Supreme Court of the United States in the past has rendered numerous decisions which indicate that the Court then believed that California was the owner of the soils and resources therein under all navigable waters within its constitutional boundaries, whether inland or not, and

Whereas in full reliance upon its own long-standing official claims of ownership and also in full reliance upon the recognition and acquiescence in such ownership by the Federal Government, and in reliance on the said decisions of the United States Supreme Court, California has granted large areas of said lands to its municipalities which, in turn, have leased or granted many parcels of such lands to their citizens who, in turn, have expended enormous sums of money in improvement thereof, and said municipalities and the State itself have also expended large sums of money in the improvement and development of said lands, all in reliance upon the recognition and acquiescence of the United States and the decisions of its courts; and

Whereas the recent decision of the United States Supreme Court in the case of United States v. California not only deprives California and its municipalities and citizens of their titles, as aforesaid, but it leaves the question of actual ownership of the soil of the 3-mile belt entirely undetermined, ignoring the settled principle of real-property law that all land within the boundaries of a State, title to which is not vested in any other owner, belongs absolutely to the State as sovereign; and

Whereas said decision has resulted in creating confusion and uncertainty as to the title of enormous areas of valuable filled lands which were formerly submerged, as well as lands now submerged, which have been granted or leased by the State; and

Whereas said decision of the Court is predicated on a theory heretofore unknown in American constitutional law and unsupported by any formed decision of any court: Namely, that in its exercise of its constitutional powers the United States may appropriate to its own use, without compensation, natural resources existing within land wholly within the boundaries of the State and not the property of the United States; and

Whereas this doctrine, if carried to its logical conclusion, might permit the Federal Government to appropriate, without compensation, minerals, forests, and other natural resources in State or private ownership anywhere which it deemed essential to the performance of its constitutional functions; and

Whereas the said decision of the Court specifically recognizes that the question of the ownership and disposition of said lands and resources is within the "congressional area of national power," and assumes that Congress will not "execute its powers in such a way as to bring about injustices to States, their

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subdivisions, or persons acting pursuant to their permission: Now, therefore, be it Resolved, That the State Bar of California urge upon the Congress the necessity of taking appropriate action (1) to vest in California and the other States full power to control the development and exploitation of all natural resources beneath all navigable waters within their respective boundaries in accordance with State law, and (2) to release to and confirm in California and every other State the sovereign right of such States to the ownership of all land and natural resources beneth all navigable waters within the boundaries of such States; be it further Resolved, That copies of this resolution be transmitted to each Member of the Senate and the House of Representatives of the United States.

Mr. COVERT. At this time I present a copy of a resolution of the house of delegates, Oklahoma Bar Association, concerning tidelands, and ask that it be made a part of the record.

Senator MOORE. It will be received and made a part of the record. (The resolution referred to is as follows:)

RESOLUTION OF THE OKLAHOMA BAR ASSOCIATION

Whereas the decision of the United States Supreme Court in the case of United States v. State of California relating to the marginal land in California has given the lawyers of this State considerable anxiety as to what claims the Federal Government might make with reference to the ownership of oil, gas, coal, and other minerals underlying the land and streams of water in this State: Now, therefore, be it

Resolved by the Oklahoma Bar Association in annual session assembled in Oklahoma City, Okla., October 31, 1947, That we memoralize our delegation in Congress to institute and support legislation by which the Federal Government disclaims any interest in the oil, gas, coal, and other mineral rights under all lands within this State other than lands owned by the said Government in fee; be it further

Resolved, That a copy of this resolution be sent to the office of the President of the United States and the two United States Senaors and eight Members of the House of Representatives of the Congress of the United States.

JOHN M. HOLLIMAN, Chairman. Unanimously approved by committee on resolutions and policy, and recommended for passage by house of delegates, Oklahoma Bar Association.

