royalty rate of not less than 122 per centum in amount or value of the production and upon such other terms and conditions as the Secretary of the Interior shall by general rule prescribe: Provided, That no limitation of acreage not provided for under the law or regulations under which any such old lease was issued shall be applicable to any such new lease.

(b) Nothing contained in this amendatory Act shall be construed to affect the validity of oil and gas prospecting permits or leases previously issued under the authority of sections 181194, 201, 202-208, 211-214, 223-229, 241, 251 and 261-263 of this title, and in existence on August 21, 1935, or impair any rights or privileges which have accrued under such permits or leases. (Aug. 21, 1935, ch. 599, § 2, 49 Stat. 679.)

§ 224. Payments for oil or gas taken prior to application for lease. Until the permittee shall apply for lease to the one quarter of the permit area heretofore provided for he shall pay to the United States 20 per centum of the gross value of all oil or gas secured by him from the lands embraced within his permit and sold or otherwise disposed of or held by him for sale or other disposition. (Feb. 25, 1920, ch. 85, § 15, 41 Stat. 442.)

§ 225. Conditions of permit or lease; forfeiture for violations. -All permits and leases of lands containing oil or gas, made or issued under the provisions of sections 223-229 of this title, shall be subject to the condition that no wells shall be drilled within two hundred feet of any of the outer boundaries of the lands so permitted or leased, unless the adjoining lands have been patented or the title thereto otherwise vested in private owners, and to the further condition that the permittee or lessee will, in conducting his explorations and mining operations, use all reasonable precautions to prevent waste of oil or gas developed in the land, or the entrance of water through wells drilled by him to the oil sands or oil-bearing strata, to the destruction or injury of the oil deposits. Violations of the provisions of this section shall constitute grounds for the forfeiture of the permit or lease, to be enforced through appropriate proceedings in courts of competent jurisdiction. (Feb. 25, 1920, ch. 85, § 16, 41 Stat. 443.)

§ 226. Lease of unappropriated deposits of oil or gas in producing oil or gas field; royalties and annual rentals; cancellation of leases. All lands subject to disposition under sections 181-194, 201, 202-208, 211-214, 223-229, 241, 251 and 261-263 of this title which are known or believed to contain oil or gas deposits, except as herein otherwise provided, may be leased by the Secretary of the Interior after August 21, 1935, to the highest responsible qualified bidder by competitive bidding under general regulations. Such lands shall be leased in units of not exceeding six hundred and forty acres, which shall be as nearly compact in form as possible. Such leases shall be conditioned upon the payment by the lessee of such bonus as may be accepted and of such royalty as may be fixed in the lease, which shall be not less than 1212 centum in amount or value of the production and the payment in advance of a rental to be fixed in the lease of not less than 25 cents per acre per annum, which rental except as otherwise herein provided shall not be waived, suspended, or reduced unless and until

a valuable deposit of oil or gas shall have been discovered within the lands leased: Provided, That the rental paid for any one year shall be credited against the royalties as they accrue for that year: Provided further, That in the event the Secretary of the Interior shall direct or shall assent to the suspension of operations or of production of oil or gas under any such lease, any payment of acreage rental as herein provided shall likewise be suspended during such period of suspension of operations or production: And provided further, That in the case of leases valuable only for the production of gas the Secretary of the Interior upon showing by the lessee that the lease cannot be successfully operated upon such rental or upon the royalty provided in the lease, may waive, suspend, or reduce such rental or reduce such royalty. The Secretary of the Interior, for the purpose of more properly conserving the oil or gas resources of any area, field, or pool, may require that leases issued after August 21, 1935 under sections 181-194, 201, 202-208, 211-214, 223-229, 241, 251 and 261263 of this title be conditioned upon an agreement by the lessee to operate, under such reasonable cooperative or unit plan for the development and operation of any such area, field, or pool as said Secretary may determine to be practicable and necessary or advisable, which plan shall adequately protect the rights of all parties in interest, including the United States: Provided, That all leases operated under such plan approved or prescribed by said Secretary shall be excepted in determining holdings or control under the provisions of sections 181-194, 201, 202-208, 211214, 223-229, 241, 256 and 261-263 of this title.

