800.6363/120

The Acting Secretary of State to President Wilson2

The President: The Acting Secretary of State, to whom was referred the resolution adopted on March 10, 1920, requesting the President to inform the Senate, if not incompatible with the public interest,3

  • “First, as to what restrictions, if any, are imposed either directly or indirectly by France, Great Britain, Holland, Japan, or any other foreign country, or the dependencies thereof, upon the citizens of the United States in the matter of prospecting for petroleum, or in the acquisition and development of lands containing the same within the territory subject to the jurisdiction and influence of such countries.
  • “Second, if such restrictions exist, what steps have been taken by the Government of the United States to secure their removal and equality of treatment in respect of citizens of the United States.
  • “Third, if any restrictions are imposed by the Government of Mexico upon citizens of the United States in regard to the acquisition or development of petroleum-bearing lands within its jurisdiction which are not imposed upon nationals of other foreign countries.
  • “Fourth, if any such discriminating restrictions are imposed by the Government of Mexico upon citizens of the United States, what steps have been taken by the Government to secure removal of such restrictions and the equality of treatment in respect to citizens of the United States,”

has the honor to lay before the President a report furnishing the information requested by the resolution as far as it can be supplied compatibly with the public interest.

Respectfully submitted,

Frank L. Polk

[Enclosure]

Report to the Senate in Response to Senate Resolution 3314

In response to the request of the Senate embodied in Senate resolution 331 for certain information regarding restrictions directly or [Page 352]indirectly imposed upon citizens of the United States in prospecting, acquiring, and developing petroleum lands abroad, and further regarding action taken by this Government with a view to securing the removal of such restrictions and equality of treatment in respect to citizens of the United States, the following report is submitted as containing the information now available and not incompatible with the public interest.

A great part of the data contained herein has been derived from consular reports received in response to Special Consular Instruction No. 672 of May 31, 1919, and diplomatic and consular instruction of August 16, 1919,4 instructing diplomatic and consular officers to obtain and forward certain specific information relating to mining laws and legal restrictions imposed upon foreigners in securing or operating mineral concessions within their consular districts.

It will be noted from the copy of Instruction No. 672, hereto attached, that it was issued almost a year (May 31, 1919) prior to the passage of the above resolution of March 10, 1920, and further, that although mineral oil is expressly mentioned as being within the purview of the instruction, nevertheless the scope of the investigation called for therein did not permit of the intensive study of the foreign petroleum situation which its present and prospective importance would seem to require. With a view to directing attention to petroleum, the general circular instruction of August 16, 1919, of which a copy is attached, relating to mineral oil concessions and rights, was sent out. Since this was in the nature of a standing instruction, the department expects to be continuously in the receipt of information on this situation.

The above instruction was supplemented by a circular cablegram, under date of October 17, 1919,5 again requesting specific information on the petroleum situation, directed to posts from which significant information might be expected. It further appears that some of the restrictions on petroleum development are of a temporary character growing out of the war situation, and it is still too early to tell whether they may form a part of permanent legislation on this subject. Moreover, there is nothing to show what action may be taken by the newly formed, reorganized, and unrecognized Governments of Europe and Asia, many of which have important petroleum-producing properties.

In view of these considerations and the probable urgency of an early reply, it has seemed desirable to submit the information now available and subsequently to supplement it with such more timely and detailed data as may be obtained on the rapidly changing international [Page 353]petroleum situation as reflected in restrictive legislation along nationalistic lines.

Because of the broad scope of the study based on Instruction No. 672 of May 31, 1919, and the further fact that petroleum restrictions are not specifically mentioned in the general instruction of August 16, 1919, much of the data derived therefrom only remotely relates to restrictions on petroleum development. In many countries petroleum has not been discovered in commercial quantities and there is consequently no specific legislation bearing on it except as general mining legislation might be supposed to cover it in the event of its discovery.

The present report with special reference to the first paragraph of the Senate resolution will be in general limited to restrictions arising out of legislation enacted to control the prospecting, acquiring, and development of petroleum lands in those countries in which petroleum is produced. The report falls in three principal parts so as to be in conformity with and responsive to the Senate resolution.

Section 1

The restrictions in the countries and their dependencies named in the first paragraph of the Senate resolution follow in this section in the order of their designation with other foreign countries listed alphabetically.

france

There appear to be no mineral oil concessions granted in continental France although there are encouraging indications and in the French colonial possessions of northern Africa several projects are in the course of development. The French Government exercises wide discretionary powers in the granting of concessions. This wide discretion makes possible discriminatory action but there is no evidence of its operation against citizens of the United States. It is probable that the French policy is to regard all applications for concessions in the light of the public interest which was reflected by an act of September 9, 1919, providing for complete nationalization of all mineral resources. It is not clear whether petroleum would come within the scope of this act or be covered by special legislation. There is reason to believe that the policy mentioned above would find expression in a restriction on development by aliens at least to the extent that concessions would not be granted to alien groups unless they form a part of a French joint-stock company of which two-thirds of the directors should be French citizens.

