CHAPTER VIII

THE ROMANCE OF MEXICAN OIL

When you cross the Mexican border at Laredo, oil enters your consciousness--and your clothes. It is everywhere, the thick, odorous _chapapote_ which furnishes the fuel for Mexico’s locomotives, the energy for every Mexican industry which has no water power, the pavements for her streets, and, I am still convinced, the heavy lubricant with which the sandal-clad brakeman of our train eased an incidental hot-box. In Tampico, whence comes all the oil of Mexico, the heavy, black “crude” is even more ubiquitous. It “tars” your shoes when you walk abroad; it decorates your clothes when you ride in anybody’s motor car or motor boat; it oozes between your toes and sticks in your hair when you bathe at the beach.

But the physical presence of oil is as a whiff from the dead well at Dos Bocas compared to its spiritual domination in all Mexican affairs. Oil is the greatest--I had almost said the only--wealth of Mexico to-day, its possession the issue of one of the mighty diplomatic battles of recent times, while the taxes and graft of it have fed the wellsprings of ten years of devastating revolutions.

Far and away and by many fold, oil is the largest single item of export of Mexico, and the varied needs of the oil industry and of the beneficiaries of that industry dominate the imports as well. To Tampico go shiploads of steel, machinery and supplies, and trainloads of soap and shoes; the factors which build civilization go chiefly and all but alone, in Mexico, to the oil fields.

Oil dominates the political life of the country not because oil companies or oil millionaires seek to control the Mexican government but because the vast unbelievable wealth which is pouring into the coffers of that government in taxes and in tribute makes revolution a game the stakes of which eclipse any sum or any potentiality of wealth or power which has ever been known in Mexico.

Oil is the inspiration for the “nationalization” policies which, forged by foreign radicals and given edge by Mexican cupidity, the Carrancistas wrote into their Constitution of 1917. This policy of nationalization, the decrees, the laws, the taxation and the graft which have come in its train, have brought into the field of diplomatic controversy the whole problem of the right of a government to enforce radical, socialistic or, if you will, bolshevik policies against foreign interests which may have entered a country and developed it under older, more conservative ideals and systems of government.

For the oil industry of Mexico is overwhelmingly a foreign enterprise. American and British and Dutch are the flags which should fly from the oil derricks, for neither Mexico nor Mexicans have had a hand worth the naming in the opening of the nation’s richest treasure-house. The search for oil in Mexico has taken on the nature of a race, a battle, between British and American oil interests, a battle not without its tremendous significance in the world oil situation. But behind this struggle, which is still and, we may hope, will remain a friendly one, loom controversies which are vaster than Mexico or England or America, problems on whose solution the very future of our civilization depends.

For the real battle in Mexico is not between the two great Anglo-Saxon powers, but between the powers of light and the powers of darkness. In Mexico’s oil fields to-day is being settled the question of whether enterprise shall have the right to bring the riches of the earth to the aid of humanity, of whether industrial power belongs to the backward people who by accident find that power in their inept hands, or to those who can develop and raise it up to the service of mankind. Upon the issue in Mexico depends not only the usefulness of all the petroleum resources of that country, but the future development of oil in Colombia, Venezuela, all South America, all Asia, all Africa. And the future of oil development in those lands is the future of the world’s oil supply, for there, alone, remain stores sufficient to meet the multiplying needs of the world.

The solution of this question is vastly complicated. Within the oil situation itself are many problems such as those just noted. Bearing upon it is the tangle of cross-purposes, indirections and varying psychologies. That solution is made all but impossible by the conditions of Mexico to-day, by the flabby weakness of the rulers of the Mexican people, by their blindness and selfishness. It has been jammed, time and again, by the failure of the oil companies and their representatives to assert their rights with a skill equal to that of the Mexicans in casting up mountains of controversy out of mole hills of technicality.

But the story of Mexican oil is not all ugly calling of names, not all mere hopeless tangle. The history of its discovery and development is rich with color. The romance of an oil field, like the romance of a gold camp, is always a thrilling tale. But the story of Tampico has this other element, for it is indeed the great romance of our race, the tale of the white man round the world, the building of gigantic enterprises, the harnessing of unknown forces, neglected for centuries by apathetic natives, unlocked by the vision and the enterprise of the Anglo-Saxon.

Oil began with Tampico, but the story of Tampico antedates oil. It goes back to the late 80’s, when one of the great railway builders of America’s youth left Kansas for Mexico. A. A. Robinson, who surveyed and built the Santa Fe Railroad from the Kansas prairies to the Pacific Ocean, who swung the track of the Denver and Rio Grande Railroad above the rapids of the Royal Gorge, was also one of the great builders of modern Mexico. Leaving the Santa Fe in 1889, he became president of the Mexican Central and built almost the whole of this first standard gauge line in the country, its branches and tributaries toward the rich granary of Mexico about Guadalajara in the west, to the mines of Pachuca in the mountains and to Tampico on the Gulf of Mexico.

Tampico, a wretched, fever-ridden village beside a beautiful river, was no port in those days. The railroad which brought Mr. Robinson to Tampico brought also the engineers who built the great jetties which cleared the bar and opened Tampico to the world, carried the ores of Pachuca to their markets and began the conscious development of what is now the busiest seaport of Mexico. The railroad company built and paid for the jetties, and under Mr. Robinson a short-line to Mexico City was surveyed and construction was begun, to be halted, in 1908, by the government merger of the lines.

All this seems to lead far away from oil, but it was in 1900, two years before the jetties were completed, that Mr. Robinson invited Edward L. Doheny and his partner, the late Charles A. Canfield, to Tampico to develop oil wells. Doheny, who had made himself famous and unpopular by discovering petroleum in the middle of Los Angeles, came to examine the seepages of which Robinson had told him in the hope that he might find an oil to help the Mexican Central solve its fuel problems, for the coal of Mexico is scarce and poor, and all the fuel for the railways had to be imported.

