production out of the Burk Burnett town site is possibly one-quarter of a mile northwest, and then there is a dry strip of territory in there [indicating] that was drilled, say, in December, 1918, or January, 1919; that was when they drilled that territory up there. The next well put in was through two derricks possibly a mile and a half away from Burk Burnett. Mr. DYAR. To the northwestward? Mr. TESTERMAN. Yes, sir. Then the next derricks that were up was in connection with the Texas Chief and Burk-Waggoner, Burk Senator, and Burk Bet. Mr. DYAR. Where is the Burk Waggoner? Mr. TESTERMAN. Down here at the northeast corner of block 84. Mr. DYAR. That does not locate it to me at all. Mr. TESTERMAN. It is not on the map here. If you had a Texas map I could show you. Mr. DYAR. Could you point out the approximate location? Mr. TESTERMAN. It is up in here [indicating]; it is down southeast of this; west of Burk Burnett and southeast of the river bed. Mr. DYAR. Did that produce? Mr. TESTERMAN. Yes, sir. Mr. DYAR. When were they put in? Mr. TESTERMAN. That well was drilled in some time in June. The four wells were drilled in there practically at the same time. Mr. GREEN. Mr. Testerman, north of the river, in Oklahoma, there have been a dozen wells drilled and all have been dry. Mr. TESTERMAN. Yes, sir, and there never has been any oil produced. The CHAIRMAN. Did you have experience in oil drilling and development before you went in here? Mr. TESTERMAN. Yes, sir; for 20 years. The CHAIRMAN. What caused you to think you would find oil here, although I do not want to go into your trade? Mr. TESTERMAN. We have in our State what we call a geological school, and those students, those young boys, we can employ to go out and drive over this country and we had them do that to see what we could find. We had driven over oil fields and one of the boys had been out over this, and they said it was probable looking territory. We went down there and looked it over and were unable to find any structure that had any promise. We had had a half dozen geologists down there, what we call high-powered men, to whom we pay $125 a day, and they had never been able to locate a structure anywhere no contour lines, no outcrops, and no rocks to indicate oil. This geological map that is submitted here was made from the logs of the wells according to the reports of the receiver, and it could not be made in any other way, because there is no outcrop there. However, the only evidence we had was an outcrop on the bank there which did not really dip to the south but was reversed to the north. The dip should have been to the southwest but the dip was on back to the northwest, and that indicated something, and that is what we figured it from. We ran those lines down and in our minds we figured that this animal was lying down there about that river bed; in fact, the theory of the geologists in that country is that the upheavals lift the earth on top in place of pulling down, and that is the reason the boys figured on it there and that proves to be true in many instances, and in many instances the only evidence you can go by is along the bluffs, and you have to calculate that. But there was no chance of running instruments over this thing and getting contours. The sand in the river is anywhere from 12 to 50 feet deep while the red base is all the way from 150 to 850; it varies very much over the country. Usually a man is said to be insane in the oil business who will prospect without geological advice, and that is what we did, and we located our wells there on that advice. The CHAIRMAN. The geological advice was better than your legal advice? Mr. TESTERMAN. A great deal better. I fully agree with you. There is quite a bit of this river bed in which I think we could find more evidence than we did up there, but we could not get it there. Mr. SCOTT. Who put the first well down in the Red River oil field? Mr. TESTERMAN. I put the first one down, so they tell me. Mr. Scort. I mean south of the river and north of Burk Burnett. Mr. TESTERMAN. I drilled the first well there. I drilled the first well northwest and southeast. I drilled two wells down below Burk Burnett but we got a very slight showing of oil; we missed the structure or had broken structure; it did not prove to be good sand. Mr. BARBOUR. In what fileds did you have your experience? Mr. TESTERMAN. In Oklahoma. Colonel ROOTE. Will you just let me for a moment call your attention to a matter that has not been mentioned but which I think is quite significant. You will recollect that Mr. Macey leveled some criticism at some provision in the Sanders Bill, I mean lines 18 to 24 on page 2, because that provision would enable the Burk Divide people to secure that land. It is those lines that have been mentioned by a number of gentlemen here. I very frankly stated that that was put in there on the theory that the persons who were there first, in good faith, ought to be given the land, and of course that would give them the land. We were criticized for that; some of the gentlemen said it was a bill directly for the Burk Divide. Now, I call your attention to bill 12544, drawn by Mr. Macey, the gentleman who was here up until yesterday, and introduced by Mr. Vaile at the request of Mr. Macey and Mr. Owens, because Mr. Vaile told me so. Insert on line 9, page 2, of that billThe CHAIRMAN. What bill? Colonel RoOTE. H. R. 12544. The CHAIRMAN. Is that another one? Colonel ROOTE. Yes, sir; introduced by Mr. Vaile at the request of Mr. Macey, the representative of the Denson group of claimants on September 1. Now, in line 9, page 2, is this provision-up to that point it follows the departmental bill and then they inserted this: Provided, however, That in the consideration and issuance thereof the Secretary of the Interior shall give preference to such parties in said suit as may have made application for leases or permits under and within the time prescribed in an act of Congress entitled (that is the leasing act) and