440 R. ARNOLD OIL GEOLOGY IN RELATION TO VALUATION 



tion of these estimates into dollars and cents — the crucial test of the 

 engineer, the finished product of the appraiser. 



UTILIZATION IN RELATION TO TAXATION 



It seems a far cry from the paleontological laboratory or geologic ex- 

 pedition to the problems of the Treasury Department, but such is not the 

 case under the exigencies of war. "Politics makes strange bed-fellows'^; 

 likewise war. Among the problems developing from the war-revenue 

 measures were those of valuing the oil and mining properties of the 

 country and the evolving of equitable methods of arriving at depletion 

 and depreciation allowances in computing income and excess-profit taxes. 



The writer has had the privilege, in collaboration with the most effi- 

 cient oil geologists of the country, of undertaking the solution of these 

 problems for the Internal Eevenue Bureau. The country has been di- 

 vided up into six districts, based on the geographic distribution of the 

 producing territory of the United States, and each district is under the 

 supervision of a competent geologist. 



The work was undertaken with a great deal of trepidation, as the mag- 

 nitude of the task was obvious. The question of valuation is being han- 

 dled through the accumulation of data regarding Jjona fide transfers of 

 prospective, proven, and producing oil properties, supplemented by the 

 consideration of such other factors as enable the appraiser to reach a 

 proper conclusion as to values. The solution of the depletion problem 

 involves the preparation of decline and cumulative production curves 

 with which the reserves of each tract of land in the country may be ap- 

 proximated and the proper depletion allowances computed. The depre- 

 ciation question, hinging more or less on the rate of depletion, is being 

 handled as a supplement of the depletion work. The problems, involv- 

 ing, as they do, millions of dollars in taxes, are practically all related 

 directly to oil geology and are being worked out by the best oil geologists 

 the country affords. This, which is probably the most striking illustra- 

 tion of the application of oil geology to valuation, now being carried out, 

 is only one of the many problems in which this new science is being 

 applied to one of our most important industries. 