Mr. Robinson agreed to buy the oil for fuel if Mr. Doheny developed it, and it was this encouragement, this faith of two great believers in Mexico, which brought about the discovery and the later development of Mexican oil. The board of directors for the Mexican Central later repudiated the Robinson contract, but the development of the Mexican oil fields had been begun, and it has never stopped from that day to this.

It was in 1905 that I first visited Tampico. I was the guest of Mr. Robinson, and as we looked out, one day, over the marshes along the river which runs past Tampico to the sea, six miles away, he told me of his dreams for his port, of the day when not only the Tampico side of the river, but the barren jungle on the other bank would be lined with wharves and great steamers, greater than any of the coasters and tramps that to the number of half a dozen a month were then carrying coal and ore and, amusingly enough as we look back on it now, crude oil from Pennsylvania for use in Tampico’s one industrial establishment, the Waters-Pierce Refinery.

I visited Tampico twice again, the last time in 1908. And then this year! It was as if the dream of the builder of the port had come true since the setting of yesterday’s sun. To-day the river is lined, from its mouth all the six miles to Tampico and above, with wharves and warehouses and hundreds of great tanks of oil, and throughout all this length are ships, tankers and cargo boats, while on the hills above are refineries and modern towns, and at night the lights are like those of great cities. The dream, indeed, of a builder of civilization, of civilized Mexico, has apparently come true.

A. A. Robinson is gone, laid away with his honors and his vision these four years. But still there is that other American, who twenty years ago rode off into the jungles of the coastal plain, saw with his own eyes the thick, slimy puddles of asphalt at Ebano, and there drilled his first wells. Years later, after his railway contracts were abrogated, seeking lighter, better oils, Mr. Doheny went, with the frontiersman’s unquenchable optimism, nearly a hundred miles farther into the jungle till he heard the unforgettable baby murmur and saw the unforgettable bubbling spring of viscous black oil of the great seepages of Cerro Azul, and there located what was to become the greatest oil well in the history of the world, the Cerro Azul No. 4.

Oil is the most fascinating of all the treasures of earth. No geologist has ever approached the solution of either its source or the contours or formations within which it lies. An oil spring such as that wonderful bubbling pool at Cerro Azul may mean the presence of a great reservoir of oil directly beneath or it may mean that the oil has come a dozen or fifty or a hundred miles along a crack in the mother-rock. Experience, faith, intuition, these determine the location of a well. It was these factors that Doheny brought with him to Mexico, for the fields which he finally drilled and proved had been rejected by many geologists before he came and after.

At Ebano, a way-station on the Mexican Central a few miles inland from Tampico this pioneer of the Mexican oil fields found his oil and developed it, and his success brought hundreds of other prospectors to Ebano in 1900-1902. But Ebano oil is heavy with asphalt, and it was dangerous to handle in the crude burners of the time because its fumes ignite at low temperatures. Thus, although it is rich in lubricating oils, it was not the petroleum which the world wanted in that day. With his contract with the Mexican Central abrogated, virtually without a market excepting for asphalt paving in Mexican cities, Doheny turned southward in search of lighter oils.

His trips into the swamps and forests of the _huasteca_ or coastal plain led him to the great seepages at Cerro Azul, sixty miles below Ebano. It also took him to Juan Casiano where he located his first wells and in 1908 opened the first of the great producing pools of the Tuxpam district. Drilling and exploration went hand in hand and not only Doheny but the British interests of Sir Weetman Pearson (now Lord Cowdray) and other American companies began to make this field famous.

Since that time the story of the Tampico oil fields has been the story of the Americans and other foreigners who followed them. No Mexican name and no Mexican interest are connected with the vast development which has come. Yet so vast is the busy zone of production, so tremendous and so varied the forces and elements working there, that one feels something false in this appearance of preponderance of individuals and of foreigners in the epochal industry of Mexico. When, however, one glimpses the long diplomatic struggle, the legal tangle, the endless problems which make the Mexican oil question so complicated, one finds that in every phase there are always only these foreigners on the one side and the predatory, scheming Mexican revolutionary leaders on the other. Never is there a Mexican on the production side, never a foreigner on the side of the elements which retard production.

It was Mr. Robinson who opened up Mexican oil, and it was Doheny and other early foreigners who first dared drill, and the foreigners alone who in the years past have dared to put millions into pipe lines, storage tanks and wonderful fleets of oil-carrying ships. Only they dared or would dare to go into the sleepy villages of the Vera Cruz plains and pay fifty cents a day to peons who had lived for generations on less than a quarter as much. Only the foreigners dared give their labor a decent wage, dared teach their men to be worth more and more until to-day they pay the commonest peon the equivalent of two American dollars a day. Only these foreigners dared believe in Mexico, dared insist on the good faith of all her faithless governments, dared to go on with their work when all else in Mexico stagnates and cringes before the continuing revolutions.

And on the other hand are the Mexicans who govern the land, making it their chief business to bait and loudly curse these same foreigners. The name of the foreign oil men is anathema in Mexico to-day, and the busiest game of any Mexican official is the oratorical denouncing of the sponsors of the industry. But, we cannot forget, these Mexicans have not and do not turn a finger to the replacing of great foreign activity by any constructive form of Mexican enterprise.

At basis the difficulties of the oil companies and the Mexican governments are psychological--and an understanding of those psychological bases is the rarest flower in the intellectual nosegay of most of those who discuss either Mexico or oil. First of all is the companies’ belligerent insistence on the principles of vested rights as the first and only basis for the oil discussion--naturally distasteful to those whose single idea is to upset those rights. Another psychological element is that the foreigners’ very respect for law and the continuity of government and their insistence that Mexico live up to their own ideals is in the first place quite beyond the conception of the Mexicans in power to-day and in the second place such an attitude is inevitably maddening to the weaker brother whom it seeks to benefit. Because the foreigners believe in Mexico, the Mexicans will not believe in the foreigners.

