Evening star., 1943-06-25
Knox Agrees 10 Probe
OF Navy's Oil Policy
By House Committee
Naval Affairs Unit States
Investigation After He
Explains Elk Hills Deal
Continued From First Page. J

comment from Representative MOtt,
Republican, of oregon that that was
"a little bit in contrast" with the
Justice Department"
Mr.. Knox asserted it was of "the
first Importance that we have an
adequate reserve" and added that
national policy dictates that we ex-
pand our reserve outside the con-
tinental United States, "in every
way possible
Some immediate attention must
be given to the immediate conserva-
ton of this invaluable material
we must maintain storage of Oil in
the ground" he told the committee
as he swung into an explanation of
the Elk Hills contract.
He said the situation at Elk Hills
offered three choices: Purchase of
Standards property, condemnation
through court proceedings or an
arrangement for its joint develop
ment.
He declared the Navy had tried"
the first of the three, purchase, but
said the company wanted S210,O00,-
600 for its interest, a figure which
he described as excessive"
Unwilling to Tie Up" Funds.
OF condemnation, he said it would
involve posting with the courts
sum representing the Navy Depart
ment's estimate of the value of
Standards interest during the pro-
ceedingS. He said undoubtedly long
litigation would follow, adding that
''in the view of the hugh demand
on the taxpayers as result of the
war" he felt that it would be un-
wise 10 tie up the money.
Mr.. Knox declared that the
choice we made"-a joint agree
ment-was made on the grounds
that it satisfied the present need
for oil and avoided posting large
sums of money.
The Justice Department report,
prepared by Assistant Attorney Cen
eral Norman M Littell, was present.
ed to the House Public Lands Com
mittee investigating the Cancelled
oil contract with the Navy Depart
ment.
Mr.. Littell's report said what he
has testifled-that the contract went
beyond" the Teapot Dome leases of
the 20S.
Mr.. Littell's report, prepared some
time ago at the request of President
Roosevelt, termed the contract "a
masterpiece of equivocation" that
was illegal and invalid" not only
under the Oil Conservation Act of
1888, but also under the War Powers
Acts. It's terms, he said, called for
pooling of approximately $500
acres of land owned by Standard Oil
with approximately 35,175 acres
owned by the Government, without
taking into consideration that water
seepage into Standards share had
impaired the value of the company's
holdings. The report recommended:
l. That the President and the
Secretary of the Navy be informed
that the contract was illegal and
void, and that appropriate action
be taken to cause Standard to cease
all activities under the contract.
2. That Standards interest in the
reserve be acquired by purchase or
condemnation. Condemnation was
desirable, it said, because of Stand
ards claims of value-more than
s146,0O0,000 after tax deduction.
3. That demand be made on
Standard for an accounting for the
crude oil extracted under the pre-
sumed authority of the contract"
and for damages, if any, for the use
Of the Governments property and
equipment.
f. That should Standard refuse to |
cease operations or refuse to satisfy
the demand for an accounting and
for damages, action be instituted to
set aside the contract, quit title to
the Governments lands, account
for the value of all crude oil and
provide for damages.
The Government" the report
said, faces choice of alternatives:
either the congressional policy of
conserving oil in the ground must
Government may receive payment
for the estimated l2,250.000 barrels
owing to it from five years of pro-
duction. or a credit of approximately
sl2,25O000 owing to the Government
would remain indefinitely on the
books of the Standard Oil Co., un-
collected and without interest"
Comparing the contract to the
Teapot Dome and Elk Hills contract
of the Harding administration, the
report said:
I'm degree this agreement goes
beyond the contracts involved in
the cases. = A" In these cases the
Government crude (oiD was to be
exchanged for fuel oil and storage
facilities. Here under the agreement
an interest in the oil content of the
Government land. together with
an interest in the Government i'm
provements in that land and all
equipment on that land, would be
exchanged for proportionate inter-
est in the oil content of Standards
land, improvements and equipment.
Such an agreement is not sane
toned by the act"