This policy would probably be effective in Algeria, French West Africa, and Madagascar should petroleum be found in those dependencies. It does not appear whether the above restrictions would [Page 354]be applicable to Morocco and Tunis. (Cablegram from Paris, Oct. 18, 1919; consular report, Oct. 31, 1919; consular report, Tananarive, Madagascar, Oct. 29, 1919; report, Tangier, Morocco, Aug. 28, 1919; and consular reports from Tunis, May 31, 1919, and Jan. 26, 1920.6)

british empire

In general each dominion and colony has its own legislation on the subject of the petroleum industry.

The policy of the British Empire is reported to be to bring about the exclusion of aliens from the control of the petroleum supplies of the Empire and to endeavor to secure some measure of control over oil properties in foreign countries. This policy appears to be developing along the following lines, which are directly or indirectly restrictive on citizens of the United States:

1.
By debarring foreigners and foreign nationals from owning or operating oil-producing properties in the British Isles, colonies, and protectorates.
2.
By direct participation in ownership and control of petroleum companies.
3.
By arrangements to prevent British oil companies from selling their properties to foreign owned or controlled companies.
4.
By orders in council that prohibit the transfer of shares in British oil companies to other than British subjects or nationals.

It is understood that the British Government has a controlling interest in the Anglo-Persian Oil Co. and that it has also assisted in the development of the Papuan oil fields by bearing one-half of the expense and contributing experts.

It may be of some significance that by general license of September 1, 1919, prohibited transactions under the regulations of the defense of the realm act were again permitted except as such transactions might relate to oil-mining property. (Cablegram from London, Oct. 18, 1919; consular reports from London, Oct. 21, 1919, Nov. 8, 1919.6

According to recent reports prospecting for petroleum is lawful in the United Kingdom only by the board of trade or the minister of munitions or persons authorized by them. Similar regulations apply to working a petroleum property. The only drilling now going on in the United Kingdom for petroleum is being done by S. Pearson & Son (Ltd.), as petroleum development managers to the Government.

It is said to be unlawful for a British citizen, without the consent of the board of trade, to transfer to an alien or to a foreign-controlled company any interest in a company controlling an oil field in [Page 355]the United Kingdom. (Defense of the realm act of 1915 as amended Oct. 23, 1917, Regulation No. 30, BB.)

australia

Commonwealth mining regulations are contained in regulations under the war-precautions act 1914–1916, and amendments thereto. According to this act, no contract for the acquisition of any mining business, or of any interest in such, or of any security issued by a mining company shall be made by any other than a natural-born British subject without the written consent of the Attorney General. It appears that no application for a mining lease to any person other than a natural-born British subject for a term of more than five years, and that no contract for the assignment or acquisition to or by any person other than a natural-born British subject of a mining lease of which a period of five years is unexpired, shall be made or granted without the written consent of the Attorney General.

british east africa

Under the laws of this protectorate all aliens would seem to be excluded from the development of petroleum.

A prospecting license shall not authorize a person who is not a British subject to peg out an oil claim. (Ordinance 1912, Part III, Division II–24, 5.)

A person who is not a British subject shall not be entitled to own an oil claim or enjoy the right of mining for oil anything in the ordinance to the contrary notwithstanding. (Ordinance 1912, Part III, Division 11–25.)

And whenever oil is found on any claim other than an oil claim the holder of a prospecting license, being a British subject, may peg out on such claim an oil claim. (Ordinance 1912, Part III, Division 11–35.)

The transfer of an oil claim and the grant or transfer of any share or interest therein shall be invalid unless the consent in writing of the governor to such transfer or grant shall first have been obtained, and the transferee or grantee is a British subject, or a firm or syndicate, all the members of which shall at all times be and remain British subjects, or a British company registered in Great Britain or in a British colony or in the protectorate and having its principal place of business within His Majesty’s dominions or in the protectorate, and the chairman of the said company and all the remaining directors shall at all times be British subjects, and the company shall not at any time be or become a corporation directly or indirectly controlled by foreigners or foreign corporations. (Ordinance 1912, Part III, Division 11–46, 2.)