Another disturbing factor is the very success of the oil companies and of the foreigners whom they employ. I have told, above, something of the picture of the Tampico that was and of the Tampico that is. It has changed in yet other ways, and most of all in the makeup of her population.

In 1908 there were perhaps two score Americans and English in the town, and the chief industry of the place was--tarpon fishing! To-day there are 8,000 Americans and a thousand British and Dutch, and the swaggering, free-money, noisy, busy atmosphere of the frontier, of the oil fields, of the white man on his bully-ragging, destructive, inconsequential “education” of the dark brother round the world, permeates the place. Its influence is not academic, but somehow one feels that Tampico is a monument to the genius and faith of the Americans who made it great. The restless power is there, the restless making over of the world that it may be a better place for the white youth of the future to stamp about in, for the dark brothers to build their new homes in.

Yet strangely enough, if you will, it is to my mind largely because of this same energy, the achievement which this spirit indicates and predicates, that the difficulties of the foreign oil companies in Mexico have been the sort they are. Their persecution has sprung from the realization of the Mexicans that these Americans, these English, these Dutch, are doing in Mexico and for Mexico what Mexicans can not, dare not, do. The Mexicans from generals to peons, are frantic, baffled, rabid, at the wretched Gringoes who dare to pour their millions out to drill wells, to build pipe lines and terminals and ships, to take and to convert this black and liquid gold from the soil of Mexico.

Of the hundreds of wells drilled in the Tampico-Tuxpam fields, some of them the veriest “wildcats” on the flimsiest of chances, hundreds of them as sure as opening a bank vault, only a half dozen, and none a “wildcat,” have been drilled by Mexicans as individuals or in corporations, and not a single ship, not a single storage tank, not a mile of pipe line, is Mexican. Were the Mexican government to take over the administration of the oil fields to-day, drilling would cease utterly, to-morrow development would stop and when, a year hence, it became vital to open more wells, the event would be marked by government ceremonies and stifling graft.

Every one who knows Mexico knows that this is the truth. The Mexicans themselves know it, and from the Tampico policeman who howls in outraged anger when an American motorist refuses to be disturbed by official anathemas, up to the presidential secretaries who devise complicated and childish schemes to force the oil companies into recognizing the dignity of Mexican sovereignty, the whole attitude toward the oil business has been fraught with effort to maintain that hazy halo of the weakling, delicate “sensitiveness,” national pride, _amour propre_.

When I left New York to study Mexican problems for the present writing, I was convinced that the full facts of the case, on both sides, were to be found in the United States; Washington was indeed the battle ground of lawyers and diplomats. Not until I reached Tampico, however, not until I went out to the oil fields, did I realize that the real problem is not the question of diplomatic controversy or commercial adjustment. There, on the long roads, where but one _peon_ of all the thousands whom we passed, took off his hat to the white _patrones_, as every one would have done twelve years ago, I found the touchstone. I knew then why reason will not prevail, why justice is non-existent, why no white man has yet been able to feel firm ground beneath his feet in the discussion of the oil problems. These problems have had their rights and wrongs, as we shall see, but I think that the great difficulty we at home have had in believing that our own people could be right has been our inability to conceive how, being right, the Mexicans could be so hostile to them.

This, I think, is the point of departure in our misunderstanding of the Mexican situation, especially as it applies to oil. Mexican jealousy and Mexican realization of the weakness of the national psychology in great enterprise have set Mexico frantic with the success, the triumph, the apparent imperturbability of the great foreign oil companies. This alone has made their hostility to the American drillers, linemen and engineers who night and day, month after month through the years of the war, kept the lines open, the oil flowing. Unarmed, and slaughtered by the score from ambush, grim, unkempt, often happily drunk in town, these frontiersmen added their bit to the fire, to be sure. But note this--it was not the white man’s rough assertion of superiority or the companies’ “tactless insistence,” but the Mexican’s conception of his own inferiority, personal, commercial, political, which lit the flame and kept it burning.

The world has entered upon a new industrial era, the age of petroleum. The commercial struggle is to-day not the war for markets, but the race for oil lands. And of all the petroleum fields known to exist, those in Mexico are the greatest in actual production, the greatest in potential extent, and the most favorably situated for distribution--all vivified by the greatest individual oil wells in the records of the world.

The story of the development of that oil field is linked with the history of Mexico, inexorably, inevitably a part of it, influencing it, all but dominating it.

The first oil well in Mexico was brought in in 1900; production began on a commercial scale in 1903; about 1904 a British company secured its first “concession” for oil drilling; in 1905 the status of petroleum as belonging to the owner of the surface land was definitely settled, and development began on a large scale; in 1912 the Madero government established, over the mild protests of the producing companies, the principle of special taxation on the oil business; in 1914 President Huerta extracted 200,000 Mexican pesos from an American oil representative in Mexico City, and the oil company, under advice of the Department of State, repudiated his draft and paid the money to Carranza; in 1914 the principle of “shaking down” the oil companies was originated by Candido Aguilar (later son-in-law of Carranza), who made a mild $10,000 collection; in 1915 Manuel Pelaez made his first call for tribute, some $1,500, under the exchange conditions of the day, which the companies paid with the advice of the American State Department and the American Ambassador, a precedent which later netted Pelaez a regular $30,000 a month; in 1915 Carranza began to devote the brains of his finance minister, Luis Cabrera, to devising oil taxes, with the result that to-day the foreign oil companies pay a total of nearly $4,000,000 a month, derived from export taxes on the product, stamp taxes on their business, occupation taxes on their offices, harbor taxes on their ships, customs duties on their supplies, etc.; in 1916 Carranza issued the decree requiring foreigners who did business in Mexico to renounce their rights of recourse to their home government; in 1917 came the new Mexican constitution declaring all petroleum in the subsoil the property of the nation; in 1919 the drilling of new wells was stopped unless the companies agreed to accept this principle of nationalization; in 1919 the second of the big oil pools went to salt water and the need of new drilling to keep up the supply of oil (and the Mexican taxes) became imperative; in January, 1920, temporary drilling permits were issued by Carranza; in May, 1920, Carranza was overthrown and murdered in the revolution of Obregon, said to have been financed by certain oil interests; in 1921 Obregon doubled the oil taxes, bringing about a shutdown, temporary but salutary; in 1921 drilling is going on, however, and the shipment of oil continues.

