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Senator COUZENS. So that in the first year he would have had a 500 per cent return on his investment of some $41,000.

Mr. GREENIDGE. Approximately; yes.

Senator Couzens. And in spite of that 500 per cent return on his investment, he received a depletion credit of how much?

Mr. GREENIDGE. $79,910.

Senator COUZENS. In other words, his depletion credit was twice the amount of his investment?

Mr. GREENIDGE. Approximately; yes, sir. Senator Couzens. That is a judtifiable criticism, I think, of the whole system of depletion. There is an exact and definite case.

Doctor Adams. You mean the discovery depletion?
The CHAIRMAN. The discovery depletion.
Senator Couzens. Yes; the discovery depletion.

Mr. GREENIDGE. I am glad you covered them all. Both of these figures are in here, both with and without depletion.

Senator ERNST. How would that work out in the course of 10 years?

Mr. GREENINGE. His production in the second year would be only 150.000 barrels.

Senator ERNST. What about the third year?

Mr. GREENIDGE. It would be 68,000 barrels, and in the fourth year 37,000 barrels, and so on. This was pertty close to a typical well in thé Santa Fe Springs field, California. We took their general curve average. Senator King happened to mention that name in his discussion, and of course I thought of it, and I am sure this covers the figures that his line of questioning seemed to bring out. Senator ERNST. And there are a good many cases of that kind?

Senator COUZENS. Oh, yes; and this is a typical case that Senator King is justifiably complaining of. This whole system of depletion credits on discoveries is ridiculous and absurd.

Mr. GREENIDGE. This also becomes a part of the record.

Doctor ADAMS. Mr. Greenidge, would it be practicable to illustrate the rapid decline of this Gulf Oil Co.'s properties by curves, and comparing them with the general curves for the district?

Mr. GREENIDGE. Yes, sir.
Doctor ADAMS. Do you want that in?
Senator COUZENS. What was that, Doctor Adams?

Doctor ADAMS. I suggested that curves showing the decline of the Gulf Oil Co.'s properties be compared with the average for the same district, to show the more rapid decline of the Gulf Oil Co.'s properties.

Mr. GREENIDGE. Curves are shown in the new oil and gas manual. Curves for all districts are there, published in book form.

Senator Couzens. I hardly think that is necessary, if it is already available.

Mr. GREENIDGE. Yes; it is obtainable there.

Senator ERNST. Does that also show what the Government gets from each of those each year?

Mr. GREENIDGE. Yes, sir; in taxes.

Doctor Adams. I think Mr. Greenidge might be in a position to give you, in reference to the oil industry, the ratios of the tax to the gross income, etc. He might give you general figures, answering the same question to which this particular illustration applied.

The CHAIRMAN. What do you mean by that, Doctor?

Doctor Adams. He might be able to show you for particular years what percentage of gross income the oil industry pays in income and excess profits taxes.

The "CHAIRMAN. Yes.

Doctor Adams. And what the depletion amounts to in reference to it.

Mr. GREENIDGE. I am not sure that I have those figures with me, but we may have.

I think, Senator Couzens, I should mention to you the number of dry holes that are drilled, in comparison to the producing wells. That has no particular bearing on this case, I realize, but I have some figures on that. If you think it would be of any interest to you, I will submit those figures in the various fields.

Senator COUZENS. I did not hear the beginning of your statement.

Mr. GREENIDGE. I have some figures on the number of dry wells, the percentage of dry wells that are drilled in the various fields in the United States. If you think it would be of any interest to you, I will be glad to submit them.

Senator COUZENS. What do you intend to demonstrate by them?

Mr. GREENIDGE. Nothing, other than the fact that although this was a producing well, it would be only one of so many dry wells.

Senator COUZENS. 'It would only demonstrate the two parallel businesses, where one might succeed and the other might not.

Mr. GREENIDGE. Yes. Senator King asked some questions, and I, of course, prepared these figures.

Senator COUZENS. So far as I am concerned, I am not particularly interested in them. I do not know about the other Senators of the committee.

The CHAIRMAN. I do not think so.

Mr. GREENIDGE. All right, sir. If Senator King wishes it at any time, it is ready for him.

The CHAIRMAN. Yes. If you should put it in the record for him, he would probably not read the record, and in addition he might want to hear it.

Mr. GREENIDGE. Yes.

