and size of this county as compared with its neighboring counties you can readily see what the results would be to the State of Oklahoma and adjoining Counties.

Contrary to the statement of many of the oil operators, Osage County comprises some of the richest and most productive agricultural land in the State of Oklahoma, and practically every foot of the land not suitable for the grow ing of crops is exceptionally fine grazing land and has been recognized for years by the cattlemen of Texas and Oklahoma as the choicest pasture land anywhere in the Middle West and has obtained the highest price per acre for grazing purposes of any native grass in this section. In these times of need, when the Nation is calling for more food and larger production of same, it does not appeal to me that Congress should take any step which would be turning the hands of progress backward and hampering the agricultural and stockraising development of Osage County.

Personally I do not own a foot of land in Osage County and am vitally interested financially in that county from an oil and gas standpoint, but I do not care to plead for the extension of leases which I own unless it can be done in a manner that will enhance the development of Osage County and the State of Oklahoma and work no injustice to those white citizens who have acquired title to the surface by deeds from the Government and Osage Nation.

From a standpoint of the future development of the Osage race as a tribe, I am sure that your investigation will justify the statement that the large amount of money now being paid annually to the Osage Tribe, derived from the bonus of the sale of oil leases and the immense royalties paid, is having a tendency to make worse citizens out of the Indian instead of better. It is a notorious fact to-day that a large per cent of the full bloods and many of the mixed bloods do not pay their bills as well now as when they had less money; and the bulk of them have become the prey of the bootlegger, the automobile salesman, and the designing and adventuress white woman and white man who seek to marry them that they may participate in the rich estate to which they are heirs. The Osage Indian is not a producer of agriculture, live stock, or anything else, with a very few exceptions.

It appeals to me that Congress is amply able to protect these Osage Indians, of whom there will be but a few at the expiration of this trust period, and at the same time admit those of mixed blood whom they do not deem necessary to safeguard to have a chance to develop their citizenship along normal lines and create an estate from the results of their own labor and frugality.

If Congress should pass a bill providing for the extension, as long as oil and gas is found in paying quantities, of all leases that are producing at the expiration of the trust period, and also provide that any leases hereafter sold in Osage County shall be made as long as oil and gas are found in paying quantities, it would create an estate from the bonus received from land that is at this time unsold and the royalties that will be derived in the next 11 years so great that the surviving heirs of the original Osage allottees can not economically spend it during their lifetime.

It would seem from the wording of the act in 1906 that Congress and the Osage Council both believed that the trust period would absolutely expire in 1931. The Osage Indian will have received for 25 years an enormous bonus and excessive royalties above the average leases in the State of Oklahoma; and in justice to the oil man for the excessive bonus and royalties that he has paid his lease should have read, or be made to read as long as oil or gas are found in paying quantities," but it does not follow that in order to obtain the equity that he is entitled to that the owners of 500,000 acres of land in Osage County should be deprived of the royalties that they anticipated that they would get at the expiration of the trust period in 1931.

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To my mind the interest of the State of Oklahoma, Osage County, the towns in Osage County and adjoining towns, and those citizens who have moved to Osage County to make their homes exceeds those of a small tribe of full bloods that will be living at the expiration of 1931, especially since the oil men and the development of the State of Oklahoma have made possible for them to become the richest tribe of Indians in the world, and the next 11 years will put more money in the Osage treasury than the past 20; and no one can claim any injustice can be done the Osage Indians as a tribe by discontinuing the trust period.

I am sending you this statement for the reason that I was unable to appear before the committee on account of the heavy rains, having planned to drive to Pawhuska to be present during the hearing.

I should like that this statement become a part of your records, and assure you that I have great confidence in the wisdom and vision of your committee, and that I believe your recommendation to Congress will be such as to render equity to all parties concerned and produce the greatest development along all lines in Osage County. Respectfully submitted.

CYRUS S. AVERY,

Tulsa, Okla.

(The following statement was submitted at Chilocco, Okla., May 13, 1920, by Mr. Earl Oliver, in behalf of the Marland Refining Co., Ponca City, Okla., and directed to be appended to the Osage hearing):

BRIEF BY MARLAND REFINING CO., IN RE H. R. 12886, SIXTY-SIXTH CONGRESS, SECOND SESSION, SUBMITTED TO SPECIAL COMMITTEE OF COMMITTEE ON INDIAN AFFAIRS AT CHILOCCO, MAY 13, 1920.

COMMITTEE ON INDIAN AFFAIRS,

PONCA CITY, OKLA., May 11, 1920.

