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land instead of it upon that ground. It would seem that these facts not only make a prima facie case, but make a case which it would be very difficult indeed for the defendants to overcome.
It seems to me, therefore, that a suit in equity should be brought to prevent further depletion of the property by drilling, for an accounting, and for other relief, and my suggestion is that you take the matter up with the Navy Department or the Interior Department, or both, with the view to obtaining instructions for bringing action, if you deem it necessary to obtain such instructions.
I do not know whether since the discovery of these papers the Land Department may have taken steps to institute what might be called a contest and notify the interested parties of its action. If that has been done or is done, it may be that that would be held to constitute a pending contest in the Land Department, which in that case would have jurisdiction on the merits, and the courts would take jurisdiction only for the purpose of protecting the property and adjudicating rights after the Land Department had passed upon it. United States v. Cameron, decided by United States Supreme Court April 19, 1920.
If, however, no action has been or is to be taken by the Land Department, a suit could be brought to enjoin trespass and quiet title which could be considered upon the merits and the rights to possession determined. (ChanslorCanfield Midway Oil Co. r'. United States (C. C. A. 9th Cir.), 266 Fed. 145, 147.)
I call this situation to your atteution in case you desire to confer upon it with the other departments. In any event it seems to me important that a suit be brought, and be brought quickly, because of the rapid depletion of the property and new wells about to be drilled. The Standard Co. is doing ito utmost to drill the section quickly.
A similar discovery was made at the same time with reference to section 16, 3)-23, in the same naval reserve. The land there, as in the case of section 36, was shown as mineral land upon the official survey, and after the survey the State at first offered it as a base for a selection. The commissioner on the same date, January 14, 1914, ordered the same action taken as in the case of section 36, but, owing to the mislaying of the letter, no action has yet been taken. A copy of that letter is also inclosed herewith.
The case of section 16 differs from that of section 36 in that there is no production and no drilling now going on on section 16. There are several claimants to different parts of it. One of them, the Potter Oil Co., partially drilled a well some time ago but ceased operations. The General Petroleum Co. drilled a deep well about a year ago and apparently made a discovery of oil, but has since been unfortunate with its well and is making no production, although still occupying the property. It has been reported in the newspapers that the General Petroleum Co. recently purchased a large part of the section from the State or from those claiming under the State.
As to this section there is no such occasion for haste in taking action as in the case of section 36. Respectfully,
H. F. MAY,
Special Assistant to the Attorney General. Senator Walsh. There is a notation on this letter: To Secretary of the Navy, February 25, 1921. Senator NORRIS. What is the date of that letter, Senator? Senator WALSH. That is February 11, 1921. Then here is a copy of a letter transmitting a copy of this letter which I have just read to the Secretary of the Navy, by Mr. Garnett.
Senator NORRIS. What is the date of that, Senator ?
Senator Walsh. That is February 25. This letter is as follows (reading]:
FEBRUARY 25, 1921. The SECRETARY OF THE NAVY.
SIR: I beg to hand you herewith, as of probable interest to you because the lands referred to are within naval petroleunr reserve No. 1 in California, a copy of a letter dated the 11th instant from Special Assistant to the Attorney General Henry F. May, which indicates that sections 16 and 36, T. 30 S. R 23 E., M. D. M., both claimed under titles derived from the State of California, were of known mineral character when surveyed in 1902, and that, therefore, the State acquired and could convey no title thereto.
There is neither production nor drilling in progress now in section 16; section 36, however, is being intensively drilled, and the production therefrom is quite large.
I am informally advised that the Interior Department has been made acquainted with the facts set forth in Mr. May's letter, and that the matter is now under consideration there with a view to determining what measures should be taken to quiet the Government's title, to control the production and further drilling, and secure an accounting for past production. For the Attorney General:
LESLIE C. GARNETT,
Assistant Attorney General, Senator Walsh. Then the following letter from the Secretary of the Navy [reading]:
NAVY DEPARTMENT, WASHINGTON,
February 28, 1921. Sir: I am in receipt of your letter GDDC 214369–1 of February 25, 1921, with reference to sections 16 and 36, T 30 S, R. 23 E., M. D. M., both sections being located in naval petroleum reserve No. 1.
