812.6363/2537

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

No. 474

Sir: Referring to previous correspondence regarding the amendment of the Regulations of the Mexican Petroleum Law, necessitated by the amendment of the Law itself, which was approved by the Mexican Congress in December, last, and published in the Diario Oficial of January 10, 1928, I have the honor to report that the Department of Industry today handed to the representatives of the local and foreign press the text of the Executive Decree signed by President Calles today containing the amendments in question, together with the form to be used in issuing confirmatory concessions on petroleum lands acquired prior to May 1, 1917. I enclose a single copy of the Spanish text of the decree in question as handed to the representatives of the press by the Department of Industry today. It is anticipated that this decree will appear in the Diario Oficial in the course of the next few days. Clippings from the Diario Oficial will be sent to the Department as soon as the decree appears in that publication.19

I also enclose an English translation of the amendments in question and of the proposed form of confirmatory concession.20 This translation, which indicates the origin of the changes made in each case, [Page 301]has been used by Mr. J. Reuben Clark, Jr. in his negotiations on my behalf with Señor Paredes, of the Department of Industry, acting on behalf of Minister Morones, and represents the substance of the amendments agreed on between them.

Finally, I enclose a copy of a statement handed to the press on my behalf today, in connection with the amended regulations.

I have [etc.]

Dwight W. Morrow
[Enclosure 1—Translation]

Mexican Decree of March 27, 1928, Containing Amendments of the Petroleum Regulations Promulgated April 8, 192621

Plutarco Elias Calles, Constitutional President of the Mexican United States, to its inhabitants, know ye:

That in the use of the power conferred upon the Executive of the Union by Fracción I of Article 89 of the Constitution and of the power set forth in Article 22 of the Law of December 26, 1925, I have decided to issue the following modifications and additions to the corresponding regulations in accordance with the amendments of January 3 of this year of Articles 14 and 15 of the Law itself.

There are modified in the terms hereinafter expressed the respective articles:

Article 147. In conformity with the provisions of Article 15, amended, of the Law, private! individuals or companies possessing rights referred to in Article 14 shall petition for confirmation before the respective Agency, according to its jurisdiction, or directly, before the Department of Industry, Commerce and Labor, within the period of one year, counted from January 11, 1928.

[Article 148. Confirmation of the concessions referred to in Article 12 of the law shall be effected through a concession executed in accordance with the provisions in these regulations, and the security that shall have been deposited under the former concession will be applicable to the same purpose in the new concession on the one condition that it was made in national gold.]

[Article 149. In accordance with the provisions in Article 12 of the law the concessions which may have been granted between the first of May, 1917, and the 31 of December, 1925, with power to explore and exploit land under Federal jurisdiction throughout the territory of the nation, or without exactly defining the area and [Page 302]site on which such exploration and exploitation work is to be done, shall be exchanged for others drawn up in accordance with the terms that these regulations indicate in lands also under Federal jurisdiction, the area of which as a whole shall not exceed the figure given in Article 39 of these Regulations. The former deposit will be applicable to the new concession provided it was made in national gold.

The federal zones for whose exploration and exploitation the said rights were conferred by some of these concessions shall be left out of the new ones; but the beneficiaries of those which on the date of the enactment of the law had been in full enjoyment of their rights may obtain a contract in accordance with Article 81 by which they will be empowered to carry on their work.]

Article 150. The confirmation of rights, as mentioned in Article 14 of the Law, shall be effected without cost and by virtue of a concession after proof of said rights, in the manner provided by Articles 151 and 152.

[Article 151. The rights derived from works done prior to May 1, 1917, referred to in Section 1 of Article 14 of the law should be proved in the manner established by the laws on the subject or on the strength of documents authentic in the opinion of the Ministry of Industry, Commerce and Labor which technically prove that the said work has been done.]

Article 152. For the purposes of the foregoing Article the following should be considered as petroleum exploitation work:

The performance prior to May 1, 1917, of some positive act which would manifest the intention of the owner of the surface or of the persons entitled to exercise his rights to the oil under the surface to make use of or obtain the oil under the surface such as;—drilling, leasing, entering into any contract relative to the sub-soil, making investments of capital in lands for the purpose of obtaining the oil in the sub-soil, carrying out works of exploitation and exploration of the sub-soil, and in cases where from the contract relative to the sub-soil it appears that the grantors fixed and received a price higher than would have been paid for the surface of the land because it was purchased for the purpose of looking for oil and exploiting same if found; and in general performing or doing any other positive act or manifesting an intention of a character similar to those heretofore described.22

Article 153.—suppressed.

Article 154.—suppressed.

[Page 303]

Article 155. The confirmatory concessions shall be issued in accordance with the provisions of Article 14 of the Law, without limitation of time when they be issued in favor of surface owners, and for the term stipulated in the contracts when they be issued in favor of lessees or cessionaires. Said concessions shall be drawn in the terms in which the form annexed to these Regulations is expressed, except those which may require modifications or additions by reason of the special circumstances of the case.

