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men realized that the restriction put upon development, for instance, in California was rather a good thing: that they were expanding faster than consumption demanded.
Senator Walsh. It did really look to some time in the more or less remote future?
Doctor SMITH. It was believed by those studying the matter that there would be a time, in view of the rapid increase in use of oil by foreign navies and by our own Navy, when our commercial supply of oil would not be available for our own Navy, and it was thought it ought to be safeguarded. And that has been the view of the department as I have observed it ever since.
Senator Walsh. Did you ever hear of a change in the policy from that of conservation of oil in the ground to that of taking it out of the ground and storing it in tanks at the seaboard?
Doctor Smith. That matter was discussed from time to time. I remember that under Secretary Lane's administration it was felt we should know what we had in the reserves; in fact, the Navy Department, some of their representatives, felt that the best kind of reserve was the one that had been pretty thoroughly explored, which meant a reserve that had already been tapped. And that was the reason, I might say, for reserve No. 2. Reserve No. 1, Elk Hills, was not as optimistically regarded by some people employed by the Navy as it was by the Interior Department. And the statement made about it was that we did not know what was in that area, that it had not been thoroughly explored. We were quite confident that there was a great amount of oil there. It was on account of that criticism as I remember it that No. 2 reserve, that of Buena Vista Hills, was created, and that was pretty well explored and, I might add, is pretty well owned by other parties than the United States. It made a better showing of oil, but for that particular reason we thought it was a poorer reservoir of oil.
But there was that feeling I mentioned, more especially on the part of the Navy, perhaps, that there was need of exploring. Then No. 3 was withdrawn on the recommendation of the Geological Survey, because it was an untapped reservoir. But even then, as I believe, it was discussed with Secretary Lane, and later, possibly, with 'Secretary Payne, although I am not sure of that, and I think with Secretary Fall, and mention was made of the fact that we did not know whether there was oil in that reservoir or not. I do not know whether mention has been made in the record, as I have not read it, that in 1916, during the summer and fall, a program-I think possibly Doctor Bain has referred to this--a program for testing the
-a Teapot Dome was set up. In a word, it was that the Geological Survey should select the points for sinking one or more wells, and the wells should be put down under the supervision of the Bureau of Mines.
There were conferences on this subject with the Navy Department, and an allotment was made for the work. The subject was discussed during the summer and fall of 1916, and the point selected for drilling; and the question decided, for instance, whether to drill beyond the second Wall Creek sand down to the Dakota sand. I mention that as showing the amount of attention that was given to it.
There was a conference, however, late in the summer of representatives of the two bureaus of the Interior Department and repre
sentatives of the Navy, and I think some representatives of the Navy oil board, some scientists outside of the service; and there was a full discussion of this matter, and it was thought best to postpone that work of testing. Apparently the memoranda that are in the files of the Geological Survey are to the effect that there was so much question regarding the validity of certain claims on the Teapot structure that it was thought best, pending the determination of that by the Land Office, to postpone drilling. And then, also, there was pending the public-land legislation, and it was thought best to wait until the next year. There was money available at that time, and allotted, as I have said, but it was thought a similar appropriation might be secured later on for the purpose.
. Senator WALSH. That was for the purpose of drilling test wells to find out what was actually there.
Doctor SMITH. Whether there was anything in those underground tanks.
Senator Walsh. But not for the purpose of taking the oil out? Doctor Smith. Not for the purpose of taking the oil out; no.
Senator WALSH. That was the point to which I was trying to direct your attention--the development of the plan for taking the oil out and storing it in tanks at the seaboard rather than utilizing the ground itself as a reservoir.
Doctor Smith. That is a matter that really I think you would see by the division of the subject would come under the Bureau of Mines consideration of that plan. It was a matter the discussion of which I never had any part in, except in a very casual way on a few occasions when talking with Secretary Fall. I could not say that we had any conferences on the subject or anything more than casual references to it.
Senator Walsh. I want to direct your attention to naval reserve No. 3. It is frequently referred to as the Teapot Dome, Doctor Smith. Did it, as it was originally set apart, embrace anything more than the Teapot Dome?
