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By Edwin Hopkins

THE year 1923 started a few days after the Venezuelan Oil Concessions, Ltd., discovered a 140,000-bbl. well at. La Rosa and a well of between 2500 and 5000 bbl. at La Paz, on the opposite side of Lake Maracaibo. These nearly simultaneous events changed, overnight, the general aspect of oil affairs in Venezuela. Up to that time, big things had been expected by the companies then in the district, but many major companies had shown little interest in the country. Within a few weeks the Pure Oil. Co. and the Gulf Oil Corpn. entered the field and acquired large properties. The Texas Co. purchased several concessions and the Standard of California, Atlantic Refining Co., and Mexican Petroleum Co. established offices. Representatives of many other companies visited the district during the first few months of the year. The sudden influx of buyers naturally caused a great rise in prices and this, together with overproduction in the United States, doubtless caused the slowing up of concession transfers in the latter part of the year. The following property transfers occurred: (1) The Gulf Oil Corpn. contract with the Maracaibo Oil Exploration Corpn., whereby the Gulf acquired the right to select 100,000 acres from the Maracaibo's zones. (2) The Gulf Co. purchase of one-quarter interest in seven concessions of the New England Oil Corpn., Ltd. (3) The Gulf Oil Corpn. purchase of several concessions of Kunhardt and others in the Perija district. (4) The Gulf Oil Corpn. purchase of certain portions of the one-kilometer Lake zone that were not covered by parcels or Government reserves (namely the "sobrantes"). (5) Pure Oil Co. purchase of all Government reserves turned back by Maracaibo Oil Exploration Corpn. in the districts of Mara and Miranda. (6) Standard Oil Co.: of New Jersey deal with the British Controlled Oilfields, Ltd., for control of approxi-mately the eastern third of the .district of Buchivacoa, state of Falcon. (7) Royal Dutch deal with the British Controlled Oilfields, Ltd., for the control of the central third of the district of Buchivacoa, Falcon. (8) The Texas Co. purchase of several concessions in Perija and one west of Mene Grande on the east side of Lake Maracaibo. (9) Purchase by the British Equatorial Oil Co., Ltd., of Goverment reserves corresponding to certain Creole Syndicate parcels under the margin of Lake Maracaibo near La Paz. (10) The Lago Petroleum Co. acquired a concession on all of Lake Maracaibo except a 1-Km. strip along the shore.

Jan 3, 1924

By S. F. Emmons

[The following notes of observations made during a visit of a few days in the month of October, 1886, which was cut short by a sudden summons East, are offered, in spite of their incomplete and tentative character, in the hope that they may aid the members of the Institute, in their coming visit to this region, to a clearer understanding of the general geological conditions under which the ore-bodies occur.] The Butte mining region lies in a sort of a depression in the mountains which is drained by Silver Bow creek and its various tributaries. On the east it is bounded by high north and south ridges of granite, and on the west by lower ridges, also running north and south, which, as far as examined, were found to consist of rhyolite. High mountains also inclose the depression on the north and south, but at a greater distance than the more immediate bounding ridges on the east and west, the distance between which is hardly more than six miles.

Jan 1, 1888

By F. Robertson Jones

IF the tendency toward extending the scope of the workmen's compensation system to include life, health, accident, old age, and unemployment insurance for workers is not promptly altered, I believe there will be a complete breakdown of that system. This is not because of any objections, there may he to requiring industries to provide these additional forms of protection in whole or in part to their employees. It is rather because our workmen's compensation laws, their scale of benefits, and the administrative procedure under them are not adapted or suited to such situations. If the compensation principle is limited to its own proper sphere and is not enlarged so as to include all the ills that the flesh is heir to, it is practical, "workable, and beneficent. If it invades foreign realms, it is bound to grow into a veritable Frankenstein' which will harm principally those it 'is supposed to aid, and, at the same time, will promote waste, fraud, and Industrial demoralization. Compensation risks will become almost uninsurable; the cost to business will be intolerable; and the development of sound relief measures which will give to labor the protection now sought by the uneconomic device of enlarging the compensation law territory will be retarded.

