Papers Relating to the Foreign Relations of the United States, 1918

File No. 812.512/2089

The Ambassador in Mexico ( Fletcher) to the Secretary of State

No. 1312

Mexico, August 14, 1918.

Sir: Continuing my despatch No. 1283 of August 7, 1918,¹ on the subject of the petroleum decrees recently issued by the Mexican Government and confirming my recent telegrams, I have the honor to report the developments of the situation in the past week, as follows:

On August 13 the Foreign Office made public its reply to the note of the British Government dated April 30. The substance of this reply was telegraphed immediately to the Department and the text and translation will be found in my despatch No. 1306 of August 14.

Your telegram No. 1237 [1357] of August 12, 3 p.m., instructing me to seek an immediate interview with President Carranza and request a further postponement of the operation of the recent petroleum decrees, reached me yesterday morning.

I put this request in writing—copy enclosed²—of which I also made a translation and arranged for an interview with President Carranza at 6 o’clock yesterday afternoon. The interview lasted half an hour and the principal points and result thereof were immediately telegraphed to the Department.

On opening the conversation, I explained to the President that, while the attorneys representing the various American citizens interested in the oil industry in Mexico had reported the result of their conferences with the representatives of the Mexican Government to their principals and more recently to the Department of State, nevertheless, my Government had not had sufficient time to study the various decrees and to determine the effect which they would have upon American interests and property rights in Mexico, and that I had been instructed to present to him a request for postponement of the operation of the said decrees and handed to him the note above referred to in translation. The President read it carefully and replied that as a result of the conferences held between Messrs. Garfield and Rhoades and Messrs. Pani and Nieto, the Mexican Government had made a number of modifications in the petroleum decrees favorable to the companies concerned; that the decrees were merely fiscal; that it was the province of the Congress, which would meet on the first of September, to pass the laws which would put Article 27 into effect, and that he believed such legislation, which would originate with him or with some member of the Congress, would be one of the first subjects to be taken up by the Legislature; that he had gone as far as he could in the matter, and could not further postpone the operation of the petroleum decrees. He referred, with evident displeasure, to that part of the request which mentioned the necessity which may arise to impel the United States to protect the property of its citizens in Mexico, and said that this was merely fiscal legislation, and, as he had pointed out in his reply to the British Government, Mexico in the exercise of its sovereign rights could not admit interference of foreign governments in the matter, and said that if this meant war or intervention, he was prepared to confront this alternative however regrettable. I replied that I saw no immediate danger-’of matters coming to such a pass and referred to the peaceful means which, in my opinion, should and would be exhausted before this alternative need be met. He agreed in this and said that the parties interested should appeal to the courts and that if and after the ordinary legal remedies should have been exhausted they still should feel aggrieved, there remained always the diplomatic channel through which to attempt settlement. Following that line of thought, I told him that I believed it would have a reassuring effect if I could say this to the Department and that every legal and peaceful means would be exhausted to reach a settlement of the juridical question involved, and I referred to the-existing treaties between Mexico and the United States in this connection. The President replied that he was not a partisan of force and stated his willingness to adopt peaceful means of settlement.

Throughout the conversation the President stressed the point that the decrees in question constitute merely fiscal legislation and that he had not attempted in the decrees to put into practice and effect the provisions of the Constitution relating to subsoil ownership, and that the Congress only had this power and would decide the conflict with reference to subsoil ownership as between the nation and private individuals. I made it clear, however, that in my opinion the decrees were based on Article 27 of the Constitution and that individual owners feared that compliance with the provisions of the said decrees might prejudice their legitimately acquired rights. He then spoke of the filing of manifestations and stated that in his opinion they should be filed; that they could be filed under protest if the companies so desired and without prejudice to their rights.

In conclusion I referred to the delicacy of the situation and to the very short time which would elapse before the decrees were put into effect, and expressed the hope that no precipitate action would be taken by the Mexican Government which would interfere with the peaceful, orderly and judicial settlement of the matters in dispute, and my personal hope and belief that with patience and good will on both sides a satisfactory settlement would be reached. The President replied in the same spirit. The interview was extremely cordial throughout. The only time in which the President showed the slightest annoyance was in connection with what he considered a threat of the United States Government to protect its citizens in Mexico.

