thousand acres of land, clear of encumbrance, the best land in America, and he might go to a bank and want to borrow $500. He could not borrow it. So, it is not a question of our financial standing. It is a question of the present conditions, that nobody's financial standing permits of borrowing, especially on anything that is associated with agriculture.

I read into the record before the Senate Finance Committee the other day, some correspondence. A farmer was seeking a loan of a thousand dollars from the Reconstruction Finance Corporation set-up out in Montana. The inspector came there, and he reported so many cows, so many horses, 4,350 bushels of wheat in the bin; machinery valued, under his appraisement, at $2,000; and the Reconstruction Finance Corporation set-up at Helena, Mont., wrote back and said they would have to reduce the loan from $1,000 to $800, and then required him to give a first mortgage on the land, and also a mortgage on the 1933 growing crops.

It simply means that there is no such thing as credit to a farmer, and the cooperative royalty pool is simply another one of the crops that a farmer has.

There is no credit at the present time, and it is retarding our operations in that line. We feel that it is worth as much to us to be protecting ourselves in the matter of our crop under the ground, as it is to be protecting our crops above the ground, and for that reason we would like to have the benefit of the servcies rendered by the Reconstruction Finance Corporation.

In the matter of farmers who have their farms leased to oil companies, or to others, that does not prevent in any manner their putting their royalties into the cooperative royalty pool. A lease is simply like renting the farm. The putting of royalty acreage into the cooperative pool is like deeding a farm away. It deeds away that much of your royalty. That is a permanent thing. But the leases do not interfere at all. In fact, we are glad to have a farmer come in who already has his farm leased. That means income for the royalty pool immediately.

Our experience in operating our cooperative royalty pool has proven also, in many instances, that we get to lease our properties in places where the individual farmer can not lease at all. Because of our spread, they will take the whole business.

Also it has been demonstrated in many instances that, through our set-up, with our experts in charge, they have advance information as to when there is to be drilling in a certain place, and those who are in the pool with us get the benefit of that advance information and get a higher bonus for the lease.

Senator GORE. That is where you go into the pool before the land is leased.

Mr. SIMPSON. Yes; where we have pooled before they start to drill. In these times-terrible times the Farmers Union Cooperative Royalty Co. pool of Oklahoma, in four years, has producing wells on its tracts. We have tracts that have producing wells. In other words, by pooling, we made it a certainty that our members would have oil. Without pooling, there would have been three or four of our members who would have had oil, and all the rest of us would still have been on the tracts that did not have oil. The doctor's tables work out all right. You can put in a sufficient number of

tracts in any potential oil country, and you convert a very small chance to an absolute certainty that the farmers who go into that pool will have oil. There is not any question about it. If times had been going on in a normal way from 1929, I am sure we would have had wonderful development in many, many, places where we have tracts, but all development ceased.

Our cooperative royalty pool incomes are managed by trustee banks, and we have thrown up such safeguards that, so far as the membership of the pools is concerned, there can be no obligations incurred against the funds that go into the pool.

Senator GORE. No debt.

and

Mr. SIMPSON. No debt. I am the president of the company, the president of the company and our secretary must, by written statement, authorize the trustee bank to pay out dividends, and those are the only only checks they pay out. I discovered that I wanted the management company audited, as to our funds in the cooperative royalty pool, and when we had it audited and the auditor put in his bill, I found out the trustee bank said they were not authorized to pay such bills. They can only pay dividend checks. We have it absolutely proof against any kind of graft or robbing of the funds. I think that is about all I have to say.

Senator STEIWER. In how many States at this time are there pools of mineral rights by farmers?

Mr. SIMPSON. We have two companies in Oklahoma, one in Kansas, one in Texas, one in New Mexico.

Senator STEIWER. I assume, therefore, that in those States, at least, there is adequate law for the making of the pool.

Mr. SIMPSON. Yes, sir.

Senator STEIWER. And that the difficulties the farmers encounter are not legal difficulties.

Mr. SIMPSON. No, sir.

Senator STEIWER. The difficulties relate only to the credit or lack of credit.

Mr. SIMPSON. For promotion of our companies, that is all. Senator STEIWER. How would your pools secure the Reconstruction Finance Corporation?

Mr. SIMPSON. How is that?

