IN TERIO R N O M IN A T IO N ^ *

y -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --

‘ 1

I GOVERNMENT

T 3 ss,t o r a g e

H E A R IN G

BEFORE THE

COMMITTEE ON

INTERIOR AND INSULAR AFFAIRS 

UNITED STATES SENATE

EIGIITY- SE VE NT H CONGRESS

F IR S T SE SS IO N

ON

T H E NOM IN ATI ON O F JO H N M. KEL LY , OF NEW MEX IC O,

TO BE A SSIS TA N T SE CR ET ARY OF TH E IN TER IO R 

(M IN ER A L RESO U RCES)

------- PMAR CH 27, 1961

P ri n te d fo r th e use o f th e C om m itt ee o n In te ri o r and I n su la r Affai rs

R E FEREHCE

LIBRARY

, apartment c

67589

U.S. GOVERNMENT PRIN TING OFFICE

WASHINGTON : 1961
COMMITTEE ON INT ERIOR AND INSULAR AFFAIRS

CLINTO N P. AN DE RS ON , New Mexico, Chairman

HENRY M. JACK SO N, Washington

ALAN BI BL E, Nevada

JO HN A. CA RR OL L, Colorado

FR AN K CH UR CH , Idaho

ER NE ST GR UEN IN G, Alaska

FR AN K E. MOSS, Utah

OR EN E. LONG , Hawaii

QU EN TIN N. BU RD IC K, North Dak ota

LEE M ET CA LF , Mon tana

J. J. HI CK EY , Wyoming

HENRY DW OR SH AK , Idaho 

TH OM AS H. KU CHEE , California 

BA RR Y GO LD WAT ER , Arizona 

GO RD ON AL LO TT , Colorado 

HI RA M L. FO NG , Hawaii 

JA CK R. M IL LE R, Iowa

Richard L. Callaghan, St af f Director

J erry T. Verkler, Clerk

Stewart French, Chief Counsel

II

a u n r a o B H i r ;

ti .C t : I
NOMINATION OF JOHN M. KELLY TO RE AN ASSIST 

ANT SECRETARY OF THE INTERIOR (MINERAL 

RESOURCES)

M ONDAY, M A R CH 27 , 1961

U.S. Senate,

Committee on I nterior and Insular Affairs,

Washington, D.C.

The committee met, pursuant to call, at 9:30 a.m., in room 3110, 

New Senate Office Building, Senator Clinton P. Anderson (chairman 

of the committee) presiding.

Present: Senators Anderson, Bible, Gruening, Moss, Long, Metcalf, Hickey, Dworshak, Kuchel, Allott, Fong, and Miller.

The Chairman. The committee will be in order.

We are meeting this morning to consider the nomination by President Kennedy of John M. Kelly, of Roswell, N. Mex., for th ep os t of 

Assistant Secretary of the Department of the Interior for Mineral 

Resources.

My senior colleague, Senator Dennis Chavez, is here. I will ask 

Senator Chavez if he will present the nominee to the committee.

STATEMENT OF HON. DENNIS CHAVEZ, A U.S. SENATOR FROM 

THE STATE OF NEW MEXICO

Senator Chavez. Mr. Chairman, and gentlemen of the committee, 

and my colleagues, I will be short and to the point.

First, I will speak about the citizen, John Kelly. I have known 

him for many years, and as a citizen and a fine person of his community, I have never known one of his betters.

I have known of his professional capabilities for many, many years. 

He is recognized as one of the outstanding geologists of the West. 

He has been State geologist for the State of New Mexico and has 

worked in tha t field in a private capacity for many years. His capabilities are used intelligently and with commonsense and in a practical 

manner.

1 personally recommend him to the committee, and I am honored 

to'present to the committee, Mr. John M. Kelly, nominee for Assistant 

Secretary of the Interior.

The Chairman. At this point in the record, we will insert the biographical resume sent to us by the Department of the Interior.

(The document referred to is as follows:)

Biographical R£sum£ of John M. Kelly

Age: 46 years. Born October 1, 1914, Chelsea, Mass. Married: Esther Elizabeth Ladenburg, Fremont, Nebr., December 29, 1938. Children: Joseph, 20; Patricia, 17; Mary Ann, 13; Michael, 11. Son of James B. Kelly (retired, 43 years, Bureau of Customs, Department of the Treasury) and Elizabeth B. Kelly, Boston, Mass. One of a family of two 

sons and four daughters.