Leases issued after August 21, 1935 under this section shall be for a period of five years and so long thereafter as oil or gas is produced in paying quantities when the lands to be leased are not within any known geological structure of a producing oil or gas field, and for a period of ten years and so long thereafter as oil or gas is produced in paying quantities when the lands to be leased are within any known geological structure of a producing oil or gas field: Provided, That no such lease shall be deemed to expire by reasons of suspension of prospecting, drilling, or production pursuant to any order or consent of the said Secretary: Provided further, That the person first making application for the lease of any lands not within any known geologic structure of a producing oil or gas field who is qualified to hold a lease under sections 181-194, 201, 202-208, 211-214, 223-229, 241, 251, and 261-263 of this title, including applicants for permits whose applications were filed after ninety days prior to August 21, 1935 shall be entitled to a preference right over others to a lease of such lands without competitive bidding at a royalty, in the case of oil, of 122 per centum in amount or value of the production when the said production does not exceed fifty barrels per well per day for the calendar month and of not less than 121⁄2 per centum in amount or value of the production when the said production exceeds fifty barrels per well per day for the calendar month, and, in the case of gas, at a royalty of 122 per centum in amount or value of the production when the said production does not exceed five million cubic feet per well per day for the

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calendar month and, when the said production exceeds five million cubic feet per well per day for the calendar month, at a royalty of not less than 121/2 per centum in amount or value of the production.

Leases issued prior to August 21, 1935 shall continue in force and effect in accordance with the terms of such leases and the laws under which issued: Provided, That any such lease that has become the subject of a cooperative or unit plan of development or operation, or other plan for the conservation of the oil and gas of a single area, field, or pool, which plan has the approval of the Secretary of the Department or Departments having jurisdiction over the Government lands included in said plan as necessary or convenient in the public interest, shall continue in force beyond said period of twenty years until the termination of such plan: And provided further, That said Secretary or Secretaries shall report all leases so continued to Congress at the beginning of its next regular session after the date of such continuance.

Any cooperative or unit plan of development and operation, which includes lands owned by the United States, shall contain a provision whereby authority, limited as therein provided, is vested in the Secretary of the department or departments having jurisdiction over such land to alter or modify from time to time in his discretion the rate of prospecting and development and the quantity and rate of production under said plan. The Secretary of the Interior is authorized whenever he shall deem such action necessary or in the public interest, with the consent of lessee, by order to suspend or modify the drilling or producing requirements of any oil and gas lease not subject to such a cooperative or unit plan, and no lease shall be deemed to expire by reason of the suspension of production pursuant to any such order.

Whenever it appears to the Secretary of the Interior that wells drilled upon lands not owned by the United States are draining oil or gas from lands or deposits owned in whole or in part by the United States, the Secretary of the Interior is hereby authorized and empowered to negotiate agreements whereby the United States or the United States and its permittees, lessees, or grantees shall be compensated for such drainage, such agreements to be made with the consent of the permittees and lessees affected thereby.

Whenever the average daily production of the oil wells on an entire leasehold or on any tract or portion thereof segregated for royalty purposes shall not exceed ten barrels per well per day, or where the cost of production of oil or gas is such as to render further production economically impracticable the Secretary of the Interior, for the purpose of encouraging the greatest ultimate recovery of oil and in the interest of conservation of natural resources, is authorized to reduce the royalty on future production when in his judgment the wells cannot be successfully operated upon the royalty fixed in the lease. The provision of this paragraph shall apply to all oil and gas leases issued under sections 181-194, 201, 202-208, 211-214, 223-229, 241, 251 and 261-263 of this title, including those within an approved cooperative or unit plan of development and operation.

Any lease issued after August 21, 1935 under the provisions of this section, except those earned as a preference right as provided in section 223 of this title, shall be subject to cancelation by the Secretary of the Interior after thirty days' notice upon the failure of the lessee to comply with any of the provisions of the lease, unless or until the land covered by any such lease is known to contain valuable deposits of oil or gas. Such notice in advance of cancelation shall be sent the lease owner by registered letter directed to the lease owner's record postoffice address, and in case such letter shall be returned as undelivered, such notice shall also be posted for a period of thirty days in the United States Land Office for the district in which the land covered by such lease is situated, or in the event that there is no district land office for such leased land, then in the post office nearest such land. Leases covering lands known to contain valuable deposits of oil or gas shall be cancelled only in the manner provided in section 188 of this title. (Feb. 25, 1920, ch. 85, § 17, 41 Stat. 443; July 3, 1930, ch. 854, § 1, 46 Stat. 1007; Mar. 4, 1931, ch. 506, 46 Stat. 1523; Aug. 21, 1935, ch. 599, § 1, 49 Stat. 676.)

