(c) of the rivers and their tributaries up to the point where the first permanent water commences to flow down to the points where they discharge into the sea. (d) of the permanent or intermittent rivers which cross two or more States. (e) Of those which serve as boundaries of the National territory or between two States. All bodies of water above enumerated enjoy the zone of ten or twenty meters in width from the line of the highest waters to which the Law of December 18, 1902, refers, but this law not having been changed, said zone constitutes solely an easement for the common use as has been explained in Paragraphs IX and X; but it never can be claimed that this zone--the Federal Zone is the property of the Nation. This continues to be a part of the river-bordering tracts, because as to this point former laws existing prior to the Constitution of 1917 have been in no wise modified. 1 XIX. If we admit that the Nation is able to make itself the owner of the beds and banks described in the foregoing paragraph, we must conclude that the Nation may dispose in principle of the oil which is found in the subsoil of such beds and banks, but it can not dispose of the subsoil of the Federal Zones because the latter have never been a part of the National property, nor do they belong to the Nation under the provisions of the Constitution of 1917. Taking the foregoing as a basis of our judgment and applying it to each one of the concessions to exploit petroleum which has been issued, we may reach a conclusion in each concrete case when such a concession goes further than that permitted by the principles established by the Constitution of 1917. XX. One other question must be decided which, although apparently one of form, is of great importance in determining the validity of these concessions, even though they are within the scope of the Constitution of 1917. Such concessions have been issued by virtue of an "Acuerdo" dictated by President Carranza, under date of March 12, 1920, and of a circular numbered 10, dated April 21, 1920. Neither of these documents has any legal validity for the following reasons: (a) The "Acuerdo of March 12, 1920, as it appears published in the Diario Oficial of the Federation, is signed only by V. Carranza. In consequence it has no constitutional value and "shall not be obeyed," as is provided by Article 92 of the Constitution of 1917 in the following terms: "All rules, decrees, and orders of the President must be signed by the Secretary of the Department having charge of the branch to which the matter belongs, and without these requisites shall not be obeyed." (b) Circular No. 10 of April 21, 1920, as it appears published in the Diario Oficial, is said to be issued by the Department of Industry, Commerce, and Labor, and is signed only by the Chief Official in charge of the office, J. Vasquez Schiaffino. Therefore this circular, which possesses the character of a regulation, lacks any constitutional validity since the regulative power is conferred by the Federal Constitution upon the President of the Republic, and not upon principal officials in charge of a department, as is provided in Article 92 above cited, and in Article 89, Section (I), which says: "The powers and duties of the President are as follows: "(I) To promulgate and execute the laws issued by the Congress of the Union, providing for their exact observance in the administrative sphere." XXI. The manifest object of the Acuerdo of Carranza was to strike at the oil companies which were operating upon lands which they have the right to legally exploit. This appears from the recitals 3rd and 4th of the abovementioned Acuerdo, which are as follows: "3rd. That the regions actually known as oil bearing are crossed by numerous rivers, arroyos, esteros, lakes, and swamps of Federal jurisdiction, whose exploitation for the purpose of producing oil may give rise, if conceded to individuals or companies organized in accordance with Mexican laws, to large revenues for the National treasury, flowing from the rents and such just and equitable participation as may be provided in the concession. "4th. That such oil-bearing regions are being intensively exploited to such an extent that the rapid exhaustion of the pools of oil is certain, as has already taken place in the region known as 'Chinampa,' without giving to the Nation the just profit which it would have received if it had permitted the drilling of wells in the Federal Zone of the rivers, arroyos, esteros, etc., of Federal jurisdiction which cross it." XXII. Lastly, inasmuch as Congress has not issued laws making effective Article 27 of the Constitution, the executive power has no right to supply legislative mandate. The executive power can only grant concessions when Congress, using the power which Section 31 of Article 73 of the Constitution gives it, authorizes the Executive to do so through the adoption of a law. Said Section 31 authorizes Congress to issue all laws which are necessary in order to render effective the powers of Congress and all others granted by the Constitution to the other branches of the Government. This point was taken from the American Constitution and has in Mexico the same meaning and the same scope as in the United States. It is therefore apparent that the Government has no power to grant the concessions which we are considering, even though such concessions do not violate individual rights. XXIII. In conclusion, the following may be said: (a) In the greater number of cases these concessions violate property rights because they refer to channels owned by private individuals as part of the tracts in which they are found. (b) When these channels are not the property of individuals, such concessions violate private rights, because they extend to the banks which are always the property of the owners of the tracts running along the rivers. 