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adjoining Texas landholders used it where it was fit for such use, and it was generally looked on as Texas territory to the center of the stream. As the oil development approached the stream by the bringing in of the “Texas Chief" and other wells, the Texas operators began to see a possible oil value to the bed of Red River and began to look for authority for its test and development. In March, 1917, Texas had amended her oil leasing laws so as to make them apply to water-covered areas, and permits and leases were sought under this law with a view of extending the oil development into the river. Up to this time Texas was apparently the only sovereignty asserting any control or interest in the south half of the stream, and this, coupled with the fact that she had always been in possession within the memory of man, had always exercised authority over it and her courts had decided in numerous cases that she ownel to the center of the stream, Texas was considered, of course, as being the proper authority from whom leases could be secured.
This was seemingly confirmed by the Federal Government when, in response to an inquiry addressed to it by Texas land commissioner, the Interior Department indicated in a letter dated October 2, 1914, that it considered that Texas extended to the center of the river.
Therefore, permits were secured from the State and the development pushed out into the stream, the General Oil Co., one of the permittees under Texas, bringing in the first well. Following this, extensive activities began and vast sums were spent and considerable oil was being developed in the river area by Texas permittees when suit was instituted and the properties placed in the hands of a Federal receiver. The resulting loss to Texas operators can not be calculated, but some idea of its extent can be appreciated when it is considered that practically all the companies operating therein are now in the hands of receivers and many of the individual operators are in bankruptcy courts.
The right of the Texas claimants to a preference in the property they had discovered, developed, and thought they owned was recognized by the Supreme Court in its ordering all wells above the cut bank turned back to the owners under certain restrictions which would secure to the Federal Government its rights.
Chapter 83. Acts Texas Legislature, March, 1917, in substance provides that any citizen of the United States may apply in writing for a permit to prospect for oil and gas on a described portion of river bed, have it surveyed out and field notes returned by the official surveyor, and the application and field notes filed in the general land office of the State. When this is done the applicant acquires a vested right to prospect therein, which right may be freely conveyed. The applicant is also entitled to a written permit from the State to prospect for oil and on discovery of oil thereon a lease is issued by the State, retaining one-eighth royalty.
Such applications, permits, and leases are the titles under which preferential rights are claimed.
The claims in behalf of which this memorandum is filed, of which the Seright lease is an example, grow out of the leases and filings made under the Texas oil and gas leasing laws. These claimants submit that such rights were acquired from the apparent sovereignty actually in possession of the area, that they have expended money and labor in attempted improvements, and that this would entitle them to preferential treatment in leasing or other disposition made of the area.
II. Possible adverse claim.—As the prospects for an extensive oil field in the bed of Red River became apparent it is, perhaps, but in keeping with the common experience that a vast number of persons not possessing rights under Texas leasing laws should cast about for means of securing a share in it. These
present two classes of claims adverse to the Texas claimants, and will be noticed briefly.
(1) Placer claims.—These are claims attempted to be filed under mineral placer laws. As legal claims they have been specifically disposed of by the recent decision in the case of Oklahoma v. Texas, and they could have no force as basis for an equitable preference.
Analysis of these claims show no equities as a possible basis for preferential rights because :
(a) No possible color of title is shown. They are not based on any grant from a sovereignty, either direct by grant or indirect by compliance with statutory invitation to acquire title, and were actually in defiance of the Federal Government which, through the Interior Department, refused to recognize them at an early date (see letter of commissioner to register and receiver at Guthrie, dated June 12, 1919), and the State of Texas then in control of the area, the only two possible sources of title.
(0) Good faith is not shown, because they are not taken under the sanction of any recognized Government agency, but rather in defiance of all agencies ordained by organized society, and are plainly only attempts to gamble on an unsettled legal situation.
(c) Money and labor expended under these circumstances could not be made the basis of an equity, but no expenditures of this nature were made by them on property covered by much of the leased land.
The placer-mining claims being without color of title or any showing of good faith in their initiation are mere colorless attempts to force title and form no basis for an equitable preference.
(2) Oklahoma riparian claims. This class of claims is based on a contention of patentees on the north bank of Red River that their land would extend entirely across the stream regardless of the amount they had patented to them as shown by their field notes. This claim also, so far as it applied to the south half of Red River, was also specifically disposed of in the recent decision, and it only remains to consider its force as an equitable basis for preferential rights.
