The people's voice. [volume] (Helena, Mont.) 1939-1969, 1953-01-23
Royalty Versus Rakeoff

or she wishes to get the most possible
out of school lands for the benefit
of our schools. That is not only a
most laudable ambition but is also
mandatory under our laws. | also, am
just as DESTROYS an anybody of accomp-
fishing that objective. 1t seems that it
is in the methods to be employed more
than anything else, that there is dis
agreement as to how to get the great
est net cash return.
great many people seem to worry
a lot about spectators" making a
profit out Of their operations in the
oil business. Now Specializing" is just
polite word for gambling, and it does
MT matter whether it is in the oil bus
mess horse racing, or slot machines.
IT is that willingness to take a chance,
so characteristic of the American peo-
pie since Christopher Columbus, that
has made America the greatest coun-
try in the world
Everyone engaged in anything per-
tanning to the production of oil is
big time, long shot gambler commonly
know as Spectator. 1t is the specula-
tor that keeps the oil production bust
ness rolling, to produce the essential
oil we need at a reasonable price In
any gambling game, all parties en-
gagged are guilty of whatever gamblers
are guilty of. That also goes for the
State of Montana through it's repre-
sentatives, the State Land Board. They
are the croupiers of the biggest gambl-
ing game ever conducted in Montana
If not the entire world. Their rakeoff
in the last year has been over $7,OOO,-
900, bid by gamblers or "speculators,"
for oil leases on State owned lands.
Approximately 97%o of the leases pur-
chased will produce no OIL and TIE
gamblers will have lost about $6,790,-
600 to the state croupiers. This will be
in addition to any money the state may
receive from legitimate royalties and
rentals, and is just so much velvet
Now, don't get me wrong I am all
for it, / believe in the right of any
one to take a chance if he feels lucky,
without being called crook Like
wise, l believe in the right of the
croupier, in this case the State OF
Montana, taking all the rake off they
can get. l am also for the elimination
OF the sliding scale royalty because in
my judgment, leases would sell for
higher bonuses, and total cash re-
ceipts in the long run, would be great |
er than the higher royalties would pro-
duce. 1t should be perfectly obvious
that since producers can legally hold |
production down to the lowest roy
atty schedules, they will do just that, |
wherever advisable. 1t would be just |
good business to do so. After all. it |
should be remembered, that the policy |
that produces the greatest final total
cash returns from all sources and nos
necessarily from oil alone, is what
counts
Every dollar received from bonuses
rentals, and delayed drilling payments
while the boom is on is Just so much |
velvet, and is far greater than re-
turns from oil royalties is likely to be.
The oil itself will still be there in the
ground and we will get it in due time
In couple of years, dry holes Will
prove lot of acreage to be non-pro-
ducing, and bonuses and rentals are
likely to fall off as much as $50, and
the boom will be bust.
note with interest, comments by
various parties in the papers recently,
including those by Mary Condor, State
Supt. of Schools, on oil and gas leases
granted by the Northern Pacific. I'm
der these leases the operator deducts
the costs of drilling, etc. and then
shares the profits with the, land own
er. Miss Condor asks why should
Montana get less?"That is a good ques
ton. Such leases or contracts are
known as a $3.50 working contract.
Sometimes they are for a 1880 or even
a 1910 division.
Working contracts are the biggest
sucker bait ever invented. If Miss Con-
don or the State Land Board thinks a
$3.50 working contract is a good deal,
l believe 1 can tell them how to double
in 80 days that 100000 lottery bank
roll take, they are sitting on with that
SNUG look of the cat that swallowed
the canary
If they disagree with me, L dare
them to offer to trade their present
royalty leases for a $3.50 working
agreement, plus another bonus pay
ment equal to the first one. inside of
"a hours the boys would be standing
in line from the front door of the State
Land office clear down to the street
with their money in one hand and
their fountain pen in the other. The
reason why? Simply because the prof
it's from the production OF oil are not
what the amateurs and suckers believe
it to be. Profits in oil are in the re-
filming and selling of it, and but very
little in it's production. Experienced
oil men know that a 5 % net royalty is
superior to any working agreement,
except possibly on leases that already
have proven production.
1t has been suggested that competent
personnel, biologists, etc. be employed
by the State Land Board to evaluate
state lands, etc. That would be an I'M
necessary and expensive duplication.
The State of Montana already has a
staff of personnel, far better quail
fled than any the State Land Board {
could employ for the purpose, whose
services could be had without cost. !
efer to the Montana State Oil Conserva- (
i'm II 1,n