House of Representatives, Washington, D. C.

GENTLEMEN: Analysis of the bill H. R. 12886, introduced March 3, 1920, to amend section 3 of the act of Congress of June 28, 1906, entitled An act for the division of the lands and funds of the Osage Indians in Oklahoma, and for other purposes," discloses three outstanding features.

I. Extension of the trust period and the oil and gas leases.

II. The leasing of the entire Osage prior to 1930.

III. Immediate application of the 3 per cent gross-production tax.

The parties in interest in this bill might be classified as follows:

First. The Osage Nation.

Second. The Osage and oil and gas lessees.

Third. The public at large, being interested through the prevention of waste of oil and gas..

Fourth. The taxpayers of Oklahoma.

Fifth. The persons who have purchased the fee of these lands from Indian owners.

Regarding the first question, i. e., extension of the trust period, we find that of the five classes interested the Osage Nation, the Osage oil and gas lessees, and the public at large would be benefited by an extension of the trust period. The taxpayers of Oklahoma would not be benefited by the extension standing alone, but, coupled with immediate application of the 3 per cent gross production tax, would be very much benefited. The fifth class (those who have purchased Indian fee lands) would naturally oppose such extension inasmuch as they would not secure the oil properties they hope to secure by failure of the extension being granted. Thus we have of the five directly interested classes three that would be benefited; the fourth would be benefited in the event the 3 per cent gross-production tax is applied immediately, as proposed; and the fifth class, i. e., the purchasers of Osage fee lands, is the only one out of the five whose wishes would be difficult to satisfy in the event of an extension being granted. The manner in which each of these classes would be benefited or injured by an extension of the trust period is given below.

I.-EXTENSION OF THE TRUST PERIOD AND THE OIL AND GAS LEASES.

The Osage Nation is interested in the extension being granted immediately for the following reasons: The surface rights were allotted to the individual Indian in 1906, but the mineral rights are held in common until 1931, at which time they become vested in the owner of the fee unless Congress provides otherwise. At the present time approximately per cent of the surface rights have passed out of Indian ownership. The sales of surface rights are being made as rapidly as restrictions are removed, and it is expected that by 1931 only a very small percentage of the surface of the lands will be owned by the original allottees. The mineral right is becoming a source of large income to the Osage Nation. Every enrolled member of the Osage Tribe has accumulated rights out of the oil and gas to the aggregate amount of approximately $23,000 each, or, as a nation, in excess of $50,000,000. Of this

amount 40 per cent is derived from the royalties of oil and gas and 60 per cent accumulated from the bonuses which have been paid for oil and gas leases. It is apparent therefore that the bonus feature is much more important to the Osage Nation than is the royalty feature. Furthermore, the system of bonus has been practiced to any extent only since 1916, or 4 years, whereas the royalties have been accumulating for 20 years. During the year 1919 the bonuses amounted to approximately twice the amount of royalties.

Oil lessees can not afford to pay high bonuses on leases which have only 10 years or less to run. In the event the extension is not granted the Osage Nation will not only lose the royalties after 1931 but it will immediately suffer a decrease of bonuses. It is therefore vastly to the benefit of the O:20 Nation that the extension be granted immediately. It would lose more in de crease of bonus at any one sale, such as those that have been conducted during the past two years, than the entire 3 per cent gross production tax will amount to for the full year.

The Osage oil and gas lessees are interested in an extension being granted for the following reasons: In 1931, unless an extension be granted prior to that date, the right of the oil and gas lessees to the property they have developed will cease and these properties in their entirety will become the property of the fee owners, with the exception of certain tools and machinery which might be removed. On the other hand, it is set out in the leases under which these properties are now being operated as well as provided in this bill that these leases shall continue as long as oil and gas are produced, provided the minera' rights remain in the Osage Nation. It is therefore important to the oil and gas lessees that an extension be granted some time prior to the expiration date in 1931. It would be a matter of convenience to the operators if such extension be granted at an earlier date inasmuch as it would enable them to more advantageously plan the development of their properties, but an imme diate extension would serve only as a convenience, not a necessity, for the lessees. As a penalty for an immediate extension, however, it is required in this bill that the 3 per cent gross production tax be immediately applied. Under such an arrangement the lease owner who now has his lease fully developed and which will in 10 years be producing only a small per cent of its present production will have paid during the 10 years approximately as much in 3 per cent gross production tax as the property at the end of 10 years will be worth.