1
2 NOMINATION OF JOHN M. KELLY

Education: Public schools, Evere tt, Mass.; bachelor of science in mining 

engineering, New Mexico School of Mines, 1936; professional degree of petroleum 

engineer, 1939, New Mexico School of Mines. Employment record: September 1945 to present: Consulting mining and petroleum engineer and geologist; indepen dent oil producer in New Mexico; presiden t, Elk Oil Co., wholly owned family business; mineral adviser to the 

New Mexico Sta te Land Office. February-September 1945: Productio n superintend ent, Gre at Western Drilling Co., New Mexico and Texas. May 1941-February 1945: Sta te geologist of New Mexico; member, director, and executive secretary, New Mexico Oil Conservation Commission; director of the New Mexico Bureau of Mines and Mineral Resources; coordinator of mines in New Mexico, War Prod uction Board; member, National Council of P etroleum 

Regulato ry Authorities, Petroleum Administration for War. March 1937-May 1941: Petroleum engineer, in charge of oil conservation and 

engineering in southeastern New Mexico for the Lea County Operators Committee, a volu ntary oil conservation group. September 1936-M arch 1937: Mine chemist, American Metal Co., Terrero, 

N. Mex. May-Septe mber 1936: Mining engineer, Rosedale Gold Mines, Ltd., Rosedale, N. Mex., a nd Globe, Ariz. Affiliations: American Institu te of Mining Engineers; American Association of Petroleum Geologists; American Association of Petroleum Land Men; American Petroleum Institut e; Ind epe nde nt Petroleum Association of America; member, 

Small Business Advisory Board, Small Business Adm inistration; New Mexico Geological Society; New Mexico Oil & Gas Association; New Mexico Land Men’s Association; New Mexico Mining Association; New Mexico Petroleum Industries Com mittee; member, New Mexico Sta te Board of Educational Finance; Roswell Geological Society; Engineers Club of New Mexico; Mining Club of New York City; Knights of Columbus; Elks Club; registered petroleum engineer, 

Sta te of New Mexico.

The Chairman. Mr. Kelly, do you wish to make a statement to 

the committee?

STATEMENT OF JOHN M. KELLY, NOMINEE FOR ASSISTANT 

SECRETARY OF THE INTERIOR (MINERAL RESOURCES)

Mr. Kelly. Mr. Chairman, and gentlemen of the committee, 1 

have no prepared statement. I have presented the biographical 

resume, and also a memorandum to the committee to deal with any 

real or apparent conflict of interest that I might have in accepting 

the position of Assistant Secretary for Mineral Resources.

As you know, the field of activity tha t would be under my supervision will include the Bureau of Mines, Geological Survey, the Oil 

Import Administration, the Office of Mineral Exploration, tlie Office 

of Coal Research, the Office of Oil and Gas, the Office of Minerals 

Mobilization, and the Office of Geography. I believe that both my professional background and educational 

background qualify me to diligently supervise the activities of the 

various bureaus tha t would come under my jurisdiction.

As for my resume, for 4 years during the war years, 1 was a State 

geologist in New Mexico; I was a member, director, and secretary of 

the New Mexico Oil Conservation Commission; I was a director in 

the New Mexico Bureau of Mines; I was a coordinator of mines for 

New Mexico under the War Production Board; and I was a member 

of the National Council of Petroleum Regulatory Authorities under 

the Petroleum Administration during the war.

Since the war years, I have been a consulting mining and petroleum 

engineer, a geologist, an independent oil producer, and mineral adviser 

at a dollar a year to the New Mexico Sta te Land Office.
NOMINATION OF JO HN M. KELLY 3

T would be glad, Mr. Chairman, to answer any questions that the 

committee might have.

The Chairman. You have arranged to sell your stockholdings in 

all oil and mining companies. You have listed companies such as 

Ashland Oil & Refining, Conoco, National Fuel Gas, Newmont Mining, and so forth.