Article 156. The confirmatory concessions issued in accordance with Article 14 of the Law do not require guarantee deposits, nor the execution of the regular works prescribed for other concessions granted in accordance with these regulations.

In the said confirmatory concessions there shall only be established police and security conditions in the petroleum works, in accordance with these regulations, and those which may be issued on these matters, and failure to comply shall give rise to the sanctions provided by Article 18 of the Law and those stipulated in the fiscal laws.

[Article 157. The last assignee of any contract executed since May 1, 1917, and before December 31, 1925, for express petroleum purposes will hold a preferential right from December 31, 1925, to the same time in 1926 to obtain concessions in accordance with the provisions of the law and those laid down in these Regulations.]

[Article 158. The rights derived from denouncements in accordance with the provisions in Article 13 of the law shall be ratified through applications which must be filed within the first three months of the year 1927. After that time the right of confirmation which was not sought shall be considered as having been relinquished.]

[Article 159. For the purposes of Article 4 of the law if the holder of the rights recognized by Articles 12 and 14 of the said law and 157 of these Regulations is a foreign company or a Mexican company with foreign stockholders in accordance with the provisions in Article 5 of the organic law and Section I of Article 27 of the Constitution, and Article 10 of its regulations, such rights may be held by the said company during the life of the contracts from which they flow, or if the case arise, for the life of the company according to the articles of association.]

Transitory

[Article 1. Pending a meeting of the board referred to in Section IV, Article 7 of the law there shall not be granted any concession with the special privileges to which the said section refers.]

[Article 2. In compliance with the provisions in Article 15 of the law, during the year 1926 no application shall be received or [Page 304]other concessions granted than those resting on the rights recognized by Articles 12 and 14 of the law and 157 of these Regulations.]

The new petitions for confirmation of rights shall be accepted within the period of one year established by Article 15, amended, of the Law.

[Article 3. During the year 1926 in addition to the general grounds provided by these Regulations, opposition to an application may be based on the rights emanating from Articles 12 and 14 of the law.]

In the term of the year fixed by Article 15, amended, of the Law, there shall also be a cause of opposition to a petition for a petroleum concession, in addition to the general ones, that which may be based upon rights emanating from Article 14 thereof, the confirmation of which may not have been requested during the year 1926.

Article 4. The petitions for concessions confirmatory of rights, as well as the oppositions to their granting, shall be subject to the procedure (tramite) indicated for those for ordinary concessions, with the exception of what is provided by Articles 11 and 12 of this Regulation, and saving that which refers to the presentation of proof documents, which can be done at the will of the interested party before the corresponding Agency or directly before the Department of Industry, Commerce and Labor.

[Article 5. During the three months referred to in Article 158 of these Regulations the existence of a claim (denuncio) not patented (titulado) on the whole or part of the zone applied for shall be regarded as a ground of opposition to an application for a petroleum concession provided the opponent be the denouncer in person or his legal representative.]

[Article 6. In concessions which may be granted as a result of applications filed up to December 31, 1926 it will be stated that they are issued without prejudice to the rights named in Articles 12, 14 and 15 of the law and the preference established by Article 157 of these Regulations.

In those which are granted as a consequence of the applications filed between the first of January, 1927 and the 31 of March of the same year it shall be stated that they are issued without prejudice to the rights referred to in Article 158 of these Regulations.]

And in those based upon ordinary petitions presented within the period of the year, counted from January 11, 1928, and which may be granted in the course of the said term, it shall be stated that they are issued without prejudice to the rights recognized by Article 14 of the Law and which may not have been the object of a confirmatory petition.

[Article 7. In order to be taken into consideration applications for [Page 305]concessions filed in the Ministry of Industry, Commerce and Labor or its Petroleum Agencies prior to the date of the promulgation of these Regulations must be ratified by the parties concerned within sixty days counted from that same date in the manner and in the offices determined by the said Regulations and at the same time the declaration of the office and date of filing of the first application shall be made so that upon the substantiation of those facts the ratification may be considered as submitted on the date of the first application.]

[Article 8. The provisions of the Regulations in force up to date will continue to apply to every matter that is not inconsistent with these Regulations pending the issuance of the regulations on petroleum work.]

The following Transitory Articles are added:

Article 9. In order to carry out the provisions of Article 15, amended, of the Law, there shall be admitted petitions for confirmatory concessions in the period indicated by the same article, even when the lands may have been the object of prior confirmatory petitions presented by the surface owners, when the new confirmations ere requested by the lessees or cessionaires; and vice versa.

Article 10. During the period of ninety days, counted from the date on which these amendments go into effect, there shall be suspended the admission of petitions for ordinary petroleum concessions on free lands, as well as the tramitación of those already accepted and of those presented based on Articles 13 of the Law and 158 of these Regulations.