He is therefore being asked to pay for an immediate extension, which he does not in any manner need, a sum equal to the value of the property at the time it is renewed to him. That such extension will eventually be granted. even although it might be delayed for several years, would appear almost a certainty; for it is scarcely conceivable that any Congress would take away valuable oil property from the companies who expended their money in develop ing the property and incurred the risk incident thereto, having excellent reason to assume that such extension would be granted by reason of the clause in the lease itself, and give such developed property to third persons who had done nothing whatever but purchase the surface. of the land at a very low price from the Indian owner and received full value for their money paid.

The public at large is interested in an extension in order that waste of oil and gas and undue cost of producing same is prevented. Men with some vision and a knowledge of conditions are becoming alarmed at the situation of the United States as regards petroleum.

It is recognized that we are at the beginning of the petroleum age, and that the United States, which has heretofore led the world in petroleum production, has now approximately no more than a 15 years' unmined supply. Thus, at a time when control of an adequate supply means world supremacy, she is faci with an early famine, whereas England, having no large supply of her own, has gone out in the undeveloped portions of the world and secured control of unmined reserves until certain of her public men acquainted with petroleum conditions now predict that in the course of 10 years the United States will be purchasing from English companies almost twice the amount of oil which the United States now consumes. It is, therefore, of vast importance to the peop of the United States that all reasonable measures be taken to prevent waste of the supply which remains.

It is an accepted fact that the United States has criminally wasted her supply of petroleum. Oil of a grade superior to that of most any other country has been forced onto the market under conditions which compelled its use for any Joe, however uneconomical such use might be. Millions of barrels of oi

ave been permitted to flow down creeks or to evaporate in inefficient, wasteful orage, and many millions more have been turned into channels for which it hould not have been used. In addition to this waste, fully four times as much oney has been expended in the development of oil fields as was necessary to he economic production of the oil and gas. These are astounding statements hen the importance of the industry to the welfare of the people of this Nation 3 considered.

This great waste of both product and money is due to one cause alone, namely, he small lease. Each great field, such as the midcontinent, or even the Osage ivision of the midcontinent, is made up of many distinct local pools, varying n area from a few acres in extent to several square miles. Under the American ystem of ownership of lands practically every pool of consequence is covered y many small tracts of land. While petroleum and natural gas will not nigrate from one local pool to another, yet each local pool is merely one reseroir within which these products are migratory, and consequently the depletion of a pool through any one hole will correspondingly decrease the amount of oil and gas that might be obtained by all the other landowners. The result of this condition, therefore, is that whenever a new pool is discovered every landowner is compelled to drill wells on his own land, or have them drilled, and ake the oil and gas therefrom at the greatest possible haste in order to secure is proportion from the common pool. He can not wait until the market requires his oil or gas nor until he has adequate storage and marketing facilities; geither can he drill only the number of wells which will most efficiently produce them. An actual illustration of the waste of these products by allowing them to escape into the atmosphere and run down streams can not be given you at this time, although such condition is well known to every man who has been in the vicinity of newly discovered rich pools.

As to the waste of money in the development of pools under these conditions, your attention, however, is called to the accompanying map of the Glenn pool, showing on the left the actual manner in which it was drilled under the small lease ownership, while on the right is shown the condition under which, except for the small land divisions, it would have been drilled to produce the oil at the least possible cost. This chart was made some years ago and it numbers the wells of that date as being 2,500. The average cost was placed at $4,500, although at this time such wells would cost $15,000. The total cost, even at those prices, was $11,250,000, whereas had the small-lease system of development not prevailed not more than 706 wells would have been required to produce the oil, which, at the same cost per well, would have amounted to only $3,177,000, or slightly in excess of 25 per cent of the actual cost.

In addition to the vast unnecessary development cost, this type of drilling, as you will recall, created such an over-production of oil that hundreds of thousands of barrels were permitted to flow into the creeks. Great quantities were stored in earthen storage where its valuable content was permitted to evaporate or soak into the ground, and additional great quantities of this high-grade oil were forced into fuel channels. Most of the gas was entirely wasted. You may think this loss is borne alone by the producer. It is not. The cost eventually is paid by the consumer.

