GEOLOGISTS HAVE A BUSY FINAL DAY PAPER BY PROF SCHUCHERT ON PALEONTOLOGY URGES PROPER LOGS BE KEPT. FACTORS OF VALUATION Treasury Department Official Tells How to Arrive at Deductions on Property. An illustrated lecture on the relations between paleontology and petroleum gology by Professor Charles Schuchert of Yale University was a feature of yes- terday's session of the American Asso- ciation of Petroleum Geologists. Pro- essor Schuchert throughout the pro- ceedings has been stressing the impor- tance of paleontology and of fossils in the work of the petroleum geologist. He urged in his paper that no greater ser- vice to science nor more profitable de- parture on the part of their scientific staffs can be accomplished by the great oil companies than to preserve logs of selected wells under scientific direction with a view to disclosing the strati- graphy of the fields through micro- paleontology and thus collecting the ma- terial for a paleontological geography such as would be of inestimable value to the profession. He pointed to possi- bilities that have been overlooked in a million wells that have been drilled for oil and said that if a small portion of these wells had been scientifically logged with reference to their fossil production the book of which he is the author on paleogeography of North America would be of comparatively small value. The slides shown by Professor Schu- cpert were from photographs of strata in various parts of the country and were designed to show conditions that make it imperative in studying stratigraphy of wells that the fossils be examined. Many slides showed limestone of varying gologic periods that in the absence of micropaleontology was sure to be confused as one limestone, thus laying a false predicate for further drilling. "It is encouraging to note," said Pro- essor Schuchert, "that most of the great oil companies are now recognizing the value of geology and that some of their gological staffs are devoting study to their paleontology as a necessary part of their work. Every large oil company should have paleogeographic maps showing the formations that have followed each other during the several geologic periods dis- closed by their drill records." Oil Property Valuation. Ralph Arnold of the United States Treasury Department gave a talk on the valuation of oil and gas properties for income tax purposes and his talk was supplemented by papers by Carl H. Beall, Roswell H. Johnson and Eugene W. Shaw on various concrete phases of this subject. At the outset Mr. Arnold said that the Treasury Department has need of the services of several geologists in con- nection with this law and the work on depletion and depreciation of oil and gas properties and he hopes to secure men. He said the Government can not compete with the big oil companies in bidding for such services, but would offer opportunity for wide fields and for prestige in that is an offer of the Gov- ernment is in effect to pay their worth in about one-fourth cash and three- fourths opportunity to become known to gain prestige against their en- trance into private employment. Mr. Arnold indicated that he is a believer in applied psychology in the tax- ing business much as the several gov- ermental agencies have been working applied psychology in winning the re- cent war. He said the use of common sense in arriving at depletions and deductions is the best rule and that in the end business is nothing but applied psychol- ogy. He referred to the dilemma of the producer, who, in order to make the best showing possible in his own interest, swelled his capital investments for the excess profits tax and minimized them for the purpose of the income tax. Factors affecting value of oil proper- ties, Mr. Arnold said, are the market for oil, the theoretical value of oil lands, the speculative value of leasing and drilling territories and the price of oil and amount of production from the property. He talked of so-called settled production and declared that it is an indefinite term governed by the field and the condition of the lease. (One way to reach the value of an oil property, he asserted, is to get the relation between the gross profit and the production--how long will it take the property to pay out. In established fields factors to be con- sidered are porosity of the sand, gas pressure, water troubles, depth of drill- ing, character of formation, cost of labor and supplies, method of recovery, effi- ciency of operation, distance from mar- ket, condition of roads, available trans- portation and oil reserves in the land. He concluded that the safest method of figuring is the production method. Value of Wildcat Stuff. In estimating the value of wildcat properties it was the opinion of Mr. Arnold that some potent factors are nearness to production, has it been test- ed before, dry holes, successful wells, geologic conditions, number of wells striking oil in the vicinity. The psy- chological feature was again found by Mr. Arnold, who went to some length to explain that a well being drilled by a known and successful company adds more to neighboring holdings in the value than a well being drilled by irresponsible or unknown parties. Indirect factors in finding the value of oil properties are the cost of the property, sales of similar properties and the speculative value of leasing and drilling fields. He pointed out that affidavits as to the value of oil proper- ties are of little worth toward establish- ing the value of such properties. In the case of incorporated companies or join- ted companies the value of a property is to an extent measurable by quota- tions on the company's stock on the stock exchange or in the curb market. But this test is not conclusive and the amount of royalties and rentals is a good criterion of value, he said. Apportioning Between Interests. As to royalties Mr. Arnold said that in apportioning the value of the property as between the lessor and the lessee a rule of thumb method would lead to the conclusion that the value of the in- terest of the lessor is double the value of the same interest held by the lessee. In other words, the taxable value of one- eighth royalty interest in a property are as great as one-fourth of the working interest. This is on the theory that the lessee pays all the cost and takes all the risks. Analogous to this Mr. Arnold explained that in interpreting the laws for de- ductions it is the intention of de- partments to construct reports so as to protect the wildcatter and the man who takes the risks of pioneering and discovering oil lands. The man who does actually discover oil properties will get the exemptions allowed by law or such dis- covery, but the law will not be con- strued favorably to the man who sits by and gets into the field after it has been discovered by the wildcatter. Responsibility of Geologists. In his suggestions to geologists as to their reports on properties Mr. Arnold said he would always be careful to make them conservative, to make the same kind of a report for the man who seeks to buy as for the man who is on the selling side of the market. "I used to think that my responsibility ended," he said, "when I signed my name to a report. But I found out in a few months that the report frequently got into the hands of conscious promoters and men who capitalized their holdings too highly. The result was tearful visits from widows and orphans whose money had been lost in the in- vestment, which was at least in-luced by the geological report."