The State points to paragraph (3) of subsection (a), which prohibits selection of land within a mineral lease or permit if any of the land in the lease is in a "producing or producible status," and argues that the use of the words "producing" and "producible" in this paragraph demonstrates that the Congress intended "producing" in paragraph (2) to mean "actually producing" and not merely "capable of production." It concludes that if there is no producing oil and gas well in the field then paragraph (2) is not applicable.

The phrase "known geologic structure of a producing oil and gas field," used in paragraph (2), has been used in connection with oil and gas leasing of public lands since the original Mineral Leasing Act of February 25, 1920, 41 Stat. 437 §§ 13, 17. Its meaning was established soon thereafter as follows:

In its unreported decision of March 24, 1924, in the case of John H. Moss v. A. D. Schendel (A-6287, Buffalo 021031-021033), the Department said:

"The applicant Moss has appealed from this decision and alleges that the lands were not, at the time of his application, within a producing field, as all wells in that field which had produced either oil or gas, were not producing, but were exhausted, the wells abandoned and the casing pulled and the wells plugged. *

"The records disclose that the Torchlight field was a known producing field long before the passage of the leasing act, and was so defined long prior to the filings by appellant or Schendel. The Department is also aware that large oil companies which have been operating in the field did abandon it in 1923, as alleged, but is not convinced that such abandonment warrants a redefinition of the structure or the revocation of the classification of the area as a producing field at this time. The term 'producing oil or gas field' as used in section 13 of the leasing act must be construed to include areas in which there has been production and which are capable of producing more oil, otherwise cessation of production in a given field because of a strike or other external matters would render areas which were clearly oil bearing, subject to prospecting operations and, when oil was brought in, the reward for discovery provided in section 14 of the act would be improperly conferred in a case where such discovery was not essential to the determination, already made, that the land was valuable for oil and gas deposits. Until further showings are made which are persuasive that the area does not still contain valuable deposits of oil, the field will not be redefined." (Kermit D. Lacy, 54 I.D. 192 (1933).)

The Department has repeatedly adhered to this construction of the phrase and still follows it. George C. Vournas, 56 I.D. 390 (1938); K. S. Albert, 60 I.D. 62 (1947); Duncan Miller, A-27644 (September 22, 1958); Duncan Miller, Louise Cuccia, 66 I.D. 388, 390 (1959), and cases cited therein.

In view of the long accepted interpretation of the phrase, which has remained unchanged throughout the many extensive revisions of

October 30, 1964

the Mineral Leasing Act without Congressional criticism, its meaning must be deemed to be established. The fact that Congress used the word "producing" in the next paragraph of the statute to mean "actually producing" does not require a different result. Paragraph (3) applies to all leasable minerals while the phrase used in the preceding section applies only to oil and gas lands and constitutes words of art. Lands in the known geologic structure of an oil and gas field which has produced but may not currently be producing are deemed to be of such value that the lands can be leased by the Secretary only through competitive bidding, Mineral Leasing Act, § 17, as amended, 74 Stat. 781 (1960), 30 U.S.C. § 226 (b) (Supp. V, 1964). It seems clear that Congress intended that oil and gas lands which could be leased only by competitive bidding should be placed in a special category so far as State selections are concerned and that Congress did not intend that only some land subject to competitive leasing, i.e., land in an actually producing field, should be placed in a special category for State selection purposes.

Accordingly, it was proper, unless similar land was offered as base, to reject selections for lands within the known geologic structure of a producing oil and gas field even though there was not actual production within the field so long as there had been production and the geologic structure has not been redefined.

Another issue raised in several of the appeals is whether land in a unitized lease which is in a participating area is producing or producible land within the meaning of paragraph (3) so that all the lands included in the lease are ineligible for selection by the State, even as to portions of the lands not within the unit or participating area.

Since paragraph (3) prohibits the selection of any lands in a lease if any of the lands in it are in a producing or producible status, lands which are part of a producing or producible lease cannot be selected no matter what their own status is. The only question then is whether a lease, part of which is in a participating area, is such a lease even though there is no well on the land of the lease itself. The very definition of a participating area makes it plain that the answer must be in the affirmative. The standard unit agreement describes it as follows:

11. Participation after discovery. Upon completion of a well capable of producing unitized substances in paying quantities or as soon thereafter as required by the Supervisor, the Unit Operator shall submit for approval by the

Director a schedule, based on subdivisions of the public-land survey or aliquot parts thereof, of all unitized land then regarded as reasonably proved to be productive of unitized substances in paying quantities; all lands in said schedule on approval of the Director to constitute à participating area, effective as of the date of first production. ***

It is the intent of this section that a participating area shall represent the area known or reasonably estimated to be productive in paying quantities; but regardless of any revision of the participating area, nothing herein contained shall be construed as requiring any retroactive adjustment for production obtained prior to the effective date of the revision of the participating area.