This morning there was published in all the local papers a new petroleum decree dated the 12th, providing that petroleum lands now under exploitation or acquired after survey would not be open to denouncement after the 15th instant, even though not manifested as prescribed by the petroleum decrees, and that such non-manifested lands would pay an annual rental of five pesos per hectare and a royalty of 5 per cent on production.

I am informed that this new decree was prepared last night in the Palace and antedated. I telegraphed this morning a translation of this last decree in full, as I thought the Department and parties interested would desire, in view of the fact that there remain only two days in which manifestations may be filed, to have the complete text.

Up to the present very few of the companies and individuals interested have filed the manifestations called for by the decrees.

I might add that, in the course of my interview with the President yesterday, he said that he was preparing a reply to my note of April 2, more or less along the lines of his reply to the British Government.

I have [etc.]

Henry P. Fletcher

[Enclosure 1—Translation]

Decree of August 8, 1918, relative to the denouncement of petroleum claims, amending Article 14 of the decree of February 19, as amended on July 31¹

I, Venustiano Carranza, Constitutional President of the United Mexican States, to the inhabitants thereof make known:

That I have seen fit to amend as follows the regulations of Article 14 of the decree of February 19, 1918, amended the 31st of July:

• Article 1. Petroleum claims on free ground may be denounced as from August 16 this year.
• Art. 2. A petroleum claim is understood to be of unlimited depth, bounded laterally by the vertical planes which pass along the boundaries of a continuous surface area of not less than four hectares and intended for the exploitation of oil.
• Art. 3. By exploitation of oil is meant the extraction, collection, or utilization of the following substances:

  I. Crude oil found in pools, springs, and natural deposits.

  II. Gaseous hydrocarbides found in the subsoil or escaping to the surface.

  III. Natural deposits of ozokerita and asphaltum.

  IV. Such hydrocarbide mixtures of the different groups as owe their origin to natural agents.

• Art. 4. Land covered by title for the exploitation of oil, or on which a denouncement is pending, shall not be considered free.
• Art. 5. Land shall not be considered free which may have been covered by manifestation submitted by the owner thereof to the Department of Industry, Commerce and Labor, in accordance with Articles 14 and 16 and first transitory article of the decree of July 31 this year; but that land shall be free which may have been covered by manifestation but not denounced by him who presents such manifestation or by the person to whom he may cede his right of preference, within three months from the 15th instant.
• Art. 6. Land shall not be considered free which may have been leased for oil exploitation and covered by manifestation to the Department of Industry, Commerce and Labor, in accordance with Articles 14, 17, and first transitory article of the decree of July 31 this year; but that land shall be free which may have been covered by manifestation but not denounced by him who presents the manifestation or by the person to whom he may cede his right of preference, within three months from the 15th instant.
• Art. 7. Land shall not be considered free which may have been leased for oil exploitation and covered by manifestation to the Department of Industry, Commerce and Labor, in accordance with Articles 15 and 17 of the decree of July 31 this year; but that land shall be free which may have been covered by manifestation but not denounced by him who presents such manifestation under the preference provided for in Article 15 of the said decree, or by the person to whom he cedes his right of preference, within two months following the declaration of preference prescribed in the same article of that decree.
• Cessions of the right of preference referred to in this and the two preceding articles shall be by public instrument.
• Art. 8. Likewise, for the purposes of this decree, and without prejudice to the provisions of Article 27 of the Constitution, land shall not be considered free which is covered by a concession contract entered into by the Government with a person or company for oil exploitation.
• Art. 9. Public lands, laylands, and national lands, tribal lands, and undivided commons, may not be denounced.
• Art. 10. A denouncement shall cover one oil claim only.
• Art. 11. A person desiring a petroleum claim shall present in triplicate to the appropriate agency of the Department of Industry, Commerce and Labor, petroleum branch, a denouncement showing his name, age, profession, residence and nationality, as well as the location, area, boundaries and other data which would serve to identify the claim.
• Art. 12. If the denouncer be a foreigner, he shall attach to his petition a certificate from the Department for Foreign Affairs, showing that he has complied with the requirements of the Federal Constitution.
• Art. 13. If the denouncer be a foreign company which may previously have submitted a manifestation to cover lands it owns or its cessionary exploitation rights, such denouncement shall be accepted, and the procedure relating thereto shall be continued; but title shall be issued only to a person or to a Mexican company organized under the laws of the country and to whom or to which the company making the denouncement may cede its rights.
• Art. 14. The petitioner shall submit with his denouncement, a certificate issued by the revenue stamp office stating that he has deposited the value of the stamps to be adhered to the title, on the basis of the area of the claim.
• Art. 15. The agent of the petroleum branch shall receive the denouncement, entering the same in his register and noting therein and on the original and copies of the denouncement the date and hour of presentation. The denouncer may demand that these notations be made in his presence. If in the judgment of the agent the denouncement is not sufficiently clear, he shall request the denouncer to make the necessary explanations, and shall make note of them on the original and copies and in his register; but the absence of explanatory data shall not be cause for not registering the denouncement. The duplicate, with proper notations thereon, shall be returned to the person who presented it.
• Art. 16. Within three days of the presentation of a denouncement, and in view of the explanations made, the agent shall decide whether or not it is to be accepted. If accepted, he shall proceed to prepare the necessary documents: if not, he shall set forth in writing the reason for his adverse decision, which shall be subject to reconsideration by the Department of Industry, Commerce and Labor upon request of the denouncer, presented to the said agent upon being notified of the non-acceptance of the denouncement, or within three days thereafter.
• Art. 17. When two or more denouncements presented simultaneously and covering the same land have been declared acceptable, chance shall decide which denouncement is to be given preference, unless the interested parties should reach an agreement among themselves as to such preference.
• Art. 18. When various denouncements are presented simultaneously covering different claims but containing a portion common to all, a drawing shall be made in which all the denouncements presented shall take a part. If the denouncement favored by the drawing includes the others presented, this fact alone shall suffice to cancel the remaining denouncements which may have been included in the drawing. But if the favored denouncement covers a part only of the land denounced, the remainder thereof shall be the subject of a new drawing among all the denouncers excepting the one favored by the first; and if after the second drawing there should yet remain a part of the land under discussion, the same procedure shall be followed in one or more other drawings as required. The drawings shall be held at intervals of three working days in order that those interested may be present at each one of them, with their denouncements duly made out. Those who may not be present at drawings to which they may be summoned, shall by this fact lose their priority rights gained by their participation in the first drawing.
• Art. 19. Once an agent has accepted a denouncement, he shall exhibit same on his bulletin board during one month, and shall cause same to be inserted three times during the same period, in the Diario Oficial, and in two other publications chosen from among those of greatest circulation in the locality. The interested party shall arrange for these insertions for his own account.
• Art. 20. The following are causes upon which objections to a denouncement may be based, interrupting the legal course thereof:

  I. The total or partial invasion of a titled petroleum claim whose title has not been declared canceled;

  II. A previous denouncement legally presented, covering part or all of the claim denounced, and which may be pending decision;

  III. Not having terminated, at the time a denouncement is made, the period during which this law grants preference to a person or company regarding the claim in question or a part thereof.

