Evening star., 1924-01-25
Willing Surrender Oil Lease Action viii Clear Fall of Suspicion

provides for an Immediate and GER
tain saving to the government OF
$235,1S4.40 over proposal (A; second.
you suggest that it gives opportunity
| to effect an additional possible saw
ing of a considerable amount should
| the contractor succeed In erecting the
storage facilities for less than the
| amount estimated.
| "It is my understanding that unless
you secure definite assurance from
fthe department that your company
would obtain leases for certain tracts
| In naval reserve No. the Pan-Amer-
I pany would prefer not to enter into
contract as outlined in proposal
| (B). In order that the government
| may take advantage Of contract
posal OBJ, l wish to advise you that
| the Department Of the Interior will
| agree to grant to the Pan-Amerfcan
Petroleum and Transport Company,
delivery of a contract relative to the
Pearl Harbor project. leases to drill
| the following tracts Of land: The NE.
! u Of section 3. T3IS, R24E. and the
strip of land lying In the east half
on the east by the tract Of land to
| be leased to the Belridge Oil Com
pany.
Give Royalty Rates.
"Thc rate of royalty which the de-
| partment will require in the two
! tracts of land referred to above VIII
not be greater than the following: low .i.
! For all oil produced OF less thah
| go degrees Baume:
| "On that portion Of the average
production per well not exceeding
! twenty barrels per day for the calen-
dar month. 1914 per cent;
| "On that portion of the average
production per well of more than
! twenty barrels and not more than
fifty barrels per day for the calendar
month, IA 27 per cent.
"On that portion of the average
production per well of more than
fifty barrels and not more than 100
barrels per day for the calendar
month, 16 2-3 per cent.
"On that portion Of the average
production per well Of more than ian
barrels per day for the calendar
month, 20 per cent.
"On that portion Of the average
production per well Of more than
barrels per day for the calendar
month, 25 PEI cent.
"on that portion of the average
production per well of more than
barrels per day for the calendar
month, 80 per cent.
"On that portion Of the average
production per well OF more than
! 4UU barrels per Qay lot tne CaienQ2r
month, 35 per cent"
Cites Figures in Lease.
These facts conclusively demon
strate," he continued. that there
could not have been any collusion be-
tween the Pan-American Petroleum
and Transport Company and any,
body whomsoever.
an expenditure by the company of
s6,466,795.5o. which amount reduced
through economies made by the COM
pany in it's construction work and its
which. together with the sum of
s235, 900, the difference between the
company's unqualified bid and its
alternative bid, amounts to $760,000.
sum Of $4,000. by which sum the
company's unqualified bid was lower
than it's competitors bid, thus making
the contract an extremely advantage
Gus one for the government and, as
before stated. uncertain in it's benefits
to the company.
In addition. the government has
received. under a provision OF the
contract. the benefit of decline Of
so cents per barrel in the purchase of
fuel oil furnished it. amounting to
about s725.000. The construction
work under this contract is practically
completed and the fuel oil has been
delivered into the tanks at Pearl
Harbor.
Later In the year 1922, and nearly
q year after had made the loan to
Mr.. Fail, the Navy Department. de-
string additional storage facilities
Dor. requested that the original con-
tract of the Pan-American Petroleum
land Transport Company be supple
imented or that a new contract be
work and supplies, as is shown by
the letter of the Secretary of the
Navy dated November 29, 1922.
For some time negotiations we're
carried on in which the president Of
our California company. who came
on to Washington for that purpose,
together with. our Washington at
torney. discussed all phases of the
proposed supplemental arrangements
with the representative OF the Navy
and Interior Departments.
Declared Risks Great.
"On the last day before the contract
was signed. the President of the Cali
Ifornia company absolutely turned
down the contract stating that he be
. lieved there was no adequate bene-
fits commensurate with the great
risks assumed by the advancement
on the part of the company of the
necessary millions to pay the con-
) tractors. who were to perform the
construction work at Pearl Harbor
and to furnish the petroleum prod
ucts required.
made under this supplemental con-
tract for tankage facilities and Pc
troleum products is $9.017.0o0. about
. one-halt for petroleum supplies and
one-half for storage facilities. The
work is well under way and about
$1,000,000 has been expended by the
company on 1t.
'This contract gave to the Navy
just that service from the naval re-
serves that the Navy Department,
sired, which was Immediately of avail
ability of its anticipated productions,
delivered where the Navy wanted 1t.
at the time 1T wanted 1t, in such
quantities as were needed. and of the
character and quality which the
Navy's requirements called for.
"In addition, a burden. the advant-
age of which to the Navy can scarce
" be measured, was assumed by the
Navy in southern California one mil
lion barrels of free oil storage. and
of devoting 100000 barrels OF the
| company's Atlantic seaboard storage
fuel oil, subject to the Nays call
for any time for a period of fifteen
years.
Navy Held Option.
''The contract also gave the option
, to the Navy Of purchasing at the
, | company's terminal station at San
Pedro such petroleum supplies as the
| Navy may require at 10 per cent
| below the market price,
In closing. wish to state that J
left Los Angeles on January II to
come to Washington to present q
statement of all the facts to the
committee and, having been informed d
that Mr.. Fall was in New Orleans,
took that route in order to apprise
him Of my intentions and found him
already in entire accord with my
purpose"
/ 27,s4o ACRES LEASED.