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Return to normal supervision.—Reduction of the available funds for supervision of oil and gas and mining operations on Indian lands from $95,000 in 1932 to $65,000 in 1937 has resulted in direct loss to the restricted Indians, and has been disastrous so far as maintaining an adequate force to supervise these operations.
Had it not been for the allotment of Public Works funds to the Geological Survey during the fiscal years 1935, 1936, and 1937 there would have been å wholesale dismissal of well-qualified engineers of long experience in these matters. The allocation of Public Works funds made it possible during this period to hold the organization together except for a few separations, but the remaining employees were necessarily engaged about half time in supervising Public Works operations rather than in supervising production operations on Indian lands; and in general, supervisory operations never really adequate to protect the interests of the Indians have been slighted more and more. The result has been a growing laxity on the part of lessees in oil and gas production and mining methods designed to conserve mineral values, in provision for the safety, health, and welfare of employees and in recording and reporting information necessary for the determination of royalty liabilities. It is anticipated that these ill effects will be cumulative in character and that the full result of such inadequate funds for proper supervision will not be available for several years. The estimate for 1938 makes no provision for more-adequate supervision of drilling and producing operations. The losses of natural resources and of revenue which could be avoided by a relatively small increase in appropriation will continue to mount.
Departmental order no. 1112.—The proposed increase of $25,000 for 1938 is principally for the purpose of carrying out order no. 1112 of the Secretary of the Interior, dated September 4, 1936, which extends the cooperative work with respect to oil and gas operations on restricted Indian lands to all Indian lands except those of the Osage Reservation, Okla. By reason of this order, checking of production, maintenance of production records, and determination of rentals and royalties due on 917 producing leases and 3,748 nonproducing leases, or a total of 4,665 leases, are now added to the supervision and jurisdiction of the Geological Survey. As a result, it is necessary to establish 4,665 lease accounts in order to account properly for all rentals and royalties accruing to the restricted Indians involved. As of September 1, 1936, there were 3,902 producing wells on the 917 producing leases. The average monthly production from them amounts to approximately 800,000 barrels having a value of nearly $1,000,000. The establishment of an efficient and effective supervisory and accounting service is absolutely essential.
The order in question reads as follows:
“In order to facilitate effective cooperation with respect to oil and gas operations under leases on restricted Indian lands (except Osage Reservation), and to define à division of functions of field employees of the Office of Indian Affairs and the Geological Survey, it is hereby directed, effective November 1, 1936, for a period of 5 vears, and thereafter until terminated:
“(i) That within the meaning of the regulations to govern oil and gas operations on restricted Indian lands, approved July 7, 1925, and any amendments or revisions thereof, the district supervisors of the Oil and Gas Leasing Division of the Geological Survey and their assistants shall be and are hereby authorized and directed to exercise the powers and perform the duties of 'officer in charge', 'supervisor', and 'inspector' in said lease and regulations provided.
“(2) That such supervisors directly or through their assistants shall receive from the lessees all notices, reports, well logs, maps, plats, records, and all other information relating to proposed or existing wells and to production of oil and gas required by said regulations to be submitted by lessees and take appropriate action thereon, and shall maintain a file thereof. Said supervisors shall submit monthly to the superintendent of the Indian agency having jurisdiction a statement of oil and gas runs and royalties derived from leases under his jurisdiction and shall carry on all accounting work necessary for the proper computation and recording of royalties accruing to the benefit of the Indians.
"(3) That all other functions with respect to Indian oil and gas leases, particularly the determination of bonuses and other administrative matters, and fiscal matters generally, except royalty accounting, be and remain the duties of the officials of the Indian Service, but the Geological Survey representatives will act in an advisory capacity in all other matters relating to oil and gas leases, development, and operation.
“(4) That the files of the Geological Survey relating to oil and gas leases on Indian lands shall be at all times available for inspection and use by authorized employees of the Indian Service, and the employees of the Geological Survey
assigned to work relating to Indian lands shall furnish to authorized employees of the Office of Indian Affairs such information and technical advice as may be necessary or appropriate to the most efficient cooperation in the conduct of the work assigned to the two Bureaus. Likewise, similar facilities and service shall be provided for the benefit of authorized employees of the Geological Survey.
"(5) That no orders of any kind shall be issued by Geological Survey representatives to any Indian, but such representatives shall have full authority to issue and amend orders to operators relative to production and operations; i. e., the enforcement of the operating regulations, the supervision of all operations, including safety and efficiency, health and sanitation, and prevention of physical or economic waste.
"(6) That necessary fiscal arrangements and personnel adjustments shall be effected to accomplish the purposes of this order.""
