The Washington times., 1922-08-18
TRUST GOT
VALUABLE
PROPERTY '
CONTINUED from First PagsJ

sinclair Naval Reserve lease on
the other hand. The people, as
well as our correspondent, are
entitled to know these differences.
Secretary Fall, in his defense
81 Teapot lease, tells the Presi-
dent that Salt Creek and Teapot
are one and the same oil pool,
and the Salt Creek wells will
drain oil from the Teapot; hence,
he says, he gave Sinclair the Tea
pot lease.
Differences Are Stated.
Salt Creek oil reserve and Teapot
naval oil reserve adjoin, They are
separated only by an imaginary line
of survey. Some of the differences
in the leases given by Secretary
Fall on lands adjoining this imag-
mary line are stated below.
At the Douglas land office in
June, 1921, with oil, selling at only
30 cents per barrel. Secretary Fall
sold at public auction. forty-one oil
leases on the Salt Creek side Of the
dine. Most of them are near Tea.
pot. Each of these leases pays to
the United States a fat royalty OF
either rs per cent or 33 1-3 per cent
VI lflc ol W oC phOuoSCus ~
addition to this large royalty the
bidding lessees paid the United
States an average of over 81 900 per
acre cash bonus on the lands carry.
ing the 33 1-3 per cent royalty. The
25 per cent royalty lands CON-
manded about the same cash bonus.
so WHEN HE BEGAN NEGo-
TIATIONS WITH SINCLAIR,
SECRETARY FALL KNEW WHAT
THESE LANDS HAD BROUGHT
BOTH IN ROYALTY AND CASH
WHILE OIL SOLD AT so CENTS
mcR BARREL.
In January, 1922, in Sinclair's
private car on a sidetrack at Fal.'
Three. Rivers ranch in New Mexico.
Fall and Sinclair began negotiation
TO lease the adjoining lands on Tea
pot. There was no competition or
open bidding in this private car
deal.
There are 5000 acres in Teapot
and in January, 1929, oil was selling
at $1.40 instead of so cents per
barrel. II Identical lands could
command a S1,000-per-acre bonus on
yo-cent oil, II is reasonable to as
sumo at least a like bonus could be
secured with oil at $1.40 per barrel.
But the possible 100000 bonus
was waived. '.r
: On the other hand, Sinclair w9s
given pipe line monopoly and
authorized to name a nominee" to
build the pipe lines from Salt
Creek-Teapot to connect with the
Standard Sinclair lines in the mid
continent field, and in the lease
he Is promised the probable 10000
barrels daily Government royalty
for transportation. This monopoly
on United States oil freight in
sures his pipe line profits, and this
grant, with other Salt Creek con.
ditions. prevents competing pipe
lines.
. So far, Sinclair saved the $s.0oo,-
900 cash bonus and got a pipeline
franchise and big transportation
order easily worth another slO.ooo,-
eOO-it would more than fill suit
case IL the saving was all in $1,000
bills.
The royalties to be paid by Sim
clair are based upon the average
size of all the producing wells.
The average well'' is found by
dividing the total production by the
number of wells producing that
production. In Salt Creek and Tea
not the average size" of Shannon
sand wells Is ten barrels a day: the
average size of First Wall creek
wells is IT'S barrels a day; the aver
are size OF Second Wall creek
sand wells is 253 barrels day; the
average size of Lakotah wells (only
two drilled) is 130 barrels reported.
The average depth Of the Shan
non sand wells is about 500 feet.
Under the lease Sinclair may drill
ms many wells as he chooses In
-, rxf the four "a nda
Secretary Fall tells the President
the Teapot Shannon sand wells are
commercial wells.
They are:
The lease requires Sinclair to oper.
ate all commercial wells. The shall
low shannon well will cost little and
nav large pfofits. BY drilling enough
shannon wells Sinclair can keep his
"ayerage well on the lease" down to
fifty barrels, even II he brings In
several $500 barrel wells.
When the wells average" fifty
barrels, Sinclair pays only 12h per
cent royalty on his side Of the imag-
mary line between Salt Creek and
Teapot. Fall knew Sinclair's neigh.
'bors are paying S3h per cent plus
their cash bonus.
~ Conditions Of Lease.
II Sinclair wells average" 100 bar.
rels, his royalty is only 14.5S per
sent. Even II the average was ESQ
barrels (which Is much larger than
salt Creek, which has not small
shannnon wells). his royalty will be
only 1880 per cent as against the
1913 paid by the man across the
line. Sinclair will naturally keep
his royalty charge down to 12h per
cent while his competitor must pay
either 25 per- cent or 33 Ia per cent.
and also pay interest on $1,000 an
acre invested In his cash bonus.
when the Standard puts down the
price of crude Sinclair can make
money long after his competitors go
broke.
The producer who bid a cash bonus
and pays 83 Ia per cent of his oil to
the United States. must pay It in
klnd-in the high grade Salt Creek
OF, Sinclair. under his lease by pri-
.yate arrangement, pays his royalty
IN fuel oil--in oil from which he has
extracted the gosoline. the kerosene,
xaa oil nr ha y,aau ,na., a..