On the expiration of the ninety days, the substantiation of the petitions suspended shall be concluded and the admission of ordinary petitions shall be renewed; but always provided both the former and the latter refer to lands as to which until that moment a confirmatory petition may not have been formulated.

The titles which may be issued in respect of those petitions shall contain a clause in which it is stated that their granting does not prejudice the confirmable rights which might exist in the lands they cover and which may have been invoked in due form in the remainder of the term established in Article 15, amended, of the Law.

Article 11. In every case in which within the year indicated by Article 15, amended, of the Law there is presented a petition for confirmation on lands asked for in an ordinary concession or (a petition) of those based upon Article 13 of the Law, or as to which titles have already been issued in consequence of a petition of one or the other kind, the substantiation of the petitions in process (en tramitación) shall be suspended and the effects of the titles issued [Page 306] (shall be suspended) pending the tramitación of the file of the confirmatory petition.

If the latter prospers and the respective concession is therefore issued, the prior petition shall be declared unfounded, whether ordinary or based upon denouncement, when it might affect the same lands, or the title which upon the basis of one of these petitions may have been already granted.

Article 12. The companies or private individuals who may have in their favor rights of those specified in Article 14 of the Law and the confirmation of which may not have been requested in the year 1926, shall be able to exercise them directly by means of a confirmatory petition or in the form of opposition to the petitions for ordinary concessions which may be presented, or to ordinary ones and those derived from Article 13 of the Law already in tramitación and of which they may have knowledge. For the latter purpose the term of opposition shall be considered amplified for the whole period of Article 15, amended, of the Law and the substantiation of the ordinary petition or one based upon denouncement, regarding which opposition may be formulated, shall not be suspended.

Therefore, I order it to be printed, published, circulated and given due compliance.


(Signed) By the President.

(Countersigned) By the Secretary of Industry, Commerce and Labor.

[Enclosure 2]

Statement Handed to the Press, March 27, 1928, on Behalf of Ambassador Morrow22a

These Regulations when taken with the Supreme Court decision handed down November 17, 1927, the legislation passed by the Mexican Congress on December 26, 1927, and promulgated on January 10, 1928, and the letter of Minister Morones issued on January 9, 1928, evidence the determination by the judicial, the executive, the legislative, and the administrative departments of the Mexican Government to recognize all rights held by foreigners in oil properties prior to the adoption of the 1917 Constitution.

The Supreme Court decision declared that the cutting down of the oil companies’ rights to a fifty-year period was unconstitutional. In connection with that decision the Court said that “the confirmation of a right is the express recognition of the same, to limit it is to modify that right instead of confirming it.” Following this decision the President asked Congress is [to] modify the law of 1925 to conform [Page 307]with the Constitution as interpreted by the Court. The committee of Congress reporting upon this law said:

“To confirm a right is to recognize it expressly in its whole extent and with the conditions inherent therein in such a way that no restriction whatever can be established with regard to the extent or conditions of the right which is confirmed.”

After the legislation had been passed certain oil companies still had doubts as to whether those who took confirmatory concessions under the new law would get a new grant or have their old rights confirmed. Because of these doubts Minister Morones, the head of the Department of Industry, Commerce and Labor, wrote a letter in answer to an inquiry from an oil company, stating that such confirmatory concession would operate “as the recognition of rights which will continue in force subject only to police regulations.”

President Calles, on the advice of Minister Morones, has now issued new Regulations modifying the old Regulations in accordance with the decision of the Supreme Court and the new act of Congress. These new Regulations make clear what Minister Morones had already made clear in his letter, that those who take confirmatory concessions under the amended law get a confirmation of their old rights rather than a new grant of rights. The form of confirmatory concession as set out in the new Regulations expressly declares that it is to “operate as a recognition of acquired rights which continue in force.”

There remains, of course, the determination of what rights the oil companies had on May 1, 1917. While there may well be honest differences on this point, there is no reason why such differences, if any, cannot be satisfactorily settled through the due operations of the Mexican governmental departments and the Mexican courts.

The changes in the Mexican laws and regulations have been made by the voluntary act of the Republic of Mexico. In the informal conversations which have taken place, Minister Morones and his official staff have approached the whole matter with a disposition to frame the Regulations in such a way as to meet such essential points as are susceptible of adjustment by general provisions.

  1. Decree published in the Diario Oficial, March 28, 1928.
  2. Neither printed.
  3. Articles and portions of articles in brackets are existing regulations which were not in the decree signed by President Calles on March 27, 1928, but which were included in the translation transmitted by Ambassador Morrow.

    For text of articles 147, 150, 152, 153, 154, 155, 156, and article 4 transitory, of the regulations of the petroleum law of December 26, 1925, prior to amendement, see Diario Oficial, April 8, 1926.

  4. See Proceedings of the United States–Mexican Commission Convened in Mexico City, May 14, 1923, p. 47.
  5. For release in the morning papers of Wednesday, March 28, 1928.