Letter from Secretary of the Interior Julius Krug to President Harry S. Truman, with Attached Memorandum from Clark Clifford

11477 anoth 6-6 THE SECRETARY OF THE INTERIOR WASHINGTON NOV - 2 1949 Feed 2/49 My dear Mr. President: X The members of the Osage Tribe owning headright shares in tribal property have voted to accept the proposal of the tribal oil x56 mining lessees to amend the existing leases to provide for secondary development by water flood and unitisation of the North Burbank x132 Field, Osage Reservation. *165 x The proposal involves a reduction in royalty previously fixed by Executive approval pursuant to section 3 of the act of June 28, 1906 (34 Stat. 539, 543), which reads in part as follows: X " # Provided, That the royalties to be paid to the Osage Tribe under any mineral lease so made shall be deter- X289 mined by the President of the United States; # *." The unitisation of the field will require the execution of & unit operating contract and a blanket lease in lieu of the existing 137 quarter section oil mining leases. On the Orage Reservation the royalty as fixed by Executive approval on these leases 1s one-sixth of the receipts for the oil produced and sold where the wells on a quarter section or fractional part average below 100 barrels per day for the calender month, or one-fifth of the receipts where the quan- tity of oil taken from all of the producing wells on any quarter SEC- tion or fractional part thereof during any colender month 1s sufficient to average 100 or more barrels per day. The field was discovered in May 1920. The cumulative produc- tion on its 18,310 acres up to November 30, 1948, amounted to 167,210,273 barrels. Production in November 1948 was 144,281 barrels, & daily average of 4,809 barrels, or 2.94 barrels per well per day for the 1635 wells in the unitized area. Estimates of future recovery by water flooding range from 120 million barrels to twice that amount with no one being certain and the probabilities being that recovery would actually range between 140 million barrels and 165 million barrels. Due to the depleted production this Department in 1946 urged that steps be taken to unitize the field. After considerable negotia- tion between the lessees and the Orage Tribal Council, the lessees, on May 19, 1948, submitted an offer agreeing to unitise and develop the area by water flood process, provided that the royalty rate is fixed at 16 2/3 percent of the first 150,000 barrels produced during x X 296 RECORDS I AMOUNT SERVICE GOVERNMENT