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Mr. Larsen, What became of the funds collected by the Texas receiver? Did he turn them over to the receiver of the Federal court?
Mr. Gore. My understanding is that they were turned over to the company which was claiming the land.
Mr. LARSEN. It seems to me that when the receiver of the Federal Government took the property from the receiver of Texas that he would have transferred the property in hand and the funds in hand to the Federal receiver.
Mr. GORE. I think Congressman McClintic, of Oklahoma, will probably suggest or submit to the committee an amendment directing the United States to recover at least the royalty on account of the oil recovered.
Mr. McClintic. I incorporated the substance of that in the bill which I asked you to consider yesterday, which is designated as a recapture clause.
Mr. Smith of Idaho. What is Mr. Testerman doing toward making a recovery of the proceeds from the property which he claims?
Mr. Gore. A motion was submitted providing for reimbursement, as in the other instances, but it was not allowed by the court. As I say, I do not know on what ground it was disallowed because the reason of the court was not stated. However, it is my inference that it must have been because he had been enjoined and forbidden to go on this property by the Texas court. Unless it was that I do not know.
Mr. Smith of Idaho. What length of time was there between the injunction being served on you and the receiver of the United States being appointed?
Mr. TESTERMAN. The injunction was served on me August 22, 1919, and the receiver of the United States Government took possession April 20, 1920.
Mr. Smith of Idaho. And during that time the persons claiming the property under the Texas law operated the property?
Mr TESTERMAN. Yes, sir.
Mr. TESTERMAN. Yes, sir, and drilled other wells; they drilled those wells on the property with this machinery. I might state to this committee, just for information, that it was almost impossible to secure drilling machinery there; I had a number of rigs and they confiscated this one and drilled those wells. I was forbidden to go down on the river, under penalty that I would be jailed, and I had other rigs there.
Mr. Smith of Idaho. It looks to me as though the court was conniving with these people to euchre you out of the proceeds.
Mr. TESTERMAN. I could not say about that, of course.
Mr. TESTERMAN. The drilling outfit, as I understand, was hauled back to the site from where the Texas fellows took it and taken over by the Federal receiver.
Mr. LARSEN. If he took that over it looks to me as though the funds would have been turned over with the property.
Mr. TESTERMAN. I do not know what the court's order was. The receiver told me that the drilling machinery was a wreck when it came back, but it was new when they took it. I drilled one well with it, and when they turned it back to the receiver I was told it was all junk stuff. Of course, I have never seen it since then. I might say in addition to that that the well I drilled, the one that is producing now, flowed about 200 barrels on the 22d.
The CHAIRMAN. On the 22d of what?
Mr. TESTERMAN. We could not run anything from that well on account of this injunction. I went up and talked to my attorneys and they put it into the hands of an Oklahoma receiver, and he was dispossessed by the Texas authorities after that. What the well made between November 7 and April 20 I do not know, but it was turned over to the receiver of the United States as a dry hole, the report says. I
made three trips to talk to Mr. Delano, and finally proposed that I would pay all the expenses if he would let me go on the well and open it. He said it was dry. I finally got someone down there to open it; I got them to clean it out and they cleaned it out. I have a son who is permitted to go on there--and we stood around and watched them, and they took out a lot of old stuff and after they got it out the well went to flowing and it gave 200 barrels of oil. That was the condition of the initial well.
The CHAIRMAN. How many wells are there on the Mellish properties?
The CHAIRMAN. Have you any idea how much oil the receiver has produced from the Mellish properties?
Mr. TESTERMAN. No, sir; I have not.
Mr. BURTNESS. Have you any approximate figures showing what the Texas receiver produced from the wells?
Mr. TESTERMAN. Only conflicting reports, Mr. Burtness. I have a very good friend who has tried to keep in touch there and he told me the first well was making about 1,000 barrels a day when the Texas folks had it.
The CHAIRMAN. How many wells did the Texas people have in operation?
Mr. TESTERMAN. I could not tell you, but they were drilling several wells, five or six.
Mr. GORE. You see, they would not allow him to go on the property and he could not keep up with them.
Mr. BURTNESS. I would like to ask with reference to the form as well as to the dates of the assignments from the individual claimants to the Mellish Corporation?
Mr. GORE. Senator Testerman will have to furnish that information.
Mr. TESTERMAN. My attorney advised me that it was necessary to drill a well upon each claim. I drilled two wells down the river and got nothing and after that we put the claims into an association under what they call the five-claims act. All I know is what he told me. And we assigned those claims to that association, called the Mellish Consolidated Association.
Mr. BURTNESS. Was that done before the discovery of oil?
