Office of the Historian

812.6363/636

The Chargé in Mexico (Summerlin) to the Secretary of State

Mexico, January 21, 1920.
[Received January 29.]
No. 2793

Sir: I have the honor to enclose, herewith, copies of two cablegrams furnished to me by Mr. H. Cunard Cummins, of the British Legation in this city, which, according to Mr. Cummins’ statement, refer to the efforts of the Aguila Oil Company—acting as intermediary with the Mexican Government under instructions from its head office in London,—to secure some arrangement with that Government under which certain American oil companies may receive provisional permits for drilling operations in Mexico.

In the first of these (Enclosure No. 1), Rodolfo Montes, a Mexican employee of the Aguila Company, informs Mr. T. J. Ryder of that Company, in New York, that he has interviewed President Carranza on the subject, and has reason to believe that provisional drilling permits will be issued the American companies, valid until the Mexican Congress enacts the organic petroleum law, if the companies will make their requests direct to Mr. Carranza, it being understood that such requests will not imply the acceptance of decrees now in force, which, in the opinion of the companies, violate legitimate rights previously acquired by them.

The second telegram (Enclosure No. 2), is Mr. Ryder’s answer, quoting a joint telegram sent to President Carranza by a number of companies, in which they state that they are willing to accept provisional permits, valid until Congress enacts the relative Organic Law, on certain conditions which they specifically define.

Excelsior refers to this proposal in its issue of to-day, and states, under eight column headlines, that the American Association of Petroleum Producers in Mexico, which has always disregarded the Mexican Government to the extent of not having addressed to it a single communication, has at last given in, and has spontaneously agreed to observe all laws and orders provisionally given in the matter of petroleum. The article adds that Mexico has won a victory [Page 201] in the defense of her laws and has recovered her place as a free and sovereign country.

In connection with this subject, I have the honor to report that recently a local representative of an American oil company stated to me that the Mexican officials immediately in charge of petroleum questions in the Department of Commerce and Industry, are indicating a willingness to make certain concessions to the petroleum companies, such as full recognition, for a period of thirty years, of vested rights acquired prior to May 1, 1917, with the right to exploit without hindrance properties so acquired, but that the principle of nationalization of sub-soil rights is to remain unchanged.

I have [etc.]

George T. Summerlin
[Enclosure 1—Telegram]

Señor Rodolfo Monies to Mr. T. J. Ryder

Mexico, January 3, 1920.
1.
I interviewed President Carranza offering my disinterested services to his Government and American petroleum industry with object that difficulties which cause present paralyzation may cease.
2.
President received my offer favorably. He showed himself absolutely firm, however, regarding obedience to constitutional laws of country and respect to national dignity and sovereignty but willing to proceed with equity and justice.
3.
Have reason to believe that provisional permits for drilling, valid only until Congress enacts organic law, will be conceded if interested parties cable direct to Sr. Carranza asking for said permits in order to avoid serious injury to Mexican petroleum industry and foreign capital invested, without these requests implying the acceptance of the decrees at present in force which in opinion of interested parties violate legitimate rights previously acquired. When organic law is given out interested parties will be obliged to subject themselves to its precepts in order to continue enjoying permits given.
4.
Sr. Carranza is deeply interested in preventing injury to Mexican petroleum industry because of paralyzation of drilling and the entrance of salt water into the principal deposits which will consequently require new drillings in order to maintain production and exportation.
5.
I consider diplomatic pressure by foreign governments inopportune.
6.
If interested parties accept arrange for them cable in terms indicated above. Would suggest they also communicate their petition telegraphically to Ministries of Industry and Finance.
7.
Kindly cable me fully result of negotiations you may undertake remitting to me the petition also in event that it should be presented.
Rodolfo Montes
[Enclosure 2—Telegram]

Mr. T. J. Ryder to Señor Rodolfo Monies

New York, January 14, 1920.

Four. Wednesday. Following cable was sent to President Carranza yesterday afternoon. Begins: The undersigned companies submit directly to the consideration of Your Excellency the very grave situation which has arisen in the oil fields of Mexico with the hope of obtaining a just and equitable decision. During recent months a constant inflow of salt water has taken place especially in the region known as “Tepetate” many wells have ceased to produce oil others are rapidly giving out and still others will be lost within a short time. There still remain some wells undamaged but there is a lack of pipeline for the adequate transport of their production. As a result of what has occurred Mexican industry, in which large foreign capital has been invested which is of great importance to the Government and the Mexican people, is confronting a crisis and is on the point of suffering an eñormous loss which can be avoided without harming the rights of any of the parties. These Companies foresaw this calamity several months ago and commenced new drillings of wells but were not able to obtain from the Government over which Your Excellency presides, permits which in their judgment were acceptable. The permits offered were not acceptable firstly because they would have obliged the companies to submit to more drastic regulations than is customary, secondly because they would have deprived the companies of essential rights exercised in good faith, and especially because thirdly they would have obliged the companies to comply with a law which will be enacted later and the precepts of which cannot be previously known by the companies. The companies are willing to observe all kinds of legal dispositions as long as this does not imply their acceptance of anything which in their judgment violates their previously acquired legal rights: they are willing to accept provisional permits, valid until Congress issues the relative Organic Law if the acceptance or use of said permits does not affect or prejudice their rights and they will not by this act attempt to acquire any new right nor expect that the Government of Mexico on account of having issued said permits abandon any right or principle they may wish to sustain. In view of the above, and without implying that they accept the regulations in force which [Page 203] in their opinion violate their previously and legally acquired rights, they respectfully beg Your Excellency to rescind the instructions which suspend the drilling of wells and to grant the provisional permits which have been solicited, including completed and uncompleted wells, as well as the permits solicited in future under similar circumstances, it being understood that the permits so requested will be valid only until Congress issues the relative Organic Law, and that the interested parties must then comply with the terms of that law or cease to enjoy such permits without suffering other harm by so doing. Ends.

Secondly: Signers comprise all Members Association including Penn-Mex Fuel Company except us of course.

Thirdly: While we were not consulted nor our participation invited in draft above message, we sincerely hope the President’s decision will be favorable for the far-reaching good effect it will produce.

Fourthly: Kindly cable me any important developments.

[No signature indicated]