Doctor ADAMS. You said a moment ago that a number of taxpayers who were denied lessee depletion have later received it. Can you name some of those companies who were denied it in the first instance, and later received it?

Mr. GREENIDGE. Offhand I could not; no.

Doctor ADAMS. I was wondering whether you had a list of those claims, of those who had been denied lessee depletion.

Mr. GREENIDGE. No; I have not.

Doctor ADAMS. Then your statement is one of general policy? Mr. GREENIDGE. Yes. To get such a list, Doctor Adams, would entail a great deal of work which, of course, we are quite willing to do and anxious to do, if necessary.

Doctor ADAMS. Well, I would like to bring out this point: My experience is that the department is ready and willing to grant a claim, if the taxpayer does not make one, when the department is able to discover it; but, in general, you can not discover all such things for the taxpayer.

Mr. GREENIDGE. No; we can not discover them all.

Doctor ADAMS. Well, you can not discover any large proportion of them, can you?

Mr. GREENIDGE. I think we do. I think we discover the majority-the large majority.

Doctor ADAMS. I mean he has to get expert aid. If he does not himself raise the question, it is not raised for him--not because the department is not willing to raise it for him but because it does not discover it.

Mr. GREENIDGE. Yes; that is true.

Doctor ADAMS. That is the point I want to make.

Senator COUZENS. Do you know who drafted the oil regulations for the department?

Mr. GREENIDGE. A large group of experts were brought here, I think, in the latter part of 1918 or the early part of 1919, from all over the country. If my memory serves me correctly, there were some ninety of them, Senator, and, as a result of extended conferences, they got up what was known as the first oil and gas manual. and some of those men assisted in the drafting of the first and second regulations.

Senator COUZENS. You refer to the first and second regulations. How many sets of regulations were drafted?

Mr. GREENIDGE. We have 33 here; 45, 45 amended, and 62; 33 under the 1917 act or regulations for the 1917 act; 45 and 45 amended for the 1918 act and 62 for the 1921 act.

Senator COUZENS. Do you know who the guiding spirit was in the formulating of those oil regulations?

Mr. GREENIDGE. I could not say with definiteness, but I think a man by the name of Ralph Arnold, of California, was the chairman of the committee. I am not sure about that, but I think he was; at least, he was among the leading spirits.

Senator COUZENS. Did he work with the employees of the department in formulating these rules and regulations?

Mr. GREENIDGE. I think so, sir. That was before my time, but from what I have heard of it, I am pretty sure that he did. Then, in conjunction with that, a number of these men had been brought on or were asked to come on here to do it as a patriotic matter. I

do not think they were paid; I am not sure about that, but I do not think they were paid for their services.

Senator COUZENS. Was Mr. Wayne Johnson in the department when you came here?

Mr. GREENIDGE. I think not, sir. I could not state with certainty. Senator COUZENS. Do you know Mr. Wayne Johnson?

Mr. GREENIDGE. Yes, sir.

Senator COUZENS. What does he do now?

Mr. GREENIDGE. He is an attorney in New York.

Senator COUZENS. Is he anything else besides an attorney?

Mr. GREENIDGE. Not as I know of, Senator-representing a variety of clients, I suppose.

Senator COUZENS. Did you work with the staff of the Gulf Oil Corporation in getting this settlement which was closed up prior to Mr. Mellon's taking the secretaryship?

Mr. GREENIDGE. No, sir; I did not know them, even. I had not become acquainted with them.

Senator COUZENS. Do you know who, in the department, worked with the officials or the experts of the Gulf Oil Corporation?

Mr. GREENIDGE. Who are now in the department, Senator?
Senator COUZENS. Yes.

Mr. GREENIDGE. I do not think there are any, Senator. I am pretty sure there are not.

Senator COUZENS. In other words, you are pretty sure that all of the employees of the department who aided in the settlement of the Gulf Oil Corporation case have since left the bureau?

The CHAIRMAN. He is his brother-in-law, is he not?

Mr. GREENIDGE. I think that is it. It is some such relationship, from what I have heard. I do not know of my own knowledge. Senator COUZENS. Does Mr. Mapes practice before the department now?

Mr. GREENIDGE. He does.

Senator COUZENS. Does Mr. Johnson practice before the department?

Mr. GREENIDGE. He does.