It is conservatively estimated that appropriations at the annual rate of $120,000 are essential to carry on the work necessary to afford the reasonably adequate conservation of the mineral resources involved and to determine monthly the rentals and royalties actually due. Such annual appropriation would be at the rate of less than 4.5 percent of the revenue accruing from the operations supervised, or little more than one-half of 1 percent of the value of the minerals produced. This would be an exceptionally low administrative cost, and the operations conducted under it would result in increased revenues to the Indians far in excess of the appropriation. Within the estimate the job can be about three-fourths done.
GENERAL SCOPE OF WORK Mining operations on Indian lands. The greater part of the mining on Indian lands is in Oklahoma, where there are zinc and lead mines on restricted Quapaw land; coal mines on the segregated Choctaw and Chickasaw coal and asphalt lands, and on restricted Indian coal lands; and scattered deposits of volcanic ash, building stone, gravel, lead, zinc, and other minerals of less value on other Indian lands. The Geological Survey functions as an agent for the Indian Service in the engineering phases of supervision over these operations.
Quapau zinc and lead mines.- On the restricted Quapaw zinc and lead lands there are about 400 shafts, 31 of which were used to hoist ore from 16 leaseholds for concentration in 8 mills during the past fiscal year. Ore-production operations were in progress on 24 of the 36 leaseholds in force at the end of the year. From the 36 leases, 91 allottees and heirs received $360,727.69 in royalties, in comparison with 71 allottees and heirs who received $1,679,863.75 in royalties in 1926, the year of greatest royalty return.
The production from restricted Quapaw Indian lands for the calendar year 1935 represented 3.13 percent of the lead and 10.37 percent of the zinc produced in the United States. This is an increase in the percentage of lead, but a decrease in that of zinc, over 1934. Continued efforts during the last several years have resulted in securing retreatment of nearly all of the retreatable mill tailings on restricted land or in operations leading to their retreatment. The value of the concentrates recovered from the retreatment of tailings since May 1926 is approximately $5,500,000, and the royalty accruing therefrom to the Quapaw Indians alone amounts to about $550,000. Additional research work is urgently needed to bring about a still greater recovery from the ore mined, but this cannot be undertaken within the estimate.
Segregated coal lands. The segregated coal and asphalt lands in Oklahoma belong to the Choctaw and Chickasaw Indian Nations and now aggregate 375,038.81 acres, of which 46,185.22 acres were included in 56 properties on which mining operations were under supervision. The amount of coal mined during the year increased about 20 percent to 475,533.56 tons, and the revenue amounted to $63,790.18, an increase of 22 percent.
Restricted Indian lands. The restricted allotted Indian lands consist of individual allotments of the Creek, Choctaw, Cherokee, and Chickasaw Tribes. There were 10 mines in operation with a production of 93,192.36 tons of coal on 24 properties involving 1,291.82 acres in effect during the year. The value of royalties, rentals, and bonuses was $10,008.79, an increase of about 13 percent.
Engineering reports have been made to the Indian Office on properties in a number of Western States during the year. Of particular importance are recommendation made from time to time on location of mines supplying coal to Indian agencies and the efficient production of coal therefrom which has resulted in a material saving. Further saving could be made by more frequent inspection of these mines.
Oil and gas operations on Indian lands.--Cooperative supervision and inspection of oil and gas development and producing operations and practices and royalty accounting was continued throughout the year on restricted Indian lands by the Geological Survey. Under the terms of the cooperative agreement between tbe Office of Indian Affairs and the Geological Survey, approved November 12, 1931, by the Secretary of the Interior, and superseded bn November 1, 1936, by order no. 1112, which defines a division of the functions of the two Bureaus, the Geological Survey supervises operations on all Indian reservations except the Osage Reservation in Oklahoma, where the Geological Survey activities are limited to such engineering examinations, reports, and technical advice as may be requested by the superintendent of that reservation and the Office of Indian Affairs. The supervision of operations for oil and gas on lands comprising the Five Civilized Tribes of Oklahoma has been materially curtailed because of an inadequate appropriation to maintain the necessary personnel. Engineering problems relating to the development and production operations on all Indian reservations have greatly increased during the past few years, while the appropriations have decreased from $95,000 for the fiscal year 1932 to $65,000 for the fiscal year 1937.
The reduction of the annual appropriation for this work has resulted in the dismissal of well-qualified and well-trained engineers, familiar with field practices and lease conditions, the closing of field offices considered essential for the proper supervision of oil and gas operations, and has resulted in substantial loss to the Indian wards of the United States.