The situation that has developed regarding these sections is an exceedingly interesting one, and it would appear that prompt action on the part of the Government should be taken to protect its interests therein.
It is, therefore, requested that the Department of Justice proceed, as soon as possible in the matter in order to prevent further depletion of the property by drilling, for an accounting and for such other relief as may be deemed necessary properly to safeguard the Government's interests. Sincerely yours,
JOSEPHUS DANIELS. The honorable, the ATTORNEY GENERAL,
Department of Justice, Washington, D. C. Senator Walsh. Meanwhile the Commissioner of the General Land Office transmitted the papers to the Department of Justice for action. I read this letter (reading):
DEPARTMENT OF THE INTERIOR,
GENERAL LAND OFFICE,
Washington, February 28, 1921. The SECRETARY OF THE INTERIOR.
Sir: Under date of January 14, 1914, this office advised the register and receiver, Visalia, Calif., that chief of field division at San Francisco, Calif., under date of April 5, 1913, transmitted to this office reports of a mineral inspector and a special agent from which it appeared that the land embraced in sec. 36, T. 30 S., R. 23 E. is mineral in character and contains valuable deposits of petroleum and that this fact was well known in 1901 and 1902, the years during which the land was surveyed and the plat of the survey was approved by the United States surveyor general. The township was withdrawa from agricultural entry September 14, 1908, pending classification by the Geological Survey; was classified as oil land June 4, 1909, which classification was approved by the Secretary of the Interior June 7, 1909; was withdrawn from mineral entry by departmental order of September 27, 1909, pending proposed legislation, and was included in petroleum reserve No. 2 by Executive order July 2, 1910, and naval petroleum reserve No. 1 by Executive order of September 2, 1912. The survey of this section was completed in the field December 17, 1901, approved by the surveyor general August 1, 1902, was accepted by this office January 26, 1903. This section was reported as mineral by the surveyor who executed the survey and by the surveyor general, and was also noted on the plat as mineral land. It appears further from the records of this office on March 7, 1903, the State offered the land in said section 36 as base for indemnity school selection on the ground that the base land was mineral in character, but on December 18, 1909, the selection was canceled by this office because of conflict with another indemnity school land selection. The register and receiver were therefore directed by letter of January 14, 1914, to issue notice of charges:
“1. That the land is mineral in character, containing valuable deposits of petroleum.
“2. That the land was known to be mineral in character at and prior to the date of the survey, December 20, 1901."
They were also directed to confer with the chief of field division, ascertain the names and addresses of all interested parties, and thereafter serve notice under the rules.
I have now received a letter from Chief of Field Division J. H. Favorite, San Francisco, Calif., dated February 2, 1921, stating that his records indicate that the last action taken was January 4, 1914, when the register and receiver of Visalia called on the field division for the names and addresses of the interested parties. In nuch as under the holding in case of United States v. Morrison (240 U. S. 192), that the right of the State would attach on the acceptance by this office of the plat of survey, directions will be immediately given to the register and receiver to amend the charges as follows:
"1. That the land is mineral in character, containing valuable deposits of petroleum.
"2. That the land was known to be mineral in character at and prior to the date of acceptance of the plat of survey by this office January 26, 1903."
It appears from the reports that this section was covered by mineral locations as early as 1899.
I inclose herewith copies of reports of the special agent and mineral inspector, with recommendation that the Department of Justice be requested to take appropriate action through the courts to protect the interests of the Government pending final action on the proceedings mentioned.