[Page 356]

No lease for the purpose of mining for mineral oil or authorizing the lessee to mine for mineral oil shall be granted and no assignment of any such license or lease shall be made, unless the lessee or assignee shall be a British subject or a firm or syndicate, all the members of which shall at all times be and remain British subjects, or a British company registered in Great Britain or in a British colony or in the protectorate and having its principal place of business within His Majesty’s dominions or the protectorate, and the chairman of the said company and all the remaining directors shall at all times be British subjects, and the company shall not at any time be or become a corporation directly or indirectly controlled by foreigners or foreign corporations.

If the lessee shall assign the same in whole or in part without the previous consent in writing of the governor, or if the lessee or assignee shall cease to be a British subject, or if, where a firm or syndicate is the lessee or assignee, any member of the firm or syndicate shall cease to be a British subject, the governor may thereupon cancel the lease, and in the event of any alteration being made in the articles of association or constitution of a company holding any such lease previous notice thereof shall be given in writing to the governor, who, if in his opinion the said alteration shall be contrary to the cardinal principle that the said company shall be and remain a British company and under British control, may refuse his consent to such alteration. If and whenever any such alteration shall be made without the written consent of the governor or if the company shall at any time cease to be a British company or shall become a corporation under foreign control, the governor may thereupon cancel the lease. (Ordinance 1912, Part III, Division V–59, 1 and 2; and Mining Regulations, 1912, 134, 1 and 2.)

No license held by a person who is not a British subject shall confer any right on the holder to prospect for oil or to acquire claims or leases for mining for oil or working oil. (Mining Regulations, 1912, 90.)

Under ordinance No. 12 of 1917 no alien is allowed to acquire an interest of any description in any immovable property without the consent of the governor in council. This ordinance was to remain in operation during the continuance of the war, but it seems to have been still in force on October 27, 1919. (Consular report, Oct. 27, 1919, from Nairobi, British East Africa, with inclosures.8)

uganda

In this protectorate the general rules and regulations governing the development of mineral resources do not apply to mineral oil prospecting which may be carried on only under special license and [Page 357]in defined areas. These licenses are issued subject to such restrictions, conditions, and regulations as the governor may impose in each particular case. (Ordinance No. 14 of 1915, consular report, Oct. 27, 1919, from Nairobi.)

german east africa (occupied)

Under British rule no mining department has as yet been organized and all prospecting for minerals in this controlled territory is at present forbidden by proclamation No. 12, dated July 7, 1917. (Consular report of Oct. 27, 1919, from Nairobi.)

british west africa

The following notice was published in the Government Gazette of the Gold Coast Colony on May 25, 1918, restricting mineral oil concessions to British subjects:

The attention of all persons concerned with or likely to be concerned with mineral-oil interests in the Gold Coast Colony is hereby directed to the provisions of section 21 of the concessions ordinance, 1900, of the said colony, which reads as follows:

  • “(1) No concession with respect to mineral oil shall be granted and no assignment of any such concession shall be made, unless the grantee or assignee shall be a British subject or shall be a firm, syndicate, or company which shall at all times be and remain a British company, registered in Great Britain, or in a British colony, and having its principal place of business within His Majesty’s dominions, and the chairman of the said company and all the remaining directors shall at all times be British subjects, and the company shall not at any time be or become a corporation directly or indirectly controlled by foreigners or foreign corporations.
  • “(2) In this section the expression ‘foreigners’ means any person who is not a British subject, and the expression ‘foreign corporation’ means any corporation other than a corporation established under and subject to the laws of some part of His Majesty’s dominions, and having its principal place of business in those dominions.
  • “(3) Every concession and assignment of a concession in respect of mineral oil shall be subject to the approval of the governor.
  • “(4) If the grantee of any such concession shall assign the same in whole or in part without the previous consent in writing of the governor or if the grantee or assignee shall cease to be a British subject, the governor may thereupon cancel the concession, and in the event of any alteration being made in the articles of association or constitution of a company holding any such concession, previous notice thereof shall be given in writing to the governor, who, if in his opinion the said alteration shall be contrary to the cardinal principle that the said company shall be and remain a British company and under British control, may refuse his consent to such alteration. If and whenever any such alteration shall be made without the written consent of the governor or if the company shall at any time cease to be a British company or shall become a corporation under [Page 358]foreign control or shall assign such concession in whole or in part without the previous consent of the governor, the governor may thereupon cancel the concession.
  • “(5) The expression ‘mineral oil’ includes bitumen, asphalt, and all other bituminous substances with the exception of coal.”