Mr. COVERT. At this time I present a letter of February 19, 1948, to the chairman of this subcommittee from Mr. P. J. Hoffmaster, director, department of conservation, State of Michigan, together with the resolution referred to in said letter, and ask that both the letter and the resolution be made a part of the record.

Senator MOORE. It will be so received and make a part of the record. (The letter and resolution referred to is as follow:)

Hon. E. H. MOORE,

STATE OF MICHIGAN, DEPARTMENT OF CONSERVATION, Lansing, February 19, 1948.

Chairman, Senate Judiciary Subcommittee on Submerged Lands,

United States Senate, Washington, D. C.

DEAR SIR: I am enclosing herewith for consideration at the February 23 hearing, which is scheduled before your committee, a statement having to do with Michigan's interest in the submerged lands laying within the boundaries of this State. I plan to attend the hearing and therefore will be available to supply any further information which may be desired by your committee.

Very truly yours,

P. J. HOFFMASTER, Director.

STATEMENT OF DIRECTOR OF DEPARTMENT OF CONSERVATION, STATE OF MICHIGAN, BEFORE THE SENATE JUDICIARY COMMITTEE, FEBRUARY 23, 1948, ON SENATE JOINT RESOLUTION 14 AND S. 1988 RE SOVEREIGNTY OF SUBMERGED LANDS WITHIN THE BOUNDARIES OF THE STATES

My statement is made to indicate that Michigan has been exercising a proprietary interest in the bottom of the Great Lakes.

There are approximately 24,642,560 acres beneath the Great Lakes within the boundaries of the State of Michigan. Michigan's boundaries were established by article I, section 1 of the Michigan Constitution of 1908 and, except for clarifying explanations by statute and United States Supreme Court decision the boundaries remain as described in the constitution. This is treated more fully by statement of our attorney general's office.

There are approximately 764,160 acres beneath inland waters, bays, rivers, lakes, etc.

All leases for the taking of minerals from State lands are administered by the conservation department. In accordance with Act No. 17, public acts of 1921 revenues from submerged lands are credited to the general fund of the State.

Act No. 17, public acts of 1921 authorizes the leasing of State lands under the jurisdiction of the conservation department for mineral development and production at a prescribed bed rate of rental and royalty. Such lease rights are offered at public auction and sold to the person bidding the highest bonus price. Leases for the taking of marl, stone, rock, sand, gravel, earth, et cetera, from the bottoms of the Great Lakes are authorized under Act No. 326, public acts of 1913 as amended. Such leases are issued requiring the payment of a specified royalty to the State for the material taken. Such leases are issued upon receipt of application and approval by the conservation commission.

There are approximately 400 acres of land lying under the Great Lakes now under mineral or mining leases and applications for leases on additional lands of this character are now on file with the State.

While the present revenue to the State from leases for development of minerals and other valuable substances from submerged lands is not great, there is a very good prospect that the future will produce much more oil and gas from under submerged lands of the Great Lakes in certain areas.

The State geologist advises me as follows:

"Twenty years or more of exploration for oil and gas have shown that the oil fields of the State are located on strong northwest-southeast structural folds which we term 'anticlinal trends.' The pools are found where small cross structures or flexures buckle these larger 'ridges' into domes or other types of closed structures. We know from recent drilling in the western part of the State these folds extend to the water's edge, and there is no geological reason known why they cannot continue beneath the waters of the Great Lakes. In other words, while at the present time there is no production or known pools under Lake Michigan, there is certainly no assurance that oil does not lie there.

"In the Essexville field, located a few miles east of Bay City and directly on the shore of Saginaw Bay, oil is being produced from wells located almost at the water's edge, and since the area of drainage of each well is an approximate circle, it must be concluded that oil from beneath the waters of Saginaw Bay is finding its way to these wells drilled upon the shore. This fact was recognized, since the State of Michigan entered into pool agreements, propertywise, with other land owners to form drilling blocks for the development of this part of the field. The State of course receives royalties from these wells based upon its acreage holdings, compared to those of other land owners in the pooled development tracts.