Mr. Kelly. Yes, sir.

The Chairman. Those will all he disposed of?

Mr. Kelly. Yes; 1 will dispose of those.

The Chairman. Do you expect to dispose of your Federal leases 

as well by transferring them to the trustee to wnom you intend to 

make disposition of them?

Mr. Kelly. That is right, sir.

The Chairman. Do you intend to operate on State and fee lands 

as an independent operator?

Mr. Kelly. That is right, Senator. I will continue the ownership 

of my holdings on State and fee lands, hut the operations will be 

carried on by my superintendent and present staff in New Mexico.

The Chairman. Senator Allott?

Senator Allott. Mr. Kelly, I have a great respect—and this is 

not exactly popular around here—but I have a great respect for the 

educational institution from which you graduated. There are others 

tha t are more popular, you understand.

I think you have a right to answer certain questions, because you 

have such a widespread and great interest in the natu ral resources 

field that I would like to help you spread out on the record a little 

hit your intentions with respect to your future operations so tha t 

there will not arise in the future anything tha t might embarrass you 

in any way. And I hope you will regard these questions in that light 

rather than in a critical way.

You have interest at the present time in some 25 or 30 companies 

here which you have enumerated. And it is your intention to convey 

the interest in these companies associated with natural resources to 

the tru st agreement?

Mr. Kelly. No, sir. It is my intention to sell the interest in these 

companies—they are mostly listed stocks, and it is m y intention to 

sell on the open market all my stocks in the listed companies with 

the exception of the Elk Oil Co., which is a wholly owned family 

company. With respect to the Elk Oil Co., Mrs. Kelly and I will 

make an irrevocable gift of all the stock in the Elk Oil Co. to our four 

minor children.

Senator Allott. What is the Gifts to Minors Act? Will you 

explain that?

Mr. Kelly. The Gifts to Minors Act in New Mexico, Senator, 

allows an individual to dispose of property to minors when a guardian 

or trustee is appointed. The guardian comes under the jurisdiction 

of the court, and any acts performed by the guardian are subject to 

the cou rt’s scrutiny and not to mine. 1 will be out of it completely.

Senator Allott. Under this act, the guardian of minor children 

would be controlling the operations of the Elk Oil Co.?

Mr. Kelly. That is right.

Senator Allott. And all the other companies of natu ral resources 

listed on page 2 of your submitted memorandum would then be sold 

on the open market?

Mr. Kelly. They will be sold on the open market.
4 NOMINATION OF JOHN M. KELLY

Senator Allott. Now, you have stated tha t it is your intention to 

continue to operate your business as a driller—at least operate a 

drilling and exploration business with respect to State owned—leases 

that you own which are leased from the State of New Mexico'.''

Mr. Kelly. 1 operate as an individual mainly, Senator, and my 

holdings include State, Federal, and fee lands. I will dispose of my 

holdings on Federal lands, and will continue the operations of the 

holdings on State and fee lands.

My staff in New Mexico will continue to operate those holdings as 

they are doing now.

Senator Allott. Now, if I may point out to you, Mr. Kelly, this 

leaves you essentially in the oil business, in the exploration business, 

and perhaps production, I do not know, is tha t right?

Mr. Kelly. It will be in the production rathe r than exploration, sir.

Senator Allott. Production. Refining?

Mr. Kelly. No, sir.

Senator Allott. But in the production business of oil and gas in 

New Mexico, even though it is not on federally owned lands? In 

other words, this leaves you operating in a field in which many of the 

people you will have to deal with are also operating, as—for example, 

running down your list here, the Ashland Oil & Refining Co., Conoco, 

Ohio, Socony, Standard—some of these I do not know—and others, 

but it would leave you operating on the same basis as many of the 

people you would have to deal with as Assistant Secretary of the 

Interior in Charge of Minerals.

Now, I am sure you see that this leaves a possibility of a conflict 

or a sympathy of interests which might tend to keep you from attain ­

ing complete objectivity. What would be your remarks with respect 

to this observation?

Mr. Kelly. Senator, I do not believe that I will continue to operate 

my properties, I do not intend to continue to operate my properties. 

I will hold ownership of them. But the actual operations would be 

carried on by other people.