All persons interested herein are informed that for several years past it has been the policy of the Gold Coast Government, a policy to which the statutory support above cited has been given, to insure that no concession with respect to mineral oil in the Gold Coast Colony shall be granted or assigned to or held by any person other than a British subject, or by any syndicate, firm, or company other than one of a predominantly British character, and under a control predominantly British. (Consular reports from Dakar, Senegal, Nov. 20, 1919, Feb. 5, 1920.9)

canada

Most of the Canadian legislation regulating petroleum development has been enacted for the Crown lands in the western part of the Dominion. The following is a provision of the order in council (P.C. Jan. 29, 1920), effective March 1, 1920, relating to petroleum and gas development:

Any company acquiring by assignment, or otherwise, a lease under the provisions of these regulations shall be a company registered or licensed in Canada and having its principal place of business within His Majesty’s Dominion.

The above provision was substituted for article 40 of the Dominion regulations for the disposal of petroleum and gas. Leases on Crown lands provide that any company acquiring by assignment or otherwise a lease of petroleum or natural-gas lands should at all times be and remain British companies, and if any such company which might acquire a location should cease to be a British company its lease should be subject to immediate cancellation in the discretion of the minister.

The reasons advanced by the governor general for rescinding article 40 of the Dominion regulations with the above-mentioned restrictions were, first, that the restrictions did not give the Dominion Government an effective control of oil production; second, that the restrictions had the effect of discouraging the introduction of foreign capital so essential to the exploitation and development of Dominion lands thought to contain oil. (Consular report[s] from Ottawa of Dec. 29, 1919; Feb. 18, 1920; and Feb. 24, 1920.10)

british guiana

The only restrictions on mining concessions in this colony discriminating against aliens are in connection with concessions with [Page 359]mineral-oil rights. None but British subjects are reported to be entitled to secure such rights. The same restrictions hold with regard to the transfer of mineral-oil rights and property to aliens. (Consular reports from Georgetown, Sept. 19, 1919, with inclosures; and Oct. 22, 1919.11)

british honduras

All mines of mineral oil are reserved to the Crown. (Ordinance No. 26, 1907, Bureau of Mines report on the petroleum industry.12)

india

American oil companies are expressly excluded from doing business in Burma by proclamation signed by Queen Victoria and Lord Salisbury, secretary of state for India, on September 24, 1884, and a blanket concession of 99 years was given the Burma Oil Co. (Ltd.) on August 23, 1885, protecting this company from all foreign competition.

In India no prospecting license or lease can be granted otherwise than according to the rules summarized below, except with the previous sanction of the secretary of state for India in council, or with that of the governor general under authority delegated to him by the secretary of state for India in council. A certificate of approval, or a prospecting license, or a mining lease shall be granted only to a British subject, or to a British-controlled company. It would seem that the regulations preclude the sale of concessions or leases to foreigners, although this is not specifically stated. Leases and concessions are granted only on Government land. Private land may be exploited, but only with the consent of the owner and in accordance with the restrictions above mentioned. (Consular report from Bombay, Nov. 26, 1919.13)

british west indies—barbados

Up to the present time no oil has been found in commercial quantities in Barbados, though there are croppings which seem to indicate the presence of oil. It is reported that no companies other than British companies have secured mineral concessions in the islands. The oil mines act, 1904–1908, III 66, empowers the governor in executive committee to make regulations and by provisional order grant to any person the right to survey and to probe and bore to ascertain the nature of the soil and to make explorations and mine for oil within any area that the governor and the executive committee may think proper. Within the past few months the British Union Oil Co. has received certain powers under this legislation. The legislation in question appears to make no specific distinctions [Page 360]between aliens or nationals, but the grant to the British Union Oil Co., known as the British Union Oil Co. act of 1919, expressly provided that the privileges and powers therein shall not be conveyed or extended to any successors of the said British Union Oil Co. of a nationality other than British. The oil mines act referred to above provides in paragraphs 3 and 4 that the British Imperial Government shall have the right of preemption over all oil residues. (Consular report from Barbados, British West Indies, Oct. 21, 1919.13)

trinidad

Title or interest in oil-bearing lands in the colonies of Trinidad and Tobago are covered in an ordinance (No. 29, 1917) which became effective December 3, 1917, entitled “An ordinance to control the acquisition of oil-bearing lands in the colony.” This ordinance as enacted was a war measure and stipulated to remain in force during the continuance of the war and for a period of six months after the close thereof. It provided that no person shall acquire any right, title or interest to oil-bearing lands without consent in writing of the governor. The governor may limit his consent as he deems necessary under instructions received from the secretary of state for the colonies. The above ordinance appears to apply particularly to privately owned oil lands.

Regulations applying to oil on Crown lands came into effect January 2, 1918, and remain in force until amended or revoked by the Government. These lands are leased by the governor subject to the approval of the secretary of state for the colonies. It appears that the secretary of state for the colonies has been following the policy which would require that any acquisition of oil rights by a British company would provide that not more than 25 per cent of its capital or voting power is to be held by aliens, and also that the chairman and managing director and a majority of the other directors shall at all times be British subjects, together with such other provisions as might be deemed necessary to insure the company remaining under British control.