Doctor ADAMS. May I ask Mr. Greenidge this? It is relevant to one point in his testimony, as to whether the 30-day period within which valuation for discovery wells must be made is such that it is really practicable to get the data to make a sound valuation within that period ?

Mr. GREENIDGE. No; it is not. It is absolutely impossible.

Doctor ADAMs. In other words, that feature of the present law is thoroughly impracticable?

Mr. GREENIDGE. Absolutely.

Senator COUZENS. When these valuations are fixed within the time period just referred to by Doctor Adams, is the price of oil for that particular year figured as the basis?

Mr. GREENIDGE. At that date, it is used as the basis.
Senator COUZENS. The date of the discovery?

Mr. GREENIDGE. The date of the discovery; yes, sir. Senator Couzens. Then the price of oil may rise or fall, and yet the depletion charge would not be affected?

Mr. GREENIDGE. Yes, sir. It has a sort of balancing effect. li the man who discovers oil at $1 gets a depletion charge of 50 cents, and the oil goes to $3.50, he still gets a depletion charge of 50 cents. If the price of oil is at $3.50 when he discovers it, he gets a depletion unit of $2, and if it goes to $1 he gets that.

Senator COUZENS. In other words, he gets twice as much depletion charge as the oil is worth on the market? Can you not conceive of any better method of arriving at it than in such a ridiculous way as that? Mr. GREENIDGE. To attempt to use the average price of oil

. Senator Couzens, over a period of years, drifts us into a mass of argument with everyone who comes up with a tax case, as to the price that you may use; and after a great deal of thought and discussion it was decided that the price at date of discovery should be used, although it did injury to some and granted others, perhaps, a little more than they should have. In the long run it balances itself, which is what you would attempt to do by an average price of oil, anyway.

Senator CouZENS. You spoke awhile ago of 90 men called in to arrange the oil regulations. Is that correct?

Mr. GREENIDGE. Yes; but I should have said they were called in for all natural resources, timber, coal, metals--I think for the entire natural resources industries, there were 90, and I am only speaking from hearsay on that, but I do know that there were a large number, because I have met 15 or 20 myself who were there.

Senator COUZENS. Were there any recommendations made by that board as to a better method of simplifying the question of depletion?

Mr. GREENIDGE. No, sir; their recommendations were made to initiate, rather than to simplify or to modify. They were here in 1918 or 1919. It was before my time, anyway.

Doctor Adams. May I ask Mr. Greenidge another question about prices?

The CHAIRMAN. Yes, Doctor.

Doctor Adams. In making valuation for discovery depletion, you use the price of oil prevailing in that district at the date of discovery?

Mr. GREENIDGE. Yes, sir.
Doctor ADAMS. Or within 30 days thereafter, which, or both?

Mr. GREENIDGE. We generally take it at the date of discovery of the oil.

Doctor Adams. Has that same thing been done with respect to the March 1, 1913, valuations!

Mr. GREENIDGE. Yes, sir.

Senator COUZENS. You have not been able to determine whether or not any other companies were required to fix it at the 5 per cent basis, have you?

Mr. GREENIDGE. No, sir. I did state, however, that some companies did not use any.

Senator COUZENS. Why was that?

Mr. GREENIDGE. Because their valuations, as set up, disregarding any discount factor, were so reasonable, or so nearly within the limits of reasonableness that a discount factor became an unimportant phase. In fact, as I testified at a previous hearing, I personally would not introduce the discount factor. I think, as a matter

of act, the present worth applies more closely to banking and tangible convertible collateral, than it does to an intangible thing like oil. However, that is personal opinion.

Senator (OUZENS. Have you had any case paralleling the case of the Gulf Oil Corporation depletion, in regard to the depletion of coal or other minerals?

Mr. GREENIDGE. No, sir. You see, coal is more easily measurable, and values of coal lands are much more easily determinable, because they are bought and sold by the acre, and records are easily accessible in The courthouses, or from the taxpayer's records.

Senator COUZENS. When a coal company leases the property and takes a royalty of 10 cents a ton or 50 cents a ton, or whatever the case might be, do you divide the depletion credits between the lessor and the lessee in that case?

Mr. GREENIDGE. Oh, yes. The operator gets a certain proportion for depletion, and the lessor also.

Senator COUZENS. Do you have the basis of the cost per ton?
Mr. GREENIDGE. Yes.
Senator Couzens. At the time it was sold?
Mr. GREENIDGE. Yes, sir.