Under the present system of leasing in the Osage, the Interior Department, in order to avoid any semblance of fostering a monopoly, felt it advisable to divide the Osage oil leases into tracts not larger than 160 acres. For the purpose of gas leases, however, it has made each lease to consist of many thousands of acres in extent. In order to prevent waste insofar as possible and undue development it very wisely refused to subdivide the land into lesser tracts than 160 acres, and in addition to maintaining the size of oil and gas leases named it imposed many conservation rules, which, while occasionally appearing harsh to the operator, yet are recognized under all circumstances as being much to the public benefit. Such conservation rules have been found to be almost entirely useless under small land divisions. This is illustrated by the difficulty experienced by the Department in enforcing similar rules in the Creek country where Indian lands are interspersed with unrestricted lands.

Without doubt the departmental conservation rules in the Osage have made this vast productive area the most striking example of efficient conservation of petroleum and natural gas in the United States where the lands are divided into many diverse ownerships. The only examples in the United States of more efficient conservation are those where one or at least a very few interests control an entire local pool. This enables them to produce the oil and gas as

needed and at the least cost, but it is perhaps objectionable in that it permits withholding these products at a time when they are needed.

As has been stated, the typical Osage oil leases are not less than 160 acres each and gas leases not less than several thousands of acres each. The allotment act of 1906, which gave to the Indians the surface of the land, and to whose assigns the oil and gas rights will go in 1931 in the event the extension is not granted, did not follow this 160-acre rule. While many of the allotments exceed 160 acres in extent, yet they are not regular and confined to quarter sections as are the oil leases, so that many of the present 160-acre leases will in 1931 be divided into three, four, five, six, and often more leases. Each large gas lease will be divided into innumerable small leases, none of which will afford sufficient gas to justify installing facilities to care for same; conse quently the gas will be permitted to escape into the air and be wasted to a very large extent or be turned into such channels as will be an economic waste. These many subdivisions will entail a vast amount of additional drilling and additional cost in operation, together with great waste of oil and gas, and, as previously stated, the public pays.

The taxpayers of Oklahoma would be interested and much benefited in an extension being granted, provided coincident therewith the 3 per cent gross production tax becomes effective. If an agreement is not reached or some bill passed, the State of Oklahoma can not collect taxes until 1931; but if some arrangement is reached which is satisfactory to all parties and the bill passed at once, then the State of Oklahoma will begin collecting taxes immediately. Such taxes would amount to the sum of $1,500,000 or more per year, and in the 10-year period perhaps $15,000,000 or more will go into the treasury of the State of Oklahoma and theoretically, at least, relieve the remaining taxpayers proportionately. The position might be taken that Congress can give the right to the State of Oklahoma to impose the 3 per cent tax immediately without granting an extension. Conceding that it can do such thing, it is scarcely conceivable that it will do the injustice to the oil operators of taking valuable property from those who have developed it and give same to a body of land speculators, while at the same time imposing a heavy tax burden not otherwise permissible. It can be safely assumed that such condition will not arise under a Democratic form of Government, and therefore each year's delay of extension will mean $1,500,000 or more per year being kept out of the treasury of Oklahoma.

Assuming, therefore, that a satisfactory arrangement is made regarding the application of taxes, the taxpayers of Oklahoma would be vastly benefited by an immediate extension of the trust period.

Persons who have purchased the fee land from Indian owners are interested in the extension of the trust period or failure of such extension for the following reasons:

Prior to the end of 1919, approximately one-third of the surface ownership of Osage lands had passed to other than the original allottees. This process of transfer is occurring as rapidly as restrictions are being removed or conditions arise which make possible the sale of such lands. The prices paid vary from $3 to $20 per acre, with perhaps $10 as the average price. The exact figures are not available for most sales, but sufficient transfers have been made in public sale under supervision of the courts and of the Indian Department that will afford a reasonably accurate and reliable indication of the prevailing prices, except that it can be assumed these sales made under the watchful care of the courts and of the department allowing freedom of competitive bidding brought much higher average prices than did those sales negotiated privately between the typical speculator on Indian lands and the typical Indian allottee.

During the fiscal year ending June 30, 1916, there were sold through the Indian Office 13,123 acres at an average price of $8.31 per acre; during the fiscal year ending June 30, 1917, 10,346 acres at an average price of $9.51 per acre. On March 4, 1919, 5.886 acres were sold at an average price of $18.44 per acre. All the above sales were made at public auction and on terms which permit the purchaser to pay one-fourth down, one-fourth in one year, one-fourth in two years, and the remaining one-fourth in three years, with interest at 6 per cent. At private sales, which required the approval of the department. there were sold 3,549 acres at an average price of $17.56 per acre. All deeds issued contained a clause stating that the land was sold subject to the mineral rights of the Osage Tribe as provided in the act of Congress of June 28, 1906.