§ 226a. Lease of lands not within known productive field; waiver of rentals. The Secretary of the Interior, in the case of lands not within any known geologic structure of a productive oil or gas field, shall waive the rental stipulated in oil and gas leases issued pursuant to section 226 of this title, for the second and third lease years, unless a valuable deposit of oil or gas be sooner discovered. (July 8, 1940, ch. 548, 54 Stat. 742.)

§ 226b. Same; preference right to new lease upon expiration of five-year noncompetitive oil and gas lease.-Upon the expiration of the five-year term of any noncompetitive oil and gas lease issued pursuant to the provisions of the Act of August 21, 1935 (49 Stat. 674), amending sections 185, 221, 223, and 226 of this title and maintained in accordance with the applicable statutory requirements and regulations, the record title holder shall be entitled to a preference right over others to a new lease for the same land pursuant to the provisions of section 226 of this title and under such rules and regulations as are then in force, if he shall file an application therefor within ninety days prior to the date of the expiration of the lease. The preference right herein granted shall not apply to lands which on the date of the expiration of a lease are within the known geologic structure of a producing oil or gas field. The term of any five-year lease expiring prior to December 31, 1945, maintained in accordance with the applicable statutory requirements and regulations and for which no preference right to a new lease is granted by this section, is hereby extended to December 31, 1945. (July 29, 1942, ch. 534, § 1, 56 Stat. 726, as amended Dec. 22, 1943, ch. 376, 57 Stat. 608; Sept. 27, 1944, ch. 429, 58 Stat. 755.)

§ 227. Leases to persons relinquishing rights under prior claims on withdrawn lands under preexisting placer mining law; claims on naval petroleum reserves; fraud of claimant; adjustment; of suits. Upon relinquishment to the United States, filed in the General Land Office within six months after February 25, 1920, of all right, title, and interest claimed and possessed prior

to July 3, 1910, and continuously since by the claimant or his predecessor in interest under the preexisting placer mining law to any oil- or gas-bearing land upon which there has been drilled one or more oil or gas wells to discovery embraced in the Executive order of withdrawal issued September 27, 1909, and not within any naval petroleum reserve, and upon payment as royalty to the United States of an amount equal to the value at the time of production of one-eighth of all the oil or gas already produced except oil or gas used for production purposes on the claim, or unavoidably lost, from such land, the claimant, or his successor, if in possession of such land, undisputed by any other claimant prior to July 1, 1919, shall be entitled to a lease thereon from the United States for a period of twenty years, at a royalty of not less than 122 per centum of all the oil or gas produced except oil or gas used for production purposes on the claim, or unavoidably lost: Provided, That not more than one-half of the area, but in no case to exceed three thousand two hundred acres, within the geologic oil or gas structure of a producing oil or gas field shall be leased to any one claimant under the provision of this section when the area of such geologic oil structure exceeds six hundred and forty acres. Any claimant or his successor, subject to this limitation, shall, however, have the right to select and receive the lease as in this section provided for that portion of his claim or claims equal to, but not in excess of, said one-half of the area of such geologic oil structure, but not more than three thousand two hundred acres.

All such leases shall be made and the amount of royalty to be paid for oil and gas produced, except oil or gas used for production purposes on the claim, or unavoidably lost, after the execution of such lease shall be fixed by the Secretary of the Navy under appropriate rules and regulations: Provided, however, That as to all like claims situate within any naval petroleum reserve the producing wells thereon only shall be leased, together with an area of land sufficient for the operation thereof, upon the terms and payment of royalties for past and future production as herein provided for in the leasing of claims. No wells shall be drilled in the land subject to this provision within six hundred and sixty feet of any such leased well without the consent of the lessee: Provided, however, That the President may, in his discretion, lease the remainder or any part of any such claim upon which such wells have been drilled, and in the event of such leasing said claimant or his successor shall have a preference right to such lease: And provided further, That he may permit the drilling of additional wells by the claimant or his successor within the limited area of six hundred and sixty feet theretofore provided for upon such terms and conditions as he may prescribe.

No claimant for a lease who has been guilty of any fraud or who had knowledge or reasonable grounds to know of any fraud, or who has not acted honestly and in good faith, shall be entitled to any of the benefits of this section.

Upon the delivery and acceptance of the lease, as in this section provided, all suits brought by the Government affecting such land may be settled and adjusted in accordance herewith and all