66 (c) In any case, concessions violate private rights by being extended to the so-called 'Federal Zones," because this term, speaking of waters of Federal jurisdiction, involves only the imposition of an easement, of common use, which does not alter the basis of the right which the owner of the land has in respect of the land. (d) If the validity of the Constitution of 1917 and of the precept of Article 27, which declares the subsoil of the country to be the property of the Nation, is admitted, even so the concessions which have been considered are illegal, because they are issued without the adoption by Congress of any law which carries into effect said Article 27. NEW YORK, December 19, 1920. MANUEL CALERO. VALIDITY OF FEDERAL ZONE CONCESSIONS. Statement of Lic. Manuel de la Peña. [Translated from EL UNIVERSAL, December 26th, 1920.] "Referring to this matter," said Mr. de la Peña, "El Universal resorts to an old argument which it has ill-digested and which starts from a false premise. These arguments may be summarized as follows: The Federal zones are properties of public domain and are destined to common use. Such properties can not grant usufruct, use or habitation to the exclusive benefit of private parties. The Federal Government holds them, to be administered and exclusively dedicated to the general uses to which the whole world is entitled. * * * The rivers throughout the entire course of their channels, as well in a zone of ten meters in width from the high-water mark, constitute a federal zone in which everybody has the right to pass, and in no way a real property of the nation. Such is the argument, and from it the inference is drawn that it is unlawful to grant concessions of any kinds on these zones, concluding with this sentence: if the portion enjoyed by the Government is subject to question, what can be said of the gift that is being made to concessionaires? Analyzing the argument, I agree with the statement that the federal zones are of public domain, as are the mineralized deposits of the subsoil, and that no usufruct or habitation lies on them. I can not admit that private enjoyment of these properties by concession is forbidden, because this is denied by several laws, some of which I shall enumerate. In this demonstration, I do not care to go back to Roman and Spanish law, because it is not in place here. To show the power in the executive to grant concessions on these zones, it will suffice to cite the following constitutional laws: I. That of June 5, 1888, which authorizes the public and private use of rivers, lakes, etc. This statute in Section B. sets forth the respect of private rights to these waters, and Section C. authorizes the grant of concessions to those waters that are national property and of common use. II. The petroleum law of December 24, 1901, which permits oil development on national lands, lakes, etc., properties that are all of public domain and common use. III. The law of federal immovables of December 18, 1902, Article 4 of which enumerates these properties, article 7 prescribes the enjoyment of waters by concession, and Article 15 authorizes the grant of licenses or concessions to enjoy the properties of public domain by competent authority, on the understanding that they create no real right and are temporary. IV. The law of December 13, 1910, which declares that rivers and tributaries are of federal jurisdiction. Article 2 of this law declares federal waters to be of public domain and common use, and in spite of this authorizes the grant thereof to individuals or corporations, and regulates the manner of granting such concessions. It is evident, therefore, that properties of public domain and common use are susceptible of enjoyment by individuals or corporations legally constituted, and that the power to grant them throughout the whole Republic in mining, including petroleum, is sanctioned by Article 27 of the constitution, paragraphs 4 and 6, and by Article 7, which gives Mexicans and Mexican companies the right to petition for such concessions. It is, therefore, perfectly legal to grant concessions on federal rivers and wholly and entirely incorrect to say that this zone is destined exclusively to general transit, and a legal absurdity to sustain that it is not a federal immovable." “With a view to determine the conditions to be complied with by applicants for concessions to explore and develop petroleum and other hydrocarbons to be found within the bounds of the national territory, by order of the Secretary of Commerce and Labor all action on applications relating to this matter is from and after this date temporarily suspended." 