Senator Allott. Perhaps I did not state it clearly. You understand, I do not imply any bad motivation. I take for granted when 

these two fine Senators come and endorse you here tha t you are the 

kind of a man you should be. I am simply looking at the frailties of 

all human beings. You would have an interest in the outcome of 

tha t operation for the production of oil. At the same time, as Assistant Secretary of Minerals you would be dealing constantly with the 

people who are engaged in the business in which you have an ultimate 

interest in the outcome. Now, is this going in any way to influence 

you or bind you—in other words, I am asking this, is this divestiture 

of sufficient amount and moment to enable you to assume your 

obligations of office without any undue subjective influences?

Mr. Kelly. I think it is, Senator. I operate as a very small independent producer. I do not operate as a driller or refiner or a transporter or a marketer. I am divesting myself of probably 50 percent 

or bette r of my properties in order to place myself in the position in 

which I feel that I can assume the duties of my office with complete 

impartiality toward the decisions tha t I might make as Assistant 

Secretary. As you understand, I operate as an individual-----

Senator Allott. As well as the Elk Oil Go.?
NOMINATION OF JOHN M. KELLY 5

Mr. Kelly. The Elk Oil Co., as I said, is a family owned company. It has been primarily a royalty company and not an operating company.

Senator Allott. May I ask this question also: Do your holdings, in addition to leases from the State of New Mexico, include some sub­ stantial amounts of mineral rights or royalties, mineral rights or fee 

royalties?

Mr. Kelly. Mineral rights or fee royalties?

Senator Allott. Yes.

Mr. Kelly. No, a very small amount, Senator.

Senator Allott. Are you acquainted with the Helium Act tha t 

was passed last year?

Mr. Kelly. Not in detail, Senator. I know about it in a general 

way.

Senator Allott. Would this law come under your jurisdiction?

Mr. Kelly. The Helium Act would come under my jurisdiction 

in the Bureau of Mines.

Senator Allott. Have you been aware or studied the Helium Act 

in any respect since you were nominated to this position?

Mr. Kelly. I have been briefed on it, Senator.

Senator Allott. Are you in sympathy with the conservation of this great natural asset which is being dissipated to a very great extent today, so tha t if we keep on—as a matter of fact, if we keep on at the present rate our present known resources of helium will have been used up by 1980 or 1985—are you in sympathy with the purposes 

of this act?

Mr. Kelly. I am, sir.

Senator Allott. And if you were confirmed, which you un­ doubtedly will be, it would be your purpose to follow out the pre­ scriptions and the intended purpose of tha t act for the conservation 

of helium in the United States?

Mr. Kelly. I will, sir.

Senator Allott. I think those are all the questions I have, Mr. 

Chairman.

The Chairman. Thank you.

Senator Dworshak?

Senator Dworshak. I have no questions right now.

The C hairman. Senator Bible?

Senator Bible. I wonder, Mr. Kelly, if you have had the oppor­ tunity to give any study to the mining program, the minerals program tha t will be offered to this committee and the Congress to be of assistance to a sad segment of our industry. The copper industry and the lead and zinc and tungsten and silver and gold mining 

industry are all a t a lowr

 ebb. I do not know whether you have had the opportunity of giving this any thought, but you have been very closely allied in the work you have been doing in New Mexico, and certainly you have some background in this field. Do you have any ideas of what can be done to help the mining industry?

Mr. Kelly. Senator, I have been studying the problem at the request of Secretary Udall, and we felt that due to the fact that the problem is as serious as it is th at a complete overall s tudy should be made rather than picking out one or two individual minerals and trying to study them as separate entities. And, frankly, in just the little time that I have been up here in Washington acting as a con-
6 NOMINATION OF JO HN M. KELLY

sultaut to the Secretary, the seriousness of the problem has struck 

me with great impact. As a result, 1 recommended to the Secretary 

that we should devote a good part of our time, my time and that of 

the staff that will work under me, toward the problem and try to 

ascertain, if we can, the underlying facts that are causing the distress, 

let us say, in lead and zinc at the present moment.