While drilling is going on in small sections in spite of obstacles, the full development of the petroleum fields of Mexico waits on the final decision of the confiscatory provisions of Carranza, whose dead hand still guides the policies of his successors along the road of anti-foreignism. In 1921, then, the oil companies are still uncertain of their status, still the objects of astonishing taxation, still subject to government annoyance and graft, still buying, in taxes and annoyances, the “privilege” of working their properties.

The plants of the foreign companies are probably the greatest installation in any single oil field in the world. The investment in pipe lines, pumping stations, storage tanks, refineries, terminals and ships represents close on $750,000,000; the length of the 161 pipe lines (practically all of them eight or ten inches in diameter) totals nearly 1,000 miles, while nearly 1,500 steel tanks, with a capacity of 60,000,000 barrels, furnish enough storage to fill a thousand ships. Through the pipe lines can pass, under high pressure, 750,000 barrels a day, although the average production for 1920 was about half of this amount.

In the Mexican fields in April, 1920, the latest date for which figures are available, there were 304 wells in production, 148 located and 123 drilling. The total of commercially unproductive wells to that date was 464, including only 35 which showed oil in too small quantities. Three-fifths of all the wells drilled in Mexico have been dry holes, and to-day of 1,113 wells drilled and projected, only 75 which have actually flowed oil have run out of production. These last, however, include some of the greatest in the history of the petroleum industry.

The vast investment and plant in the Tampico-Tuxpam fields produced in 1920 over 140,000,000 barrels of oil, one-fourth of all that was produced in the entire world, equaling some 40 per cent of the production of all the fields in the United States. The 1920 production was nearly five times that of 1913, when less than 26,000,000 barrels were extracted from the Mexican wells, and when Mexico’s total oil output was only one-ninth that of the United States and contributed less than one-twelfth to the production of the world. The growth has been steady and by tremendous strides, for when the pressure of war was on, the men who were taking out Mexican oil built up a production which between 1916 and 1917 brought an increase of 40 per cent and began a development that despite superhuman difficulties gained such momentum that between 1919 and 1920 the increase was 60 per cent.

On your map you will easily find, on the eastern shore of Mexico, the city of Tampico, located in the center of the palm of the hand with which Mexico grasps the great Gulf. A little to the south you will find, with difficulty, the town of Tuxpam, midway between Tampico and Vera Cruz. From Tampico directly south to a few miles west of Tuxpam runs the “line” along which lies virtually all the oil yet developed in commercial quantities in Mexico. The “line” is thirty-five miles long; the great producing territory never extended over twenty miles; momentarily the section which is giving the oil of the Tuxpam district is along ten miles in the middle of the “line”--and the territory is hardly a half mile broad at its greatest width. This section produced in the past ten years 500,000,000 barrels of oil. In 1920 it produced about 140,000,000 barrels, close to one-quarter of all the oil taken from all the wells in the world.

Now trace the “line” north to Texas and Oklahoma--it is an extension of the great mid-continent field of the United States. Now go south, through the old Furbero field, swing a little in toward the Gulf, and south of Vera Cruz, on the Isthmus of Tehuantepec, you will find Minatitlan, the site of early drillings, and of the refinery of the Mexican Eagle Oil Company. Still south, on the “line,” and you will find, if your map is large enough, the village of Macuspana, in the state of Tabasco. Here oil of a grade so fine that the natives burn the crude seepage in their lamps has been oozing through the soil for centuries, and here, long ago, the British drilled many test holes. The “line” runs true, skirting the Gulf of Mexico.

Still more. There are oil seepages on the West Coast, an extension, perhaps, of our California fields. Other indications have been found, even far inland, and indeed on the Gulf side, the “line” does not by any means cover the seepages, even of the coastal plain. All this section, off into the interior toward the states of Puebla and Hidalgo, has been leased for oil. But production sticks to the “line.”

The Tuxpam field, the heart of the “line,” will ultimately go to salt water. Of this there is no question. Every pool of oil that has been drained--now three in number--has given its 100,000,000 barrels, and the steaming, brackish water, still under terrific pressure, has wiped out the property, often between sunset and sunrise--a few hours between 50,000 barrels a day and nothing. Dos Bocas at the northernmost end of the “line,” came in on July 4, 1906, hailed as the greatest well of history, blew out her casing, caught fire and burned for months, a torch of gas and flame 850 feet high, till (if it was oil and not gas she burned) she had easily spent her 100,000,000 barrels. Another great British well, Portrero del Llano No. 4, flowed eight years, giving nearly her 100,000,000 to industry, and went to salt water over night. The Casiano field, of the Doheny interests, paid a similar toll. Cerro Azul No. 4 of the same company came in at a full rate of 162,000 barrels a day. She has never been allowed to flow full, for the whole field is owned by the company, and the pool is considered safe from drainage. Further south, the Doheny companies have, in 1921, opened another vast field, the Chapapote Nuñez--but that, still, is “on the line.”

During the past year the Naranjos field has been showing salt water; the Chinampa, with a hundred wells located on a relatively few acres, is being drained at top speed, and salt water has been cutting closer in at its edges. To-day the Zacamixtle camp, the last of the “line,” which was drilled like mad by scores of crews putting down wells that cost in Mexico $100,000 each, has been narrowed to a strip of an oil river only a few hundred yards wide.