in case of conflicting claims thereunder, grant leases or permits to one or more of them as shall be deemed just." When Mr. Macey and Mr. Owens drafted this bill on behalf of the Denson group and at whose request Mr. Vaile introduced it, they were of the opinion they were the first to file applications for leases and told me so, and there they inserted in this bill a clause that would have required the Secretary of the Interior to grant a preference to those who had filed applications and they did not think we had filed any applications at all, and told me so. The CHAIRMAN. Do any of the bills contain this provision, taken from section 18 of the oil leasing act, that no claimant for a lease who has been guilty of any fraud or who had knowledge or reasonable grounds to know of any fraud, or who has not acted honestly and in good faith, shall be entitled to any of the benefits of this section? Colonel ROOTE. That is in our bill, Mr. Chairman. Section 5 makes all of the provisions of the leasing law applicable, except as otherwise provided in here. Therefore, that provision, if you will read section 5 of the Sanders bill, page 4-the bill of December 18 "SEC. 5. That except as otherwise provided herein the applicable provisions of the act of Congress approved February 25, 1920, entitled 'An act to permit the mining of coal, phosphate, oil, shale, gas, and sodium on the public domain,' shall apply to the leases and permits granted hereunder, including the provisions of sections 35 and 36 of said act relating to the disposition of royalties. Therefore it adopts all of the provisions of the leasing law where these special provisions do not take the place of them. I think that covers it; it was so intended, at any rate. The CHAIRMAN. You would have no objection specifically to incorporate it? Colonel ROOTE. No, sir, I would have no objection to specifically incorporating it, if there should be any question, although I think this section here, making the provisions of the leasing law applicable, would cover it. However, we have not the slightest objection to that going in and wish you would put it in if there is any question about that. Mr. DYAR. That reminds me of one thing I forgot. The Sanders bill provides for a royalty or, rather, a payment in terms to the Government. Really, the payment is the other way. It only gives the Government a one-eighth of the net proceeds in the hands of the receiver. Now the leasing act and the Secretary's bill, or the departmental bill, are based upon a one-eighth of the gross proceeds, substantially. Colonel ROOTE. That matter we had up for three or four weeks with the Secretary of the Interior and he finally agreed to this proposition. Mr. DYAR. I know, but it does not look right to me. If you are going to pass these bills at all, on that basis, I do not see any reason why you should cut down the royalty to the Government to a one-eighth of the net proceeds, rather than to apply the principle of the leasing bill and make it an eighth of the gross proceeds. I thought that they had changed it, until I spoke about it. The other day, you will remember, I said The CHAIRMAN. In the leasing bill we make provision for oil unavoidably lost or used in production. Mr. DYAR. Oh, yes; that part of it is all right. What I mean is the fund in the hands of the receiver has been subject to all the expenses of development, administration and everything else and it has been diminished by sum 22 or 23 per cent of its total, on that account, and it would have been if they had been in possession doing the development themselves. The CHAIRMAN. What suggested change would you make in the Sanders bill to comply with your idea? Mr. DYAR. I do not know just what change in the language; but the Secretary' 3 bill has a provision which is The CHAIRMAN. Get the bill and let us see what it is. Mr. DYAR. It is one-eighth of the oil. The CHAIRMAN. What section are you reading from? Mr. DYAR. I am not reading. Mr. BARBOUR. It is section 4. Mr. DYAR. Section 4, yes-12 per cent of the value at the time of production, except oil or gas used on the property for production purposes, or unavoidably lost. The CHAIRMAN. Where is that? Mr. DYAR. Section 4 of the Sanders bill. The CHAIRMAN. Where is the language "at the time of production?'' Mr. DYAR. Section 4. That is all the way through. But when it comes to the fund in the hands of the receiver, it is 12 per cent-it says of the proceeds of the oil and gas that have been produced or may hereafter be produced by the receiver of said property, after deducting the proper proportionate part of the cost of said receivership and the cost of administration and production. That is an entirely different basis, you see. The first sentence with the two provisions for what was retained from the original production before the receiver took charge and for what is to be paid after the lease is all right—produced by the lessee after he gets the land; but when it comes to deal with the moneys in the hands of the receiver, they deduct all expenses of operation, production and administration before taking out the percentage which is to go to the Government or which the Government is to retain. Colonel ROOTE. May I just say a word on that, Mr. Chairman. That matter was discussed at great length by the Interior Department officials. The figures were taken into consideration and it was our argument that if we had not been disturbed in our possession there we would have developed this property for a great deal less than what it cost to develop it under the receivership and in the manner in which it was developed, and that if the Government took out 121⁄2 per cent of the gross amount produced, it leaves very little of past production for those to whom leases will be granted. Now we had all the figures and the matter was considered for weeks. This matter was considered by the Secretary of the Interior and, after due deliberation, he has agreed to the provision in section 4 of the Sanders bill, the