Evening star. [volume] (Washington, D.C.) 1854-1972, 1928-10-17
SINCLAIR OIL LEASE
| DELIVERY STOPPED
Secretary West HaltS Royalty
! Contract Declared Invalid
by Sargent.


stop delivery of oil from the Salt Greek
Field in Wyoming on Monday morning
October % in view of the Attorney Cen
erals opinion that the oil royalty con-
tract is invalid.
West acted after conference in the
snorning with Interior Department ex-
perts, at which the stoppage was dis
Cussed.
The Sinclair company was advised
Through q telegram dispatched to its
sof1ce at Tulsa, Okla. The statement
issued by the Department Of the IN
,sterior read:
Acting under an opinion of the At
Sorney General of the United States
dated October Is. 1923. Secretary West
nf the Department of the Interior served
notice by telegram upon the Sinclair
Crude Oil Purchasing Co. of Tulsa,
Okla. that as the Attorney General had
held that the Sinclair Co.'S oil royalty
contract of December 20, 1922, has no
binding effect on the United States
Government, delivery of Government
royalty oil under said contract will be
stopped at am, Monday morning,
October %. 1928
"A like notice has been given to all
lessees and opera tors of record, num-
Hoertng approximately 100. they being
advised that beginning at that hour
and date and until further notice the
Government elects TO take its royalties
in cash.
This is a preliminary step prepara-
tory to working out a plan for DISPOSE
lion of the Governments royalty oil in
accordance with the law
First Assistant Secretary Edward c.
Finney, who handles the departments
public land affairs: Dr. George Otis
Smith, head of the Geological Survey;
Commissioner William Spry of the
General Land Office, Ernest o. Patter-
son, solicitor for the department, and
the technical experts of the Geological
Survey were in executive session.
The stopping of oil delivery will be
made with the least possible loss to the
Government and in the most practic-
able way. the Secretary said. The out
put of oil from the scores of wells in
the field will have to be temporarily
disposed Of and as soon as practicable
the royalty oil will be readvertised for
Aale to the highest and best bidder.
The contract with the Sinclair inter-
ests has been the center of considerable
by Hubert Work, then Secretary of the
Interior
The instrument was held invalid by
Attorney General Sargent because it
contained renewal option upon which
unsuccessful applicants for the original
contract were given no opportunity to
bid
The agreement was executed by Al
bert B. Fall as Secretary of the In
terror in 1922 and was held originally
by the Mammoth Oil Co. Later the
Sinclair Crude Oil Purchasing Co. as
Bumed the contract. Fall is under in
dictment for criminal conspiracy to de-
fraud the Government as the result of
the celebrated leasing of the Teapot
Dome naval oil reserve to Harry F. SIN
clair.
Lease Renewal Granted.
With the expiration of the contract
last December, the Sinclair Co. sought
to renew under its option and renewal
was granted in February by Secretary
Work, now chairman of the Republican
national committee, who held that the
contention that the option was illegal
had not been proved, and said the de-
partment solicitor had ruled there was
no alternative.
hdt6T WOTk TeIGII6Q Tic CdSE 10 bIlc
Department of Justice and Attorney
General Sargent's ruling revealed Pres
ident Coolidge also had requested that
he take such action. Meanwhile agi-
tation developed in the Senate and
Senate committee visited the Salt
Greek field in the course of a general
Investigation of leases affecting that
territory.
Sargent declared that in his opinion
the contract has no binding effect upon
the United States, asserting that 1t was
mot let in the manner required by
law" and that it was beyond the power
OF the Secretary of the Interior to in
clude the renewal option.
The Secretary, he said, "has no pow
er to enter into contract with the
highest bidder containing an option of
renewal provision, when such provision
was not offered to all bidders in the
advertisement for BIDS He added that
there could be no doubt but that such
an option was materially advantageous
to the high bidder" enabling him to
terminate the contract If it should be-
come undesirable to him. but valuable
to the Government, but denying the
Government such privilege should the
situation be reversed.
viii Block Oil Sales.
In the five years during which the
original contract was operative, the
Sinclair Crude Oil Purchasing Co..
which is owned jointly by the Sinclair
Consolidated and the Standard Oil Co.
of Indiana took from the Salt Greek
field 19,543,536 barrels of oil at an av-
erage of S1.73 a barrel-a total of
S33,757,350
1T is we'll established" said the
power by statute to enter into a con-
tract on behalf Of the public with the
best bidder, has no power to grant
that bidder any term materially adj
vantageous to him which was not an
nounced in the advertisement for bids.
The contract entered into must be the
contract offered to the highest respon-
sible bidder by advertisement. This be-
ing so, ! think the Secretary has no
power to enter into a contract with the
highest bidder containing an option of
renewal provision when such provision
was not offered to all the bidders in
the advertisement for bids. There can
be no doubt that such option was ma
terially advantageous to the high bid
der. 1t enabled such bidder. If the
contract should become onerous to it
and valuable to the Government. to
terminate it. II, conversely. the con-
tract should become burdensome to
the Government and advantageous to
the bidder, it gave such bidder the
right TO compel the Government TO
bear this burden for the longest term
provided in the contract
1T is established by decisions Of the
United States Supreme Court that there
is no general power in the Secretary
Of the Interior apart from statute
which might enable him to sell the
royalty oil. If he fails to sell the oil
in the manner required by that section,
IN my opinion he fails TO bind the
United States.
1T appears" the opinion continued,
that when the Secretary of the IN
terror work granted the renewal I'M
Ger the option he ia so upon the ad-
Stce of tnt solicitor of the Interor De-