Doctor Smith. I think the distinction should be sharply drawn whenever we mention that withdrawal, between the Teapot Reserve and the Teapot Dome oil structure. The reservation was intended, as all other reservations are intended, to be larger than the structure itself, and to later on cut down with the growth of information, because there is no intention to keep withdrawn or in reserve any land that is not valuable for that special purpose. In this case, however, the structure was believed to extend farther north than later it was found to extend. So that for two reasons, especially in the vicinity of the northern end of that reserve, the reserve was larger than the structure itself, for one thing as a matter of policy, and the other as a matter of ignorance.
Senator Walsh. Was it known at the time this was set apart as a naval reserve that the adjacent Salt Creek structure was being drilled and the oil extracted from it?
Doctor Smith. Oh, yes. The Salt Creek structure was considered in the first consideration of creating a reserve there, whether some of the Salt Creek structure might be included. But of course the objections to that were evident that so much of it had been taken up validly, and the Teapot Dome was considered as a separate entity and one that could be made into an ideal reserve, as we considered.
Senator Walsh. Was it anticipated at the time naval reserve No. 3 was set apart that it would be subject to drainage to any extent from the wells in the adjacent Salt Creek field?
Doctor SMITH. It was believed that it was not subject to such drainage, and that was the reason it was regarded as ideal. And I say ideal as contrasted, for instance, with the other two reserves that had been set apart in California. And that view had been taken for some time previously. The first work of the Geological Survey in that area, I believe, was in 1909; the first work being done by our geologist, Mr. Wegemann. And it was reported on the following year, I think, and the report was published perhaps in 1911. And then there was a subsequent report more in detail
. Senator Walsh. What part did you have in the work which led to the leasing of these reserves—reserve No. 3 to the Sinclair interests and reserve No. 1 to the Doheny interests?
Doctor SMITH. I had no part whatever in that.
Doctor SMITH. Why, the question of leasing any of these reserves I do not remember has been passed on by the Geological Survey. There was the geological question, as shown in your record, put up to the Survey regarding the possibility of drainage, and that was reported on.
Senator WALSH. That is the report made by Mr. Heald ?
Senator WALSH. That was the extent of the connection of the Geological Survey with the matter?
Doctor SMITH. That was the only direct connection of the Geological Survey. The secretary asked me to assign one of the geologists, a man well qualified to investigate the report that had come to him of the possibility of drainage at the northern end. I assigned Mr. Heald, who went out to the field, and made an oral report to the secretary and then submitted the memorandum that Secretary Fall inserted in the papers addressed to this committee.
Senator Walsh. Further than that your advice was not sought nor were you consulted on the subject?
Doctor SMITH. I know of no other time later than that when we were consulted or the matter was discussed. I would want to qualify that statement simply by saying that references were made from time to time by the secretary when we were conferring on other subjects, but nothing in the way of asking our advice. I remember that at one time I suggestd to him that neither of us knew whether there was any oil in the dome or not, and he agreed, under a strict construction of the matter that neither of us did then know whether there was any oil in that dome. But he thought there was the strong presumption in favor of oil, as shown, as he said, by the favorable terms of the lease. But that was only a casual reference; it was not what you would call an official confernce on the subject.
Senator LENROOT. That was subsequent to the lease?
Senator WALSH. Are you familiar with the evidence given by Mr. Heald in the hearing here.
Doctor SMITH. I talked the matter over with Mr. Heald at the time he made the report. I was familiar with the other work which had been done. I had read, that of course, in connection with the routine work of the Survey and also in connection with the moves leading up to the creation of these reserves; I say, I had studied the reports of our own geologists, so that I had that type of familiarity with the subject, which I think possibly is less than the understanding that the committee now has of the subject. I have never been on the ground.
Senator Walsh. From what you have learned about it, in an official capacity or otherwise, what is your view as to the necessity of leasing naval reserve No. 3 consequent upon such drainage as may have taken place or might take place?
Doctor Smith. Why, officially I approved, and scientifically I approved of the finding of Mr. Heald, which was to the effect that there was the possibility, more than a possibility, of drainage in the northern end of the Teapot Reserve, but not of the Teapot structure.
