812.6363/540

The Chargé in Mexico ( Summerlin ) to the Secretary of State

No. 2331

Sir: In confirmation of the Embassy’s telegram No. 3154 of August 28, 5 P.M.93 I have the honor to send enclosed text and a complete translation of the Mexican Senate Petroleum bill which was introduced on August 27, 1919.

Special attention is invited to the text of the Senate Committee’s report accompanying the bill,93 (which the Embassy has not had opportunity to translate), in which the new term domirdo pleno is defined as embracing both dominio directo and dominio util. In other words, the introduction of this new term appears materially [Page 608] to restrict the meaning of dominio directo as heretofore used in this connection, and consequently lessens the Mexican Government’s powers thereunder.

In an interview given to the local press Secretary Cabrera is reported to have said that the proposed legislation is too liberal and may be easily violated by the petroleum companies, that only those wells which were drilled before the promulgation of the Constitution should be excluded from the effects of the law and that to exclude petroleum lands acquired as such prior to May 1, 1917 means little or nothing because it is very easy for the companies to declare that their intention was to exploit the petroleum deposits. On the other hand, he continued, if only wells in operation on May 1, 1917 are considered as private property it is very easy to determine definitely just what constitutes such property. Acting on this principle the industry will be completely nationalized as soon as wells now producing become inactive, which should be after a period of fifteen or twenty years, whereas, under the proposed bill complete nationalization of the industry may never be affected. He criticised particularly paragraph IV of Article 3 and Article 4 which define property over which the nation has only dominio directo.

Mr. Joaquin Santaella, Chief of the Technical Bureau of Petroleum, is quoted as stating that the Bill is unconstitutional, mentioning particularly the third article which specifies the cases in which the Nation retains only the dominio directo over petroleum; he added “so long as the Constitution is in force, any limitation on this dominio is absurd, and the only road open to the petroleum interests is to amend the Constitution, which would mean to destroy the results of the revolution secured at a cost of eight years of civil war and other sacrifices”.

Deputy Jesus Rodriguez de la Fuente, Chairman of the First Petroleum Committee of the Chamber, in a signed statement to the press, quoted members of the Queretaro Constitutional Convention and a report of the Federal Executive in proof of his contention that the bill is unconstitutional because the words “dominio directo” give the nation complete ownership of petroleum properties and products, including the rights of “dominio util”. He stated that some of the members of his Committee agree with him that the proper procedure is to amend Article 27 of the Constitution94 in such manner as to admit legislation under it which will respect and protect acquired rights in the petroleum industry.

I have [etc.]

George T. Summerlin
[Page 609]
[Enclosure—Translation—Extract]

Proposed Petroleum Law Introduced in the Mexican Senate, August 27, 1919

Chapter I

petroleum products

  • Article 1. The properties subject to the provisions of this Law are:
    I.
    —The beds, sources, and natural deposits of petroleum and its derivatives, be they surface or subsoil;
    II.
    —Gaseous hydrocarbides found in the subsoil or which may escape to the surface of the land;
    III.
    —Natural deposits of ozocerite and asphalt;
    IV.
    —Natural deposits of all mixtures of hydrocarbides of the various classes.
  • Article 2. To the Nation belongs the dominio pleno of the properties enumerated in the preceding article, which may exist in the subsoil of the following lands:
    I.
    —Waste lands which may never have been destined for common use nor for a public service, and those which, though no longer waste—due to their having been ceded in ownership in conformity with laws on the subject, to any individual, company or corporation—have been recovered by the Government from the said cessionaires through the rescission or annulment of the respective contract, and not for any other cause;
    II.
    —Those of federal public domain or of common use, referred to in Article 4 of the Real Estate Law of the Federation, of December 18, 1902;
    III.
    —Those belonging to the Federal Treasury, referred to in Articles 16 and 23 of the same Law;
    IV.
    —All those respecting which the Nation may have heretofore, or may in the future expressly reserve to itself the subsoil.
  • Article 3.—The Nation has dominio directo over the properties enumerated in Article 1, existing in the subsoil of the following lands:
    I.
    —Those belonging to the States or Municipalities, be they for common use or for their own;
    II.
    —The grants or town property of communities;
    III.
    —All those respecting which the Nation may have ceded the dominio util, reserving to itself the dominio directo.
    IV.
    —All those of private ownership, respecting which no contracts may have been made covering the exploration or exploitation of the subsoil prior to May 1, 1917; and also those respecting which the owner of the surface has not demonstrated with positive evidence up to and prior to that date, that his intention was to possess also the substances of the subsoil.
  • Article 4.—For the effects of Fraction IV of the preceding article, positive evidences of possession of the subsoil are understood to be:
    I.
    —Any work done by the owner of the surface for the exploration or exploitation of the subsoil;
    II.
    —Contracts entered into having for their purpose the exploration or exploitation of the property’s subsoil;
    III.
    —The express statement in the titles covering the holding of lands, that they were acquired or held as petroleum lands, or that, with this understanding, they were registered or manifested prior to May 1, 1917.

. . . . . . .

  1. Not printed.
  2. Not printed.
  3. Foreign Relations, 1917, p. 955.