• Art. 21. Objections to a denouncement based upon any of the causes established by the preceding article, must be filed with the petroleum agency during a period of sixty days from the date on which the denouncement is first placed on the bulletin board of the agency.
• Art. 22. The opposer shall present, together with his objections, a certificate from the principal revenue stamp office, wherein it is stated that he has deposited therein an amount equal to one year’s rental on the claim in question, in accordance with Articles 47 and 48 of this law. Unless the said certificate is presented, the objection will not be accepted.
• Art. 23. The objection having been filed, the interested parties shall be cited to appear at a meeting, following the manner of procedure established by the regulations of the mining law in effect. Those who fail to appear shall be advised at once that they may have recourse to either administrative or judicial channels to adjust their differences.
• Art. 24. Should the interested parties not immediately elect to handle the matter through administrative channels, the course of denouncement shall be interrupted, and the documents thereof shall, within forty-eight hours, be passed to the judicial authorities, for the substantiation of the corresponding suit at law. The opposer may only base his opposition upon the causes which he has alleged and which are expressly set forth in the administrative documents, just as they were sent to the judicial authorities.
• Art. 25. In case the interested parties decide to handle the matter through administrative channels, the denouncement documents will continue their course, to the end that when convenient the Department of Industry, Commerce and Labor, having heard both the denouncer and the opposer, may render a final decision.
• Art. 26. Should the interested parties have elected to handle the matter through administrative channels, they may not have recourse to judicial channels, but if they have chosen the latter, they may, prior to a court decision having been rendered, submit the matter for decision to the Department of Industry, Commerce and Labor.
• Art. 27. Any other objection, founded on causes distinct from those expressed in Article 20, should be filed with the agency, but the latter will not in that case suspend the course of the denouncement; the Department of Industry, Commerce and Labor, when the documents are passed thereto for revision, will then decide whether or not such objection should be given consideration. If the former, the objection will be substantiated and decided, observing the form of proceduce set forth in Articles 23 to 26. If the Department decides not to take into account the objection filed, it shall proceed as though no objection had been made, the opposer reserving his due rights.
• Art. 28. The Department of Industry, Commerce and Labor may take under advisement objections to the denouncement presented thereto during the course of the revision of the documents, providing that the opposer furnishes proof of not having had recourse to the petroleum agency for causes beyond his control.
• Art. 29. A denouncer of a petroleum claim shall be declared as having forfeited his rights should he fail to make the insertions required by Article 19; should he fail to furnish data requested within the period fixed therefor, in order to proceed with the investigation of the denouncement; and, should he fail to appear at the meeting cited if objection or opposition to the denouncement should be filed. Such denouncer shall forfeit the deposit referred to in Article 12.
• Art. 30. An opposer who fails to appear at the meeting cited shall be considered as having forfeited his right to object to the denouncement, except in case such failure to appear is due to causes beyond his control.
• Art. 31. An opposer who forfeits his rights, or one whose opposition proves unfounded, shall forfeit the deposit established by Article 22, which shall be applied to the payment of one year’s rental on the claim, counting from the date on which denouncement was presented.
• Art. 32. Should a final decision thereon not be rendered within one year after the filing of an objection to a denouncement, the denouncer and the opposer shall each deposit an amount equal to one year’s rental, in the corresponding principal revenue stamp office, the same rule applying for each further year that the final decision may be delayed.
• The deposits made by the party in whose favor the final decision is rendered, shall be applied to the payment of rentals on the claim, and those made by the party losing the decision shall become a part of the national revenues, the first party reserving the right to demand indemnity from the second party, corresponding to the matter in question.
• Art. 33. The Department of Industry, Commerce and Labor may pardon the denouncer’s delays when the latter proves, within the period of the proceedings or during the revision of the file on the case, that his delays were due to fortuitous circumstances or force majeure.
• Art. 34. The period of sixty days having elapsed, without any objection having been filed which furnishes cause for the suspension of the administrative proceedings, the petroleum agent must send to the Department of Industry, Commerce and Labor, copies of the denouncement documents showing the status thereof.
• Art. 35. The titles covering petroleum claims shall be issued through the Department of Industry, Commerce and Labor, after the petroleum bureau has revised the agency documents. Such titles confer possession of the respective claims, without the necessity of any other formality.