Senator COUZENS. Do both of these gentlemen practice before the department mostly in oil cases?

Mr. GREENIDGE. I do not think either of them has appeared in oil cases; at least, not as far as I know. Neither of them has appeared before the Engineering Division in an oil case.

Senator COUZENS. Who succeeded Mr. Mapes as solicitor?
Mr. GREENIDGE. Mr. Hartson.

Senator COUZENS. The present solicitor?

Mr. GREENIDGE. The present solicitor.

Senator COUZENS. Have you any record showing when and how the Gulf Oil Corporation asked to have their claims closed under

section 1312?

Mr. GREENIDGE. Yes; I have knowledge of their having asked it at some time, I should say, last summer.

Senator COUZENS. What do you mean by "last summer?" About what time?

Mr. GREENIDGE. I could not be exact, Senator.

Mr. GREENIDGE. As regards the engineering end of it, Senator. Senator COUZENS. You think that is correct?

Mr. GREENIDGE. I am pretty sure that is correct.

Senator ERNST. Do you know their names? Can you state them for the record?

Mr. GREENIDGE. Of those who had

Senator ERNST. Those who you think had something to do with it and who have since left.

Mr. GREENIDGE. Yes; Mr. C. F. Powell was acting chief of the section, and Mr. Burr McWhirt, I think, was the engineer who checked the figures. I do not think any other engineers had anything to do with it.

Senator ERNST. But you had nothing to do with it?

Mr. GREENIDGE. No, sir.

Doctor ADAMS. Was this refund submitted to the then Solicitor? Mr. GREENIDGE. I presume so.

Doctor ADAMS. You do not know from the record whether it was or not?

Mr. GREENIDGE. I am pretty sure it would have been, though, because every other refund was submitted to him, above a certain

amount.

Senator CoUZENS. Who was the then Solicitor?

Mr. GREENIDGE. The first Solicitor, Senator Couzens, that I remember anything about was Mr. Mapes.

Senator COUZENS. Is he any relation to Wayne Johnson, that you

know of?

Mr. GREENIDGE. Not that I know of, but I have heard it said that he is related to him.

Senator COUZENS. Was it not the fact that this application for closing the Gulf Oil Corporation case under section 1312 was after Mr. Harding's death?

Mr. GREENIDGE. It was thereabouts. It was either after or shortly before. I could not tell you with certainty, the exact date. Senator COUZENS. In other words, nearly a year had expired before the closing of the case?

Mr. GREENIDGE. Oh, yes; a considerable time had expired after the closing of the cases.

Senator CoUZENS. Does Mr. Hartson remember offhand what the other things are that the bureau was to submit? Mr. HARTSON. Yes; Senator Couzens. I would like to have Mr. Greenidge, if agreeable to the committee, explain with reference to those sums of money he testified to as having been the amount allowed in depletion, how they affected the tax, if he has those figures.

Mr. GREENIDGE. Yes; we have those figures. I will have to call on the auditor to furnish that information.

Mr. HARTSON. I do not want the committee to get the impression that the sums of money referred to by Mr. Greenidge are the amounts of money refunded because of the allowance for depletion to the company.

Senator ERNST. I think that is the impression that was created. What is the fact about that?

Mr. HARTSON. I will ask Mr. Greenidge to explain that.

Mr. GREENIDGE. That these sums that I have mentioned were refundable sums?

Mr. HARTSON. Yes.

Mr. GREENIDGE. No; they were not. They were the amounts allowed as deductions from gross income.

Senator COUZENS. That is the way I understood it. Perhaps the other Senators did not understand it that way.

Mr. HARTSON. Now, Senator Couzens, there was some discussion here last Thursday afternoon as to that 5 per cent basis that was used in connection with the Gulf Oil Corporation in this settlement, and there was some criticism of that. I think Mr. Greenidge has something on that that may be of interest to the committee.

Mr. GREENIDGE. You asked for some information to be supplied the committee on that point, Senator Couzens, and I thought we would make an effort to present it in such a way that it would be easily understandable.

Senator COUZENS. Before you go into that, could you say how many cases were settled on a 5 per cent basis?

Mr. GREENIDGE. No, sir; I could not.

Senator COUZENS. Were there many of them?

Mr. GREENIDGE. Very few that I know anything of.

Senator COUZENS. Were not most of them settled on a 10 per cent basis?