Analysis of such claims shows no equities as a basis for a preferential claim, because
(a) No color of title is shown to any land south of the medial line. The patents from the Government only give title by express grant to the area comprised in the field note of the patent, and by implication to the medial line. A claim to any land south of that line is, therefore, wholly without color of grant or conveyance.
(0) Good faith is not shown, since it is an attempted confiscation of valuable property based on no color of title and in fraud of the royalty rights of the Government under which the claim is made.
(c) Under these circumstances no equities will arise from the expenditure of money or labor which would be a deliberate gamble on a title known not to exist and in defiance of the Texas de facto sovereignty. However, even a consideration of this question is made unnecessary by the fact that all sums spent by riparian claimants in attempted development have been refunded to them under court order by the receiver in charge of the property, and that they have been given extensive adjoining property lying north of the medial line. It is further suggested that they could not claim recognition in equity, as they had induced the Government to patent to them valuable oil lands on representation that it was mere grazing land.
III. Texas permit claims.—Texas permits were issued on application, a survey and official return of notes to the Texas oil land offices, and the payment of certain fees and rentals. In general form it resembles the oil leases given by the Federal Government under its leasing act. These permits are regularly provided for by the statutes of that State (acts 1919, ch. 83) and approved hy its appellate court, where proper application was filed. The statute recognized the filer to have as much a vested right as if the permit was actually issued, and provided for its transfer as of any other vested right.
A number of such filings were made on Red River prior to the time of the boundary suit, drilling done, and oil found. The recent decision in the boundary case seems to hold that much of such area is not in Texas but under the jurisdiction of the Federal Government. A condition, therefore, presents itself which calls for one of three things, viz:
First. To take over this property, disregarding all individual rights.
Third. To lease by giving preference to claimants under Texas leasing laws, thus recognizing, as far as possible, rights acquired under a de facto sovereignty exercised by the State of Texas while in possession of the area, but requiring them to do equity to any other class of claimants showing an equity in the property.
.As it is fundamental in every constitutional government that the right of the individual secured from the acting sovereignty should not be confiscated upon a change of sovereignty, the first course is unthinkable.
Possible claims under the second class have been considered, supra, and found untenable,
The third remains, i. e., giving preference in leasing to claimants under the Texas oil and gas laws, and presents the following points in its favor:
First. Such claimants hold at least under color of title, since they claim under a grant or right to a grant from a State which was in possession and exercising de facto sovereign rights over the territory, and to that extent their title is superior to any other class.
That Texas was de facto sovereign at the time is shown by the following:
(a) The fact that it was in possession and had been in possession for a hundred years or more. This was admitted in the bills of both Oklahoma and United States filed in the case of Oklahoma v. Texas (see record, pp. 10, 41), and was proven by the testimony of over a hundred witnesses, as shown by the record in that case (Rec., 244477). Texas people from early pioneer days used the river as a carrier of commerce and made every conceivable use of its south bank and bed without question (Rec. 274, 374), advertising its rights to possession by notices put on the center of at least three bridges spanning the river (Rec. 428, 433, 437, 438) and emphasizing it in public celebrations participated in by people of both Texas and Oklahoma (Rec. 437).
(6) The fact that Texas had for a long time exercised governmental control over the south half of the river. Her courts exercised unquestioned jurisdiction over it. Not only did the trial court punish crime committed on it, and enforce property rights arising on it, and hold inquests over persons found dead in it (Rec. pp. 297, 448, etc.), but the State appellate courts extended their jurisdiction to the center of the stream. (See Spears v. State, 8 Tex. Crim. App. 466; Persons v. Hunt, 98 Tex. Sup. 420; Butt v. Calvert, 24 Tex. Rep. 355 ; Blumer et al. v. Marshall, 126 S. W. 1162 ; Carroll v. State, Rec. pp. 379, etc.)
Texas peace officers policed it and arrested offenders for every class of crime. (Rec. pp. 297–448.) Texas grand juries exercised jurisdiction over it. (Rec.
361.) Texas game wardens protected the fish in it (Rec. 460), and every form of government control was exercised.
This exercise of de facto sovereignty was acquiesced in by Federal Government and seemingly approved by it in numerous documents. (Rec. 501-530, 683, 736, 741-765, etc.)
That a State holding under such circumstances is exercising a de facto sovereignty, and that grants made by it not only carry color of title but are universally held in our scheme of government to give vested rights which would be recognized by a new sovereign so far as consistent with the laws of the new sovereignty, has been decided by our Supreme Court in Rhode Island v. Massachusetts (12 Pet. 657) :
“There are two principles of the law of nations which would protect them in their property (referring to the individuals in the disputed territory).