Jan 1, 1934

By J. W. Rutter, K. T. Aust

Observations are presented of the formation of annealing twins during the growth of a recrystallized grain into a striated, melt-grown crystal of high-purity lead. The formation of an annealing twin resulted in replacement of the original migrating boundary by a large-angle grain boundary of the caincidence-site type or by a near-twin boundary. The results support the Fullman-Fisher theory of annealing twins and demonstrate the usefulness of the coincidence-site model. FULLMAN and Fisher1 have advanced the following theory to account for the formation of annealing twins during grain growth. Whenever a grain A grows into a matrix of grains S1 and S2, a twin A' of grain A may form, as shown in Fig. 1, if the following energetic condition is satisfied: where "E" and "a" refer to the specific interfacial free energy and the area, respectively, of the boundaries indicated by the subscripts. In effect, the twinned grain will persist when the energy of the boundary between the twin(A') and the matrix grain (S, or S,) is less than that of the boundary between the original growing grain (A) and the matrix grain by an amount which exceeds the energy of the coherent twin boundary between A and A'. Experimental observations on the changes in grain boundary free energy accompanying the formation of twins1 are in agreement with the theory outlined in Eq.[l]. Direct observations of the formation of annealing twins at moving grain corners1"3 and the depend-

Jan 1, 1961

By J. E. Forciea, R. W. Salmi

Operating and research personnel at U.S. Steel's Pilotac concentrator have evolved specifications for magnetic separators suitable for use in beneficiation of Mesabi magnetic taconite. These specifications were developed as a result of investigations into the operating and metallurgical problems at the Pilotac concentrator over a period of some ten years. This paper discusses primary magnetic separator specifications, but much of the information is also pertinent to secondary and tertiary magnetic separators. Of particular significance is the proposal of a new basis for specifying the magnetic field which includes consideration of both field strength and field gradient. Other areas of discussion include flowsheet service, operating conditions such as drum speed and pulp level, tank configuration, magnet strength including field gradient, sleeve bearing design, designation of corrosion resistant materials and other details that result in a metallurgically efficient machine that has low repair and maintenance requirements. The mechanical and metallurgical design of magnetic separators at the Pilotac plant, Minnesota Ore Operations, United States Steel Corp. has progressed from the original single-stage, belt-type machines to the present multiple-stage, drum-type units, In ten years of operation, the plant operating and research personnel, in consultation with manufacturers, have made design changes to improve mechanical, electrical and magnetic features to meet process needs as flowsheet designs developed and to incorporate new permanent magnet materials as they became available. Separator specifications were an end result of this effort. The latest specifications which were developed for the Minnesota Ore Operations' plant were not all-inclusive listings; they covered only those points indicated by plant experience. For example, magnet pole piece design and dimensions were not stated. The manufacturers were given freedom to use any design as long as the field pattern was as specified. The selection of the items to be included in the specifications was undoubtedly influenced by particular conditions at Pilotac such as composition of plant water, concentration characteristics of the ore, repair and maintenance facilities available and the research programs that had been conducted. Only the developments leading to the specifications for a primary or "cobber" magnetic separator are presented in this paper. However, the same general concepts are used to specify secondary and tertiary separators. The areas of interest discussed include flowsheet service, tank configuration, magnet design, bearings, materials of construction, and some minor mechanical details. FLOWSHEET SERVICE The primary magnetic separators in the Pilotac Concentrator flowsheet are located after the first stage of grinding as shown in Fig. 1.

Jan 1, 1965

By FREDERICK W. BRADLEY

MINING methods are evolved rather than devised; and the process is slow. The advance in no particular year is phenomenal, but progress is un- questionably being made constantly in several directions: (a) better adaptation to given conditions of various "systems" of mining; (b) better utilization of mechanical equipment ; (c) improvement in working conditions so as to promote the health, safety and efficiency of the workers. During the year 1930 operations were commenced at a number of important new mines. Methods adopted are not new, except in minor detail, but the fitting of methods to conditions is interesting, because, as the engineers presumably started from scratch, they have selected the methods that experience under similar conditions has indicated as being the best.

Jan 1, 1931

By C. L. Sainsbury

Lode and placer tin deposits of the western Seward Peninsula, Alaska, have produced more than 2200 tons of metallic tin and constitute the only known domestic deposits of economic grade and size. The lode deposits consist of quartz-topaz greisens containing cassiterite and wolframite as well as numerous base-metal sulfide minerals, and most are in or near altered biotite-granite that forms isolated stocks or in rhyolitic dikes near granite. Within the main lode-producing area in the central York Mountains, nonpegmatite beryllium deposits, consisting principally of fluorite, chrysoberyl, diaspore, tourmaline, and white mica, with minor euclase, bertrandite, phenakite, hematite, and todorokite, are distributed zonally around the tin deposits and locally are transitional with them. All the known beryllium deposits are replacement lodes in carbonate rocks. In the area discussed, both tin and beryllium deposits are localized in a structural belt striking N70° to N85°E across the central York Mountains. The belt is characterized by numerous normal faults, which cut extensive thrust sheets, and by dikes of rhyolite, rhyolite porphyry, and lamprophyre that were injected along the faults. Ore deposits are localized where the dikes intrude brecciated rocks beneath thrusts and, although complex in detail, form tabular lodes that tend to lie along the thrusts. The granites contain abnormal amounts of tin, beryllium, lithium, and boron, and the tin and beryllium lodes are believed to be genetically associated with these enriched granites

