Papers relating to the foreign relations of the United States, 1928, Volume III

856d.6363/512: Telegram

The Secretary of State to the Chargé in the Netherlands (Norweb)

Washington, March 2, 1928—4 p.m.

8. Your 8, February 24, 4 p.m. Please at once present to the appropriate official the following informal memorandum:

“The American Chargé d’Affaires ad interim promptly reported to the Secretary of State the information informally communicated to him to the effect that the Netherlands Government had instructed its Minister at Washington to initiate certain further formal correspondence with the Secretary of State in relation to the question of reciprocity between the two Governments in matters pertaining to petroleum. The Government of the United States, however, believes that an informal exchange of views rather than continuation at this time of the formal diplomatic correspondence which has now extended oyer eight years is better calculated to facilitate a prompt understanding satisfactory to both Governments. Accordingly, the Chargé d’Affaires has been instructed to make the following statement of the position of the Government of the United States in the matter.

The laws of the United States with respect to its petroleum resources are general in terms and, as a matter of policy, have been applied with the greatest possible liberality, and the benefits thereof are equally available to the citizens of foreign countries and to American nationals. Under the general mining laws of the United States it has been held, by formal decisions still in force,⁹ that a corporation organized under the laws of the United States or one of its States can acquire title to public mineral lands even though its stock is controlled by citizens of foreign countries. Private lands, to which the foregoing principles also apply, constitute about 90% of the proven oil lands of the United States.

With respect to Indian lands, which comprise approximately 10% of the above-mentioned private oil lands, it may be pointed out that a corporation organized under the laws of the United States but controlled by a Netherlands corporation has acquired and holds leases specifically approved on May 15, 1923, by the appropriate Department of the Government.

The Mineral Leasing Act of February 25, 1920, is applicable to production on public lands of a limited number of specified minerals, including petroleum. This Act contains a provision that citizens of other countries, the laws, customs or regulations of which deny similar or like privileges to citizens or corporations of this country, shall not by stock ownership, stock holding or stock control own any interest in any lease acquired under the provisions of the Act. The Act is thus not discriminatory in its terms, nor has discrimination appeared at any time in the customs or regulations affecting the grant of leases in pursuance of the Act. The existence of reciprocity is expressly made a question of fact, and is determined on the basis of applications made to the competent authorities. Such applications would be granted if the applicant shows in support of his application that the laws, customs or regulations of the foreign country in question do not deny reciprocal privileges to American nationals.

This means that if the laws, customs or regulations of the Netherlands permit the acquiring of mineral leases or concessions affecting mineral lands in the Netherlands or its colonial possessions by corporations formed under the laws of the Netherlands or of its possessions, the stock of which is controlled by American citizens or corporations, then a corporation organized in the United States, the stock of which is controlled by citizens of the Netherlands, could acquire a mineral lease on public lands of the United States under the Act of February 25, 1920.

It is a fact of very great importance that the Government of the United States has permitted foreign interests freely to acquire petroleum holdings on private lands of the United States which, as stated, constitute about 90% of the proven petroleum areas in the United States. In this connection, it is significant that in 1926 one group of Dutch companies obtained from the petroleum fields of the United States 5,793,267 metric tons of oil, amounting to over 37% of its total production in all countries and to about twice its production in the Dutch East Indies. The Government of the United States is certain that the Netherlands Government will admit that Netherlands interests have received most liberal treatment in the United States.

On the other hand, however, applications by or on behalf of American interests for concessions under existing laws for exploitation of petroleum resources in the Dutch East Indies have been urged for years without favorable action, and it is only recently that the Netherlands Parliament has approved a measure authorizing the Minister of Colonies to grant an application of such interests.

The Government of the United States has noted with considerable gratification the assurance extended in a note of November 14, 1927, from the Netherlands Minister at Washington to the Secretary of State to the effect that the Netherlands Government has the intention, after the above-mentioned project shall have become law, to continue taking the same line in future with regard to the issuing of oil lands. The Government of the United States understands from this assurance that the Netherlands Government proposes to treat American petroleum interests on a footing equivalent to that accorded to Dutch nationals, somewhat as foreign nationals of reciprocating countries are treated by the Government of the United States.

It is further stated in the note under reference that the Netherlands Government is quite willing to continue such a line of conduct with respect to issuing oil lands, but that it could only take the responsibility of doing so if the Government of the United States were willing to declare the Netherlands a reciprocating country within the meaning of the Mineral Leasing Act of February 25, 1920.

As has been indicated in previous correspondence, especially Mr. Phillips’ note of September 25, 1920,¹⁰ the laws of the Netherlands seem not to deny the right of an American citizen to own or hold stock in Netherlands corporations engaged in exploiting or producing oil. But in view of the fact that, so far as the Government of the United States is advised, the Netherlands Government has never directly granted an exploitation concession to any American company, the existing Netherlands law as administered has not accorded to American nationals reciprocal participation in the development of Netherlands petroleum resources.

The Chargé d’Affaires is authorized to state that action by the competent authorities of the Government of the United States holding the Netherlands to be a reciprocating country would in principle be assured in case the Netherlands Government, as an earnest of its policy,

(1) should confirm the understanding of the Government of the United States that the laws of the Netherlands do not deny the right of Americans to own or hold stock in corporations organized thereunder to exploit petroleum resources of the Netherlands or of its possessions;

(2) should definitely grant an important concession or concessions to American interests; and

(3) should confirm the understanding of the Government of the United States that the Netherlands Government will take the same line in the future with regard to the granting of oil lands, and will treat responsible American interests on a footing equivalent to that accorded to Dutch interests.”

Telegraph when you present memorandum and report promptly any significant developments.

Kellogg

9. Marginal notation by the Economic Adviser, Department of State: “Note. Refers to 28 Land Decisions, 178. A[rthur] N. Y[oung].”
10. Not printed; but see telegram No. 573, Sept. 22, 1920, 7 p.m. to the Minister in the Netherlands, Foreign Relations, 1920, vol. iii, p. 278.