Rather th an taking a piecemeal approach to it, we will try to come 

up with a long-range program. If necessary we will recommend to 

the Congress some piecemeal legislation to get the industry over its 

present difficulty. Then we would have tha t piece of legislation as 

a minor part of an overall program looking toward stabilization of 

the base of the industry, and then going from there. It is going to 

be a difficult job, but I am willing to tackle it.

Senator Bible. 1 know you are, and 1 know it is challenging and 

a most difficult area in which to work. But I am delighted to hear 

tha t you have already started some studies in this direction, and I am 

hopeful th at you will be able to come up before this committee in the 

reasonably near future with some type of a program that might be 

enacted and be of help to the mining industry. I know th at you have 

some considerable knowledge in this field. It is not an easy problem, 

but I think it is one on which, if we can work together, we can come 

up with some results rath er than just some flag raising.

Thank you.

The Chairman. Senator Dworshak?

Senator D worshak. Mr. Kelly, 1 have read with a great deal of 

interest the information available to the committee with reference to 

your extensive background and experiences in the minerals field. Of 

course you know that one of the real problems facing this committee 

is to determine the long-range planning on multiple use of our public 

domain. How do you feel about t hat generally?

Mr. Kelly. I believe th at the public domain should be so handled 

tha t multiple uses can be carried on. By multiple use, I presume you 

mean multiple use between the oil companies and the mining companies and multiple use between the mining companies and the 

forestry companies, and then multiple use to the wilderness area?

Senator Dworshak. Th at is right. And tha t embraces at least 

a half dozen categories, like minerals and lumbering and grazing and 

recreation and power development and conservation in its various 

aspects.

I was greatly encouraged when I read recently, after an announcement was made of your appointment as Assistant Secretary, some of 

the comments you made down at a hearing at Roswell, N. Mex., when 

you certainly indicated, for instance—I will quote and, if this is not 

correct, I wish you would correct me:

Our Nation prospered on the multiple use of our public domain, and Congress 

has wisely followed and impleme nted this policy by its previous acts. S. 4028 

would be contradiction to past congressional policy th at has called for fuller 

utilization and development of all the resources of the public domain. Freezing 

the sta tus quo of wilderness areas in our national forest areas would all but destroy 

the multiple use and sustaine d yield objectives now being administered. It is 

possible th at en tire forest areas and wildlife ranges could be re stricted to this one 

iand use by liberal inte rpretations of S. 4028. *

Are those correct comments of yours?

Mr. Kelly. Yes. I believe they were made at a hearing in 

Albuquerque.
NOMINATION OF JO HN M. KELLY 7

Se na tor D worshak. I said Roswell. Th e record sho uld show th at 

th at hearing was in Al buquerq ue.

And I th in k the dis tinguish ed c hairm an of our c om mittee was ther e 

on th at occasion. I was n ot. I do no t kno w who else was present.

Th e C hair man. Se na tor Ker r was the re. Maybe I ha d be tte r no t 

s ta rt to name them.

Se na tor D wor shak. T hat was on the wilderness bill.

Th e C hairman The heari ng was called to give ou r people a chance 

to exp ress them selv es, bu t also because of the inclusion in the wild erness bill originally of In dian lands. Ou r New Mexico India ns and 

ot he r In dian s were very str on gly opp osed in th at heari ng to an y 

In di an lan ds being includ ed. The decision was rea ched to rem ove 

In di an lan ds from the bill.

Se na tor D worshak. M r. Kelly, in the light of yo ur extensive experience in develop ing min erals, I am sure th at while you , like some 

of th e re st of us, may recog nize th at rec rea tion is a heritage th at we 

shou ld all cherish and pre serve, th at nevertheless in the pub lic land 

St at es o f the We st it is ve ry esse ntia l th at we have a fully integ rated 

eco nomy a nd develop me nt of our m ultiple-use resource s, or otherwise 

we would find ourselves dev eloping int o wha t you might call ghost 

are as. And you will feel th at the m ost desirable long-rang e plan is to 

pro vid e for com plete mu ltiple-use dev elopm ent?

M r. K ell y. I will s ta y with the s ta te m en t I made in Alb uquer que, 

Se nator .