With Chinampa and Zacamixtle gone, only the Cerro Azul, the sixty square miles of the Chapapote field, and the adjacent Toteco pool will remain on the “line” with no reserves save to the south, in a territory recently proved by the “Toteco” and “Chapapote” districts, or to the north, in the Tampico or Panuco field proper. This last is a heavy oil section, and here, too, the largest portion of the territory is owned by the Doheny companies.

Why, with this dwindling field, this steady reduction in reserves, has there not been more development in Mexico? You know the basic answer--revolution. But through revolution and graft and theft and murder the American operators in the oil fields, working for British and American companies, have kept on the job. Revolution is not the only answer.

Carranza, when he became president of Mexico, cast envious eyes toward the oil fields, and sought to make them his own, for loot and for graft, and not for conservation, be it noted here. He “nationalized” petroleum, by his new constitution, and tried to force the companies to give up their properties. They did not surrender, in fact or in principle, and for five years have fought for their rights, and for what they believe is the hope of oil development in all the backward lands of the globe.

In 1919 Carranza stopped the drilling of new wells, in an effort to force the companies to submit to his decrees, and not until Tepetate and Juan Casiano went to salt water and the tax returns of nearly $30,000,000 a year (at that time) were direly threatened, did he give temporary permits for drilling. He might fight for the nationalization of the oil, but he was routed by the danger to the vast sum upon which he ran his government and upon which his generals and favorites fattened and grew rich.

Thus in the oil fields drilling has been resumed. But off the “line” there is virtually no drilling, none of the “wild-catting” which is the life of the oil industry. Until the new government, if it ever does of its own free will, loosens the death-grip of Carranza, the oil industry will remain paralyzed and confined to its narrow, shrinking bed between Tampico and Tuxpam.

But why does Mexico go on? Why does she see so little of the way before her? The situation is complicated by many factors, two of which stand out in relief. These are the support given the Carranza ideas first by the British companies and second by some new American companies. The British needs in Mexico have from time to time been identical with the American, and then the two have worked together, but the British occupy a peculiar position, going back to the Madero revolution of 1910-11. At that time the Mexican Eagle company (which is a Mexican corporation) was caught with a number of the old Diaz “reactionaries” as its company officials, and it was also the holder of the hated Diaz “concessions.” As a result it had to walk the chalk line very carefully under both Madero and Carranza, a condition which has always made its position weaker than the American. The large local business of the Eagle Company, in refined gasoline and oils, as well as in fuel oil, has also complicated the matter. It was due to these and similar factors that the Eagle Company placed itself under the “protection” of the Carranza decrees when they were first issued, although with protests, both legal and diplomatic. With a single American exception, the English interests were the only ones which gave any comfort to those early Carranza plans. Upon their support the former president built many of his subsequent activities, including the ruling on drilling permits. He gave these permits to the Eagle Company without conditions, at the very time withholding them from the “unfriendly” Americans under a demand for a written waiver of all protest against future petroleum legislation.

The second form of support which the Mexican governments obtained is more recent, and more complicated. Under the Carranza decrees oil lands were open to “denouncement” (or filing of claims) and the taking out of a “denouncement” even to protect one’s own property was taken as an unqualified recognition of the right of Mexico in confiscating the oil rights of that property. The American and British companies united in an agreement not to denounce their own lands and not to buy or lease denouncements upon any other lands.

In 1919, some new American interests, which had had other experience in oil, entered the Mexican field. They spent some $500,000 in looking up titles to the properties and leases held by the old companies. They found many defects, for the inheritance laws, the poor records and the negligible value of the properties as farm lands make questionable titles the commonplace of the oil game in Mexico. Where there was an apparently defective title, these interests acquired the outstanding lien, and so laid claim to some of the finest producing lots.

So far the plan was a not unexpected move toward getting a hand in the oil game, a chance to sit in with big stakes alongside the big companies. The new elements, however, next “denounced” their new claims before the Carranza government, thus placing themselves quite outside the old-crowd oil camp. This “denouncing” of their properties brought them many favors from Carranza officials, but it made negotiation with the old companies difficult.

The Mexican oil problem, in its simplest, is three-fold. It has to do, first, with the nationalization of the petroleum in the subsoil, which threatens to wipe out vested property; second, with the question of taxation, which may at any time, and indeed actually threatens to become confiscatory; third, with the problem of concessions which are to-day the most obvious form of political graft and to-morrow may precipitate a Mexican war over petroleum rights.

First, the nationalization of petroleum. The Constitution of 1917, adopted by Carranza, and continued by de la Huerta and Obregon, definitely declares petroleum the property of the nation. In the grants of land made by the Spanish crown (the basis of all land titles in Mexico to-day), gold, silver and other metals were especially reserved as the property of the king, and in colonial times and since have been worked only by special permission or grant under “denouncement,” quite independently of the owner of the land. Neither coal nor oil was known to commerce in Spanish times, but in 1884, when the mining laws were revised, the Mexican government as inheritor of the rights of the Crown of Spain and retaining, as it did and does, the royal control over gold and silver, specifically stated that coal and oil belonged to the owner of the surface. This was confirmed later in the mining laws of 1892. In 1905, after oil was discovered and certain concessions for drilling had been issued to Sir Weetman Pearson (now Lord Cowdray), head of the Mexican Eagle Oil Company, an effort was made to have oil declared the property of the nation, like gold and silver, and thus subject to concession and denouncement. This was opposed by the American interests, which held no concessions. The issue was decided virtually unanimously by the Academy of Jurisprudence, and in the mining laws of 1909 the title to oil was definitely and unequivocably vested in the title to the surface soil.

