812.6363/1880: Telegram

The Ambassador in Mexico ( Sheffield ) to the Secretary of State

272. Petroleum department of Department of Industry, Commerce and Labor issued an order on June 8 giving special conditions governing issuance of provisional permits for drilling oil wells on lands the acquired rights to which have not been fully proven by the applicant companies, in substance as follows:

  • First, permits essentially provisional and subject to rights being proved within given period never to be extended beyond calendar year.
  • Second, applicant must execute bond for unlimited amount satisfactory to Department to guarantee value of petroleum which may be extracted in case he does not succeed in fully proving validity of his rights within period specified.
  • Third, if because of two preceding paragraphs permits are canceled, beneficiaries are required to reimburse Department for value of petroleum extracted under permits and in case this is not done Department will foreclose bond, making use of Department’s compulsory powers to which bondsmen must expressly submit themselves.
  • Fourth, permits authorized for sole purpose of not interrupting petroleum exploitation and will maintain provisional nature until beneficiaries have legally proved their rights. Permits will contain statement that issuance confers no right on beneficiaries but by simply using permits the beneficiaries admit that they accept absolutely all the conditions mentioned in this order.

[Paraphrase.] I invite the attention of the Department to paragraph 3 of the order which may be given confiscatory effect. I am informed that a majority of the oil producers have decided to protest against the order. They will not accept surrender of rights provided for in paragraph 4. They state that the enforcement of the order will put an end to oil drilling.

A copy and translation of the order will go forward by next pouch. [End paraphrase.]

Sheffield