Senator COUZENS. And you fix the cost of the coal at the time of the discovery, just the same as you do at the date of the discovery of oil!

Mr. GREENIDGE. Pardon me, but discovery is not allowable, and has never been allowable in coal, because the coal fields have been treated as being known by our geological bulletins or by other publications, such as the Bureau of Mines, so that the discovery factor does not apply to coal.

Senator Cotzens. Does it apply to any other minerals?.

Mr. GREENIDGE. Yes, sir; it does to copper, zinc, lead, mercury, etc. It does not, however, apply to timber, which is another natural resource on which depletion is allowed.

Senator Couzens. Would it apply to iron ore?
Mr. GREENIDGE. Yes, sir.

Senator COUZENS. Do you have the same depletion in arriving at depletion charges in those cases as you have in the case of oil?

Mr. GREENIDGE. No, sir; I can not say that we have.

Senator COUZENS. No such controversies ever existed or do now with respect to these minerals as they do with respect to oil?

Mr. GREENIDGE. Not as great controversies, I should say: no.

Senator CouZENS. Have you formulated in your mind any plan of arriving at discovery depletions which might be better enacted into law than the plan which now exists?

Mr. GREENIDGE. I have given a great deal of thought to the subject, and have my mind made up definitely on some of the phases of it, but not on all.

Senator COUZENS. Your office does not agree, does it, with the recommendations that are now before the Finance Committee of the Senate, or perhaps, rather, in the revenue bill sent over from the House?

Mr. GREENIDGE. I could not answer that question yes or no, Senator, because it would be criticizing what a superior officer had done, and I would rather ask to be excused from answering that, if you would permit me.

Senator COUZENS. Well, the inference, of course, that we get from that is that you are not in accord with it.

Mr. GREENIDGE. As I stated before, on the 30-day principle, the valuation at date of discovery or 30 days thereafter

Senator COUZENS. And you are not all agreed on the blanket allowance of a maximum of 50 per cent return?

Mr. GREENIDGE. I have not been called upon to express an opinion on that by the department.

Senator COUZENS. And you would rather not do it here?

Mr. GREENIDGE. I would prefer that your question be withdrawn, Senator, if you will please do so.

Senator Ënnst. Expunge that from the record. You do not think that you men are not allowed to have an opinion on those propositions, do you?

Mr. GREENIDGE. Oh, yes; we are allowed to have them all right. The CHAIRMAN. And to express them, I mean.

Mr. HARTson. I am very sure that the Secretary would have no objection to Mr. Greenidge expressing his own opinion.

The CHAIRMAN. Certainly not. Because the Secretary or the bureau formulates the policy that should be followed, that does not mean that you are to have no opinion of your own about the proposition, as to whether it is a right or a wrong, policy. Otherwise, we never would be able to get any expert opinion from anybody inside the Treasury, and that is what we are trying to get now.

Mr. GREENIDGE. I have not been instructed along those lines. Remember, I am not objecting to it. I am quite willing to do it, but, as a matter of ethics, I have refrained from answering the question, because this policy has been laid down by a superior officer. However, on the advice of counsel of the department, that I should progress, I will do so without hesitancy.

Senator Coczens. The point is that the Finance Committee and other members of the Senate are not all going to agree upon

the section in the revenue act as it came from the House, in dealing with this matter, and I thought you might have some expert advice to give us as to what others thought than those who were successful in having it put in the act.

Mr. GREENIDGE. Yes, sir. I am at your service, gentlemen, as far as I am permitted to be. I am very anxious to do everything I can, because I believe in simplification and practicability, if possible.

Senator Couzens. Tell us how you would proceed to deal with this thing, if you were the chief ?

Mr. GREENIDGE. First of all, I would eliminate the 30-day clause, the date of discovery, or within 30 days thereafter. The minimum that I should possibly take would be 72 days, and preferably a year. I mention 72 days because if a man brought in a well at the end of a year he would have January, February, and half of March to figure his possible output of the well before the filing of his tax return for that year. That is why I place that limit, but that is the minimum that should be considered.

Doctor ADAMS. May I ask Mr. Greenidge this question, because I am interested in this: With respect to the division of the discovery depletion between the lessor and the lessee, Mr. Greenidge, do you think that a lessor, under ordinary circumstances, has any real

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