Jan 1, 1968

By Walter McKee

WHEN mixed with common cast steel in quantities ranging from 11 to 13 ½ per cent. and properly treated, manganese increases the ductility of the metal and adds greatly to its toughness and resistance to abrasive action, which properties comprise the distinctive characteristics that make manganese steel so valuable for many purposes at the present time. Manganese steel has been manufactured for about 26 years. .It was first made in a small way in England and subsequently produced in the United States in 1892. At present the manganese-steel foundries of this country have an annual capacity of about 60,000 tons and most of the growth has occurred within the past 10 years. In the early days of the industry it was impracticable to make manganese castings weighing over a few thousand pounds, but at present crusher heads, rolling-mill pinions, and similar castings weighing up to 30,000 lb. each are produced, and it does not appear that the limit of weight has been reached by a considerable margin. Manganese steel is similar in analysis to ordinary first-class converter metal except that it is high in carbon and contains from 11 to 13 ½ per cent. of manganese. From one standpoint manganese steel is similar to malleable iron in that the casting as it comes out of the sand is hard and brittle and must be made ductile by a heat-treating process. The heat treatment is an essential part of the process of making manganese-steel castings and must be properly carried out to secure satisfactory results. The necessity for heat treatment limits the thickness of sections which may be made of manganese steel. Originally the annealing depth was comparatively small, but researches carried on during the past few years have resulted in an increase in the thickness of section up to 5 ½ in., which it is possible to treat successfully. Large castings are cored out to a minimum thickness of 5 ½ in., thus not only eliminating some of the internal stresses which are invariably set up in a very thick casting, but also reducing the weight and inertia of the piece, an

Jan 12, 1915

By David Keys

THE object of this investigation was to determine with a vertical magnetic variometer the extent of the titaniferous ore deposit that occurs not far from Ivry in Terrebonne County, Quebec, about 70 miles north of Montreal. The Ivry mine, on lots 37 and 38 of range V, Beres-ford township, Quebec, is one of the largest and most accessible to transportation of the deposits of ilmenite in Quebec. The ore consists of an aggregate of ilmenite anhedra serving as host for numerous fine plaques of hematite. No magnetite is known from any occurrence near this lot, and in this way the deposit differs from many others that contain a large percentage of magnetite with the ilmenite. The deposit at Ivry thus has much lower magnetic susceptibility than those containing abun-dant magnetite, and a sensitive magnetometer was necessary for the work, although a body of magnetite with ilmenite about a mile from the Ivry mine was successfully prospected with a dip needle. The principal orebody is exposed in a quarry known as the Ivry mine, from which about 16,000 tons of ore have been shipped. Small exposures of ilmenite isolated by drift serve to show the presence at the surface of some of the bodies indicated by the magnetometer,- but most of the hill is covered with glacial till and second growth hardwood. At the lower levels the till gives place to fluvioglacial sands and gravels from which the forest has been cleared. The increasing thickness of the sand and gravel as the hill descends makes the tracing outward of the deposits from the rocky knob of anorthosite a difficult matter. Within the orebodies too, some masses of anorthosite persist, which may account for some local irregularities. Fig. 1 is a photomicrograph, taken by reflected light, of a typical specimen of the ore. The dark patches are hematite and the light parts are ilmenite. No trace of magnetite was found. Fig. 2 is a photo-micrograph of a thin section of the country rock showing the texture of the anorthosite. The mean of four analyses quoted by Robinson1 is: titanium, 19.26 per cent; iron 45:41 per cent.