• Art. 36. Excepting in the cases provided for in Article 13, titles shall be issued to the party presenting the denouncement, without prejudice to the rights of a third party. In order that titles may be issued in favor of persons other than those making the denouncements, it shall be necessary to furnish proof in the form of a public instrument to the effect that the rights of the denouncer have been transferred to the other party. The interested party shall furnish proof of payment of rental corresponding to the claim before title can be delivered to him.
• Art. 37. In the cases of community lands, which may not have been legally contracted for oil exploitation, only the coowners may denounce oil claims, and the denouncement proceedings shall be discontinued until all the coowners or their representatives have appeared before the Secretary of Industry, Commerce and Labor, who shall issue calls for such meetings with due anticipation, to furnish express and proven manifestations of their individual rights, and, an agreement having been reached, a common title to the oil claim covering the subsoil of the land pro indiviso shall be issued. In such titles the representation of each coowner shall be expressed. The summons by means of which the coowners are cited to appear shall be placed on the bulletin board of the petroleum agency during a period of sixty days; it shall be published three times during the same period in the Diario Oficial and in the two newspapers of the largest circulation in the locality.
• The Department of Industry, Commerce and Labor has the power to appoint a commission which shall have charge of handling before the proper authority, the issuance of the titles of ownership to the coowners.
• Art. 38. After ninety days from the date of the summons referred to in the preceding article, if the coowners of the community under consideration do not present themselves, those not doing so shall be considered as having lost their rights and title and the corresponding title shall be issued, after compliance with the provisions of this law, to the coowners who may be present. When those present may not have requested a petroleum claim title to the entire community land, the same shall be issued covering the portion requested, and the remainder shall be declared free ground.
• Art. 39. The concessionaire of a petroleum claim may at any time petition its reduction. The petition shall be presented to the appropriate petroleum-agency, together with his title and a plan of the claim as reduced.
• The new title shall cancel the old and shall not be subject to the title stamp tax, but the concessionaire shall be obligated to stake out the reduced claim within the period of time named by the Department of Industry, Commerce and Labor. When the reduction has been granted, the remainder of the land shall be declared free.
• Art. 40. The concessionaire of an oil claim may extract therefrom all the substances referred to in Article 3, without other restriction than that of not invading with his extraction operations neighboring claims, and that of complying with the provisions of this law and such regulations as may be issued covering exploitation.
• Art. 41. The exploiters of an oil claim may occupy within the limits of the claim, and with due authority from the Department of Industry, Commerce and Labor, surface space necessary for extraction operations and the immediate storage of the products, extracted, paying to the party who may be entitled to the same, the proper indemnity, but without permitting the procedure in such cases to retard the course of the work.
• Art. 42. The exploiters of a petroleum claim may acquire the right of passage and pipe-line right of way, upon due authority from the Department of Industry, Commerce and Labor, and may install such pipe lines and pumping stations as operations may require, paying to the party who may be entitled to the same, the proper indemnity, but without permitting the procedure in such cases to retard the course of the work.
• Art. 43. The exploiters of an oil claim shall have the right to establish storage stations and refineries, with the approval of the Department of Industry, Commerce and Labor, and with the consent of the owners of the lands they propose to occupy. In case the consent of the owners can not be obtained, the areas necessary may be expropriated.
• Art. 44. The exploiters of petroleum claims shall have the right to construct wharves, loading stations and submarine pipe lines, with the approval of the Department of Industry, Commerce and Labor, in conformity with the dispositions which the Departments of the Treasury and Public Credit and of Communications and Public Works dictate on the subject.
• Art. 45. On petroleum claims, only the respective concessionaires shall have the right to construct storage stations and refineries.
• Art. 46. The concessionaire of a claim may use the surface waters necessary to his operations, in accordance with the common laws covering such matters. He may also use underground waters for the same purpose, upon authorization from the Department of Industry, Commerce and Labor, and upon payment of the corresponding indemnity to whomever may be entitled thereto.
• Art. 47. The concessionaire of a petroleum claim on leased land shall pay the tax established in Articles 2, 3, and 5 of the decree of July 31 of this year, making where necessary the adjustment referred to in Article 12 of the said decree.
• Art. 48. The concessionaire of an oil claim on unleased land, shall pay an annual rental of five pesos per hectare and a royalty of 5 per cent of the production.
• Art. 49. Taxes shall become due from the date of the denouncement, and shall be payable bimonthly in advance, and such payments should be made during the first fortnight of each bimonthly term.
