New-York tribune., 1918-01-19

ally susceptible Of accurate dctcrmina-
ton, and it is only "deplctcd" by the
operations of the individual or cor
poration mining it.
An oil we'll. on the other hand, be-
gins to decline The moment it is drilled
into tho oil sand This sand, contain
ing the reservoir of oil, is in most
cases tapped by the wells Of adjoining
operators, and rs these wells arc
pumped ;hcy .lraw from the reservoir
much of the oil which the first operator
would otherwise have realized. Again.
there are many natural causes. such
as the clogging up of the pores Of the
oil sand, the cncroachmcnt Of salt
water, the diminution Of the rock
pressure, etc, which cause oil wells to
decline. These are factors over which
the oil producer has absolutely no con-
troll. and they cause his property to
deplete quite as much as do his own
operations. Moreover, the oil pro-
ducer, unlike the miner, has no means
of knowing how long his property will
continue productive. AS q practical
matter. the oil operator does not con-
slider that he has made profit until
the productive wells have paid back to
him not only their own cost, but also
the amount expended in previous un-
successful prospecting. which is, of
course, a total loss.
Such loss should not be treated
the same way as the ordinary business
loss. for it is one which cannot pos
sibly be foresecn or guarded against
IN any way, yet it is only by continued
prospecting that the production can
be maintained.
1t is an unfortunate fact that the
financially hazardous business of pro-
ducing crude petroleum has not been
better understood by Congress. 1t is in
a distinct class. and an attempt to apply
the ordinary rules of taxation to it
is bound to result in hardship.
would like also to enlighten M:'
Snyder as to few other points. He
says:
"For example, oil production, {.
is lower this year than last" l pre-
sumo that he means that the produc-
tion of the year 1917 was lower than
in 1916, but, as matter of fact, it
was greater by about 3S,000,000 bar
rcls. Thcie is plenty Of gasolene and
other products of crude petroleum for
not only our own domestic purposes,
but for all the war needs Of ourselves
and our allies.
This situation will continue if con-
turbed, although as your correspondent
says:
ave cannot afford to enact
law which would very drastically de-
crease oil productions"
All waste Of gasolene should stop, of
course, for, as was pointed out in one
of your automobile articles the other
day, there are perhaps 100000 gall
Ions wasted in the United States daily
through careless handling at garages,
leaky carburctors, etc.
There is no possible cause for alarm,
however, for the industry can meet all
at reasonable figures. The present
prices for petroleum and its products
are not "war prices" in any sense of
the term.
The few conclusions which I have
set forth above arc readily demon
strated by existing statistics.
The facts are readily available, and
1t is unfortunate that an article dealing
with such an important economic sub
ject does not set them forth correctly.
WALTER Z. KELLEY.
Washington, Jan. Is, 1918.
FNOTE.--1n Mr. Snyder's article it
was contended that the life of an oil
we'll is fixed in the sense that it is
limited, and that "if an oil company
exhausts given field in year or two
this may result in enormous excess
taxes. But the excess taxes might take
all of this and part Of the invested
capital as we'll. This would not only
be gross injustice, but stupid blunder-
ing" On that point, therefore, Mr.
Snyder seems to be in substantial ac-
cord with Mr. Kelley. both apparently
agreeing that since the life of an oil
we'll is limited, special provision should
be made, levying the excess profits
tax. Mr.. Kelley states that there is
no possible cause for alarm, because
the output Of petroleum will suffice to
meet all demands. Mr.. Snyder con-
tends, however, that if the excess
profits tax should absorb an unduly
large share of the profits of oil pro.
ducers, the incentive to greater pro-
ducticn would be removed and output
would tend to decrease. In this we
agree with him. m.~Financial Editorl