Until 1917, the vast development of Mexican oil fields went on apace, based on the old property rights and apparently safe from molestation. Carranza switched the matter completely around by the simple expedient of adding oil to the list of minerals which are national property and placing the new ruling in that famous Article 27 which contains most of the anti-foreign provisions of the new constitution.

The Mexican defenses of this action are two. The primary thesis is that the subsoil has always belonged to the government, whether king or republic, and that it was beyond the power of ministers or courts or legislatures to alienate those rights. In other words, Mexico is only “taking back her own.” The opposition to this is on the basis of vested rights, on the long periods during which the owners of the lands had actually enjoyed possession of the subsoil, paying taxes on full valuations, and on the virtual obligation of contract of all Mexican governments to support developments under the laws of their predecessors.

The other contention, more general and yet with a stronger appeal to modern radicals, was that such nationalization was in line with the trend of the times, a trend later manifested in the Russian revolution. Candido Aguilar, then Carranza’s foreign minister, gave voice to this phase in his note of August 12, 1918, to the British Foreign Office, where he stated that “the modern conception of property is that it is a social function bound closely to the prosperity of the State.”

Both these contentions might in fact be worthy of consideration if the government of Mexico were of a character to be trusted, if it were indeed genuinely devoted to any sincere ideals of social reform, if it were truly interested in the conservation of the nation’s resources for the benefit of the people. But the Mexican governments have been none of these things, truly believe none of these things. The radicalism of Mexico, the socialism of Mexico, are means to an end, not ends in themselves, means to power and position, for loot and for the pelf which goes into private pockets and not even into national coffers.

Certainly if government could be depended on, the idea of paying fixed royalties to a national treasury is financially preferable to dickering with individuals, and obviously more businesslike. But since oil has been known, the great organizations which handle the product have been accustomed to dealing with private owners; it is a game they know, a business they understand. In Mexico there is the other factor which one can never lose sight of, and that is that government control means graft, favoritism, chicanery, the meddling of foreigners and big business in the very heart of the councils of government. And those things, until now avoided, must never come into being.

In the final analysis, the proposed nationalization of petroleum has never been a conservation measure, the only excuse (to radical or to conservative) for its promulgation. The Mexican governments, from Carranza to Obregon, accepted “denouncements” upon petroleum lands already developed, granted vast concessions for drilling, on a royalty arrangement with the government, in so-called navigable streams and other “federal zones,” and in every way in their power carried on a _redistribution_ of petroleum titles. This single fact of the government acceptance of such denouncements and concessions indicates that the intention is not to conserve, but to get a new deal with somebody besides the Gringoes and the Indians who own the oil lands sitting around the table.

The whole interpretation of the oil features of Article 27 seems at variance with the ideas of genuine radicals as completely as it is at variance with the ideas of dyed-in-the-wool conservatives who still dare talk of “vested rights.” The effect of the enforcement of the nationalization plan would be first to change royalty payments from the land owners to the government and second to move the dealings for oil leases from the open field and the negotiations of plain buying and selling to the conferences of government officials where honor is to-day a more commercial commodity than land, and where the proportions of lease money to graft would be as one to ten. It would indeed, bring on the era of concessions and favoritism with a vengeance, and the dismal pictures of the foreigners’ corruption and exploitation of Mexico would become a bitter reality.

At present, the chief hope of avoidance of such a condition lies in Article 14 of the same Constitution of 1917, which declares that none of the provisions of that instrument shall be construed as being retroactive. The interpretation of non-retroactivity has been the subject of much discussion. At one time Carranza’s foreign minister told the oil companies that it should be understood to mean that the government would not collect for the oil already extracted. At other times it has been held that the expropriation of petroleum rights would not affect the properties where wells were opened prior to May 1st, 1917; then not to land acquired for drilling purposes before that date. It was this detail which was taken up by the Mexican Supreme Court in August, 1921. But after years of fighting single incidents, and working along the theory that American companies could demand only their own rights, the issue has actually broadened to the whole question of property rights of Mexicans as well as foreigners. There are millions of acres of potential petroleum land in Mexico, not one per cent of which is owned or leased by foreigners, and all this would be wiped out, along with foreign properties, if the oil were declared definitely confiscated to the nation, or even if merely the “oil” lands were exempted.

Were non-retroactivity interpreted to nationalize only the oil and coal in federal lands to which no title had ever been given to private individuals, the vested rights of land owners would be protected whether petroleum had been discovered on the property or not. Such an idea of nationalization would approximate the control of oil in national lands in the United States under the new leasing laws. It is this interpretation which the oil companies and the Mexican land owners are seeking, and which has not been touched by the Mexican Supreme Court decisions noted above.

The second issue in the oil controversy is taxation. Until the 1921 temporary increase, export duties on oil were collected at a theoretical rate of 15 per cent of its value. This valuation is supposedly on the basis of sales of oil in Mexico. There are hundreds of such sales, but their prices are not taken, and arbitrary estimates ostensibly based on the prices for which oil is sold abroad, less another arbitrary allowance for transportation, are the criteria. The results of this system have been confusing to the exporters, to say the least. Some of the lower grades of oil, for instance, were actually paying, not 15 per cent of their value, but 40 or 50 per cent. The valuations fluctuate also according to government caprice and the need of tax money; the result is another difficulty in making close prices to consumers, which in the end all must feel in the price of gasoline. A peculiar tax difficulty of the oil companies was over an exact doubling of the valuations and thus of the taxes, made by the Carranza government a few days before it fell--an increased tax which the de la Huerta and Obregon governments have sought to collect. Still more recent is the virtual doubling of oil taxes which shut in many of the wells during July, 1921.

