812.6363/742
The Association of Producers of Petroleum in Mexico to the Secretary of State
[Received November 16.]
Sir: Kindly refer to your letter of October 27, 1920,48 (your So–812.6363/737), by which you acknowledge receipt of my letter of the 21st of the same month, both relating to concessions granted to third parties by the Mexican Federal Government of the right to explore for and exploit the petroleum underlying the so-called Federal Zones on rivers in the Mexican oil fields, the effect of which concessions, if they are not cancelled, will be the confiscation of the vested rights of American citizens in the adjoining lands or leases owned or controlled by American citizens.
[Page 223]In this letter you advise me that the American Embassy at Mexico City has received an informal communication from the Foreign Office of the de facto Mexican Government stating that the Embassy’s informal representations have been brought to the attention of the Secretary of Industry and Commerce, with the request that he furnish all necessary information and data, for forwarding to the Embassy. You further advise me that in view of this response to the Embassy’s informal representations, and of the existing situation in Mexico, your Department considers that it must refrain for the present from further instructions to the Embassy.
On behalf of the Association of Producers of Petroleum in Mexico, I beg to express the appreciation of the Association for your letter under acknowledgment and to represent to you the capital importance to the American interests affected, that, at the earliest date which may be consistent with the relations of the American Government with the Mexican authorities, the Embassy be instructed to call upon the Mexican Foreign Office for the information and data requested of the Mexican Department of Industry and Commerce. Vested American rights are being jeopardized and unless early relief is obtained through further representations of your Department, they will suffer irreparable damage and confiscation.
The Government of President Carranza or that of his successor have actually signed at least seventeen concessions covering the petroleum subsoil of the so-called Federal Zone of all the rivers and their affluent creeks, rivulets and brooks in the entire proven fields of the State of Veracruz. Enclosed you will find a table of these concessions and a map of the “Southern” oil region of Mexico, showing the location of the concessions with reference to the holdings either of members of this Association, or of other American interests.49 A map of the river-zone concession situation in the Panuco field is not attached. But it is not needed for your comprehension of the situation in this field, since you can visualize the situation from the situation in the Southern region. The Panuco river is a tropical river of slow current and many sinuosities, which has several affluents in the developed oil field, all of which are covered by Federal Zone concessions and make possible the drainage of producing wells of all members of our Association by offset wells if they are allowed to be drilled on these concessions. Nevertheless, if the Department so requests, I shall be glad to have a map prepared. From this map you will perceive that, as I intimated in my initial letter of August 3, 1920, the grantees of these concessions will be in a position, if they are permitted to develop their concessions, to drain by offset wells, the petroleum deposits underlying the lands or leases of practically every member of the Association. Since the [Page 224] Carranza Government initiated its program of nationalization of the petroleum subsoil, no more ingenious, insidious and dangerous attack upon the vested rights of American citizens has been devised. At the cost of hardly more than a few sheets of paper and document stamps, favorites of the Mexican Government are being enabled to procure locations for wells which will offset the producing wells of members of this Association. It is hardly necessary to explain to you, that the discovery of producing wells has been conditioned upon the drilling of numerous dry holes and the expenditure of hundreds of thousands of dollars in these operations, to say nothing of the considerable sums previously expended by our member companies in the purchase or lease of their holdings from the Mexican owners, prior to the taking effect of the new Mexican Federal Constitution of 1917.
In order that you may appreciate that the Association’s apprehensions of immediate peril are well founded, I draw your attention to the fact that the Compañia Maritima de Petroleo, has drilled a well at Lot “A”, Buenavista, on the Panuco river, capable of producing daily five thousand barrels of petroleum, which offsets the following wells of members of this Association:
- Well #3 of the Mexican Gulf Oil Company
- Well #1 of the Panuco–Boston Oil Company
- Well #4 of the Tal Vez Oil Company
In the Tuxpam field, on the so-called Federal Zone of the Tan-cochin creek, the Compañia del Agwi, S.A. (Guffey interests) has brought in a well with a daily capacity of 50,000 barrels. This well threatens the production of adjoining wells belonging to the following members of this Association: International Petroleum Company, The Eagle Oil Company, Freeport–Mex. Petroleum Company, Mexican Gulf Oil Company, and of the wells of all other companies which tap the Amatlan pool.
While the members of this Association have taken, or are taking, steps to sue for relief in the Mexican courts, these steps afford no prospects for adequate relief. The offset wells of these concessionaires of the Federal river zone will have exhausted the petroleum pools, long before the actions will have been decided in last resort by the Federal Supreme Court of Mexico. As an illustration, I beg to remind you that the “amparo” suits initiated more than two years ago by the members of this Association, in order to test the constitutionality of the Carranza petroleum decrees, have not yet been heard by that court; and that there is no indication that within any calcu[l]able future these causes will either be argued or decided.
[Page 225]Nevertheless, the vigorous representation of your Department, heretofore made to the Mexican Foreign Office, has meanwhile afforded the members of this Association a measure of practical relief in the matter of denouncement of their holdings, since the Mexican Government has refrained from enforcing the Carranza decrees to the full extent of the letter thereof.
It is hoped by the Association that your Department will lend its good offices in this matter of encroachment of vested American rights through the granting of Federal Zone concessions, which in comparison with denouncements, contain elements of far greater danger, because of their more insidious character.
Respectfully,
By
Chairman of Executive Committee