It is probable that the present and future policy of the colony will be dictated by the secretary of state for the colonies at London with considerable regard to the needs of the British Admiralty, which seems anxious to reserve sufficient prospective supplies of petroleum for the British Navy. Trinidad, by reason of its location and its petroleum deposits, has a strategic importance from the standpoint of the British Navy, and in view of this it is unlikely that foreign capitalists would be given an opportunity to secure [Page 361]petroleum concessions. (Consular reports, Oct. 22, 1919, and Feb. 28, 1920, from Trinidad.14)

holland (netherlands)—sumatra east coast

A number of companies are drilling for oil, with reported success. All of these companies are said to be controlled by the Bataafsche Petroleum Maatschappij, of which the Kolonials Nederlandsche Petroleum Maatschappij, of The Hague, is the holding company. (Consular report from Medan, Sumatra, Oct. 19, 1919.15)

dutch east indies16

Prospecting licenses and concessions are granted only to Dutch subjects, inhabitants of the Netherlands or Netherlands East Indies, and to companies incorporated under the Dutch laws either in the Netherlands or in the Netherlands East Indies, having in their board of directors a majority of Dutch subjects. Persons or companies not established in the Netherlands East Indies must be represented in the islands by a trustee, who must comply with the stipulations of the mining law.

Considerable part of the archipelago, more especially the smaller islands, is still entirely closed to private mining work, partly by the reservation of large areas for State exploration with a view to their being worked later either by the Government or by private companies. American companies have, for many years, without success, endeavored to secure leases in this field.

The Royal Dutch-Shell Co. has a complete economic monopoly of production.

A new bill has been laid before the Netherlands State council to confirm the contract between the Royal Dutch Petroleum Co. and the Government, under which contract the company will secure the working of all the oil lands in the Dutch East Indies, including Sumatra. (Consular report from Soerabaya, Java, of Jan. 27, 1920.15)

japan

Five oil fields sufficient for the use of the Japanese Navy are held by the navy department. Foreigners would seem to be restricted in the development of petroleum properties by article 5 of the Japanese mining law promulgated by imperial order on the 7th of March, 1905, reading as follows: [Page 362]

No persons other than subjects of the Empire or juridical persons duly formed in accordance with the laws thereof are entitled to acquire mining rights.

The meaning of “juridical persons” in the Japanese law is such that it is believed to be practically impossible for foreign companies to retain or transfer undisputed possession of mining rights in Japan. (Consular reports, with inclosure, of Oct. 8, 1919, and Dec. 10, 1919, from Yokohama, and Jan. 23, 1920.16)

bolivia

Under a law dated December 12, 1916, all oil lands belong to the State except those already legally taken up by private owners. However, it is believed that there are no restrictions against aliens since any person may freely prospect on these public lands without a license by merely notifying the local administrative authority. (Consular report from La Paz, Bolivia, Nov. 26, 1919.17)

colombia

Aliens have the same rights as natives to locate and own mines where such rights are secured by treaties or where the alien’s national laws give reciprocal rights to Colombians. (Consular reports from Barranquilla, Jan. 19, 1919, and Oct. 11, 1919.18)

costa rica

There is said to be no distinction between natives and foreigners. The Government reserves ownership of the subsoil. No permission is required for exploration. Acquisitions can be obtained only by concessions from the Government. The only monopoly of mineral resources in the Republic concerns petroleum rights through contracts with the Government giving exclusive oil rights to one company in the Provinces of Limon, Puntarenas, and Guanacasti and to another company in the Provinces of Heredia, Alajuela, and Cartago. (Consular report, Oct. 6, 1919, from San José.17)

dominican republic

There appear to be no legal distinctions between nationals and aliens in granting concessions. The proposed new mining law provides that petroleum or natural gas wherever found will be considered as the property of the nation. Special permits for exploration and exploitation are now required and will be required under [Page 363]the new law. (Consular report from Santo Domingo, July 25, 1919.19)

ecuador

A new law is reported to declare that petroleum mines not adjudicated belong exclusively to the State and private parties may not denounce them pending the enactment of a new law. There are said to be no restrictions, legislative or administrative, discriminating between aliens and nationals. (Consular reports, June 5, 1919, and Aug. 30, 1919, from Guayaquil; cablegram of Oct. 30, 1919, from Quito.20)

guatemala

Restrictions are laid on aliens in the acquisition of mining rights in the case of petroleum. These restrictions on petroleum are contained in presidential decree No. 722 of December 20, 1915:

  • Article 1. The nation reserves the absolute title to all sources of petroleum and hydrocarbons in general which exist in the Republic.
  • Art. 2. The acquisition and exploitation of said sources shall only be accomplished by means of a lease, not to exceed 10 years in duration, contracted with the ministry of public works, which shall be submitted for the approval of the chief executive and which shall only be made with native or naturalized citizens.
  • Art. 3. The above-mentioned contracts shall be nontransferable, except by express authorization of the Government, and then only provided the interested parties are citizens of Guatemala.
  • Art. 4. Special regulations shall detail the requirements and conditions necessary for entering into these contracts, and this decree shall be held as an integral part of the mining code and shall be reported to the national legislative assembly at its ordinary sessions. (Published in “El Guatemalteco” of Dec. 20, 1915.) (Approved by the national legislative assembly on Apr. 29, 1916, decree 945.) (Consular reports of July 3, 1919, and Aug. 30, 1919, from Guatemala City.21)

mexico

Denouncement (filing claim by due legal process) of mining properties is made in accordance with the provisions of Mexican mining laws, as modified by the provisions of articles 27 and 33 of the Mexican constitution of 1917. This constitution was signed January 31, 1917, and promulgated February 5, 1917. The following is believed to be a reliable translation of pertinent excerpts from articles 27 and 33:

[Page 364]

Art. 27. The ownership of lands and waters within the limits of the national territory is vested originally in the nation, which has had and has the right to transmit title thereof to private persons, thereby constituting private property.

Private property shall not be expropriated except for cause of public utility* and by means of indemnification.

The nation shall have at all times the right to impose on private property such limitations as the public interest may demand as well as the right to regulate the development of natural resources, which are susceptible of appropriation, in order to conserve them and equitably to distribute the public wealth. In the nation is vested direct ownership of all minerals, petroleum, and all hydrocarbons—solid, liquid, or gaseous.

Legal capacity to acquire ownership of lands and waters of the nation shall be governed by the following provisions:

“I. Only Mexicans by birth or naturalization and Mexican companies have the right to acquire ownership in lands, waters, and their appurtenances, or to obtain concessions to develop mines, waters, or mineral fuels in the Republic of Mexico. The nation may grant the same right to foreigners, provided they agree before the department of foreign affairs to be considered Mexicans in respect to such property, and accordingly not to invoke the protection of their Governments in respect to the same, under penalty, in case of breach, of forfeiture to the nation of property so acquired. Within a zone of 100 kilometers (62.14 miles) from the frontiers, and of 50 kilometers (31.07 miles) from the seacoast no foreigner shall under any conditions acquire direct ownership of lands and waters.

“IV. Commercial stock companies may not acquire, hold, or administer rural properties. Companies of this nature which may be organized to develop any manufacturing, mining, petroleum, or other industry, excepting only agricultural industries, may acquire, hold, or administer lands only in an area absolutely necessary for their establishments or adequate to serve the purposes indicated, which the Executive of the Union or of the State in each case shall determine.”

Art. 33. Foreigners are those who do not possess the qualifications prescribed by article 30 (birth or naturalization). They shall be entitled to the rights granted by Chapter I, Title I, of the present constitution; but the executive shall have the exclusive right to expel from the Republic forthwith and without judicial process any foreigner whose presence he may deem inexpedient.

No foreigner shall meddle in any way whatsoever in the political affairs of the country. (The Mexican Review for March, 1917.)

There appears to have been as yet no judicial interpretation of article 27. However, the following, from an opinion of the attorney general of Mexico as to the interpretation to be given to the [Page 365]first paragraph of article 27 of the new constitution, may be informative:

I.
All landed property, whether of national or of private ownership, urban or rural, comprised within the confines of the Republic shall be considered as covered by the term “lands and waters of the nation.”
II.
Only Mexican individuals and Mexican associations have the right to acquire lands, waters, and their appurtenances in the Republic.
III.
Alien individuals may acquire such property, either directly from the nation or from individuals—Mexican or alien—on complying with the conditions prescribed in Section I of the seventh paragraph of article 27 when authorized by the State. Hence, even though compliance be had as hereinbefore provided, the State may deny aliens this right under the discretionary power vested in it by this provision.
IV.
Alien corporations shall in no event acquire such property. (Translated from Diario Oficial, Dec. 8, 1917.) (Consular reports from Nogales, Sonora, Mexico, Sept. 27, 1919, and Guaymas, Mexico, Oct. 10, 1919, and from Aguas Calientes, Aguas, Mexico, Aug. 22, 1919;22 also the Mexican Oil Question.)

