Senator LENROOT. Did Mr. Heald know at that time that there was oil in the saddle?

Doctor SMITH. I do not think he did.

Senator LENROOT. And that would have a rather important bearing on the matter, would it not?

Doctor SMITH. Why, in part, yes, but that would not change my opinion.

Senator LENROOT. No, not when you speak of the fault being the sealing point.

Doctor SMITH. Even then that saddle would at some time have water in it before the Dome would be drained, in my opinion. But this is a discussion of the geology of an area I have not visited, you understand.

Senator LENROOT. I understand.

Doctor SMITH. And having once been a field geologist myself I believe more in the testimony of the man who has been on the ground. Senator LENROOT. In reference to these original withdrawals you made some comment, if I understand you, that the Navy's needs were the primary object of the withdrawals. Did I so understand you?

Doctor SMITH. That was the primary object of those of us who were engaged in drawing up the recommendation to the Secretary of the Interior.

Senator LENROOT. I am not talking about the naval reserves only, but the oil-land reservations.

Doctor SMITH. I understand. I think that has not been sufficiently emphasized in the contention we have had regarding the leasing law. It has often been said that that purpose was put up as a stalking horse. I think I have the right to say that I know what the purpose of the wording was in the original letter.

Senator LENROOT. Was not an important consideration the inapplicability of the placer mining laws to that territory?

Doctor SMITH. Oh, yes. That was referred to and repeatedly argued, that it served that purpose. But the prime purpose in starting this move in February, 1908, was the fact that the Interior Department saw that the Navy needed oil at some time in the future. Senator LENROOT. Now, then, I was coming to that.

Doctor SMITH. We had not discovered the word "preparedness' then, but we had the idea.

Senator LENROOT. If those withdrawals had not been made and the placer mining laws were inapplicable, all these Government lands would have gone into private ownership?

Doctor SMITH. Yes, sir.

Senator LENROOT. And while here were important deposits of oil and the Navy needed oil, if it had not been for that policy the Government would have been in the position of giving away valuable public property containing oil that the Navy needed and would have had to buy it back.

Doctor SMITH. Yes; and I am not sure that that was not even mentioned.

Senator LENROOT. I think it was.

Doctor SMITH. Yes, sir.

Senator LENROOT. So it was not only the policy of having a reserve for the indefinite future, but a policy of getting a reserve for the use of the Navy at any time.

Doctor SMITH. Yes, sir. I think Senator Lenroot will remember that in the discussion of the leasing measures before the House committee it was set up that the Government, receiving royalty in kind, would put it in a position where the Navy might buy oil at better advantage.

Senator LENROOT. I think you were the first to suggest the receiving of royalty in kind.

Doctor SMITH. I think so.

Senator LENROOT. You are familiar with the history of this legislation in Congress?

Doctor SMITH. I think so.

Senator LENROOT. Is it not a fact that at the time the withdrawal was made it could not have been known what the policy of Congress would be with regard to the disposition of these lands?

Doctor SMITH. I think that is quite true.

Senator LENROOT. Is it not a fact that there was very strenuous opposition in the Senate against any leasing law?

Doctor SMITH. I think so, and also in the House.

Senator LENROOT. In the House also that was true?
Doctor SMITH. Yes, sir.

Senator LENROOT. But I think the Senate was more successful perhaps in getting through legislation opposed to the general leasing principle, than was the House. So that so far as the Government receiving any royalties on any Government lands, there had been no policy adopted, and there was no way of determining what that policy would be at the time these withdrawals were made?

Doctor SMITH. That is the reason mention was made of the need of holding this matter pending legislation. It was the transition period in Government policy regarding the natural resources.

Senator LENROOT. So at that time the situation was that unless this action were taken, with the Navy needing oil it would all have passed into private hands, and the Government would have had to turn around and purchase what it had given away?

Doctor SMITH. Yes; and probably at some later date would have had to purchase at very high prices. Of course at the time these things were done the market was temporarily flooded with oil and it did not look like there was necessity to make provision for the future. Senator LENROOT. Would you say that quite aside from the policy the Navy has pursued, but assuming that their defense policy has been a correct one, that the purpose of the original withdrawal of the naval reserve is carried out and that the Navy is getting the oil in these naval reserves?