Senator STEIWER. If Senate Joint Resolution 247 were agreed to, how would the pools secure the Reconstruction Finance Corporation for advances?

Mr. SIMPSON. The management organization would have to satisfy the Reconstruction Finance Corporation. They own a certain per cent of the pool tracts-in fact, 25 per cent and that 25 per cent they can alienate, but the pool part that goes in for the membership could not be in any way alienated.

Senator STEIWER. It is not an ownership of lands? It is an ownership of mineral rights, is it not?

Mr. SIMPSON. It is an ownership of mineral deeds to royalties. Senator STEIWER. Has any estimate been made as to the amount of money that will be required under this resolution for any stated time say the next 6 months, or the next 12 months, or any other time that might be assumed?

Mr. SIMPSON. I assume that Mr. Aldrich Blake, who will be the next witness, will be able to give those figures. I do not know that.

Senator STEIWER. I will propound the question to him. Have you any further questions, Senator Gore?

Senator GORE. I have no further questions.

Senator STEIWER. Thank you, Mr. Simpson.

STATEMENT OF ALDRICH BLAKE, OKLAHOMA CITY, OKLA.

Senator STEIWER. What is your address, Mr. Blake?

Mr. BLAKE. Oklahoma City.

Senator GORE. Senator, Mr. Blake originated this idea, and found the pattern in the Osage country. I wish, Mr. Blake, that you would set up that situation in the Osage country so that the Senator will see the picture, and it will be in the record.

Mr. BLAKE. First of all, I want to set up the importance of this to the farmers of the Southwestern States. By those I mean, at the present time, Colorado, in which our New Mexico pool has considerable Colorado acreage-the Farmers Union is back of it-Colorado, Kansas, Oklahoma, Texas, and New Mexico. Those are the five States which constitute the heart of the mid-continent oil and gas field.

I have taken from the Statistical Abstract of the United States the figures showing the total value of the crops raised in those States for 1929 and 1930, and also the total value of the minerals. The average total value for those two years of all the farm crops was $761,750,000. The same two years the average value of the minerals taken from the ground was $1,124,000,000. In other words, the farmer had a larger crop, in value, beneath the surface of the earth, than he had on the surface of the earth.

Of course, without the minerals being pooled, very few farmers participated in that enormous wealth, but the point I want to make is that in those two years, 1929 and 1930, the average total value of the minerals was about 50 per cent greater than the total average value of all the farm crops.

We got our inspiration for this movement from the Government itself. I notice in the letter from the Reconstruction Finance Corporation that they say that the pooling idea is something new. Congress enacted it when it passed the law compelling the Osage Indians to own their mineral rights in common. There were 2,229 of them. Most of our pools have 2,229 members. That will be the total number in any one pool.

As a result of that Government act, each of the Osage Idnians up to date has received more than $110,000 in cash.

Senator GORE. Just a moment, Mr. Blake. You understand, Senator, that in the Creek, Chickasha, and Choctaw countries, for instance, the Indians receive their land allotted in severalty, top and bottom, surface and mineral rights. The individual Indian receives not only the surface to his land, but all the mineral content under the surface. In the Osage country, the individual Indian received an individual allotment, but he did not receive the minerals underlying the land. All the minerals were reserved to the tribe as a tribe, and each individual member of the 2,200-odd he speaks of has an equal share in the mineral rights.

Senator STEIWER. Do the Osage Indians have a reservation?
Senator GORE. Yes, sir.

Senator STEIWER. Most of the other Indians were allotted in such a way that their properties were separated one from the other, were they not?

Senator GORE. Yes, sir; and that is true in the Osage Tribe, so far as the surface of the land is concerned. Each Osage has his allotment in severalty, so far as the surface is concerned, segregated from each and very other Osage Indian, but no Osage allottee gets any individual right to the minerals underlying his land. In the Creek country, he got all the minerals under his land, and so in the Five Tribes generally, and in the Osage country the Government reserved all the minerals to the tribe, and this tribal fund is distributed, share and share alike, among all the Osage Indians, whether their respective allotments have minerals under them or not. You might have a dry well, and I might have an oil-producing well. You would share equally with me in all that was produced in the Osage Nation. Do you get the point?

Senator STEIWER. Yes.