palestine

Rich petroleum fields are believed to exist in certain districts of Palestine. The British policy in this section, as in all other occupied areas, seems to be to restrict petroleum activities, so far as that may be possible, by leaving in force for the time being the regulations in force prior to the time of occupation. (Consular report of Nov. 8, 1919, from Jerusalem.23)

persia

Citizens of the United States are generally excluded from petroleum development in Persia where the Anglo-Persian Oil Co. has an exclusive right, granted May 28, 1901, for a term of 60 years. This concession, extending over the entire country, with the exception of five Provinces, and covering about 500,000 square miles, has been greatly strengthened by the agreement between the British and Persian Governments, signed on August 9, 1919,24 by which the Persian civil, military, and financial administrations were placed under British supervision and direction. (Memorandum and inclosure from the American Petroleum Institute.23)

Section 2

With reference to steps taken by this Government looking to the removal of restrictions operating directly or indirectly on citizens [Page 366]of the United States as mentioned in the second paragraph of Senate resolution 331, it should be noted that in general the restrictions set forth above are so drawn as to distinguish between aliens and nationals. This distinction causes the discrimination, if any, to fall on aliens generally, thus only indirectly operating on citizens of the United States. In the absence of prohibitory treaty provisions, this form of discrimination would seem to be justifiable from the viewpoint of international law, however impolitic it might be as regards reciprocity and international comity.

It should be further noted that the above legal restrictions generally applicable to aliens are in a large measure enforceable by administrative regulations which give large play to the discretionary powers of the executive. It is in the application of these comprehensive discretionary powers to particular cases that the possibility of discriminatory action is involved. Since this discriminatory action would seem in the absence of treaty provisions to be the only basis on which diplomatic protest could be based, the Department of State has endeavored promptly and systematically to secure detailed information regarding injuries to particular American interests resulting from the alleged discriminatory enforcement of these restrictions in foreign countries, with a view to making representations to these foreign Governments when the circumstances should seem to warrant.

The action taken by the department in connection with the restrictive legislation of Mexico appears in greater detail in the third section of this report.

Representations have been made to the Colombian Government for the fuller protection of the vested subsoil rights of citizens of the United States by the modification of Colombian legislation.

Pending future developments it has seemed to be the policy of the British Government in the occupied areas to prohibit prospecting for minerals. (See German East Africa in sec. 1 above.) It is believed that a similar policy is being followed in the occupied areas of the Ottoman Empire. The unsettled conditions generally prevailing in these occupied regions make it impossible to hazard any speculation as to the ultimate policy to be adopted. A final decision on this question, however, will be of great significance to this Government because of extensive American interests already present in these regions and the promise of future development. In connection with this policy of the British authorities in the occupied areas of the Ottoman Empire, the American Embassy at London was authorized by cable on October 30, 1919, to make representations to the British Government.23 In reply assurances were received that discrimination [Page 367]with reference to the granting and development of concessions in the occupied regions is not being permitted.24

The vastly increased importance of petroleum in gradually supplanting coal as a sinew of trade and war is reflected in the widespread restrictive legislation set forth above. (See sec. 1.) A step in the same direction in the legislation of the United States is found in section 1 of the recently enacted “Act to promote the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain” (Public No. 146, 66th Cong.), reading as follows:

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That deposits of coal, phosphate, sodium, oil, oil shale, or gas, and lands containing such deposits owned by the United States, including those in national forests, but excluding lands acquired under the act known as the Appalachian Forest act, approved March 1, 1911 (Thirty-sixth Statutes, page 961), and those in national parks, and in lands withdrawn or reserved for military or naval uses or purposes, except as herein after provided, shall be subject to disposition in the form and manner provided by this act to citizens of the United States, or to any association of such persons, or to any corporation organized under the laws of the United States, or of any State or Territory thereof, and in the case of coal, oil, oil shale, or gas, to municipalities: Provided, That the United States reserves the right to extract helium from all gas produced from lands permitted, leased, or otherwise granted under the provisions of this act, under such rules and regulations as shall be prescribed by the Secretary of the Interior: Provided further, That in the extraction of helium from gas produced from such lands, it shall be so extracted as to cause no substantial delay in the delivery of gas produced from the well to the purchaser thereof: And provided further, That citizens of another country, the laws, customs, or regulations of which deny similar or like privileges to citizens or corporations of this country shall not by stock ownership, stock holding, or stock control own any interest in any lease acquired under the provision of this act.