The chief of field division reports that the Standard and other oil companies have drilled a large number of wells on said section 36 during the past two years, which are now producing a large amount of oil. Very respectfully,
Clay TallMAN, Commissioner. Then the letter from the Secretary, John Barton Payne, to the Attorney General, transmitting this letter from the commissioner (reading]:
DEPARTMENT OF THE INTERIOR,
Washington, March 2; 1921. DEAR MR. ATTORNEY GENERAL: I inclose herewith copy of a letter from the Commissioner of the General Land Office dated February 28, 1921, wherein he recommends that appropriate action be taken through the courts looking to the protection of the Government's interests pending final action on proceedings through the local land office at Visalia, Calif., charging sec. 36, T. 30 S., R. 23 E., M. D. M. to be mineral (oil) in character. In view of the facts stated, I concur in this recommendation. Cordially yours,
JOHN BARTON PAYNE. The honorable the ATTORNEY GENERAL.
Senator NORRIS. It is evident that that came to the Attorney General or the Department of Justice from two or three different sources, then, is it not?
Senator Walsh. Yes. May wrote to the Department of Justice. Favorite wrote to the Department of the Interior.
Senator Norris. May wrote to the Department of Justice?
Senator Walsh. Yes. May was an officer of the Department of Justice and wrote the Department of Justice. Favorite was an officer of the Interior Department and he wrote to the Interior Department.
Senator NORRIS. Exactly. Now, who sent the word to the Secretary of the Navy?
Senator Walsh. The Department of Justice, receiving the letter from May,-transmitted a copy from May to the Secretary of the Navy, and the Secretary of the Navy sent back word to the Department of Justice to proceed to protect it.
Senator NORRIS. Exactly.
Senator Walsh. Here is a letter from Mr. Benjamin, referred to to-day (reading]:
DEPARTMENT OF JUSTICE,
San Francisco, May 13, 1921. Hon. W. D. RITER,
Assistant Attorney General, Washington, D. C. DEAR SIR: I am in receipt of yours of May 7 advising me of the anticipated conference with Mr. Sutro concerning the contemplated actions against the Standard Oil Co. which has been tentatively set for June 15.
Mr. Sutro advised me that most unexpectedly he has been called to Washington, and that he might take the matter up tentatively with your department prior to the date above mentioned. I am to-day writing to the Attorney General explaining, in some detail, reasons which appear to me to make it inappropriate that I should participate in the hearing before the Secretary of the Interior on June 15 in connection with the application of the Honolulu Consolidated Oil Co. for relief in certain particulars. If the Attorney General agrees with me I shall not expect to make the trip to Washington for the purposes of that case. I have suggested that Mr. Hamel be permitted to do so. I find that Mr. Hamel is thoroughly familiar with the case and all of the facts, and as the reasons which seem to make it inappropriate for me to argue the case do not apply to him I have suggested to him that he prepare himself most thoroughly for the presentation of the case in the event that the Attorney General should so instruct him.
I am writing you thus as I anticipate the Attorney General will take the subject up with you. With best regards, I am, Very truly yours,
RAYMOND BENJAMIN. Senator Walsh. Letter from Mr. Riter to Mr. Benjamin, as follows (reading]:
MAY 23, 1921. RAYMOND BENJAMIN, Esq., Special Assistant to the Attorney General,
242 Post Office Building, San Francisco, Calif. Sır: You will recall that in writing to you about this matter a few days ago I mentioned the fact that Mr. Loomis, of the Standard Oil Co., felt disinclined to have Mr. Sutro take this matter up with you at San Francisco and expressed the desire to have a conference here. I got the impression from this that for some reason or other Mr. Loomis preferred that you should keep out of the matter, but when Mr. Sutro called last week his attitude was entirely different. He expressed regret that you were not here to participate in the matter and showed no disinclination whatever to discuss the same with you. He impressed me as being absolutely frank and straightforward. The main thing to which he called attention was this: That about the time the State of California acquired title to the section in controversy the regulations of the Interior Department were to the effect that the presence of mineral must be actually known so far as any particular section is concerned, it being immaterial what conditions exist in the surrounding area. He therefore urged that inasmuch as this particular section was not known to contain oil at the time the State acquired title, it was immaterial to enter on a discussion of the presence of oil in the adjoining territory. In short, he said, that the regulations of the Interior Department just referred to had become a rule of property and ought not to be disturbed with respect to land where the title had already passed. He emphasized the fact that the decision in United States v. Southern Railway Co. (251 U. S. 1) was really based on the fact that fraud had been perpetrated. As a matter of fact the decision in Diamond Coal & Coke Co. v. United States (233 U. S. 236) seems to have been in great measure influenced by the fact that fraud was also perpetrated there. The last clause in the opinion is very significant where the court says: “Neither are we considering other minerals whose mode of deposition and situation in the earth are so irregular or otherwise unlike coal as to require that they be dealt with along other lines." Mr. Sutro emphasized that fraud was entirely lacking in the present case and he called attention to the fact that even as late as 1916 certain officials, in testifying before a congressional committee, in effect said that they regarded this section as not valuable for oil.
