to Atlanta, Ga. I might say that he was selected by the Bureau of Agricultural Economics of the Department of Agriculture to make a survey of our pooling program, and the results of his investigation, are embraced in Senate Document No. 93, first session, Seventysecond Congress.

Dr. Hartman told in the Senate hearing that where you pool a few as 100 tracts the opportunity for complete loss is four tenths of 1 percent, and if you pool 2,000 tracts, which is the approximat number we have in our pools, the probable loss to the farmer reduced to a mathematical absurdity.

Mr. STEVENSON. You mean by having an average interest in 1 spread that covers an entire area he is sure to get something! Some man may have an area which if he had held it by himself would have made him comparatively rich, but he goes in and the profits fro that are spread over the whole business?

Mr. BLAKE. In Oklahoma, for instance, a group of bankers there in the First National Bank have a financing company and have loaned over one quarter of a million dollars to farmers on their shares in these pools. They would not have lent them one dime on the individual tracts. The point we want to bring out is we are ot verting a frozen asset and that asset adds to the value of the farms in those five States by converting that frozen asset into a liquid

asset.

I remember we called on Mr. Simpson a while ago about lending money to a farmer in Jackson County so that he could save his farm. Mr. Thurmond put up the share in the pool and got the lo

When we started this we organized a managing company in order to keep these pools from all liabilities and financial responsibility All the pools do is to own a certain number of acres. The incote from the pools is trusteed as corporate trust funds and is only avail able as dividends. It costs a great deal of money to go out at interview thousands and thousands of farmers. We had to si men into the field in order to build these pools. So we organ a managing company which receives one fourth of the acreage of the pools, and the stock of that company was sold to a number of people. It is now prohibitive to dispose of such shares and conte to create and organize these pools. What we want to do is this Take the one-fourth acreage interest as we acquire it and put it up collateral and receive the money from the Government: then we can put people to work getting farmers to pool their mineral rightand use the income from that one-fourth interest to liquidate te loan. Meanwhile, instead of disposing of the stock to the pulls we plan either to give that part of the one-fourth interest ba's to the farmers or preferably to the national farm organizations, that they would receive and have a perpetual interest or estate i those vast natural resources. That would serve as a sort of ergerment and the income would benefit all agriculture in the Ute States.

This program is not in an embryonic state. We have in holding company about 1,100,000 spread acres, or 125,000 full alty acres. The return from that 125.000 acres has been more thar sufficient in these extreme-panic times to meet the interest charge on a 50-cent per acre loan from the Reconstruction Finance Cor poration. It is our contention that this loan would pay out without a drop of oil or gas. It would pay out on money received from

the sale of leases and the bonus on those leases, if we never get a drop of oil or a foot of gas.

On the Osage Indian Reservation the leases alone have paid the individual Indians about $55,000 apiece. That is why I said that act of Congress was probably one of the finest pieces of legislation ever enacted by Congress.

It is so simple and easy to determine the value of a large spread It is not like determining the value of a single tract where you have to get the sand texture, rock pressure, and so forth. This is on a spread of acres which has definite value and which is very simply and easily determined.

That, in brief, is our story. Of course, I could go on and explain at length the features of these pools, how we have made them safe from outside interference, and the restrictions placed on the officers, and so forth. You can only own 10 shares and only get 1 vote. The property cannot be disposed of except by referendum ballot. The bylaws cannot be changed except by referendum ballot.

Our program, if completed, will assist some thirty or forty thousand farmers. The amount of money put in is very, very small, considering the amount of good that will be done.

Take the situation in the West today. The farmers are disposing of their mineral rights in this market for practically nothing. Millions and millions of acres are going to be given away. It would be far better for them if they pooled and sold their individual shares, because the individual shares have a bigger value than the individual tract. Most engineers will tell you that the spread value is from 2 to 10 times the value of the individual tract, depending on the location and where the pooling is being done. But every major company recognizes that. That is why they buy vast spreads of leases and pay rentals on them year after year. They recognize that while they would not be interested in a single tract, they are interested in a large number of tracts and know that the success percentage of those tracts will more than repay them for their losses on individual tracts. In other words, it increases the per-acre value of the whole. We are creating a bigger asset for the farmer and converting a frozen asset into a liquid asset, and I venture to say if we are able to go ahead with this pooling idea, we will save many a farmer's land. We have already saved a great many by virtue of the fact that up to recently they have been able to borrow money on their shares in the pool, while on the other hand their mineral rights are absolutely worthless to them in the present market. The whole thing involves only about $350.000, practically every penny of which would be used in putting men to work. There is a little office overhead, but the bulk of our money is used in putting men into the field to send to the farmers' doors. The farmer does not come to you. I think Mr. Simpson can substantiate the fact that we have to go to the farmer. We have the backing of the Farmers' unions in Colorado, Kansas, and Oklahoma. They are not organized in Texas and New Mexico.

