Evening star., 1926-12-03

the Pan-American Co. bids before the
bids were opened?" asked Mr.. Roberts.
Not to my present recollection
replied Balm.
The opinion rendered by Oscar
Sutro, counsel for the Standard Oil
Co. of California. which held that un-
der the law it was illegal to enter
| into such a contract. was next dis
| cussed by MIR. Roberts. Roberts pro-
| duced letter Balm had received from
| Ford, Bacon & Davis Co. which in
closed this opinion and Bain's reply,
in which he stated that he was hav-
| ing Sutro's opinion examined by at
| torneys both in and out of the Govern
ment service.
Balm then testified he gave Sutro' 8
| opinion TO Fall and Finney, but that
as far as he knew no solicitor in the
department had been asked to pass
upon it.
Prior to Falls departure in April
for New Mexico Balm admitted under
questioning Of Roberts, that he told
Fall. because Of the legal difficulties
involved in the contract. It would be
difficult TO get satisfactory bids. The
| result of this was the letter Fall wrote
to DENLY stating that difficulty had
been encountered with the companies
| owing to the fact that payment in
oil would be made. Falls letter ex-
planned to oil companies could not
| construct the tanks and the construc-
ton companies wanted cast in return
for their work He suggested at that
time that congressional authority be
obtained whereby Navy oil from the
California reserves could be sold for
money, and that the funds thus re-
ce.ved could he used for building the
storage facilities.
Contract Sent to Fall.
On April II. 1922, Balm, said the
Pan American bids were referred to
Fall at Three Riverts. n. Mex.
\. w. Ambrose. oil expert of the
department, took with him draft
of the contract and in fact "all the
informal ton there was on it in
Washington at the time
After Ambrose got there Balm said
that he had received word to "go
ahead"
Balm testified that he had learned
from Doheny, about April ~, that
the Pan American Co. would sub
NIT an alternate proposal on the
construction work at Pearl Harbor.
When the bids were opened, April
Is, it was found the Doheny Co.
had submitted two offers. a. bid
for in the invitation. "B" bid was
different, he said. 1t contained a
clause granting preferential right to
the Pan American Co. in the Elk
Hills reserves should they be
opened hereafter to leasing.
Balm said the "B" bid was accepted
and approved by himself Mr. Finney,
Secretary Fall and Admiral J. K Rob-
ison. Fall was at Three Rivers when
the bids were opened and did not re-
turn to Washington until after the
contract had been awarded. The wit
ness pointed out, however. that Secre.
taI-y Fall had agreed to the "B' pro-
posal when notified by wire.
Asks Value of Rights.
Roberts went briefly into the ques-
ton of preferential rights as contained
in the clause. The witness said that
he had once remarked to J. J. Cotter,
representative of the Doheny COM
pany, that "a preferential rights
clause was very valuable. "As a
matter of fact" said Mr.. Roberts,
you knew that it was estimated that
the Elk Hills reserve contained from
$50 to 250 million barrels of oil. did
YOU not?'' Rain said that that was
his impression. Mr.. Roberts abruptly
shifted cross-eXamination to the scene
of Bain's trip to California during
January of 1922. when he went to con-
fer with various oil company officials
regarding the Pearl Harbor project.
At this tine the Elk Hills lease and
the oil conversion plan were still hang
ing fire in the department.
AS he had testified previously, Balm
said he had found the oil companies