821.6363/360: Telegram

The Secretary of State to the Minister in Colombia (Piles)

9. Your 10, February 14, 4 p.m. The Department has noted your statement that you do not think it advisable to do anything for the present. However, the Department feels that, unless you are firmly convinced such action would have an unfortunate effect, it would be highly advisable for you to discuss personally and confidentially with the President of Colombia the whole subject of the new oil regulations, in order that the Colombian Government may fully appreciate the serious effect which these regulations may have on American companies operating in Colombia and on the Colombian petroleum industry generally, and that the Colombian Government may fully understand that the Department is giving this matter very serious consideration.

In the course of your discussion you should invite attention to the following considerations:

American companies interested in petroleum development in Colombia believe that the new oil regulations contain features which are unworkable, impracticable, and not contemplated or authorized by the petroleum law, and that they are also in contravention of the Constitution of Colombia.
The companies interested contemplate asking the Council of State to suspend the application of this decree at least until such time as the constitutionality of the decree may be passed upon by the Supreme Court of Colombia. In view of this contemplated action which the American companies are taking upon the advice of their attorneys and representatives here and in Colombia, it is believed that much good might be accomplished if the President would decide voluntarily to set aside the regulations or to modify them so as to remove the features which the companies think impracticable and in violation of the property rights guaranteed by the Colombian Constitution.
The regulations appear to go much beyond the terms of the law. For instance there is no provision in the law requiring an application for a drilling permit upon private land, and to support an application for a permit the applicant must submit proof of title to the land satisfactory [Page 590] to the Minister of Industries. All those holding land in fee in tracts of which the area exceeds 500 hectares and is less than 2500 hectares are required to submit their titles to the Minister of Industries before November 23, 1928 showing private ownership in them prior to January 1, 1874, and if the area of the tract exceeds 2500 hectares the owner is required to submit his title papers, however great their antiquity. It will be very difficult and perhaps in some cases impossible for the owners of Spanish grants in Colombia to produce the original titles issued by the Government of Spain.
The regulations vest the Minister with authority to pass upon private titles, and his ruling is to be binding until the judicial power resolves otherwise. The purpose of this is to change the burden of proof in respect to private ownership of land. Under the substantive law of Colombia, the one in possession of land under a recorded deed is presumed to be the owner until the contrary appears, and the Supreme Court of Colombia has held that this rule is binding even upon the Nation; that is to say, if the Nation sues a private person in possession of land for its recovery, the Nation must prove a superior title to that of the person in possession. However, if the owner of land goes into court as a plaintiff, the burden of proof would be upon him. Of course there is no authority in the Constitution or laws of Colombia which permits the Executive Power to change the rules of substantive law.
The regulations requiring the filing with the Minister of Industries of all private maps and geological data would seem to be inconsistent with the guarantee in the Constitution for the protection of private papers. You may, however, consider it inadvisable to mention this fact at the present time.
You should point out that the new Petroleum Law increases the production tax to double what it was under the previous law. Most of the areas held by foreign companies are in the zone which, under the new law, would pay a 16% royalty. If there should be added to this royalty the 10% payable to the owner of the land, it would make a burden which the oil companies could not bear.
You may also say to the President that the American oil companies wish to cooperate with his Government in a friendly, liberal and constructive spirit. They wish in good faith to contribute and assist in the development of the country, and they particularly desire to have the good will and cooperation of the Government to the end that the two forces may work in harmony. They want a practical law, with workable regulations, which will assure them a fair return upon their investments, which are very large. They have expended their money freely in carrying on the work of exploration for petroleum, and many of them have already lost very considerable sums. But [Page 591] they have faith in the country, and if the Government will give them proper support and assistance they will develop an industry there that will add very substantially to the wealth, prosperity and progress of the country.
You may say to the President that it would be considered a just and helpful act if he were promptly to suspend the decree embodying the regulations under the Petroleum Law, at least until such time as the Supreme Court shall have passed upon the validity of both the law and the decree. The Department has been assured that in case the President shall suspend the decree no proceedings will be brought in respect to it before the Council of State.
The Department has been given to understand that in Colombia itself there is very considerable dissatisfaction with the decree and the law, and that all the members of the Cabinet save two have resigned in consequence.