File No. 312.115/211.
The manager states the present conditions and brings to the Department’s
attention a question which often becomes necessary to be decided by
American interests and individuals; that is, whether foreigners should
pay or decline to pay forced contributions to one or the other of the
contending factions. If payment is made to one, by compulsion or for
expediency, if the other party comes into possession, such payments are
held to be unfriendly and improper by the last arrivals.
[Inclosure.]
Memorandum on conditions in oil
fields.
At present all important oil wells in Mexico are in the hands of
forces professing to be commanded by General Villa. All tanks except
those at the wells are in the hands of the Carrancistas, who also
control all shipping points.
The Villista commanders having control of the country at the wells
are in a position to do untold and irreparable damage to the
producing wells, most of which cannot be entirely shut in, and some
of which must be allowed to run at least 20,000 barrels per day. Any
attempt to close in these wells would result in their breaking
through the ground and forming craters, like Dos Bocas, wasting the
whole underground oil-measures. The Villa officers, through their
control of the field, demand the payment of “taxes” or advance
payments of taxes in large sums, and on refusal to make payment stop
the pumps which are necessary to take the oil away from the wells.
The Constitutionalist Government continues to collect the production
tax, which legally is nothing today, since the tax law passed by the
Madero Government was operative only for one year, to July 1, 1913,
and the Huerta law, operative to July 1, 1914, was declared
void.
On their taking possession of oil termini and shipping points, the
Carrancistas, by decree of July, 1914, raised the 20-centavo tax
(which had expired as above stated) to 60 centavos and made this
payable in gold, also by decree. This tax has no sanction of any
legislative body, exists merely by virtue of a decree of a First
Chief, and is enforced only by the ability of said First Chief to
stop shipment and otherwise interfere with the business. The
companies are naturally paying the tax.
The oil-producing companies have no objection to the payment of
proper legal taxes, but are subjected to extortion by reason of the
situation above noted, and would appreciate the advice of their
governments as to the proper course to pursue. Refusal to pay taxes
on either side will surely result in disaster which, though possibly
compensated by claims in the far future, will ruin the companies’
stockholders, many of whom rely upon their income from the companies
for their livelihood, and starve the companies’ laborers. Payments
to either side arouse resentment of and recriminations by the other
side.
A claim the value of which is at best conjectural, and the payment of
which is at best, long delayed, is not to be considered against a
present and immediate catastrophe which could result from a refusal
to pay whatever either side demands.
The Government is respectfully requested to say whether, under the
circumstances, payments to whatever party demands money should be
made, or the demand refused.
Vera Cruz,
Mexico, May 6,
1915.