This legislation, although limited by its application to the public domain, evoked considerable interest abroad. This manifestation of foreign interest indicative of the intense international competition to secure and restrict exploitation of the world’s petroleum resources, makes the further protection and development of American petroleum interests abroad, in a large measure, dependent on reciprocal arrangements between Governments. A suggestion of a trend in this direction is already noticed in the following excerpt from a note directed by this department to an interested foreign Government prior to the enactment of the above legislation by Congress:

The exclusion of American citizens, either in law or in fact, from commercial production in other countries, has given rise in this [Page 368]country to an agitation for some form of governmental action. The source of this movement lies in the conviction that, with respect to certain essential raw materials, the enjoyment of the same rights in foreign countries that aliens enjoy in the United States is essential to the future welfare of our people. This conviction is believed to underly and explain the provisions of the public-lands leasing bill to which you have referred. The movement would lose much of its force if an agreement were in existence providing in adequate measure for that reciprocity toward which the proposed legislation is directed. The securing of adequate supplies of oil in emergencies does not appear to be irreconcilably opposed to the principle of reciprocal access to supplies.

Section 3

In reference to the information requested in the third and fourth paragraphs of Senate resolution above mentioned, the Department of State is not advised that the Government of Mexico has imposed express restrictions upon citizens of the United States in regard to the acquisition and development of petroleum-bearing lands in Mexico which are not imposed upon the nationals of other foreign countries.

It should be noted that the holdings of American interests in Mexico are so extensive that general restrictions applicable to foreigners fall most heavily on American interests.

The alleged nationalization of petroleum by the separation of subsoil from surface rights, and the governmental reservation of the former, may have been effected by article 27 of the new Mexican constitution of 1917. (Mexico, above sec. 1.) There appears to have been no judicial interpretation on the construction of article 27. It may be that some relief may be expected from a judicial construction of the conflict which appears to exist between article 27 and article 14, which states that no law shall be given retroactive effect to the prejudice of any person.

On February 19, 1918, the Mexican executive, under authority of a congressional resolution of May 8, 1917, conferring upon him extraordinary powers in the department of finance, issued the first of a series of decrees, which seems to have been the first step in enforcing article 27. To this decree diplomatic protests were made by this Government, Great Britain, and France. The position of this Government in regard to this apparently radical legislation is set forth in the following from Ambassador Fletcher’s note of April 2, 1918, to the Mexican Government25:

While the United States Government is not disposed to request for its citizens exemption from the payment of their ordinary and just share of the burdens of taxation, so long as the tax is uniform and not discriminatory in its operation, and can fairly be considered [Page 369]a tax and not a confiscation or unfair imposition, and while the United States Government is not inclined to interpose in behalf of its citizens in case of expropriation of private property for sound reasons of public welfare, and upon just compensation and by legal proceedings before tribunals, allowing fair and equal opportunity to be heard and giving due consideration to American rights, nevertheless, the United States can not acquiesce in any procedure ostensibly or nominally in the form of taxation or the exercise of eminent domain, but really resulting in confiscation of private rights [property] and arbitrary deprivation of vested rights.

  1. This letter and enclosed report were transmitted to the Senate by the President under date of May 17, 1920, and published as S.Doc. 272, 66th Cong., 2d sess.
  2. S.Res. 331, 66th Cong., 2d sess.
  3. Reprinted from S.Doc. 272, 66th Cong., 2d sess. (file no. 800.6363/140a); no copy of original report found in Department files.
  4. Foreign Relations, 1919, vol. i, pp. 163 and 167, respectively.
  5. Ibid., p. 168.
  6. None printed.
  7. None printed.
  8. Not printed.
  9. Neither printed.
  10. None printed.
  11. Neither printed.
  12. Congressional Record, July 29, 1919, vol. 58, pt. 4, pp. 3306 ff.
  13. Not printed.
  14. Not printed.
  15. Neither printed.
  16. Not printed.
  17. See also section on petroleum exploitation in the Dutch East Indies, vol. iii, pp. 260 ff.
  18. Not printed.
  19. None printed.
  20. Not printed.
  21. Neither printed.
  22. Not printed.
  23. Not printed.
  24. None printed.
  25. Neither printed.
  26. While the term “public utility” may be somewhat misleading, it is felt that that of “public use” may be even mere so. The same expression (“por causa de utilidad publica”) is to be found in the 1857 constitution, and has always been interpreted by the courts of Mexico in the sense of public interest, as in the case of land expropriated for the surface work of a mine, etc. (H.N.B.) [Footnote in S.Doc. 272.]
  27. None printed.
  28. Not printed.
  29. Foreign Relations, 1919, vol. ii, p. 703.
  30. Not printed.
  31. Foreign Relations, 1919, vol. ii, p. 259.
  32. See ibid., p. 260.
  33. Foreign Relations, 1918, p. 713.