The direct oil taxes are now about $2,000,000 a month, so that the doubling is an item of no small moment. At present no immediate solution of the tax difficulties is in sight, and the companies have been split by favoritism into two camps. One is largely British, which finds it profitable to accept the decrees. The other is largely American and finds the enforcement of the new regulations oppressive. Some plans for relief have been discussed. One of the proposed oil bills based on Article 27 interprets it not as nationalizing petroleum, but as nationalizing the right of taxation, taking all tax privileges from the states and vesting them in the federal power. The idea would be to provide a single direct tax on petroleum extracted from the soil instead of upon that exported. Apparently this tends toward a solution of the tax question. But here again enters the difficulty of dealing with Mexicans, for such a direct tax would be without recourse, until its provisions became confiscatory, while at present the companies have at least a chance of defense in protests against arbitrary valuations.

The outstanding fact in the tax situation, as in the nationalization question, is the bad faith of Mexican government. The much discussed reforms are non-existent, and government in Mexico is for the benefit, not of the governed, but of those who rule, and taxes fill not the treasury but the pockets of officials, and appropriations are not for schools and civic welfare, but for the army and “public works,” where graft is so colossal that it passes the conception of citizens of simpler lands.

The third element of the Mexican oil problem has to do with concessions. This is a phase of nationalization, but to-day it has taken on an importance which recently obscured other issues. The government had issued a number of what are called “federal zone concessions,” giving to individuals and companies the right to explore and extract oil from the rivers, lakes, etc. The federal zones are narrow strips along the seashore and navigable rivers on which an easement has been reserved for the public use. The American oil companies contend that this mere easement cannot be converted into absolute ownership, which is the effect when the government grants to third parties the right to drill wells there and thus to tap the pools of oil which the companies have discovered and developed and on which they are paying rentals to land owners.

There were a few oil concessions under Diaz, practically all to English companies. One of the great shibboleths of the Madero revolution was the wiping out of the system of concessions, so no more were given until toward the end of the Carranza régime. Beginning then, becoming almost an orgy in the brief rule of de la Huerta, and continuing into the days of Obregon, concessions have become common, some going indirectly to a few American companies, many to the British corporations and more to Mexican favorites of the ruling group. The concessions issued cover practically every river and semi-arid gully (regarded as a “navigable stream” for the purposes of the concession) in the whole Tampico-Tuxpam field, a stretching of the “federal zone” idea in order to make possible the penetration of the producing fields by concessionaires.

Other concessions are of different sort. Under de la Huerta one was issued giving the right to explore rivers, lakes and government lands over the entire republic, with preferential drilling rights up to a production of 400,000,000 barrels per year, the chief consideration being a return to the Mexican government of 40 per cent of the gross value of the oil found. Another, to a company, also American, gives rights to explore Lower California and other West Coast states, with the privilege of denouncing not only government lands, but private properties as well--the return to the government in this case is 10 per cent of the gross.

The concession feature of the oil question, like the others which I have described, has its rights and its wrongs, but the fact of giving concessions, and in such blanket form, to take oil from the lands of private property holders, is in itself proof of but one thing--the intention of the Mexican government, not to conserve its resources of oil for the benefit of its people and the generations yet unborn, but to get out of the oil business as much as possible as quickly as possible--and solely for itself and its favorites.

The final phase of the oil problem in particular and of the entire Mexican question in general is anti-foreignism. Article 27 of the new constitution contains a number of anti-foreign provisions other than petroleum nationalization. One is that only Mexican citizens may develop oil (and other properties) in the republic. Another section of the Constitution, as I have mentioned, gives this provision force by requiring that foreigners who sought to work such properties should appear before a government department and waive all rights of appeal to their home government for protection. This and other anti-foreign provisions are summed up in the so-called “Carranza Doctrine,” one of the interesting developments of his picturesque reign. This has been stated as follows:

“No individual should aspire to a better situation than that of the citizens of the country to which he goes; legislation should be general and abstain from distinctions on account of nationality. Neither the power of nations nor their diplomacy should serve for the protection of particular interests or to exert pressure upon the governments of weak peoples with the end of obtaining modifications of laws which are disagreeable to the subjects of a powerful country.”

The world outside largely persists in taking Mexican professions at their face value, and in solemnly accepting the beautiful Mexican laws and the beautiful Mexican arguments as literally true. On this point I have quoted elsewhere the words of a great Mexican publicist, who has written: “The carpet baggers of Mexico have traditions rooted as far back as colonial times. They combine the shrewd and subtle wit of the Indian with the grandiose words of modern civilization, with which they have gained the sympathy of uninformed outsiders.” Our own State Department has answered the “Carranza Doctrine” in no uncertain terms and once wrote that “the Department is of the opinion that ... an attempt is being made to coerce American companies ... to admit in advance ... the correctness of the contention of the Mexican government in the matter of ownership of oil deposits, against which the American government has made solemn protest as threatening confiscation of rights legally acquired by American citizens.”

In fact, there is no reason to doubt that virtually all of the oil decrees of Carranza, all the rulings of his ministers, all the regulations which have been enforced with such insistence on petty details have been, first, appeals to sentimentalism abroad and, second, childish expedients to force recognition by the foreigners of some sort--any sort--of superiority in the Mexicans. In the last, so well set forth in the State Department message quoted just above, lies the basic cause of the failure of the companies to reach an agreement with the Mexican government. Every willingness to discuss a point, every slackening of their demands, has been accepted, not as an approach to a solution, but as a weak concession to Mexican “national pride” and personal dignity.

There are two remaining reasons why the oil question remains unsettled. They are extremely practical,--loot and incompetence. Of the former, George Agnew Chamberlain, the novelist, recently American Consul General in Mexico City, has written in his book, “Is Mexico Worth Saving?” that:

“Today it is taken as a matter of course that ninety per cent of all Mexican officials in positions of trust are openly corrupt and will inevitably continue so until controlled by some greater power than any single faction of their peers.... The graft of Mexico is outright loot; its effect is to open simultaneously all the arteries of the body politic and to pour the entire life blood of the nation into the gullets of the group in power.”

