lessee to pay any increased or additional taxes levied as the result of operations by lessee on the amount of production obtained. Damages. A special clause requires the "lessee" to pay for damages to growing crops. While at first glance this stipulation appears to be in favor of the land owner or "lessor," this is not always the case, since it may preclude the land owner or "lessor" from obtaining compensation for other damage done. Having beer specific as to one clause or object, it might be construed as a waiver of land owner or "lessor's" rights to demand reimbursement for damages other than those specifically mentioned. Consideration, Bonus, Royalty.-In consideration of the lease, the land owner or "lessor" usually receives a sum of money, paid at the time of delivery of the executed document. This payment makes the contract legally binding. When this consideration exceeds the limits of a nominal sum (for instance, ten dollars), which is sufsufficient to make the contract valid, it is usually referred to as a "bonus" or "premium." Such bonus or premium may vary with the circumstances surrounding each case. It may range from twenty-five cents per acre in "wildcat" territory to several hundred dollars per acre in proven territory. Such a bonus or premium may consist of an all-cash payment at the time the transaction is consummated, or may consist of a part cash-down payment and the balance to be paid from the proceeds of the sale of the "lessee's" share of the first oil produced from the lease. Such bonus or premium, whether all cash down payment, part cash part oil payment, or all oil payment or its equivalent, is nevertheless distinct from, and in addition to, the "royalty" provided for in most oil and gas leases. Perhaps the most important compensation, however, to the land owner or "lessor," where exploration has been rewarded with production, is the "royalty." "Royalty" ordinarily consists of an agreed and stated percentage of either the gross production or the gross proceeds derived from the sale of the gross production of both oil and gas. This percentage or royalty may, according to agreement, be paid either in cash or in oil. The percentage of royalty exacted by the land owner is usually one-eighth (122 per cent) in "wildcat" territory, and sometimes as high as one-half (50 per cent) in proven territory. Many other factors influence the amount of bonus and royalty to be paid in consid eration of oil and gas leases. Not infrequently provision is made for a graduated scale of bonus and royalty according to the size of the wells, the gravity of the oil, the gasoline content of the gas, the depth of producing horizon, the nearness to pipe lines, or other transportation mediums such as railroads or water routes, and last, but not least, the distance to refineries and markets. Casing Head Gas Royalty. Recent development in the production of natural gas gasoline makes necessary a special provision for royalty to the land owner or "lessor" from this source. In the past, most leases have been written without such provisions. Escrow Agreements. An escrow agreement is an agreement whereby a third party (usually the purchaser's bank) acts as "escrow agent" of the purchase price or down payment paid by the purchaser, and the executed instrument, deed or lease, by the land owner. This is for the purpose of protecting both parties during an agreed period, to permit counsel for purchaser to examine title and gives the land owner additional time to correct defects in the title. The bank has really no interest in the transaction. It is merely an accommodation to the parties when they accept for deposit, in a special trust account, the purchase money, together with papers, usually in a sealed envelope, with the bank's instructions written thereon. "Escrow agreements" are sometimes employed by shrewd operators for obtaining what is commonly termed a "free ride" on a well in process of testing. With this end in view, usually only a small portion of the purchase money is deposited in escrow by the purchaser as against the land owner's executed instrument. Should the test result in a failure or only a small producer, then either the negligible sum deposited in escrow is forfeited to the land owner or title is rejected upon some technicality and the amount deposited is withdrawn and papers released to the land owner. There are many ways of obtaining the same result without loss or even risk on the part of the "escrow specialist," even when the full amount of the purchase money is deposited in escrow. The process simply entails the use of escrow agreements so worded as to meet the occasion. Oil field speculation has become a rather lucrative business, especially in newly opened districts. The operator, or speculator, as the case may be, closely watches prospecting and all developments, and on receiving news of an oil or gas strike rushes to the locality and escrows, options or leases, all available property with as little. expense as possible. When producers who really wish to drill come to the field later, they are asked exorbitant, and in many cases prohibitive, prices. Examples of this may be seen in every