In addition to the supervision of drilling and producing operations on Indian lands, the Geological Survey engineers have performed numerous functions, including bonus appraisals of oil and gas leases offered for sale, royalty appraisals, investigations and appraisals of damages to Indian allotments because of drainage of oil and gas, surface and subsurface pollution of domestic water supply by salt water and oil, and have submitted reports and recommendations thereon. The engineers have furnished information and advice to superintendents concerning all oil and gas activities on all lands within or near Indian reservations, have considered gas drive, repressuring, and water-flooding projects and reported thereon. Oil shipments have been gaged and the gravity and impurity content of the oil determined. Physical tests of natural gas have been witnessed to insure proper participation in royalties accruing from natural gasoline, propane, and butane.
The Geological Survey has cooperated in the drafting and consummation of unit plans of development. Survey engineers have considered allocations of allowable production to Indian leases, thereby assuring equitable withdrawal of oil and gas from restricted Indian lands as related to adjacent and adjoining patented lands.
Through more adequate supervision of production and marketing practices and royalty accounting, irregular practices by lessees in computing production and royalties and in the submission of royalty statements, resulting in a loss of revenue to the Indians, can be largely avoided. Such corrective work has been applied effectively to producing leases in western Oklahoma, having an annual production of approximately three-fourths of a million barrels and an income for the fiscal year 1936 of about $350,000. Leases other than those in the Osage Reservation and the reservations in western Oklahoma produced approximately 11 million barrels of oil and returned a total income of approximately 24 million dollars during the fiscal year 1936. The same constructive work on these restricted Indian lesses would result in substantially increased revenues.
With the new development on Indian lands in the Rocky Mountain States, and the lack of an adequate personnel because of inadequate appropriation, it has been impossible to devote the time necessary effectively and efficiently to protect the intersts of the restricted Indians.
Inemand application of engineering principles to the development and production of oil and gas has resulted in continually increasing the demand and necessity for technical assistance and supervision by the Geological Survey engineers. Sinoa lan proportion of restricted Indian leases have passed their flush-produetien stage morettierent prxluction methods are necessary to obtain commeniul prxiuetan. In many cases stimulation of production by such special methods as rprissuring or water texting is necessary to prevent abandonment
lewis which have an uoni only 25 to 30 percent of the original oil content. Rerwirts on the fossibility of such pnujerts have been prepared, but this essential work has a very limited by use of the inadequate engineering personnel available due to the present small appropriation.
Oil and gas leases and wells on Indian reservations under supervision of the Geological Survey, as of June 30, 1936:
Utah: Navajo, Executive order ..........
Mr. Dond. There is an increase in that item actually of $25,000 if we take into account the deficiency appropriation of $7,500. It makes a net increase of $17,500.
MONEY TURNED OVER TO GEOLOGICAL SURVEY This money is turned over in a lump sum to the United States Geological Survey and is used in connection with its operations under the item found on page 329 of this bill.
I have told the Geological Survey people that when we reached this item I wanted one of their men here to discuss it if the committee wanted more information than is found in the justification.
The justification begins on page 97 and outlines quite fully the work involved in supervising the mining operations on leased Indian land.
On page 98 we give a break-down, showing the manner in which the increase is accounted for.
Further on in the justification we give a tabulation showing the oil and gas leases and the wells on Indian reservations that are under the supervision of the Geological Survey as of June 30, 1936.
The Geological Survey has personnel peculiarly qualified for this particular type of work. There is no overlapping in the service. As a matter of fact they formerly obtained this appropriation in their own right.
This committee wanted to find out the total expenditures being made on behalf of the Indian Service, and so they lifted this item out of the Geological Survey chapter and inserted it in the Indian section of the appropriation bill.
The justification is made up by the Geological Survey and turned over to us and we insert it in our books.
Mr. Rich. The fact of the matter is it eliminates any possibility of duplication between the Indian Service and the Geological Survey the way it stands now?
Mr. Dodd. You are correct.
Mr. Rich. The only thing that you are asking is this appropriation of $25,000?
Mr. Dodd. Yes, sir.
Mr. Dodd. There has been some additional work placed upon the Geological Survey by reason of an order signed by the Secretary of the Interior last September 4.
FUNDS FOR CONTINUING WORK NEEDED TO REPLACE FINANCING OP EMERGENCY
I would like to call attention also to the fact that our appropriation for this work in 1931 was $85,000; in 1932 it was $95,000. Then began the emergency program, and much of the work of the Geological Survey for a period of 3 years was financed through allotments from the Public Works appropriations. That appropriation is now gone and the Geological Survey can expect no help from that source in 1938. Thus it will be necessary to provide funds for continuing this very valuable work.
Mr. LEAVY. I want to ask you a question, because this is a matter that affects my district substantially.