Se na tor D worshak. T hat implies th at you felt th at way. I do 

not wan t the record to show th at you were prim ari ly con cern ed only 

ab ou t w hethe r Ind ian la nd s sh ould be in clu ded; you a re also inter ested 

in the lar ger asp ects of the wilderness legislation ?

Mr. K ell y. That is rig ht.

Se na tor D worshak. I certa inly am no t going to be unrea son able 

an d ask you to make a comm itm ent now. I sim ply an greatly encou raged th at you did have those views a few years ago, and I am 

sure th at if you are confirmed for this position th at you will stil l hav e 

the se b asic view's of yours u pon which to predica te some of tlffe polic ymaking which will come un de r yo ur supervisio n.

Th e Chairman. Se nator Gru ening?

Se na tor Gru en ing . Mr. Kelly, follo wing the line of question ing of 

Se na tor Bible, we in Alask a are very mu ch concern ed ab ou t the low 

st at us of our min ing indu stry . We have the re pu ta tio n of havin g 

31 of 33 critica l min erals the re, bu t no thing is happening . Th e only 

subsoil miner al th at is being developed is oil. We have great tin 

deposits on the Seward Penin sul a, and lead and gold. I hope it is 

part of yo ur activitie s in the formu lation of the prog ram to help us 

in de velop me nt of those mineral resources. Some of the m are 

gravely nee ded . We have the only tin dep osit in the Western Hemisphere, th at is, on the Nor th Am erican Co ntinen t, an d it is in a very 

low stat e. As you know, gold pro duction is on the w ay do wn; mo st of 

th e gold opera tio ns are ab ou t to be sus pen ded , and the whole min ing 

pictur e is v ery dep ressing. We hope t h at you w ill giv e yo ur a tte ntion 

to th at pro ble m in Alaska as soon as it is possible for you to do.

M r. K elly. Well, Senator , as I stat ed to Se nator Bible, we are 

un de rtak in g a thoro ugh st udy of the entire mineral pictu re ra th er 

th an ju st tryi ng to pic k ou t one o r two specific m atters.
8 NOMINATION OF JO HN M. KELLY

Senator Gruening. Thank you very much.

The Chairman. Senator Fong?

Senator Fong. Yes, Mr. Chairman.

Mr. Kelly, we have no gas or oil or petroleum in the islands, and 

the only thing we have is titanium and bauxite. I hope you would 

give those minerals some consideration, when you become Assistant 

to Mr. Udall.

I am satisfied, Mr. Chairman, th at the Government is very fortunate 

in having a man of Mr. Kelly’s competence and experience to come 

into the Federal service. I note tha t he has given up a lot of his holdings, and it seems—I note the diversity of his holdings and it seems 

that he is a man who is very aggressive and knows how to go after 

things. I think we are very fortunate in having a man of his caliber. 

I am sure he will be most circumspect when it comes to dealing with 

other people relative to gas and oil leases.

The Chairman. Senator Moss?

Senator Moss. Mr. Kelly, I want to join with Senator Fong in 

commenting on your very excellent qualifications to accept this 

position, and 1 am sure you will do an outstanding job.

I had one question that was forwarded to me from my own State 

by a man who deals with Federal oil and gas leases who said that it 

was his undertanding that you advocated placing all Federal oil and 

gas leasing on a competitive bid basis rather than priority of filing 

and a fixed rental and royalty as we operate now. What is your 

position on that, Mr. Kelly?

Mr. Kelly. Senator Moss, the branch of the Department of the 

Interior tha t administers the Mineral Leasing Act, the Bureau of 

Land Management, will not be under my direct supervision, so tha t 

I will not be making policy in tha t phase. However, my basic thought 

is that the Government and the industry could benefit by a change 

in the method of leasing of Federal lands.

Senator Moss. Don’t you feel tha t this would tend to freeze out 

the small independent lessee?

Mr. Kelly. I do not think it will freeze out the small independent 

oil producers and others who are legitimate operators. It might have 

a little tendency to hold back the speculators, but not a legitimate 

operator. I base that statem ent on the history of the leasing of State 

lands in the State of New Mexico, where those lands arc up for competitive bids, and we small independent operators have been able to 

exist under those regulations.