Jan 1, 1936

By R. W. Raymond

Under the names of Conservation, Social Justice, the New Nationalism, and Progressive Democracy, many earnest reformers are calling for a new system of Federal government to replace the one which they ascribe to our fathers, and declare to have been outgrown. They are proposing the lease by the United States of certain natural resources on the public domain, for the profit of the U. S. Treasury, instead of the sale of such resources to private citizens or associations of citizens. In the present paper, I shall try to show that this notion is neither new nor good. It is clear that the United States is owner, as well as sovereign, of public lands acquired through conquest or purchase from other nations, as it was owner of the public lands expressly ceded to it by the original thirteen States. Its policy with regard to such lands involves, therefore, two entirely distinct questions: What shall it do as owner ? and, What shall it do as sovereign ? The latter question, it must be confessed, has played but a small part in our history. All the prerogatives of sovereignty which were not explicitly conferred upon the Federal government by the original States were retained by them. The ownership or control of precious or other metals or minerals in the earth, for instance, was thus reserved to the several sovereign States. New York, South Carolina, and other States have passed laws on this subject, without regard to Federal authority. As new States have been successively admitted to the Union, the tacitly accepted theory has been, that they thereby acquired all the reserved rights of the original States. These newer States largely outnumber the first thirteen; and it is inconceivable that they would submit to any deprivation of sovereignty based on historical grounds. One of them—Texas—came into the Union by its own voluntary

Jan 1, 1913

By AIME AIME

APOCRYPHAL, no doubt, but widely entertained is the proposition that top-flight mining geologists never agree with each other on anything. Being rugged individualists, they frequently seem intolerant of opinions that conflict with their own. However, one may suspect that controversy is often more apparent than real. For example, at last summer's meeting of the American Mining Congress, Ira B. Joralemon and Reno H. Sales, discussing "Mining Geology, Today and Tomorrow," seemed to be in serious disagreement over various phases of the subject; but much of this arises from the different angles of approach of the two distinguished and successful ore finders.

Jan 1, 1941

By James Kitson, Abram S. Hewitt

I HAVE now the duty—the very pleasant duty—to perform, of presenting to the Hon. Abram S. Hewitt the Bessemer gold medal for distinguished services to the iron and steel trade. When this matter was brought under consideration in London it was well known that, as Mr. Hewitt would be the first to acknowledge, there is more than one man in America upon whom we would gladly have cm ferred this distinction, and to whom this merit might be justly at tributed ; but Mr. Hewitt has been long known to our distinguished members on the other side of the Atlantic as one of the most active minds in the investigation of new methods of manufacture, and one of the most enterprising metallurgists on this side of the Atlantic. Well, gentlemen, we proposed to Mr. Hewitt that he should receive this gold medal, but I think it is quite right, and is his due, that I should state that he at once declined to receive it; and he declined in a manner which rendered it impossible to any one but very per sistent friends and very obstinate Englishmen to refuse. When we heard that our American friends had conferred once more upon Mr. Hewitt the distinction of President of the American Institute of Mining Engineers, and particularly with reference to our contem plated visit, and when we heard that he had been elected unani mously to that position, we felt that we had received the stamp of approval from this side. Gentlemen, as I said before, Mr. Hewitt has long been known to many of us in England as an advocate of scientific education. A report which he made of the metallurgical products at the Paris Exposition in 1867 was one of the matters which drew very clearly and distinctly the attention of the English iron and steel trade to the necessity of further improvement in our technical education as to iron and steel; and it was one of those beginnings which led ultimately to the foundation of the Iron and Steel Institute. The development of the ideas which 'he there investigated undoubtedly led

Jan 1, 1891

By F. S., Mc Nicholas

A practical discussion of the theory of A block caving is presented which applies particularly to the physical conditions of the Climax orebody although the conditions are sufficiently characteristic of caving ore-bodies to provide valuable information applicable elsewhere.