newly opened oil district, and have been common in mid-continent fields. Lastly, it may be mentioned that from the standpoint of bona fide development, the operations of the "escrow specialists" and "rider boys" are very undesirable, both from the standpoint of the land owner and the real oil and gas operator. Digest of State and Federal Laws on Mines and Minerals CONSTITUTIONAL PROVISIONS (Article X, Constitution of Arkansas, 1874) Section 1. The General Assembly shall pass such laws as will foster and aid the agricultural, mining and manufacturing interests of the State, and may create a bureau to be known as the Mining, Manufacturing and Agricultural Bureau. Section 2. State Geologist. The General Assembly, when deemed expedient, may create the office of State Geologist, to be appointed by the Governor, by and with the advice and consent of the Senate, who shall hold his office for such time, and perform such duties, and receive such compensation, as may be prescribed by law. Provided, that he shall be at all times subject to removal by the Governor for incompetency or gross neglect of duty. Section 3. Exemptions from Taxation. The General Assembly may, by general laws, exempt from taxation for the term of seven years from the ratification of this Constitution the capital invested in any or all kinds of mining and manufacturing business in this State, under such regulations and restrictions as may be prescribed by law. Law Creating the Office of State Geologist AN ACT to Establish the Office of State Geologist and Provide for a BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: BE IT ENACTED BY THE PEOPLE OF THE STATE OF ARKANSAS: Section 1. Office of State Geologist created. Under authority of Section 2, Article 10, of the Constitution of the State of Arkansas, there is hereby created the office of State Geologist, which office the Governor is empowered to fill, with the advice and counsel of the Senate, by the appointment of a person of known integrity and competency, who shall be a graduate of a reputable college or University and who has a practical and scientific knowledge of geology and mineralogy, and who shall hold office for the term of two years. Provided, that said term shall expire at the same time as the term of State officials, elected for biennial periods, and that the State Geologist shall be at all times subject to removal by the Governor for incompetency or neglect of duty, after notice and a hearing. Section 2. Duty of Geologist. The said State Geologist shall, upon consultation with and approval of the Governor, establish and equip a chemical laboratory for the carrying on of this work and appoint suitable assistants, the said Geologist and his assistants to constitute the Geological Corps whose duty it shall be to make a geological survey of such sec tions of this State as he may deem necessary and proper to ascertain the mineral properties of the State, this survey having for its object: 1. An examination of the geological structure, including the dip, magnitude, order and relative portions of the several stratas, their ore-bearing qualities or usefulness in the production of oil, gas, water, building stone, road materials or other valuable minerals; the accessibility of same for mining or manufacture, and the most economic means for their production. 2. An examination of the various soils of the State for the determination of their chemical constituency and agricultural adaptability, with recommendations for the preservation and improvement of their fertility by the addition of other materials, such as the phosphate rocks, limestones, charls, marl and greensands found in various parts of the State, with the view of ascertaining their value for use on deficient soils. 3. An investigation of the available water power of the streams of the State, and of the problems of flood control and land drainage, so that information will be available to citizens of the State that will enable them to develop the hydro-electric possibilities and reclaim the rich agricultural lands along these waterways. 4. To investigate methods of mining and mineral production, and devise means for the conservation of the natural resources, and to make suggestions for safeguarding the lives of miners and preventing explosions and other accidents; co-operating in this work with the State Mine Inspector and the State Oil and Gas Inspector. 5. To collect such specimens of rocks, ores, soils, fossils, organic remains and mineral compounds, as will exemplify the geology, mineralogy and agronomy of the State, and deposit said specimens, accurately labeled and classified, in a room to be provided by the Commissioner of Mines, Manufactures and Agriculture, who shall preserve them for exhibition. 6. To obtain records of the names and addresses of all individuals, companies or corporations engaged in mineral production in the State, together with information as to the capacity, output and holdings of such plants, amount of capital invested, number of persons employed, value of products and other data indicative of the business of such establishments. 