SUGGESTION FOR CONSERVATION OF PETROLEUM 685 



lem. The Northern Securities Com- 

 pany was dissolved, but the merger still 

 exists as a fact. And there are other 

 railroad combinations which are vir- 

 tually mergers — through the great 

 financial institutions. The fact is, such 

 combinations are not evils in them- 

 selves. 



Combination promotes economy and 

 efficiency. It prevents waste of economic 

 energy, and as such it is a good thing. 

 But monopoly is the perversion of a 



good thing, which the Government 

 seeks to prevent without sacrifice. In 

 the case of railroads and water-power, 

 fixing rates appears to be the best way 

 to accomplish these results, and it would 

 seem that these results could be accom- 

 plished with greater facility in the case 

 of water-power than of railroads. 



Regarding the question of jurisdic- 

 tion — whether state or Federal — the 

 usufruct doctrine can be applied with 

 equal facility under either jurisdiction. 



SUGGESTION FOR THE CONSERVATION 



OF PETROLEUM 



By ROSWELL H, JOHNSON 



THE strong appeal that ex-President 

 Roosevelt's efforts for the con- 

 servation of natural resources 

 have made is surprising and significant. 

 That the Nation will henceforth judge 

 legislation and executive orders largely 

 from this standpoint is assured. It is 

 rather remarkable, therefore, that the 

 greatest influence to-day making for the 

 needless overproduction of petroleum 

 is the lease form which the Depart- 

 ment of the Interior, under Mr. Roose- 

 velt, has forced upon those operators 

 who leased from the Indians. 



The business of producing oil is nat- 

 urally one of rapid growth, because of 

 the large prizes which follow success 

 and the relatively small amount of capi- 

 tal which is necessary to engage in it. 

 In this respect it resembles the mining 

 of gold in contrast to the mining of 

 other metals. When, therefore, gov- 

 ernmental regulation adds to this a le- 

 gal stimulus to oil-production, the con- 

 servation of petroleum suffers severely. 



In the oil fields off the reservation it 

 is customary to charge an annual rental 

 upon leased lands until a well is drilled, 

 when a royalty on the oil produced is 

 paid. But when an operator leases 

 from an Indian, the Indian Office forces 

 him to pay $1.15 an acre a year the first 



two years; $1.30 an acre a year the sec- 

 ond two years, and $1.75 an acre the 

 fifth year until he drills ; and if he 

 fails to drill in five years, to lose the 

 lease. The effect of these provisions is 

 obvious. It forces operators to drill in 

 spite of overproduction. It prema- 

 turely tests large areas of land, and 

 brings into development pools which 

 would otherwise lie reserved for years. 



The demand of some rental for every 

 year that a well is not drilled is an old 

 feature of oil leases which should stand, 

 but the automatic enlargement of this 

 payment from year to year and the lim- 

 itation of five years are wholly unneces- 

 sary and work a great disadvantage to 

 the Nation. 



It might be said that the department 

 must look after the interests of the 

 Indian first, even though the welfare 

 of the Nation suffers; but the Indians 

 collectively would probably receive 

 more money from a flat rental with no 

 time restriction, because of the larger 

 number of leases which would be so 

 carried on Indian lands, and because 

 the oil coming on the market in re- 

 sponse to its normal demands would 

 bring a better price than when pro- 

 duced without effective demand, as at 

 present. 