Senator Walsh. And that letter, as I remember, suggested the drilling of a line of offset wells along the boundary line.
Doctor SMITH. Along the northern end, which was outside the structure as now known, or as then known in fact, but not so far outside as previously supposed when the reservation was made.
Senator Walsh. And was it your view that that was all that was requisite?
Doctor SMITH. Mr. Heald made the recommendation that this be the limit of the drilling, and I agreed with him. I think his words were “the limit of the leasing,” and I agreed with that.
Senator Walsh. Have you learned anything since to change your view about that? Doctor
SMITH: Why, I am still of the same opinion. But, Senator Walsh, I would like to add to that answer, that that is a matter-when we speak of drilling-based on my geological understanding of the conditions of that structure. Now, the question of leasing is an administrative matter that depends in a way upon these physical considerations, but there are other considerations that come in which I realize are important and on which I might have opinions, but which I have not considered in an official way.
Senator Walsh. I understand that perfectly. The Secretary has told us in his letter that one consideration was the agreement to build a pipe line; that another consideration was the acquisition of claims having more or less foundation; and that another consideration was the securing of more competitive conditions in the Salt Creek field. I do not desire to ask you to pass upon the sufficiency of those considerations. I am simply asking you now, as a geologist and as the director of the Survey, as to whether you found any reason in the conditions reported by Mr. Heald for doing anything more than drilling a line of offset wells.
Doctor Smith. I agreed with Mr. Heald on that. I think there was found an error, a typographical error, which was changed, in his land description. But I concurred wholly with his report that the drilling that he suggested was sufficient drilling to protect the reserve.
But as to how long-a reserve is not set up for an indefinite period, and I realize, as I think it must have occurred to everyone, that in case of war, with an underground reservoir of oil of uncertain capacity, which is unconnected with any transportation lines, undeveloped in the sense of not being in a condition to produce without a considerable expenditure of money and lapse of time, is not an ideal reservoir from a strategic stamdpoint. That is something I refer to as being entirely outside of geology, and yet is based in a way on our idea of geologic structure.
Senator Walsh. Of course if it was planned to utilize it in time of war it must have been gotten out some time before it was to be used.
Doctor Smith. It could not be like the old fire engine, as to which the town council adopted an ordinance requiring a test to be made two days before every fire. You have got to test this reservoir at some time before war comes.
Senator Walsh. Anyway it would be advisable to test the reserve by drilling wells to ascertain with reasonable accuracy what there is contained in the structure.
Doctor Smith. That was the joint recommendation of the Bureau of Mines and the Geological Survey in 1916.
Senator Walsh. But even if that were the case and it were tested, eventually it would have to be taken out in anticipation of some war.
Doctor SMITH. And we would have to have transportation lines connected with it to transport the oil to the place where it would necessarily be used.
Senator Walsh. And that would be done, of course, in anticipation of there arising the conditions anticipated at the time when the reserves were set aside, namely, the importance of getting a supply of oil at a reasonable price for the Navy?
Doctor Smith. And I might recall to you the fact that in passing the leasing legislation governmental use of oil was anticipated in the provision that the roaylty might be paid actually in kind as well as in terms of kind; that is, not in money but in oil ?
Senator Walsh. That is all I wish to ask you.
Senator LENROOT. Doctor Smith, with reference to Mr. Heald's report, did I understand you to say that Mr. Heald's report was that there would be no drainage from the structure itself?
Doctor Smith. That was the way I interpreted the report, that there was danger of drainage only on a part of the reserve.
Senator LENROOT. A part of the reserve, but not the Teapot Dome structure ?
Doctor SMITH. No, sir.
Senator LENROOT. The Teapot Dome structure extends north of the fault, does it not?
Doctor Smith. Possibly, but I was thinking of the fault as the boundary line for the purposes of the reservoir.
Senator LENROOT. So, then, when you make that statement you include only that part of the structure south of the fault?
Doctor Suitii. Yes; that is it.
Doctor SMITH. As I understand it the saddle is farther south than it was first thought.