• Art. 50. During the period of one year from the date of issuance of the title covering an oil claim, the interested party must erect monuments at the vertexes and other principal boundary points, and such intermediate monuments as may be necessary so that each may be visible from the preceding one; and must present in duplicate to the petroleum bureau a map of the land so marked. This map (or plan) must comply with the requisites fixed by the Department of Industry, Commerce and Labor, and the ratification or correction of the title shall be made in accordance therewith.
• If the concessionaire does not comply with this obligation, the Department of Industry, Commerce and Labor shall impose upon him a fine varying between 50 and 1,000 pesos depending on the importance of the claim and the frequency of the offenses, and may have the work done for account of the party interested.
• Art. 51. Within the period of two years counted from the issuance of the title, the interested party shall present in duplicate to the petroleum bureau, plans and descriptive data of the plans and installations proposed for the operation of the oil claim. These plans and data must comply with the requirements fixed by the Department of Industry, Commerce and Labor.
• If the concessionaire does not present the documents called for in this article, the Department of Industry, Commerce and Labor shall impose upon him a fine varying from 50 to 1,000 pesos depending on the importance of the claim, and shall fix a new period within which to submit them; it not being permitted to begin the work of exploitation until this requirement has been complied with.
• Art. 52. Within the period of three years counted from the issuance of the respective title, the concessionaire of a petroleum claim must furnish proof to the petroleum bureau that he has begun work on the claim.
• Art. 53. The ratification or correction mentioned in Article 50 may be made upon petition of the owner of the claim, or the owners of adjoining claims who may be interested therein, or ex officio by the Department of Industry, Commerce and Labor. In the latter case the final decision of the Department mentioned will not prejudice the rights of the owner of the oil claim in question or of the neighbors who believe their interests to have been injured.
• Art. 54. Every concessionaire of an oil claim is obligated to furnish to the Department of Industry, Commerce and Labor, such technical and financial data as may be requested by the petroleum bureau, and to admit to the plants the students of the official schools who visit such plants for the purpose of acquiring practical knowledge of the petroleum industry, furnishing every facility to such students. These obligations also apply to concessionaires of pipe lines, refineries, storage plants and loading stations.
• Art. 55. The following shall be considered as causes for cancelation of oil claim titles: failure to pay the taxes referred to in Articles 47 and 48; failure to comply with any of the conditions stipulated in Articles 52 and 54; the closing down of work for a continuous period of six months without just cause, after exploitation work has been begun; or any serious infraction of the regulations covering exploitation within the terms therein expressed.
• Art. 56. Forfeiture of a claim shall be declared administratively by the Department of Industry, Commerce and Labor, after the party interested has been cited to appear in his own defense, excepting when he can prove that his failure to appear has been due to force majeure.
• Art. 57. In cases of cancelation of titles for failure to make rental payments, the corresponding declaration will be made within four months following the bimonthly term in which the said rental payments were not made.
• In the cases of cancelation for failure to pay royalty, the declaration of annulment shall be made during the bimonthly term following that in which the penalty was incurred.
• Art. 58. The titled claim of any holder of the right of exploitation whose title is declared canceled, may only be denounced during the three months following the date of cancelation, by the previous concessionaire and by the owner of the surface area of the claim, who, for that purpose, must present a manifest in the form prescribed in Articles 15 and 17 of this law, in order that the petroleum agency of the Department of Industry, Commerce and Labor may admit the denouncement of the person making such manifest, as being the last holder of the right of exploitation.
• If a claim whose title is declared canceled be under the exploitation of a third party through a contract still in force, the said contract of exploitation shall retain its force, the former concessionaire being substituted by the new one for the effects of the said contract.
• Art. 59. The direct exploiter of a claim, officially recognized as such, although not the holder of the concession therefor, in case the title should be declared canceled shall enjoy the preferred right to denounce same within the thirty days following the period granted in the preceding article, to the various concessionaires of the right of exploitation and to the owner of the surface area of the claim, providing that none of the latter have made use of their rights. He shall also enjoy such preference in cases of cancelation of titles not covered by the preceding article, within a period of thirty days following the date on which the declaration of cancelation is exhibited on the bulletin board of the respective agency.
• Art. 60. Any claim on land under contract, the title to which is declared canceled, shall be considered as free ground as soon as the periods fixed by the two preceding articles have terminated, and thirty days have transpired since the date on which the declaration that the claim is free ground was first exhibited on the bulletin board of the respective agency.
• Art. 61. Any claim on land not under contract, the title to which is declared canceled, shall be considered as free ground thirty days after the declaration of cancelation is first exhibited on the bulletin board of the respective agency.