I would like for you to consider this letter, which is signed by all of the three representatives of the national organizations, namely, Mr. Fred Brenckman, legislative representative of the National Grange; Mr. John A. Simpson, national president the Farmers' Educational and Cooperative Union of America; and Chester A. Gray, legislative representative the American Farm Bureau Fed

eration. That letter is dated February 1, 1933, and is addressed to members of the Senate and House of Representatives of the United States, reading as follows:

We urge the immediate consideration and passage of Senate Joint Resol tion 247, which provides for protection and relief to farmers by aiding them to conserve and liquefy their mineral rights through recognized and established cooperative agencies engaged in the pooling of mineral resources underlying farm lands.

This resolution embodies the results of a report made to Congress by the United States Department of Agriculture last year (S.Doc. No. 93, 72d Co. 1st sess.), which reveals that the cooperative pooling of farmers' misera rights is a means of liquefying frozen farm assets. The orderly pooling of mineral rights would materially enhance income from farm crops in ma distressed areas.

The resolution merely asks the Government for self-liquidating loans based on adequate security. These loans will give the farmers protection and reliet with no additional cost to the Federal Government.

We urge the immediate passage of this resolution.

They are all sponsoring it. While it is somewhat new, we fee. that in the Southwestern States and many other sections this pro gram will be of tremendous importance to agriculture. The Govern ment report shows that 57 percent of the area of the United States is potentially oil and gas area. Every acre in Mississippi is potentially oil and gas area. Unless these farmers pool in advance, before development, it is too late after development to pool. Unless they pool in advance a few will get all the money and the rest will ttinue to live in shacks and hovels and wonder how they can money to meet expenses.

I want to give you another illustration. When oil was disco ered on the Seminole lands in Oklahoma, at the end of the first year. had the farmers pooled their rights, each farmer in the county would have received $25,000 in cash from his rights. They h have been clipping coupons the rest of their lives if they had used their incomes advantageously. They did not pool. You cannot get a farmer close to a big productive field to pool with somebody that is not so close. You have to pool in advance. We are trying to get enough money to cover the entire field in advance. The Gos ernment did it for the Osages, which was probably the most bene ficial experiment that ever happened to anyone. The Osage Nat is not as rich in oil as Seminole, East Texas, and other oil fielis. yet, in spite of that, the Osages received $110,000 apiece and the to ernment is still distributing dividends to them.

Mr. REILLY. What is the difference between pooling and the farmer leasing individually? It is only that he gets a better prar. is it not, if he leases individually?

Mr. BLAKE. No farmer can tell whether his land is going to be th particular tract developed or not. He does not know, even if he leases it, whether they are going to keep that lease the next year; bu if it is in the pool, if his land is not leased, he is getting some of the other fellow's money.

Mr. STEVENSON. The point here is that some of the pools wi benefit by what they would receive for bonus money and rent. Mr. BLAKE. If Congress had not passed that law, about 150 Qag Indians would have divided $265,000,000 and the other 2.100 wosli have received nothing.

Mr. REILLY. Well, the advantage in pooling is by getting some thing that you might not have otherwise gotten.

Mr. BLAKE. Yes, sir.

Mr. STRONG. Then in addition to that it costs money to go around and get these farmers into the pools. Very often a man will go out and pick up blocks of land of farmers that are not willing to go into a pool.

Mr. DISNEY. There is one question that has not been made clear, and that is the one-fourth interest which is given to the management company seems to be rather large.

Mr. BLAKE. The one-fourth interest acquired would be the acreage put up for the loan. I explained if that had been done up to date the rental receipts on a fourth interest alone would have been more than sufficient to pay the interest on the loan and that is true in the worst possible period you can imagine.

Mr. DISNEY. No; you did not understand me. The management company's taking a fourth interest seems to be pretty high.

Mr. BLAKE. I explained, Congressman, that the managing company has heretofore capitalized that one-fourth interest and sold that stock to the public. It is proposed now not to sell that stock to the public but to return that part that would have gone to the public to the national farm organizations or to the individual farmers in the pool and let them own it instead of the public. They would own that much more. The managing company will receive about one third of the one fourth for its services and risk.

Mr. REILLY. Your proposition is that pooling is a good idea for all the farmers and your money from the Reconstruction Finance Corporation is to enable you to form pools?

Mr. BLAKE. Yes, sir.

Mr. DISNEY. How much would you need?

Mr. BLAKE. About $350,000 under the present program.

May I include this statement, which is an analysis of the Government's report by Mr. E. R. Chamberlain?

Mr. STEVENSON. Yes, sir.