Doctor SMITH. In the case of No. 1 and No. 2. But if you will remember the status of the land, naval reserve No. 1 was an excellent reserve if the Government won its case against the Southern Pacific Railroad, but not so much of a reserve if it lost that suit.

Senator WALSH. Naval reserve No. 1 or No. 2?

Doctor SMITH. No. 1.

Senator LENROOT. Yes; that is No. 1.

Doctor SMITH. It was recognized that if those alternate sections went to the Southern Pacific Railroad the reserve, to be of any value

to the Government, would have to be drilled. I think it was recognized at the time No. 2 was created that the Navy would have to take its own oil or some one else would take it out-I mean take it out through other lands for the greater part.

Senator LENROOT. I do not know that you get my point.
Doctor SMITH. I would like to mention No. 3?

Senator LENROOT. All right.

Doctor SMITH. With regard to No. 3 reserve, that was looked upon, by some of us anyway, by some of those with whom I was most in touch, as a reserve for utilization at some future date. Now, there might be a difference of opinion as to how long a period the leaving of No. 3 alone would be. Some of us never had any fear of those outstanding claims, we did not believe they were valid, and we not only set up the reserve on that basis but stated that opinion.

Senatar LENROOT. I do not know that you quite get my point yet. My question was this: Aside from the policy that has been pursued of using a part of this oil for the purpose of procuring storage for oil, all of the oil that is being secured from these naval reserves it being used for the Navy, is that correct?

Doctor SMITH. Yes, sir.

Senator LENROOT. And my question is, that that carries out the original policy that was being pursued for the Navy, of setting aside naval reserves.

Doctor SMITH. As regards Nos. 1 and 2, Senator Lenroot, I would add that this type of action was really forced upon the Government by reason of the large ownership by other interests in those two

reserves.

Senator LENROOT. Now, with reference to that matter. I do not remember whether you were a party to certain conferences that were held looking forward to an elimination of all private holdings in reserve No. 1.

Doctor SMITH. I knew of them.

Senator LENROOT. You are aware that it reached the point where the Southern Pacific Railroad and the Standard Oil Co., which I think were the only private owners, were willing to effect exchanges and make releases, giving them No. 2 and thereby being able to have No. 1 intact. Do you remember that?

Doctor SMITH. Yes. Not only do I remember that, but preceding that the possibility you referred to had been foreseen, and I think even in the earliest discussion of this matter, in recommendations to the Secretary of the Interior, it was set up that by exchanges there might be a segregation of tracts. Of course it did not take much originality to think of that, because it had been a policy that had been adopted in connection with the national forests for eliminating private holdings, by exchange.

Senator LENROOT. You remember that the conference reached the point where an agreement was substantially reached but Secretary Daniels opposed it.

Doctor SMITH. I knew of that.

Senator LENROOT. At that time the title of the Southern Pacific in neither reserve had been determined.

Doctor SMITH. No.

Senator LENROOT. If that could have been done we would have had a reserve in No. 1 that would have been an ideal reserve.

Doctor SMITH. An ideal reserve although slightly smaller than at first planned.

Senator LENROOT. And that reserve was in a very different situation than reserve No. 3 by reason of the fact that the oil could have been secured with reasonable promptness from either No. 1 or No. 2 Doctor SMITH. And had been proved, and not only that but its geographical location was far superior.

Senator LENROOT. As far as these reserves were concerned, if it had been possible to eliminate private ownership the oil might have been left in the ground a much longer period of time; that is, it could have been developed so much quicker than No. 3, that it might have been used as a reserve for a longer period of time than No. 3 from a defensive standpoint.

Doctor SMITH. I think so.

Senator LENROOT. That is all.

The CHAIRMAN. I want to understand your position in relation to the drainage in the Teapot Dome structure. You understand that the boundary line of reserve No. 3 is here between sections 20 and 29 [pointing to map]?

Doctor SMITH. Yes, sir.

