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

No. 3417

Sir: Referring to the Embassy’s despatch No. 2912 of October 1, 1926, and to previous correspondence regarding the Mexican Government’s order of June 8, 1926, on the subject of provisional drilling permits, and the modification of this order by Presidential Decree of August 24, 1926, I have the honor herewith to enclose translation of an official statement issued by the Department of Industry and published in today’s press purporting to “clarify” this order.

No reply from the Mexican Government to the Embassy’s note of October 1, last (a copy of which was enclosed with the despatch above mentioned) has been received.

I have [etc.]

James R. Sheffield

Official Statement Issued by the Mexican Department of Industry, Commerce, and Labor76

Certain petroleum enterprises have requested clarifications regarding the order issued by this Department dated June 8 and amended August 24, last, for the perforation of wells on lands to which the rights of the enterprises or private individuals might not have been duly justified.

The purpose of the Department in issuing this authorization was none other than to accede to a written petition of serious companies who offered to give the guarantees the Government demanded to its satisfaction in order to obtain permits with the purpose of not interrupting exploitation to the prejudice of the industry and of the enterprises and private individuals who, on account of their engagements might suffer some injury as the result of the paralyzation of their work.

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As is seen, this Department granted the authorization guided by a broad spirit of cooperation and interpreting the law in its most-liberal sense, in view of its constant desire to grant to the industry all facilities compatible with the legal precepts.

As the first order of June 8 established unlimited bond to guarantee the drillings and the exploitations which might be made by virtue of this order and certain enterprises stated that they were unable to give this kind of guarantee, and since every order must be of general application, a new attempt was made to give greater facilities and the amended order of August 24 modified the unlimited guarantee by a fixed guarantee of 100,000 pesos for the bond, which for this purpose was to be given according to the provisions of the first order cited.

If, then, drilling permits are only to be granted to those who justify their rights in the lands they desire to drill, the Department, in giving this greater degree of facility, had to try to see that such liberality was guaranteed.

The bond established has two purposes:

To guarantee the amount of any royalty that might belong to the nation in case the land be national property;
To back up morally the authorization granted.

And if the enterprise benefited by the permits can not prove its rights by any of the means which our laws concede to it, it is logical that the nation should have the power to require the legal participation belonging to it in case the lands are national property and, in case they be not so, that the rights of third parties be protected; but if the beneficiaries should not pay the share which legally belongs to the Federal Government, the Department would be legally capacitated to make the bond effective without this implying that the interested parties were deprived of the judicial remedies the law grants in these cases if they think that this measure is violative of their rights.

If after the granting of the provisional permit the beneficiary should not prove his acquired rights in the land and petitions for his concession, the latter will be granted preferentially always saving the rights of third parties.

As for the granting of the bond, it is believed that it should be made before drilling is commenced, although it is not the purpose of the Department to cause unnecessary expenses, since if the drilling carried out were not productive this same bond can be used for a new drilling to be granted under similar conditions or will be cancelled if the said bond is not used for this purpose.

  1. Printed from the Mexico Excelsior of Dec. 23, 1926