Mr. GREENIDGE. Where the analytical appraisal method is used; yes, sir.

Senator COUZENS. Does the information that you propose to give to the committee, as suggested by Solicitor Hartson, show the relative benefits to the taxpayer from applying the 5 per cent basis as contrasted with the 10 per cent basis?

Mr. GREENIDGE. I think so, Senator. I prepared it with that in view.

Senator COUZENS. Then you may proceed.

Mr. GREENIDGE. More as a matter of general information, which may tend to clear up the ideas of the committee, as I understand them. I think in the last session I tried to stress the fact that the estimate of ultimate recoverable oil was the important thing in oil reserves and not the discount factor.

Now, Senator King, in his discussion, mentioned that a well coming in at 5,000 barrels per day should be multiplied by the 365 days in a year to show its ultimate production, and I have prepared this curve to show the committee that that is not the case.

A well comes in at 5,000 barrels per day, we will say, starting here and its drop off is very rapid, so, we will say, it is 5,000 here, and at the end of the year it is probably less than 2,000.

This is

Senator COUZENS. Because of the lack of gas pressure? Mr. GREENIDGE. Because of the lack of gas pressure. purely a general curve. It has been prepared for the purpose of demonstrating what actually does happen, and it has been specially prepared to show a well whose ultimate production is 500,000 barrels. That is all the oil that you can commercially get out of this well on this curve will be 500,000 barrels, and it will last 10 years. In the first year it will produce 240,000 barrels; the second year 120,000 barrels; the third year 60,000 barrels, and so on down as the curve drops down.

Senator COUZENS. Do you consider a well that produces a thousand barrels of oil per year a commercial well?

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Mr. GREENIDGE. In some fields it is what we know as the economic limit, Senator, but in a great many fields they go below that. For instance, some of the wells in the Bradford field, Pennsylvania, produce as little as one-tenth of a barrel per day, or less than 40 barrels per year and still they pump them. Of course, with deep wells, and a low quality of oil, you can not carry them to that extent.

Senator COUZENS. Is this all of the information that you have in that connection?

Mr. GREENIDGE. I have two sets of figures which I have prepared for the 500,000 barrel well and for the million barrel well to which I referred the other day.

A compound discount of 5 per cent on that well shows a composite discount factor of 9.66 per cent. I would like to explain there The CHAIRMAN. What does that mean?

Mr. GREENIDGE. That is what I was coming to now, Senator.
The CHAIRMAN. All right.

Mr. GREENIDGE. If you were to loan me money, and if at the end of a year I were to return you a dollar, you could not afford to loan me a dollar. You could only afford to loan me 95 cents, and if I would likewise return you a dollar at the end of two years, you could only now loan me 90 cents, and so on. If I am going to return you $1 at the end of 10 years, you can only afford to loan me 61 cents to-day.

The CHAIRMAN. That is calculated on the 5 per cent basis.
Mr. GREENIDGE. Five per cent compound.

The CHAIRMAN. Yes.

Mr. GREENIDGE. The first year's production of these wells, as I have shown you, is likewise larger than any other year, except in one instance only, in Mexico. The production of the first year is multiplied by 95 per cent, or the 95 cents on the dollar to which I have just referred.

The CHAIRMAN. Yes.

Mr. GREENIDGE. In the second year your production is very much less, and the present worth of that dollar is very much less. It is 90 cents. That is carried on down until the last year's production of a thousand barrels is only worth to-day 61.4 cents per dollar. The summation of the results of value, multiplying production by the present worth factor, gives you a total present worth of the value of the oil at the date on which you are doing your valuing.

The CHAIRMAN. For taxable purposes?

Mr. GREENIDGE. Or for loan purposes.

The CHAIRMAN. I understand, but we are talking about taxable purposes now.

Mr. GREENIDGE. Yes. That is income. Now, if you had 500,000 barrels of oil in the ground at the date of estimate, or at the date on which you started into the business, either as a loan, or to extract it. or otherwise, if your yield was 500,000 barrels at that date, you may have sold it for $500,000 and that would have been your present worth; but you are getting a lessening proportion from that well per year, which is also worth a less amount of money every year, and the present worth of that 500,000 barrels, extracted at that rate, as I have shown by the curve, is only $451,682, and your reduction there, your composite discount there is 9.66 per cent.