7. To obtain a list of the owners of undeveloped mineral properties, and information as to character of mineral, extent of deposit, location, convenience to transportation, placing this at the disposal of persons seeking investments in mineral properties. 8. To prepare an accurate geological map of the State, showing by colors, symbols and other appropriate means, the exposed or surface formations, topographic contours, soil types, physical features and areas of mineral-bearing ores, with comprehensive data concerning the stratification of rocks and underground conditions, for publication with the reports of the survey. 9. To examine and analyze specimens of minerals submitted by citi zens of the State and report upon their intrinsic worth or economic value, and to collect from various sources the names of manufacturers and others who use, or may be in the market for mineral products, and to furnish these names to the owners of mineral deposits or properties who seek to develop same. 10. To obtain from the county clerks of the various counties when oil or gas wells may be drilled, or from the driller of such well, and other sources the records or logs, which the statutes provide shall be kept of such wells, and copies filed with the county clerk, keeping this data in a convenient form so that it may be accessible to any person seeking information regarding the underground structure of the State; and further, the said State Geologist shall correlate the data obtained from these logs and other sources, and construct therefrom maps showing the relative positions of various geological formations, and the depth of water, gas and oil bearing strata, and such other information as would be helpful in a study of the geology of the regions where wells have been drilled. 11. To co-operate with the State Tax Department in investigation for tax purposes and inventorying and appraising all mining properties held under private ownership or control. 12. To make a report on or before the first Monday in December of each year of the results and progress of the survey, accompanied by such maps, profiles and drawings as may be necessary to explain same, which report the Governor may cause to be printed and distributed, or shall lay before the General Assembly for its consideration. Provided, that if the public interest requires, special reports may be issued from time to time, showing the results of geological investigation. Section 3. Beginning of work. Free access to public records. The work of the Geological Survey shall commence as soon after the appointment of the State Geologist and his assistants as is practical. The Geolog. ical Corps shall have access at all times to the field notes and maps of the State Land Office, and to the records and reports of the State Mine Inspector, the State Oil and Gas Inspector, the county clerk of any county, or to the public records of any State Department or county official, without the payment of any fee. Section 4. Mineral discoveries to be reported first to the owners of land. When, at any time during the progress of the survey, said Geologist or his assistants shall discover any considerable deposits of minerals, metals, ores, clays, oils, gas, coal, or anything else of value, situated upon the land or lands of any citizen or citizens of the State, he shall forthwith notify the owner or owners of such discovery or discoveries; and should the discovery be upon land belonging to the State, he shall at once and without delay notify the Governor thereof, and the Governor, upon receipt of such notice, shall forthwith cause all such lands to be withdrawn from sale or donation until otherwise provided by the General Assembly. Such withdrawals from sale by the Governor shall be by proclamation, directed to the Commissioner of State Lands, and shall be published in at least one newspaper of general state circulation. Section 5. Location. The office of said State Geologist shall be in the State Capitol. Section 6. Before entering upon the discharge of their duties the State Geologist and his assistants shall take and subscribe to an oath to faithfully discharge all duties which may be required of them under this Act, and a copy of this oath, duly executed, shall be filed with the Secretary of the State. Section 7. That the salary of the State Geologist shall be not to exceed $4,000.00 per year, and that the salary of his assistants, and expenses of the office, together with the State Geologist's salary, shall not exceed the amount appropriated for the prosecution of this work. Provided, that all salaries of subordinates and items of expense shall have the approval of the Governor. Section 8. That all moneys expended under this Act shall be authorized by vouchers issued by the State Geologist and approved by the Governor, which voucher will empower the Auditor of State to draw his warrant upon the State Treasurer for the amount certified and approved, and the State Treasurer is hereby directed to pay any and all warrants of the Auditor of State so issued, and out of funds appropriated for this purpose. Section 9. That all laws and parts of laws in conflict with this Act be, and the same are hereby, repealed and this Act, being necessary for |