Mr. TESTERMAN. It was done before the discovery of oil; that is, the assignment commenced before that, and we were some time in getting the parties together, who were here and yonder, you know, and I rather think some of it was done before we got oil; in fact, I know it was. But the question came up about the legality of it and we reorganized as soon as we got oil and we made a new assignment, that is, we assigned this to the Mellish Association for the purpose of operating under what he called the five-claims act. I do not know what it was.
Mr. BURTNESS. Have you a copy of one of those assignments?
The CHAIRMAN. Did you have in mind any law regarding the assignment or any law that prohibited the assignment?
Mr. TESTERMAN. No, but he thought they could be assigned.
Mr. TESTERMAN. No, it was made before; I think part was made before we discovered.
Mr. Dyan. When you created this association did the original locators maintain their proportional interests in the property?
Mr. TESTERMAN. Yes, sir. But after we drilled the wells and this litigation came on then is when we reorganized and issued it into units, because we had to have money and could not get it.
The CHAIRMAN. Did you reorganize after you discovered oil?
The CHAIRMAN. Is that the assignment you speak of when you refer to an assignment?
Mr. TESTERMAN. Yes, Mr. Chairman. They first made an assignment to the Mellish Consolidated Placer Mining Association of all of their interest in the Mellish Association. Then we drilled the wells and when this litigation came on we reorganized, so that we might issue units in lieu of those interests they had on the first organization.
Mr. GORE. I think they were under the impression that they had to put down a well on each claim and needed people to put up money, so they organized this holding company so that those who put up the most could have the most.
There are one or two verbal points which I would like to mention. After the word “citizen” I should think the words "of the United States” should be added.
The CHAIRMAN. What bill are you referring to?
Mr. GORE. The Sanders bill. And after the words “lands and oil and gas deposits" I rather think the words “belonging to the United States and” should be added. I consulted with Colonel Roote about it but he does not think it is material, so I am not disposed to insist on it but merely suggest it for the consideration of the Committee.
Mr. LARSEN. Reverting to the quantity of land, the difference between 480 acres and 640 acres, you stated the condition with reference to Mr. Testerman and his associates. Do you know whether or not the same condition exists with reference to claimants in other cases?
Mr. GORE. I could not speak generally as to the Burk Divide people.
Mr. LARSEN. Then so far as you know if the committee were to adopt the scheme of 640 acres would it result in any of the claimants getting more than twenty acres per person?
Mr. GORE. I rather think it would, and I think Congress has permitted that where they need larger tracts for development, and I think they would be permitted to share accordingly.
Mr. LARSEN. It is possible you did not quite understand my question. If there were 160 acre lots and eight persons filed on the 160 acres that would mean 20 acres to each, and my question was whether in the other cases they had as many as eight persons.
Mr. GORE. Yes, sir.
Mr. LARSEN. I am not speaking of the Testerman claims but I am speaking of the other claims.
Mr. GORE. Yes, sir. I think the Burk Divide claims were filed in accordance with the placer mining law, eight claimants to each 160 acres, and another group was the Burk Burnett.
Mr. LARSEN. Then nobody would get more than twenty acres?
Mr. GORE. You see, it would be merged, in a sense, and twenty acres would not be allotted to one man and twenty to another, but it would result in somewhat of a community interest.
Mr. BURTNESS. So that we may have a little more definite reference to this matter in the record as to the date of the assignment I would like to state that I find in volume 2 of the transcript of the evidence, at pages 680 to 692, inclusive, what is known as the Mellish Exhibit No. 10, and which appears to be a copy of the so-called assignment from the various claimants of the Mellish Consolidate Placer Oil Mining Association
in Red River. I do not believe it is necessary to insert the document itself because it is rather long, but the agreement is substantially this: After setting out the locations made by all of the individuals and their names, as well as the name under which they operated each claim, there is this language:
‘Now, therefore, it is hereby agreed between the parties herein above named, and whose names are hereto affixed, that said mining claims above described shall be grouped into an association composed of the locators herein before named, to be known as the Mellish Consolidated Placer Oil Mining Association in Red River, of which the parties hereinbefore mentioned shall be members, and their interests therein shall be in proportion to their respective interests in the claims hereinbefore described, which interest is an undivided one-eighth in each of said placer oil mining claims above described for each of the locators thereof."
Then later in the exhibit I find this language:
“It is further agreed, by and between the parties hereto, that each of the said parties shall have a one-eightieth interest in said Mellish Consolidated Placer Oil Mining Association in Red River for each of the said placer oil mining claims of which he is a locator, to wit.”
Then the names are set out, and this instrument is dated January 2, 1919.