The CHAIRMAN. Now, the saddle is about here; that is, sections 23 and 29?

Doctor SMITH. Yes; the saddle is in the northwest quarter of section 28.

The CHAIRMAN. Is this 28 [pointing on map]?

Doctor SMITH. It is here, in the northwest corner of section 28. The CHAIRMAN. Now, do I understand from you that there has been oil discovered in the saddle; not on the first sand, but the second sand?

Doctor SMITH. The second sand; yes, sir.

The CHAIRMAN. And that you then hold that there will be no drainage north of the saddle?

Doctor SMITH. South of the saddle.

The CHAIRMAN. South of the saddle to the north?

Doctor SMITH. My statement was intended to be that I would not on that account believe that there was not existent a closure which at some stage would effectually become a water seal.

The CHAIRMAN. That is, south of the saddle?

Doctor SMITH. In the saddle where the water would come across and make a water seal.

The CHAIRMAN. That is the way it had to come across

Doctor SMITH (interposing). That is where it would come across. The CHAIRMAN. But since they find oil in the second sand in the saddle there

Doctor SMITH (interposing). That means that the water has not come yet across, it does not mean that it will not come across.

The CHAIRMAN. But it is likely that it would have come across if the gas pressure had been taken away, even if there were no oil there. Doctor SMITH. I was thinking in terms of the water pressure. The CHAIRMAN. But will not the oil travel faster than the water? Doctor SMITH. I think the water is the propelling force.

The CHAIRMAN. That and gas?

Doctor SMITH. I think more of the water. But I have tried, Senator, to escape setting myself up as an authority on an area that I have never visited.

The CHAIRMAN. I think that is pretty wise, too. however, that oil travels faster than water?

But you admit,

Doctor SMITH. No; I can't make the distinction: what fills those places between them, if one pulls away from the other.

The CHAIRMAN. And you have no idea to express as to whether it is water, or oil or gas in that space?

Doctor SMITH. Oh, it is my opinion that it is the water that pushes the oil.

The CHAIRMAN. And therefore, it seems to me, that no other conclusion could be drawn than that there would be drainage here [indicating on map]?

Doctor SMITH. There would be some drainage.

The CHAIRMAN. From the saddle to the north.

Doctor SMITH. There would be some drainage there, but I think the water in immediate contact with the oil would come into the space before the oil in the area away down to the south would come through.

The CHAIRMAN. Now, there was no oil in the saddle anywhere else, south of the saddle in the first sand?

The CHAIRMAN. Now, it has developed there is oil in the saddle in the second sand.

Doctor SMITH. Yes, sir.

The CHAIRMAN. And in land south of it?

Doctor SMITH. Yes, sir.

The CHAIRMAN. In the space in the Dakota sand, they still find oil there. Do you think that would not demonstrate the fact that there was oil through the saddle here to the south part

Doctor SMITH (interposing). I don't see any connection between the Dakota sand and the thing we are discussing here.

The CHAIRMAN. But you do not demonstrate there was oil there, from the saddle to the dome?

Doctor SMITH. There might be connection between the oil in the Dakota sand and that.

The CHAIRMAN. I asked you if there was oil discovered there? Doctor SMITH. I would not let the absence or presence of oil in the Dakota sand influence me any more regarding the oil in the second wall than I would the absence of oil in the first wall influence me.

The CHAIRMAN. That is, you do not want to express any opinion as to whether there would be oil in the Dakota, or oil in the first sand?

Doctor SMITH. I think they are independent. My belief that there is oil in the Dakota is based on what is known miles away in the Dakota, and not a thousand feet above in the wall sand.

The CHAIRMAN. There have been no producing wells in the Dakota sands?

Doctor SMITH. I have called it Dakota, Senator. But that is a little bit of detail of stratigraphy there that neither the Senator or myself want to discuss.

The CHAIRMAN. Do you want to express an opinion as to whether there will ever be oil produced in those sands?

Doctor SMITH. No, sir; I do not want to express an opinion. Senator LENROOT. Doctor, so far as this saddle is concerned, the oil north of it is on a higher elevation than the Dome?