66 'When once the proposed measure of the Petroleum Bureau submitted on September 20th last to the effect that applicants shall give bond for the fulfilment of the obligations contracted with the Department has been studied, or the conditions governing the exploration and exploitation of petroleum by the law regulating Article 27 to be enacted by Congress, applicants will be informed of the conditions with which they must comply in order that their applications should be favorably acted upon." In explaining the scope of this ruling, the Secretary stated: "What is hereby suspended are concessions to explore and exploit, but not denouncements (entries) which will continue to be acted upon, in accordance with the provisions now in force." ESTABLISHMENT OF PETROLEUM ADVISORY BOARD. REGULATIONS OF JULY 16, 1920. President de la Huerta signed July 16th a resolution to establish a consulting board (Junta Consultiva), under the direction of the Secretary of Commerce, Industry and Labor, who will preside over the board, and four members, two of whom will be lawyers and two engineers. This board will analyze proposed laws bearing upon petroleum, will investigate controversies which may arise in relation to the subject, and will endeavor to develop the industry. NOTE. These regulations have been entirely abolished. WHEREAS the production of petroleum in the republic through the great development it has attained in the last few years should constitute a source of revenue for the Federal Treasury which shall bear a just relation to the great profits obtained by the oil companies or enterprises; and WHEREAS it is expedient to exempt from the special stamp tax the petro. leum consumed within the republic, so as to encourage industries by facilitating the acquisition of abundant and economical fuel; and WHEREAS the quality of the petroleum produced in the republic differs greatly, and accordingly varies in commercial value, a tax, to be reasonable and equitable, should be based on the value of each product; and WHEREAS a considerable quantity of this liquid is not utilized because of the lack of precautions in prospecting and in daily handling, thus causing frequent losses not only to the companies interested but also to the Federal Treasury by reason of the duties not collected; NOW, THEREFORE, I, Venustiano Carranza, First Chief of Constitutionalist Army, in charge of the executive power of the Nation, in the exercise of the powers with which I am invested, have seen fit to issue the following decree: ARTICLE 1. All crude petroleum of domestic production, as well as fuel oil not intended for consumption in the country, shall be subject to a tax of ten per cent (10%) on the value of the net ton, as hereinafter provided: 1 NOTE.-The Decree of April 13, 1917, on taxation, has been superseded by a Decree of May 24, 1921, on the same subject, effective July 1, 1921. A Decree of June 7, 1921, effective July 1, 1921, imposes a specific tax on petroleum. A. The Department of Finance shall fix every two months, as prescribed in Article 4, the value of crude petroleum and fuel oil on the theoretical gravity of 0.91. I. To compute the value of crude petroleum and fuel oil twenty centavos shall be deducted for each increase of one-hundredth in gravity, including in this classification crude petroleum of 0.965 gravity and fuel oil of 0.97 gravity. II. To compute the value of crude petroleum and fuel oil of a gravity less than 0.91 forty centavos shall be added for each decrease of one-hundredth in gravity. III. The Department of Finance shall fix every two months the value of crude petroleum of over 0.965 gravity and the value of fuel oil of over 0.97 gravity. B. Products derived from the refining of crude petroleum and from the refining of gas from wells not intended for domestic consumption shall be subject to a tax according to the following schedule: Refined gasoline and refined kerosene-three per cent ad valorem. Lubricants 0.0025 pesos per liter. Paraffine 2 pesos per ton. Gas five per cent ad valorem. The Department of Finance shall fix every two months the valuations of gasoline and kerosene, using as a basis the prices obtained in the City of New York during the previous month. C. The following shall be subject to the payment of taxes, in accordance with the previous schedule: I. Petroleum intended for the use of tug-boats and tank steamers employed in export service; II. Crude petroleum and its derivatives, when wasted in any quantity either through carelessness or non-compliance with the legal provisions shall be subject to a rate double that governing similar products; III. Products derived from the natural gas of wells when wasted for the same reasons. ARTICLE 2. The following products shall be exempt from this special stamp tax, excepting that corresponding to sales under the Law of June 1, 1906: A. All crude oil consumed within the Republic either through sales or use in exploration or development work in fields or terminals of the companies; all crude oil delivered to refineries in the country to be refined or for fuel purposes; all crude oil used by steamers or tugs devoted to coastwise trade; and, in general, all crude oil of domestic production used in any form within the Republic. B. All products derived from crude petroleum of domestic production of whatever name or nature, sold or used in any form within the country, provided they have been treated in domestic refineries, in fields or terminals of the companies, irrespective of the process employed. C.1 All petroleum required by national vessels for their use. D.' Samples of all kinds of crude petroleum, fuel oil, gasoline, kerosene, gas oil, lubricants, paraffine, or asphalt, provided the value of any one product does not exceed ten pesos, basing the value on the prices fixed every two months by the Department of Finance and Public Credit. ARTICLE 3. For the purposes of the present decree, crude petroleum shall be understood to be the natural product as it comes from the wells or deposits, provided it does not contain more than 1% water and sediment; if it should 'As amended December 29, 1919. |