Mr. GORE. I think the reason for that one-eightieth, Mr. Congressman, was this: They did not know but that one of the claims might be dry, and they tried to provide so that if one produced and another did not they would all participate.
Mr. BURTNESS. And it was for that purpose the adjustment was made?
Mr. BURTNESS. As I say, the instrument is dated January 2, 1919, but a great many of the acknowledgements are dated later.
Mr. GORE. That grew out of this circumstance: You must remember that there was a great rush into this oil country on the Burk Burtnett and Burk Burnett extension, and there were thousands of people who rushed into those fields from the four quarters of the earth, and it was a difficult matter to get these acknowledgements after they had dispersed.
Mr. Burtness. I simply mentioned the fact that the signatures were apparently attached at a date later than the date of the instrument.
Mr. DRIVER. It seems to me from the language which has just been read that this was an association of these various interests for their mutual convenience and operation of the property?
Mr. GORE. Yes, sir.
Mr. BURTNESS. Under the terms of this very instrument Tom Testerman and others were appointed trustees.
Mr. DRIVER. My reason for mentioning that was to ascertain how far the limitation fixed on the acreage would affect these particular claimants. There has been some discussion here about 640 acres and 480 acres being the limit, but if the particular interests of these various claimants are transferred to this association I do not see that the limiting of the acreage would affect them particularly.
Mr. GORE. You might be correct and I rather hope you are.
Mr. BURTNESS. Still the language used here, as far as the assignment is concerned, setting out the names, and so on, goes on to provide this:
“Do hereby sell, transfer, convey, and assign to the said Mellish Consolidated Placer Oil Mining Association, all of their right, title, and interest, forever.”
Mr. Driver. And they selected trustees to operate the propetrty?
Mr. BURTNESS. Yes; later selecting trustees of the association to operate the properties.
Mr. GORE. I merely want to refer to the fact that Mr. Barcley stated that the bill as drawn would afford relief to Texas claimants who in good faith complied with the conditions, and I am disposed to agree with him in that conclusion. As you will remember, Judge Dyar suggested that he was not resisting legislation to lease these lands to the pioneers who went there and developed them, so that the contest seems to revolve mainly around the proceeds.
Mr. BURTNESS. The reason I mentioned this matter of the assignments was due to some statements made yesterday by Mr. Macey, which statements seemed to indicate that these assignments
, in the form they are, might technically be contrary to the provisions of the placer mining act, where they were made prior to the discovery of oil. That is the reason I was interested in trying to get just what the assignments were and to determine whether they were really anyting more than assignments merely for the convenience of the parties, and they seem to retain specifically in that instrument, which was executed prior to discovery, the original interest which they had.
Mr. Gore. As I recall, there was an act passed March 2, 1911, which provided that claims regularly made could not be held void on account of transfers. You know it grew out of some decision, I think, by the Supreme Court.
Colonel RootE. No; the Land Office.
Mr. GORE. Well, that raises a very interesting question and one which I would like to look into further. Gentlemen, I thank you. I will submit for the information of the committee, to be printed in the record, an amendment prepared by Congressman McClintic, which directs the recovery of royalty from those who operated the properties between the ouster of Senator Testerman and his associates and the taking over by the Federal receiver. My own judgment is that it ought to direct the Government to recover all the proceeds and not merely the royalty, that is, recover all the proceeds where they did not act in good faith and did not make discovery and do not comply with the conditions set out in the bill.
(The amendment referred to follows):
“S. 4197. Page 4, line 2, change period to colon, and add the following (at the end of section 4):
Provided, That the Secretary of the Interior is authorized and directed to take such legal steps as may be necessary and proper, to collect from any person or persons who shall not be awarded a permit or lease under this act an amount equal to the value of all oil and gas produced by him or them from any of said lands prior to the inclusion of said property in the receivership, except oil or gas used on the property for production purposes or unavoidably lost and except other reasonable and proper allowances for the expenses of production: Provided, That of the amount so collected, 124 per cent shall be reserved to the United States as royalty and the balance after deducting the expense of collection shall be paid over to the person or persons awarded permits or leases under this act, as their interests may appear."
The CHAIRMAN. Yesterday we promised to permit Colonel Roote to offer something.
ADDITIONAL STATEMENT OF COL. JESSE B. ROOTE.
Colonel Roots. It was with reference to the alleged transfer of the Burk Divide property. It will only take me a very short time to present that, because I have the documents.
I am under the necessity of taking a very short time of the committee on a matter of personal privilege, Mr. Chairman.
The CHAIRMAN. We would like to close to-day, Colonel Roote.