12. Allocation of production. All unitized substances produced from each participating area established under this agreement, except any part thereof used in conformity with good operating practices within the unitized area for drilling, operating, camp and other production or development purposes, for repressuring or recycling in accordance with a plan of development approved by the Supervisor, or unavoidably lost, shall be deemed to be produced equally on an acreage basis from the several tracts of unitized land of the participating area established for such production and, for the purpose of determining any benefits accruing under this agreement, each such tract of unitized land shall have allocated to it such percentage of said production as the number of acres of such tract included in said participating area bears to the total acres of unitized land in said participating area. * * * 30 CFR 226.12.

Thus it is concluded that a lease any part of which is in the participating area of a unit agreement is a producing or producible lease so that any land covered by the same lease is, whether or not within the participating area or unit agreement, ineligible for selection by a State.1

There remains one case, A-29619, in which the Division of Appeal's decision, in addition to affirming the land office decisions, rejected the State's selections as to additional lands on the grounds that a redefinition of the known geologic structure of a producing oil and gas field made while the appeal was pending placed them within the limits of the field. The State contends that the Director (or his delegate) was without jurisdiction to modify the local manager's decision for lands not covered by its appeal. This contention is without merit, for the Director has authority at any time to take up and dispose of any matter pending in a land office or to review a decision of a subordinate officer,

At the time the decision appealed from in A-29826 was issued, the participating areas had not been established and the appeal objected to a rejection of the selections based on the assumption that the selected lands were certain to be included in participating areas. Since then, parts of the leases of which the selected lands are a part have been included in participating areas, so that this objection is now moot.

October 30, 1964

with or without an appeal. Oscar C. Collins et al., 70 I.D. 359, 360 (1963); Barney R. Colson, 70 I.D. 409, 412 (1963).

Following the filing of the appeals, the Governor of the State of Utah, by letter dated October 1, 1963, to the Secretary, raised an additional question with respect to a number of the applications involved in a number of the appeals. He stated that the selected lands in the applications contain known deposits of oil shale of good potential and that the selections were filed primarily for the oil shale deposits. He asked if it would be possible for the State, by executing waivers of the oil and gas in the selected lands, to acquire title to the lands and all other minerals in the land, including the oil shale deposits.

The Governor's question is directed to this typical situation: The State has filed an application selecting lands determined to be valuable for oil or gas, oil shale, and possibly other minerals. The application lists as base or lost lands tracts of land also determined to be valuable for oil or gas or oil shale or possibly some other mineral. The application is rejected because the selected land is determined to be on the known geologic structure of a producing oil or gas field (and the base lands are not) or included in a producing or producible oil and gas lease. The Governor's question in essence is whether a waiver by the State of oil and gas rights in the selected lands would eliminate the known geological structure and producing or producible lease objections to approving the selections.

Paragraph (1) of subsection (a) of Rev. Stat. § 2276, supra, provides that no mineral lands may be selected by a State except to the extent that the selection is made as indemnity for mineral lands lost to the State. If land selected by a State is valuable for oil or gas or oil shale and the land does not fall within paragraph (2) or (3) of subsection (a), it is clear that the selection may be aproved if the lost land is valuable for oil or gas or oil shale or some other mineral.

What is the result if the selected land additionally falls under paragraph (2) or (3)? This is the situation where the lost land is mineral in character and the selected land is reported not only to be valuable for oil or gas but also to be either within the known geologic structure of a producing oil or gas field or in a producing or producible oil and

gas lease. If the lost land is not within the known geologic structure of a producing oil or gas field and the selected land is, the selection, without more, would have to be rejected. Regardless of whether the lost land is on such a structure, the selection, without more, would have to be rejected if the selected land is in a producing or producible lease. Could the selection, however, be approved if the State agreed to a reservation of the oil and gas to the United States?

Prior to the 1958 amendment to Rev. Stat. § 2276, a State could not select mineral lands unless the mineral was one enumerated in the act of July 17, 1914, 38 Stat. 509, as amended, 30 U.S.C. §§ 121-123 (1958), or a similar statute. The 1914 act permitted the selection under a nonmineral land law of land reported to be valuable for oil or gas upon the condition that the oil or gas would be reserved to the United States. Thus, a State could select as indemnity under Rev. Stat. §§ 2275 and 2276 land reported to be valuable for oil or gas provided it consented to a reservation of the oil or gas to the United States. See State of Arizona, 71 I.D. 49 (1964); State of Arizona, A-27743 (August 16, 1961).

***

as

**

* oil,

The 1914 act applies to lands "withdrawn or classified gas or which are valuable for those deposits ***" 38 Stat. 509, 30 U.S.C. § 121 (1958). It does not differentiate between such land on a known geologic structure of a producing oil or gas field or such land not so situated or between such land in a producing or producible lease and such land not so included. Since prior to the 1958 act the oil or gas had to be reserved to the United States in all these situations, it did not matter what the status of the land was. In other words, it seems clear that prior to the 1958 act, a State could select land within the known geologic structure of a producing oil or gas field or land included in a producing or producible oil and gas lease since the oil and gas were to be reserved to the United States. This was true whether the base land offered by the State was or was not mineral land.

The question then is whether the enactment in 1958 of paragraphs (2) and (3) of subsection (a) of Rev. Stat. § 2276 was intended to change the situation and to bar a State from selecting land on the known geologic structure of a producing oil or gas field (unless the base land was so situated) or land in a producing or producible lease