In view of the fact that certain adjoining sections, or sections close by, were involved in the suit instituted by the Government in California before Judge Bledsoe in which an adverse decision was rendered, from which the Government failed to prosecute an appeal, I thought it advisable to call into the conference Mr. J. Crawford Biggs, of Raleigh, N. C., who represented the Government in that suit. He accordingly came to Washington and discussed the matter at considerable length with Mr. Caldwell and Mr. Sutro. The upshot of it all was that it was not for this department to determine whether this section was known mineral land at the time the State acquired title, and that all we were asked to do was to preserve the property until this question of fact could be settled by the Interior Department. Accordingly, Commander Stuart, of the Navy Department, who has charge of its oil interests in the naval reserve in California, met with Mr. Biggs, Mr. Caldwell, and myself one day to discuss whether a receivership was really necessary to protect the property pending the determination of this question of fact. We all thought it advisable to avoid a receivership if the Government's interests can otherwise be safeguarded. Commander Stuart was of the opinion that this could be accomplished, and later in the day they called upon Mr. Finney, the Assistant Secretary of the Interior. We regard the Standard Oil Co. as entirely solvent and we are of the opinion that a scheme can eventually be worekd out by which the drilling operations of that company will be carried on in such a way as to preserve the property from the operations on adjoining ground, without exhausting the property of all of its oil contents pending a determination of this question of fact.
It therefore looks as though it would be unnecessary to institute any suit but the details still remain to be worked out. I shall keep you advised of the progress.
With reference to the argument in the other matter which takes place before the Secretary of the Interior on June 15, I can well appreciate the embarrassing position in which you would be placed if you were called upon to argue this matter and accordingly telegraphic instructions were sent a few days ago to Mr. Hamel to represent the Government. Respectfully,
W. D. RITER,
(For the Attorney General). If it would not bother the committee now I beg leave to say that there is something here that may not be entirely clear to you. This matter of whether certain land is mineral land or is not mineral land is one which has frequently engaged the attention of our courts in the West, as well as being involved in proceedings in the department. It was formerly a fairly well settled rule of the Department of the Interior, which arose out of courts in placer mining contests, that when you went to establish the mineral character of a certain tract of land, say 20 or 40 acres, you could not establish the mineral character of that land by showing that mineral had been found in adjacent land. And they attempted to apply that rule later when the disposition of coal and oil lands came under consideration, but any one can see that the principle can not possibly apply, because if you found oil on section 36 there it was a very reasonable inference that oil would be found on section 35. So that they broke away from that rule. That is what is referred to here.
Now there isn't any more here, as far as my present information goes, Mr. Chairman, that I care to burden the record with now. If there should be it can be offered later.
And I desire to say at this time that I wish to express my thanks to the members of the committee who have attended for the patience with which they have listened to the testimony which I have offered, which I am sure has been tedious at times.
That is all the testimony that I have to offer at this time. I am pursuing another line of inquiry, which has not yet developed to such an extent that I care to lay it before the committee. That will take