The oil companies are the ripest prey for loot in all Mexico. Their individual employees pay graft of certain kinds--of that I have no doubt, although there is vigorous and official denial. The companies themselves, however, pay a tribute, through the channels of astonishing taxation and contributions to public works, which is no less than the buying of the privilege of doing business. Another phase appears in the gossip which is general that one of the English companies materially aided the Obregon revolution--certainly every moneyed interest in Mexico had ample opportunity to do so. The American companies were, after Obregon’s occupation of Mexico City, “shaken down” for about $1,000,000 which was credited against taxes--and the taxes afterwards proportionately increased!

As a whole, the companies have resisted the temptation to ease their way along the broader paths of high government by the voluntary use of money--they have generally confined their expenses to the ample totals of taxes and assessments. It is for this reason that one of the most serious phases of the Mexican congressional discussion of petroleum legislation is that practically every member of the Mexican congress expects “his,” and when it is not forthcoming, will see to it that nothing favorable to the foreign companies finds its way to the statute books.

Lastly, incompetence. Perhaps the most appalling factor of the whole Mexican situation is the utter and profound ignorance of the men in control of the national affairs, men to whom the culture, the very procedure, of modern civilization are as a closed book. I believe that the oil problem is made serious chiefly because the Mexicans who might otherwise be willing to solve it are so uneducated, so limited in viewpoint and understanding, that they cannot conceive of the vast sums of money which must be invested in pipe lines, storage tanks, pumping stations, wharves and ships and refineries before the oil taken from their country’s soil becomes the fabulous treasure of which they hear so much. They seem utterly incapable of grasping the fundamentals of their national problems; the pity of the condition almost obscures the significance of the fact. It has not been easy for me to explain the oil problem in its simplest phases to Americans, yet in this chapter you who have read it have learned more than the floor leaders of the Mexican congress will ever know.

It is through this forest of ignorance, this slime of graft, that the foreign oil companies are making their way. They have committed many mistakes in their handling of the situation, selfish mistakes, mistakes of ignorance, but the struggle has been against forces whose depravity has been literally unbelievable. Personally, I am no fire-eater, but I have seen much of Mexico and I have seen something of the psychology of depravity, and I believe that the last lingering hope of Mexican adaptability to world conditions lies in Mexican recognition of the need of grasping truth rather than theory, of facing facts with manly faith in Mexico and in Mexican ability to solve her problems as other nations solve theirs, by honesty and patriotism and not by graft and personalism. This attitude the oil companies have nurtured, and in this their policy has been a policy of weakness. Seeking here an outlet for the day, there a hope for the morrow, they have put a premium on Mexican dishonesty, given a prize for Mexican argumentative skill. I know some of the problems the companies have faced, I know the need for oil during the war, I have written here something of the magnificence of their achievement, but for all that, I hold that they have had much to do with the vacillation, the inefficiency, the watery, grafting policy of the Mexican governments from Carranza to Obregon. They have had a large part in making such a policy successful by not refusing unjust demands firmly and directly, by not challenging Carranza to close the oil fields, by not taking a mighty loss to save the endless leak of graft and taxes and cynical legislation which is their heritage to-day. Even yet their policy is one of conciliation to Obregon, the newest president; still they are offering compromise, still giving the subtle Mexican mind to understand that perhaps they might agree to Article 27, perhaps they might accept a little higher taxation, perhaps they would like a few concessions, perhaps they might be counted on to get the hopefully predicted Mexican loan.

All this is the last phase of the complicated problem. We have said, in days gone by, that this is the problem of the oil companies, that theirs is the gain and theirs should be the cost. But if I have succeeded here I have conveyed an idea of the breadth of the oil problem. It is no longer a question of whether the American State Department is making the proper moves to support honest and industrious American investors and workers abroad. It is no longer the academic problem of whether the oil companies are handling their business in an intelligent and efficient manner. The problem is ours, yours and mine, of you in Kansas, of me in New York, of our cousins in England and China. It is the problem of the chap who runs a Ford and of the man who is cutting our freight bills by renting us a truck, of the steamship company which is carrying our goods, of the captain of the battleship which keeps us safe from near and distant enemies.

The problem is not merely whether the white peoples of the world are to have the right to develop the riches of the backward nations for the benefit of the world, but of _how_ they are to do it. So far, even in forward-looking lands, it has been impossible to eliminate private ownership and colossal private fortunes from the wheel of oil production; in Mexico, to-day, it would be disaster beyond understanding to turn the right of concession and oil privileges over to corrupt and inept government. The battle of the oil companies in Mexico is to save, first themselves from such a fate, and second to save all the unopened oil resources in the world from the strangling hold of such governments and such peoples everywhere. The oil industry can no longer carry the burden of such conditions, for the prices of your gasoline and your ship’s fuel oil are reflections not of a world scarcity, but of the uncertainty, the colossal artificial difficulties of oil production in the backward lands.

Commerce has fashioned the world into one brotherhood, and the Great War, for all its appearances, has welded us all into a mightier machine of civilization than history has ever known. Oil is the fuel of that machine, and oil must come to its engine, though all the power of politicians and bandits combine to keep it in the soil. The backward countries are swept into the forefront of commercial importance when oil begins to flow from their soil. The process is going on all over the world. In Mexico it is at its zenith. The oil must come, and from Mexico before all others, for Mexico lies in the heart of the world, her shores touched by more waters in proportion to her area than any other continental nation. And her stores of oil are the greatest man has yet found or dreamed of.

To-day the world’s need of oil threatens the life of Mexico. It is eating out her body by revolutions, by bandit governments, by colossal graft which feeds on the ever growing river of gold from the oil fields. The world’s need for Mexico’s oil threatens her with intervention, not because of capitalistic machinations, but because of the crass and wicked injustices which the wealth has tempted her to wreak upon her foreign residents, because wealth has undermined her government and given her over to demagogues.