"First. The grants by a government, de facto, of parts of a disputed territory in its possession are valid against the State which had the right. (12 Wheat. 600.)
Second. That when such territory is acquired by treaty, cession, or even conquer, the rights of the inhabitants to property are respected and sacred. 8 Wheat. 589; 12 Wheat. 535; 6 Pet. 712; 7 Pet. 867 ; 8 Pet. 445; 9. Pet. 183; 10 Pet. 330."
See also Knight v. U. S. Land Asscn., 142 U. S. 161.
(a) By the fact that they are founded on color of title and taken from the Government having apparent control of the area and paid for; (b) by the fact that they were taken on apparent assurance of Interior Department that Texas extended to the center of the stream. This assurance was given under the following circumstances, which lead the permittees to conclude that that department recognized Texas' title. The land commissioner of Texas, before issuing such permits, addressed an inquiry to the Interior Department as to its understanding of the location of the boundary on Red River. That department replied by questions from an opinion in Land Decision (24 L. D. 372) rendered after the Greer County decision, and which assured the boundary line to be the center of Red River.
Third. Such permits gave rise to equities which in good conscience can not be disregarded. In addition to the equities from the above notice, the permittees have expended capital and labor in discovering and attempting to develop the territory. They have in all cases expended a sum as fees, surveying charges, and rentals in securing such permits which was directly looking to preparations for prospecting for oil and have in many instances spent large sums in actual drilling, laying of pipe lines, and building of storage, pump houses, etc.
The advantages of recognizing the Texas permit holders as a class, subject to adjustment of equities other class of claimants may show is obvious.
(1) It recognizes the right of the only class of claimants having any color of title to the property.
(2) It is extending courtesy to a sovereign State and her citizens and will go far toward remedying the hardship the recent decision necessarily imposed.
(3) It has a direct precedent in the case of Greer County, where the title already granted by Texas as de facto sovereign was made the basis for a preference to the extent of 320 acres to the individual. (Acts of Cong., Jan. 18, 1897, c. 62, 29 Stat. 590.)
(4) It is carrying out the policy already initiated by the Supreme Court in recognizing the rights of Texas claimants to a preference when such court on hearing orders that all wells on patented lands in the river bed be turned back to Texas claimants with proper provision for the protection of the Government in its royalty rights.
(5) It will give preference to a class of claimants who spent by far the bulk of the money in developing the field, and where activities in adjoining Texas territory has really made it possible for the Federal Government to realize anything from this apparently barren sand bed.
(6) It will fix a policy which will eliminate a vast and interminable contention, calling for innumerable hearings for each separate claimant who may think he has a chance to at least force a compromise by various methods ordinarily used in such cases, and will yet enable the perfection of the interests of other claimants in the few instances where they are shown to actually have equities. Respectfully submitted.
0. E. HARRISON.
Mr. RAKER. Do you know why Texas passed a leasing law to lease land covered with water?
Mr. HARRISON. I could only guess. I imagine it was to meet a situation like this; I imagine so.
Mr. RAKER. Did not the folks know of the Greer case, the one in 162 California, page 1, running about 100 pages.
Mr. HARRISON. That is a question that an attorney would ask a witness; I mean it respectfully.
Mr. RAKER. Surely.
Mr. HARRISON. But you can not ask practical oil man; you could not ask the people that are in my company if they ever heard of the Greer case because they never did and do not know anything about the Greer case. All they knew was that Texas claimed this land. They had their abstractors and made their abstracts which showed the title in Texas.
Mr. RAKER. There was no abstract they could make, was there? Let us get down to brass tacks.
Mr. HARRISON. Surely.
Mr. RAKER. Land that was leased or licensed. You are not talking about patented land.
Mr. HARRISON. I am talking about licenses.
Mr. RAKER. That is what I am talking about. There was not any abstract to make.
Mr. HARRISON. We certainly got an abstract.
Mr. RAKER. The only abstract you could make, as far as Texas was concerned, was that Texas was admitted into the Union. Is not that all?
Mr. HARRISON. It showed the authority of Texas to make leases.
Mr. HARRISON. It showed the direct lease from Texas, the original licenses and subsequent assignments.
Mr. RAKER. say on consulting the books, it would be the first one; it would be just one paper.
Mr. HARRISON. Certainly. It would be the same as when the Government of the United States issues patent to public domain.
Mr. RAKER. That is the point exactly.