Jan 1, 1950

By W. A. Ver Wiebe

Under the impetus of new demands caused by the war, the oil and gas industries of Kansas established new records during the year 1942. In all, 1513 test wells were drilled, which is somewhat of a drop from the figure of 2113 for 1941. The 1513 tests yielded 800 new oil wells, 85 new gas wells, and 628 dry holes. Thus there was an increase in two categories, the gas wells and the dry holes. Considering that last year only 592 dry holes were completed out of a much larger total, the figure of 628 dry holes causes some concern among local operators. The increase in unsuccessful tests illustrates once more the fact that each year it is becoming harder to find the remaining oil pools. When the figures are broken down, it appears that western Kansas accounted for 1177 tests, of which 689 were oil wells, 33 gas wells, and 455 dry holes. The total potential daily initial production uncovered by the successful wells amounted to 753,178 bbl. of oil and 619,734,000 cu. it. of gas. The figures for new initial production indicate a substantial drop from last year's figure of 1,691,000 bbl., and the figures on gas are slightly higher. In 1941 the new gas as based on a daily potential was 508,000,-000 cu. ft. In eastern Kansas, 336 wells were drilled. Among these in were oil wells, accounting for a daily initial potential production of 16,199 bbl. The new gas wells numbered 52 and added 253,725,000 cu. ft. per day to the gas potential production of the state. The remaining tests, 173 in number, were dry. It is interesting and perhaps significant that about half (630) of the wells drilled in western Kansas were drilled by the independent operators. Among the large companies, the Cities Service Oil Co. drilled 163 wells; the Stanolind Oil and Gas Co., 52; the Skelly Oil Co., 39; the Continental Oil Co., 48; and the Shell Petroleum Co., 21 wells. In eastern Kansas the independent operators drilled 297 out of the total of 336 wells. Among the major oil companies the Cities Service Oil Co. drilled 19; the Phillips Petroleum Co. 7; and the Sinclair-Prairie Oil Co., 6 wells. The figures based on relative percentages of dry holes to successful oil or gas wells are revealing. In western Kansas almost one half of all wells drilled by the independent operators were dry holes. The major oil companies drilled approximately 547 wells in western Kansas, of which 379 were successful in finding either oil or gas. It thus appears that the major companies fared better than the independents. In eastern Kansas the major companies drilled 39 wells, of which 29 were successful in finding commercial quantities of oil or of gas. No less than 329 wildcat test holes were put down in western Kansas and 105 in eastern Kansas, or 434 in all, during 1942. Considerably more than half of these were drilled by independent operators; 223 in western and 99 in eastern Kansas. An exploratory hole 56 mile or more from production is regarded as a wildcat well in Kansas. On a percentage basis, about 80 per cent of wildcat wells were failures. In western Kansas only 20 per cent found either oil or gas. The failures were about equally distributed among the major

Jan 1, 1943

By W. A. Ver Wiebe

Under the impetus of new demands caused by the war, the oil and gas industries of Kansas established new records during the year 1942. In all, 1513 test wells were drilled, which is somewhat of a drop from the figure of 2113 for 1941. The 1513 tests yielded 800 new oil wells, 85 new gas wells, and 628 dry holes. Thus there was an increase in two categories, the gas wells and the dry holes. Considering that last year only 592 dry holes were completed out of a much larger total, the figure of 628 dry holes causes some concern among local operators. The increase in unsuccessful tests illustrates once more the fact that each year it is becoming harder to find the remaining oil pools. When the figures are broken down, it appears that western Kansas accounted for 1177 tests, of which 689 were oil wells, 33 gas wells, and 455 dry holes. The total potential daily initial production uncovered by the successful wells amounted to 753,178 bbl. of oil and 619,734,000 cu. it. of gas. The figures for new initial production indicate a substantial drop from last year's figure of 1,691,000 bbl., and the figures on gas are slightly higher. In 1941 the new gas as based on a daily potential was 508,000,-000 cu. ft. In eastern Kansas, 336 wells were drilled. Among these in were oil wells, accounting for a daily initial potential production of 16,199 bbl. The new gas wells numbered 52 and added 253,725,000 cu. ft. per day to the gas potential production of the state. The remaining tests, 173 in number, were dry. It is interesting and perhaps significant that about half (630) of the wells drilled in western Kansas were drilled by the independent operators. Among the large companies, the Cities Service Oil Co. drilled 163 wells; the Stanolind Oil and Gas Co., 52; the Skelly Oil Co., 39; the Continental Oil Co., 48; and the Shell Petroleum Co., 21 wells. In eastern Kansas the independent operators drilled 297 out of the total of 336 wells. Among the major oil companies the Cities Service Oil Co. drilled 19; the Phillips Petroleum Co. 7; and the Sinclair-Prairie Oil Co., 6 wells. The figures based on relative percentages of dry holes to successful oil or gas wells are revealing. In western Kansas almost one half of all wells drilled by the independent operators were dry holes. The major oil companies drilled approximately 547 wells in western Kansas, of which 379 were successful in finding either oil or gas. It thus appears that the major companies fared better than the independents. In eastern Kansas the major companies drilled 39 wells, of which 29 were successful in finding commercial quantities of oil or of gas. No less than 329 wildcat test holes were put down in western Kansas and 105 in eastern Kansas, or 434 in all, during 1942. Considerably more than half of these were drilled by independent operators; 223 in western and 99 in eastern Kansas. An exploratory hole 56 mile or more from production is regarded as a wildcat well in Kansas. On a percentage basis, about 80 per cent of wildcat wells were failures. In western Kansas only 20 per cent found either oil or gas. The failures were about equally distributed among the major

Jan 1, 1943

By L. C. Morganroth

Magnesites are of two general classes - massive and crystalline.