Mr. BLAKE. We merely took the idea fostered by the Government itself, and tried to extend it to the white landowner. In other words, we figured that if 2,229 Indians, by virtue of an act of Congress, could pool their mineral rights and make $110,000 apiece in cash, and still be earning money, 2,229 white farmers living in the same kind of potential oil area, could voluntarily pool their mineral rights and, over a period of time, make, or earn, acre for acre, what the Osahes earned.

Senator GORE. Mr. Blake, can you state what percentage of the Osage Reservation produces oil?

Mr. BLAKE. I have not the exact figures, Senator, but I understand it is around 2 per cent. But if it had not been for pooling their mineral rights, about 150 Indians would have taken the $265,000,000 and the rest of them would have been paupers. The white men are paupers in Kay County in many places where there is just as much oil-in fact, a little more oil-but they did not pool. I figured out, about two years ago, when the Seminole pool was a year and a half old, that if the farmers of Seminole County

Senator GORE. When you say the Seminole pool, you do not mean a cooperative pool?

Mr. BLAKE. No; the Seminole oil pool. If the farmers of Seminole County had pooled their oil royalties, each would have each earned about $25,000 in the first year and half as a result of the discovery of the oil in Seminole County alone.

We made only one distinction in organizing our pools. In the Osage Nation they pool all of their mineral rights. We only accept one-half of the mineral rights to a given number of acres from each farmer, so that if oil or gas is struck on his particular tract, he gets a full one-half of the royalty proceeds individually, which is plenty to make him rich. The rest goes to the pool and is distributed pro rata among the members.

In the case of the Osage Indians, the Government acts as trustee to receive the moneys and pay them out. In the case of our pools, we have corporate trust companies to perform that function. That is the best we could do, because, of course, the white man is not a ward of the Government.

I notice in the Reconstruction Finance Corporation letter that they suggest that this is rather a new and untried experiment. Our cooperative pools at the present time have a gross spread of 1,100,000 acres. I imagine that is the largest royalty spread of any concern in the world. It is growing very rapidly. We have over 7,000 landowners already interested.

Senator STEIWER. Is that in one pool?

Mr. BLAKE. No; those are the five pools. There is a group of pools. We are organizing three more. We have a program of eight pools, which will include, when they are finished, about 10,000,000 gross

acres.

You asked about the percentage of the lands leased down there. Very few of the major companies, including the Standard Oil group, have under lease to exceed 1,000,000 acres. We rank right up with any of them.

In so far as royalty is concerned, we rank ahead of any of them. So ours is not a new experiment in any sense of the word, nor is our enterprise in an embryonic stage. We have already demonstrated that it is possible to pool mineral rights.

I want to say something about the general advantages of the pooling idea before I get down to the specific reasons for this loan, and the terms upon which we would like to have it made. You asked particularly about increasing the value per acre by virtue of the spread. You can not tell exactly how much the per-acre value is increased, because it differs in various sections. In some sections, a spread is worth ten times as much as an individual tract. In other sections, the spread is not worth any more than an individual tract. To illustrate, we will take a county in which geology is working out 100 per cent. Every known structure has produced, and every syncline has failed to produce. A spread in such a county means nothing. You have to get on the structure, and that is all there is to it. In other areas, there is not any geology. It is a flat country. It is in the general oil trend. There is a spread, if you wanted to sell it, would bring from two to ten times what a single tract would bring.

We have had farmers who were unable to sell their individual mineral rights, who needed money, or else they could not get what they thought was an adequate price, at the time. They have traded those mineral rights, located in the potential oil area, into the pool, and sold the share which they acquired for more than they could have sold their individual royalty for. Sometimes that has run double or treble.

Senator GORE. And still have half of their royalty left?

Mr. BLAKE. And still have half of their royalty left. There is not any rule, but I do not think you would find any mining expert who would not agree to the principle that a large spread is far more valuable, on the average, than an individual tract. Of course, so far as the farmer is concerned who pools his mineral rights, it removes the speculative feature. If he is sitting out there alone on the prairie, lightning has got to strike him if he is going to get any oil. The minute he goes into one of these pools, he is interested in any well that may be drilled on any pool tract. He is putting his mineral rights to work immediately. He is liquefying them. The share which he acquires in the pool, represents an interest in the spread. It has a loan value.