"In the Detroit area as well as in the vicinity of Manistee there are wells producing strong brines from rock formations at considerable depth. We know that these formations extend beneath the waters of Lake Michigan, Lake Erie, and the Detroit River, and that the brine flowing through them has been at least in part at one time beneath these waters. We have, however, no information as to the value of these brines.

"In the Saginaw Bay region there are at least two well defined structures which cross the bay, and there is no reason to believe that oil cannot or will not exist along them."

For many years the State has managed these submerged lands under existing legal authority. Administrative policies and organization on a State level has effected a sound, efficient and prudent management program. It is believed that

the continuance of ownership and jurisdiction by the State is well justified solely from the standpoint of good governmental administration, not to mention the legal and equitable questions involved.

Therefore, in view of the present and potential values of the natural resources in submerged lands of the Great Lakes it is important and proper that the rights therein of the State and parties lawfully entitled thereto be preserved by appropriate legislation. In my opinion Senate bill 1988 accomplishes this result and should become law.

FEBRUARY 18, 1948.

P. J. HOFFMASTER, Director, Department of Conservation.

Mr. COVERT. At this time I present a letter of February 16, 1948, addressed to the chairman of this subcommittee from Mr. Gilbert M. Denman, president, State Board of Education of Texas, together with a copy of the resolution which accompanied it and which is referred to in said letter, and ask that the letter and the resolution be made a part of the record of this hearing.

Senator MOORE. The letter and resolution wil be made a part of the record.

(The letter and resolution referred to are as follows:)

STATE BOARD OF EDUCATION OF TEXAS,
Austin, Tex., February 16, 1948.

Hon. E. H. MOORE,

Senate Judiciary Committee,

Senate Office Building, Washington, D. C.

DEAR SIR: Enclosed is a copy of resolution of the State board of education, urging your support of bill S. 1988. If the Supreme Court of the United States rendered an opinion that title to the land in all the large cities of Texas belongs to the United States, there would doubtless be mass meetings of indignation throughout Texas. The opinion in the Tidelands case involves a greater financial loss to Texas and from a legal standpoint is just as shocking to all those who understand legal titles and vested rights. The people of Texas are beginning to fully realize the utter injustice of this decision, the magnitude of their financial loss, and the sinister creeping policy established by this decision of Federal domination over States in disregard of long-established and recognized States' rights. As you know, the tidelands of Texas rightfully belong to our public free schools, so the decision is a crushing blow to education in Texas. We therefore urge you to do all in your power to secure the passage of this bill.

Respectfully yours,

GILBERT M. DENMAN, President.

RESOLUTION OF THE STATE BOARD OF EDUCATION OF THE STATE OF TEXAS

Resolved by the State Board of Education of the State of Teras, ThatWhereas there is now pending in the Congress of the United States a bill, S. 1988, to confirm and establish the titles of the States to lands and resources in and beneath navigable waters within State boundaries and to provide for the use and control of said lands and resources; and

Whereas said bill, if enacted into law, will confirm in this State and the publicschool system of Texas the right to the income from the lands beneath navigable waters, as in such bill defined, within the State of Texas; and

Whereas such income has been of paramount importance to the welfare of the educational system of Texas, and education in Texas will seriously be jeopardized if the State should be divested of such income as held by a recent decision of the Supreme Court affecting such lands; and

Whereas it is to the national interest as well as the interest of each State that the revenue for education in the States be not divested and impaired; and Whereas such bill should be enacted into law: Now, therefore, be it

Resolved, That the State Board of Education of Texas exhort the Members of the Senate and House of Representatives of the United States of America in Congress and the Committees of the Judiciary, and other committees to which said bill may be referred, that said bill S. 1988, in all its contents, do pass and becomes a law.

GILBERT M. DENMAN, President.

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