Senator Moss. Are all State lands in New Mexico operated under 

a competitive bid for lease?

Mr. Kelly. They are, sir.

Senator Moss. 1 have no further questions.

The Chairman. Senator Miller?

Senator Miller. Mr. Kelly, referring to this memorandum that 

you prepared for the committee, on the first page, paragraph 1 says, 

“ I will sell all of my stock holdings in oil and mining companies,” 

but paragraph 3 points out that you will make an irrevocable gift of 

some stock. So the first paragraph should be modified to tha t extent?

Mr. Kelly. Yes. As I stated earlier in the hearing, I will sell all 

my holdings in all the companies, with the exception of the family 

owned company, the Elk Oil Co., which will be conveyed as a gift to 

my minor children.
NOMINATION OF JOHN M. KELLY 9

Senator Miller. Now, who will be the custodian for gift of the 

stock in the Elk Oil Co. for your children?

Mr. Kelly. 1 will recommend to the court tha t James T. Jennings, 

attorney, president of the New Mexico Bar Association, will be made 

the custodian.

Senator Miller. And Mr. Harris of Roswell as successor?

Mr. Kelly. I will make that recommendation, but, of course, as 

you understand, it will bo up to the court to make the decision.

Senator M iller. Are you related family wise or businesswise to 

Mr. Jennings or Mr. Harris?

Mr. Kelly. I am not related familywise to either of the gentlemen. 

Businesswise, Mr. Jennings is my attorney.

Senator Miller. They are not engaged in current operations on 

fee lands or State lands with you?

Mr. Kelly. Not with me, no, sir.

Senator Miller. Would it be possible that you might be called 

upon to make a decision which could adversely or favorably affect the 

Elk Oil Co. in its operations?

Mr. Kelly. No, sir, because the Elk Oil Co. will end up as primarily 

a company holding overriding oil royalties. It will not be operating 

as a producer of oil, as I contemplate the operation now. The company will not be an operating company; it will be mainly a royalty 

and leaseholding company.

Senator Miller. If tha t is so, then why would you take the step 

to make the gift, if you could see no possible situation in which a 

decision of vours as Assistant Secretary might adversely or favorably 

affect it?

Mr. Kelly. I am making the gift not because of so-called conflict 

of interest. I am making the gift because of the Department of 

Interior regulation which states that I must divest myself of all 

holdings, whether leases, overrides, payments, or whatever holdings 

pertain to Government lands, and the Elk Oil Co. will hold overriding 

royalties and oil payments on leases that I have sold. It is necessary 

tha t I convey the stock of the Elk Oil Co. out of my name and control.

Senator Miller. Now, in connection with your policy of trying to 

stimulate the development of our mineral and oil interests, of course 

you are familiar with the facts that there is a divergence of opinion 

on whether we should maintain or decrease the percentage depletion 

under our tax laws. Do you have any views on that?

Mr. Kelly. Again, I will not be asked on policymaking m atters on 

taxes. But speaking as an individual, I do have views on it. I 

believe the depletion allowance for all minerals have been in the best 

interests of the citizens of the United States, in th at we have been able 

to produce the mineral resources when needed in times of emergency. 

Also w e have been able to produce our mineral resources in times of 

peace to maintain the growth curve in this country.

Senator Miller. So if perchance you were asked, because of your 

position and also of your background, by the Treasury Department for 

a policy state ment by the Department of the Interior on any proposed changes in the percentage depletion allowances, do I gather from 

your answer that your position would be th at you recommend tha t it 

not be changed, a t least downward?
10 NOMINATION OF JO HN M. KELLY

Mr. Kelly. I recommend tha t a thorough study be made, and I 

believe tha t the results of tha t study would show tha t the depletion 

allowances, perhaps, have been on the low side.

Senator Miller. Thank you very much.

The Chairman. Senator Long?

Senator Long. Mr. Chairman, everything tha t I have read in the 

record and what I have heard here this morning indicates tha t the 

President and the Secretary of the Interior have made a very wise 

selection.

The Chairman. Senator Kuchel?

Senator Kuchel. I nave no questions, Mr. Chairman.

The C hairman. Senator Metcalf?