Jan 1, 1915

By W. A., Wasley

THE EL TIGRE MINE is a highgrade silver and gold producer located in the northern part of Sonora, Mexico. It has been worked continuously since 1903, producing 50,000.000 oz. of silver and returning handsome dividends. During 1930 and 1931 falling silver prices compelled the Tigre company to make representations before the Department of Labor in Mexico City showing the necessity for drastic reductions in wages and personnel. The delays in obtaining permission from the Federal Labor Board to make these readjustments caused the company to suffer considerable financial loss during those years. After the reduction in operations was finally effected, the Sonora state government headed by Señor Francisco Elias (former Governor, now Secretary of Agriculture) and Señor Rodolfo Elias Calles (present Governor and eldest son of Señor Plutarco Elias Calles, recently Secretary of War and former President of Mexico) have cooperated with the company to make continued operation possible by revising downward certain state taxes that would have been a factor in forcing the closing of this mine. Also, permission to change our workmen over to another system of mining was essential to continued operation.

Jan 1, 1933

By WILLIAM J. LINNEY

MAGNETITE ore from Lyon Mountain, so- called "Low Phos Chateaugay," has long been known to the iron and steel industry for its almost complete absence of impurities. These magnetites occur along the northern foothills of the Adirondacks in several parallel and folded stringers which are continuous for several miles, striking generally northeast-southwest and dipping usually over 45° to the northwest, or roughly toward the St. Lawrence River. Ore of minable thickness is found in shoots of various sizes as to length and breadth, but of undetermined and possible great depth.

Jan 1, 1943

By A. S. Hewitt

After an interval of fourteen years, saddened for all of us by the death of David Thomas, the father of the anthracite iron-trade, first president of the Institute, and by the untimely loss of his successor, Alexander L. Holley, whose memory we are about to honor by loving services, the members of the American Institute of Mining Engineers have conferred upon me for the second time the office of president, under circumstances similar to those which led to the choice in 1876. Then the whole world was represented at the great exposition of industry which was held in Philadelphia to celebrate the one hundredth anniversary of our declaration of political independence. In 1890 it is our privilege to receive as guests the members of the British Iron and Steel Institute, who, with singular and graceful felicity, have appointed a meeting in the United States in the year when we pass from the second to the first place in the international column of the production of iron, and thus celebrate our industrial independence. For the honor of being chosen to extend to our distinguished guests the right hand of fellowship and a hearty welcome I return to my associates the grateful acknowledgment of one whose chief claim to your favor is to be found in his love for the professional occupation in which we are all engaged, and in his efforts, public and private, to promote its advancement into new fields of usefulness. In order to indicate the full significance of the visit of our foreign guests at this time, it will be proper to explain briefly the origin, aims and work of the Iron and Steel Institute. It unquestionably owes its birth to the International Expositions held in London in 1851 and 1862, and in Paris in 1867. These expositions served to break down the jealousies of nationality and to diffuse a better knowledge of industrial processes. Trade-secrets, which had been carefully guarded, became common property; manufacturers who had previously regarded themselves as rivals formed bonds of union and ties of friendship, as the results of an intercourse which

Jan 1, 1891

By Thomas R. Stauffer

The principle that conventional schemes for taxing petroleum or mineral resources are "inefficient" is illustrated using simulation calculations tested against an "ideal" system. Inefficiency is defined as the relative success in maximizing expected government revenues from the resources. Most systems fail because: 1) they leave oil in limbo, i.e. unproduced because of excessive fiscal burden; or 2) they unnecessarily increase the variance in the explorationist'c, rate of return by undertaxing large fields and overtaxing smaller but infra-marginal fields. This increases his discount rate and reduces taxable surplus. An "ideal" tax system is specified which maximizes government revenues while minimizing risk to the operator. Two criteria are developed: 1) the tax falls to zero on fields which yield only the minimum necessary rate of return ("marginal" fields); and 2) the after-tax present value of all fields is the same for all fields above a threshhold size. In particular, marginal fields, while contrib- uting little to expected values, do contribute to reducing variance and hence risk praemia by distributing the exploration costs over a higher probability of successful outcomes.

Jan 1, 1982