Transitory Articles

I. The denouncement of claims on lands with an area of less than four hectares shall be permitted only when there already exist thereon wells in production or in process of being drilled, these latter covered by permits granted previously, and on condition that such lands have been manifested in accordance with the decree of July 31 this year.

II. The decree of July 8 this year and all other laws and regulations are hereby annulled, in so far as they may conflict with this law.

I, therefore, order that this be printed, published, distributed and given due compliance.

Given at the Palace of the Executive Power of the Union, on the eighth day of August, nineteen hundred and eighteen.

V. Carranza

[rubric]

[Enclosure 2—Translation]

Decree of August 9, 1918, relating to oil claims¹

I, Venustiano Carranza, Constitutional President of the United Mexican States, to the inhabitants thereof make known:

That in use of the extraordinary powers in the Treasury with which I am vested, I have seen fit to decree the following:

Article 1. Paragraph II of Fraction 101 of Article 14 of the Federal stamp tax law of 1916, is amended as follows:

II. Those of oil claims, according to the area covered by each title, at the rate of $3 (pesos) for each hectare or fraction thereof equal or greater than half a hectare. The stamps to be adhered to the title shall bear a covering seal reading “Petroleum Titles.”

Art. 2. Paragraphs II and III of the fraction reformed shall in the future bear the Nos. Ill and IV respectively.

Transitory: The decree of July 8 this year is canceled, relative to the tax on petroleum titles.

I, therefore, order that this be printed, published, distributed and given due compliance.

Given at the Palace of the Executive Power of the Union in Mexico, on the ninth of August, nineteen hundred and eighteen.

V. Carranza

[rubric]

[Enclosure 3—Translation]

Decree of August 12, 1918¹

I, Venustiano Carranza, Constitutional President of the United Mexican States, to the inhabitants thereof make known:

That in use of the extraordinary powers in the Treasury conferred upon me by the Congress of the Union, and

Whereas, claims upon which exploration or exploitation work has been done, as well as those acquired after a geological survey, have a greater value than ordinary claims, and, therefore, their exploitation should not be granted through simple denouncements,

I have seen fit to decree the following:

• Article 1. Recognized petroleum claims in which an investment of capital has been made for oil exploration or exploitation and which may not be covered by “manifestation” up to the fifteenth of this month—as prescribed in the decree of July 31 this year—are not subject to denouncement.
• Art. 2. The right of oil exploitation of the said claims shall be acquired by means of special contracts to be made with the Department of Industry, Commerce and Labor, in conformity with the regulations to be issued on the subject, until such time as the organic law governing Article 27 of the Constitution shall determine the form in which the respective concessions are to be granted.
• Art. 3. The present holders or exploiters of such claims, who may not have presented the manifestations called for in the decree cited, shall continue to hold and to exploit the said claims, paying to the Federal Treasury an annual rental of 5 pesos per hectare, and a royalty of 5 per cent of the production, until such time as the bases are issued for the making of the respective contracts; but if the interested parties prove that they are in possession of the said claims through contracts entered into prior to May 1, 1917, they shall continue to hold and to exploit them, subject to the obligation to pay the tax established by the said decree with reference to oil contracts.
• Art. 4. The present operators of the said claims may continue to exploit work already begun and authorized, after compliance with the requirements of the preceding article, but they shall not be permitted to begin new work until after making the contracts by which they are given the right of exploitation of the said claims.
• Art. 5. Payers of taxes established in Article 2 shall make their payments in accordance with Articles 6, 7, 8, 9, 10 and 11 of the decree mentioned.
• Art. 6. Payment of the taxes established by this law shall give to the payers thereof the right of preference in the making of contracts covering the claims to which Article 2 refers.
• Art. 7. Failure to make payment of the taxes established in Article 3, shall result in the loss of the right of preference acquired through that payment, and shall cause the claim in question to be declared free, or the right of preference to be granted to another.
• Art. 8. The Executive shall make use of the right of economic coercion in securing compliance with the fiscal obligations imposed by this law.

Transitory Article

This law shall become effective as from the sixteenth of this month.

I, therefore, order that this be printed, published, distributed, and given due compliance.

Given at the Palace of the Executive Power of the Union, this twelfth day of August, nineteen hundred and eighteen.

V. Carranza

[rubric]

1. Ante, p. 750.
2. Enclosure not printed. See telegram No. 1357, ante, p. 754.
1. Diario Oficial, August 12, 1918.
1. El Pueblo, August 10, 1918.
1. El Universal, Mexico, August 14, 1918.