Senator Metcalf. Mr. Chairman, I, too, have examined the documents presented here by Mr. Kelly and heard his responses to the 

questions this morning, and I agree with my colleagues that Secretary 

Udall is fortunate to obtain a man of his professional attainme nt and 

actual accomplishment, and I think with the same energy he demonstrated in the petroleum field he will look into the mining field in my 

State. And we are fortunate to have him as Assistant to the 

Secretary.

The C hairman. I promise him that we will give him no peace until 

he does something with lead and zinc.

Senator Metcalf. And copper.

The Chairman. And copper.

Senator Hickey?

Senator Hickey. I would only like to say tha t I have known of 

Mr. Kelly’s work when I was a member of the Interstate Oil and Gas 

Conservation Commission in the West, and certainly I think the 

Secretary is very fortunate to have a man of his background in this 

post. I am doubly pleased tha t we have a man conversant with the 

development problems and the problems of depletion, because we are 

vitally interested in such m atters, as all the Western States are.

And certainly you will approach tha t in a manner tha t will give 

credit to the administration, Mr. Kelly.

Mr. Kelly. Thank you.

Senator Allott. May I say one thing, Mr. Chairman?

The Chairman. Surely.

Senator Allott. I think we have a typical example of a situation 

which arises. If Mr. Kelly came up here for appointment he would 

probably have to come up here under one of two situations, either 

having a minimum of background which would very doubtfully 

qualify him, or come up as he does with a wealth of background 

which undoubtedly qualifies him. And we all are interested in this 

question of of interest and conflict of interest. 1 suppose the point 

could be made tha t the custodian of the Elk Oil Co. stock is his 

personal attorney. I do not regard the matter in this way. I do 

not think that the Congress can enact laws which are going to keep 

dishonest men from avoiding the law and taking advantage of the law. 

I personally feel th at he takes this office with the idea th at he is going 

to do it in an objective and fair way. But it seems to me that the 

best criteria tha t the Congress can take with respect to these people is 

that, having divested themselves of the main interest to the best of 

their ability, that then we hold them to the strictest standards of their 

office. I am sure tha t Mr. Kelly will do so, and I am sure tha t he 

knows th at this is the attitude of the committee.
NOMINATION OF JO HN M. KELLY 11

Mr. Chairman, if it is in order, I would move that we vote on the 

nomination now.

The Chairman. I was going to adjourn to the conference room, 

but we do not need to.

Senator Miller. Before we do so, may I make a comment bearing 

on what Senator Allott has said?

I was very interested in the reason tha t motivated the nominee 

in making this gift to the Elk Oil Co. It was not the conflict-ofinterests statutes, but some regulation over in the Interior Department. It seems to me that the Interior Department, and possibly 

the other departments, might take another look at some of these 

regulations to see whether or not the regulations are a sort of a meat-ax 

approach to the divesting of interest where the results obtained are 

not at all in line with the objectives. It seems to me tha t the conflictof-interest matter is primarily—and just to say tha t because you 

happen to have an interest in an oil company, if your position is such 

that you are not going to have any possible effect upon it, as he has 

testified he would not have in connection with his duties—it is rather 

unfortunate tha t he would be required just by some regulation over in 

the Department to divest himself of these interests.

The C hairman. I appreciate what the Senator has said. I know 

that is the situation tha t arises steadily. We had one in connection 

with Atomic Energy just a short time ago when Dr. Seaborg was 

required to divest himself of something tha t I thought could not 

possibly affect his activities as Chairman of the Atomic Energy 

Commission. But tha t is the way t hat some of these regulations are 

drawn; it makes it extremely difficult.

Senator Hickey. I would think tha t a full disclosure would be 

sufficient for people in this position ra ther than divestiture.

The Chairman. Well, we are not the custodians of the conscience 

of the Interior Department, that is the great difficulty. Probably 

we had better leave it alone.

If there are no further questions, I think we will abide by tradition 

and move to the conference room, there to take up the motion of the 

Senator from Colorado.

Senator Chavez. May I say just one more thing. I am glad to 

have this nomination come up before such a fine group of men.

The Chairman. It is one of the best committees in Congress.

(Whereupon, at 10:15 a.m., the committee proceeded to executive 

session.)

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