last Sanders bill, H. R. 13475, and we stated the other day, or at least I did, in reply to a question by Judge Raker of California, with respect to the money expended by the Government in this litigation, that if the commitee sees fit to take out of all this fund, first, the $117,000 that the three departments of the Government have spent, why we would make no objection to it, and then to divide what is left in the proportions set forth, or as provided in this section 4. But if we are first to give the Government the 12 per cent of the oil or the proceeds of the gross amount, if you will just stop and figure how much has been taken out and then what is left on hand in the receiver's treasury, why the Government will get more than we will. And, in a spirit of compromise-the Secretary did not even suggest that the expenses of this litigation be first deducted, but it has been advanced by Major Dyar, with great earnestness and zeal and it seems to me to have impressed the minds of some members of the committee, and I stated the other day The CHAIRMAN. I think we first interrogated him about the expenses. Colonel ROOTE. Yes; we are willing for the committee to insert somewhere in the bill a provision that, first, out of all this fund, the Government shall be reimbursed for all of its expenses, not exceeding $117,000, or whatever the gross amount is, and then let this provision as to royalty, that has been approved by the Secretary of the Interior, stand. The CHAIRMAN. What percentage of the funds on hand came from oil production on the Burk Divide, do you figure-roughly? Colonel ROOTE. I have no means of knowing. I can only guess at it, Mr. Chairman, because the books of the receiver are not available for our inspection; but certainly more than half. The CHAIRMAN. And from where does the other come? Colonel ROOTE. The other comes from Mr. Testerman's property and then there is some land The CHAIRMAN. How much from the Testerman property, as a guess? Mr. TESTERMAN. Something like $250,000 or $300,000. We do not know, it is simply a guess. Colonel ROOTE. I do not know; it is a pure guess. Mr. DYAR. All the rest that is not on your claims is on the Testerman claim? Colonel ROOTE. No. The lines of our claims do not quite go to the middle of the river, and there is a strip of ground in there on which there are several wells. That was mentioned today. but the hearings had been prolonged so much that I did not go into it The CHAIRMAN. On whose claims are those wells? Colonel ROOTE. I do not know. One is on the Pacific-Wyoming. It is called the Roberts claim. The Pacific-Wyoming has a claim of 20 acres and there are one or two wells on that, and then The CHAIRMAN. Did they expend any money on a well? Colonel ROOTE. Yes, sir; they drilled a well, the Pacific-Wyoming drilled a well, to the sand. Mr. DYAR. What do they call that well; I did not know that. Mr. DYAR. It was not the Silver Moon Well, was it? Colonel ROOTE. No; that is well No. 181. It is the Roberts Well, or the Roberts placer claim well. The Pacific-Wyoming Company drilled that well and that is the only company, outside of the Testerman & Burk Divide, that did drill a well. Mr. Dyar. Did they get oil in there before the receiver took charge? Colonel ROOTE. They lost it; but I think the receiver got oil in the same well, is my understanding of it. Mr. DYAR. My impression has been all along, but it is only a guess from the hearings, that probably five-sixths, pretty near all, of the money in the hands of the receiver, is money out of lands embraced in your claim. Colonel ROOTE. It is nothing like five-sixths of this $3,000,000. There is a lot of this embraced in the flood plain here. Mr. DYAR. Oh, no. In the figures I gave you to-day, he segregates the river-bed wells entirely from the flood-plain wells. Colonel ROOTE. Yes; but the gross amount on hand now covers both flood-plain wells and river-bed wells. Mr. DYAR. Oh, yes. Colonel ROOTE. Yes; the gross amount on hand. Mr. DYAR. And the amount returnable to Texas claimants of flood plain lands is probably somewhere between five and six hundred thousand dollars. Colonel ROOTE. I think it is very much more than that. Mr. DYAR. You think it is? Colonel ROOTE. Yes; I think it is a million dollars at least. And then there are, I believe, six wells north of the Burk Divide, drilled by the receiver north of our line. Who they will go to, I do not know; except I am quite sure one of them will go to the Pacific-Wyoming Co. Mr. TESTERMAN. There are three claims to them. Colonel RooTE. I do not know. Mr. TESTERMAN (continuing). So I understand. Mr. DYAR. Let us figure a little on that; it is easy to reach it if I have those figures. You can figure it out, except we do not know the expenses chargeable against it. It would be thirteen-sixteenths of the five million and something, less expenses. In Colonel ROOTE. And then there is this, Major, that has not been mentioned. this money that is still on hand, that the receiver has, a part of it will have to be returned to those north-shore riparian claimants, A. E. Pearson and others. Mr. DYAR. I do not think they got a well. Colonel ROOTE. My goodness alive, they got a splendid well, No. 181. Mr. DYAR. The ruling of the court is that the present medial line is to be taken as half way between the present banks of the river Colonel ROOTE. I am mighty glad of that. Mr. DYAR. And all theirs are north of the medial line, so that the United States will get every one of those wells. Colonel RoOTE. There are several of them northwest of us. Mr. DYAR. That may be true. Colonel ROOTE. There are a number of them that I do not know who will get. Mr. DYAR. Now the receiver's account, somewhere, by direction of the court, keeps the production of each well separately, and this can all be ascertained when it is necessary to know it. Of course, it would be of interest and of some value to know it now. Colonel ROOTE. Then on the delta property which comes from the north, there are some wells. |