Mr. BLAKE. It is as follows:

FARMER OWNED MINERAL RIGHTS-A FROZEN ASSET

(By Ernest R. Chamberlain, Oklahoma Farmers' Union)

[Page numbers in parentheses refer to Senate Document 93]

GROWTH OF FEDERAL FARM RELIEF POLICY

It has been the policy of the Federal Government to encourage farmers in the orderly marketing of their commodities and in overcoming the disadvantages of isolation, through cooperative organization, in order that they may exercise collective-bargaining power, produce scientifically, and benefit by joint employment of expert technical and mechandising advisors.

The advantages of cooperative activity have, in recent years, been adapted by farm organizations to the ownership of their mineral rights as a result of the following existing conditions.

While the occurrence of oil and gas is generally unpredictable without costly and extensive exploration, practically all of the potentially productive oil lands of America lie in agricultural areas. The area in the United States that is "considered by geologists to be potential oil-producing lands" is so distributed as to embrace vast areas in all but a dozen States of the Union (pp. 3, 7). While only a small percentage of potential oil-producing lands will actual y produce, whatever petroleum is produced in the future will be produced, in the main, from lands now being used for agricultural purposes.

It is obvious that the individual farmer in these areas is handicapped seriously in attempting to estimate the value of his royalty rights, and it is equally

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obvious that he runs a great speculative risk, avoided by major prodang companies and lease speculators and royalty corporations who acquire great spreads" in potential oil areas-buy mineral rights from farmers in advance of exploration, recoup their investment by sale of part of such rights as explorstion proceeds, and eventually obtain sure returns from the discovery of oil or gas on some fraction of the acreage thus acquired. Unorganized farmers are 'forced to choose between the risk of getting nothing at all, if they do not lease or sell, and the risk of parting with potential fortunes in exchange for me pittances if they do lease or sell" (p. 9).

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Furthermore, the farmers are often victims of unfair dealings due to their lack of information as to lease terms, royalty clauses, delay agreements, etc. (pp. 9, 10). This disadvantage could be remedied by cooperative action. whereby the farmer would be able to avail himself of expert legal and technical knowledge. Unless he has the advantage of organized bargaining, under exist ing conditions, the only way in which he can be sure to realize anything from his mineral rights is by selling them outright to well-informed persons whe are farsighted and discerning enough to acquire large spreads of such right in the path of development and who can therefore afford to assume the ris involved (p. 12).

It is apparent, therefore, that the average individual farmer in an area that may eventually be very productive has but small chance to get any cash returns of consequence unless he is in a position to have his potential royalty interests effectively managed. This emphasizes the need for organization to secure and manage effectively the mineral rights of the farmers (p. 12). T problem is that of converting a farmer's gambling risk" into an order business along lines employed by great drilling and royalty corporations theselves (p. 15).

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The first extensive royalty pooling demonstration was that adopted by the United States Government for the Osage Indians. Their lands were not it any way selected for mineral potentialities, but by embracing 1,500,000 acres i "potential" territory the law of averages worked in their favor. By auct ing their leases they secured an average of $153.76 per acre for them. Ind pendent farmers in what proved to be more productive areas scarcely averag above $2 an acre. The Osages received $109,000,000 or 45 percent of thet total from leases without production of oil or gas. The report states that without the collective bargaining power made possible through adequate operative organization there is slight question but that the bonuses would have totaled only a nominal sum."

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Collective bargaining power cbtained from such organization of minera rights under common ownership would bring the farmer better lease terms and drilling contracts, as a result of which he would obtain higher bonuses, rentals and royalties. In this way he would liquefy what otherwise, to him, is a frozen asset. By so doing he would place himself in a position to receive a more or less steady income from pooled mineral rights. With his miera. rights secured in a cooperative pool, the farmer would have a business state in the natural resources of the country (p. 15). He puts his subsurface eral rights to work for him at once and prior to development. He substitutes a known and liquid asset for an unknown and frozen asset inaccessible de him as an individual,

Cooperative pooling increases the per acre value of mineral rights in a ! analogous to that in which fire insurance increases the value of individas: buildings (p. 17). Petroleum appraisal engineers recognize in their appraisals that thousands of tracts of land in the potential mineral-producing belts har little or no market value as separate units but have great value when pooled or held in a large spread by common ownership under one management. The basis for this reasoning develops from the fact that geologists and all gi gas mining engineers are unable positively to locate unmined oil or gas withst the drill. Therefore a large spread of acreage in a general ofl and gas be? has an average per acre value greater than any particular tract would have de virtue of the fact that there is greater possibility of locating at least one pre ducing well on a number of tracts than on any one tract. In general, one might say that mineral rights in wildcat acreage are valueless unless or until demand for them develops. The fact that pooling of such mineral rights doen create a value that did not previously exist is suggested by available trave concerning the appraised value of acreage accepted by five royalty pools operat ing in the mid-continent oil and gas field (p. 17).