Evening star., 1943-06-17
Elk Hi|Is0i|D Deal.
Called Illegal by
Justice Aide
LitteII Says Contract
Violates Petroleum
Act of 1888
By the Associated Press.

o1oilodlu u oll W. Ol CdlllOrQla
for developing the Elk Hills oil
reserve was termed illegal and
invalid today by Justice De-
partment official. who said it
violates 1888 Petroleum Con-
SerVatlOn Act.
The charge came from Norman
Llttell, Assistant Attorney General.
at House Public Lands Committee
hearing in which Representative
Elliott, Democrat, of California said
the deal had something of the
mixing of the Tea Pot Dome scam
dal OF some years ago"
The contract provided for Navy
purchase Of company land and
equipment in the California field
ana authority for the company TO
Withdraw a specified amount of oil
from the fields shallow area.
The act Of 1888 TO which Mr. Lit
tell referred empowers the Secre-
tary OF Navy to provide for con-
serVation of naval oil reserves and
for the exchange of naval lands in
the reserve with property owned bv
OiA Iolll PoilICS iIltlt.
Although naval officials declared
/ the contract was designed 10 pro-
tect and conserve naval petrmoleum
lands In the reserve, the Justice
Department position was TO the con-
, trary.
Mr.. Elliott suggested to the COM
mlttee that it 90 to Elk Hills to study
the situation on the ground" and
Chairman Peterson said he believed
al least subcommittee should 60.
Report to President.
Mr.. Llttell said he had made an
exhaustive examination OF the con-
tract and submitted a report to
James F. Byrnes, war mobilization
director. His reports will be re-
layed by Mr.. Byrnes to President
Roosevelt, Mr. Littell added, and
the Chief Executive will make the
/ decision as to whether the contract
should be Cancelled.
The committee then postponed
further study of the situation until
next Tuesday, in order to allow the
President time for study of the
report.
An authoritative congressional
source said. without permitting the
use OF his name. that he expects Mr..
/ Roosevelt to order the contract can
/ celed in view of the findings of the
Justice Department.
The contract called for pavmenr
OF $l,748 408 by the Navy 10 Stand
ard Oil in return for title and equip
ment on 1927 acres of land the COM
pany owns on the Elk Hills reserve
Tor the duration of the war. but for
a period Of not less than five years.
The Navy recently requested that
the item in an appropriation bill 10
carry through the deal be deleteG.
A naval spokesman however. de-
tended the contract with Standard
as a good one.
NoorhiS Calls for Probe.
+ The contract calls for a daily pro-
duction Of $4,000 barrels of oil from
the shallow oil zone by the COM
pany. but not to exceed 27,375 .O0n
barrels over the fve-vear period
unless specifically authorized by the
Navy.
/ Al previous session Of the Pub
/ lie Lands Committee Representative
/ VOorhiS. Democrat. of California
declared the contract called for pay
ment of "a per cent of the cost OF
developing the reserve by the Navy
in return for which the Navy would
receive "a per cent of the oil How
ever. contending the contract re-
/ ouired the Navy to sell its share 10
/ the company, then repurchase, and
that the entire deal looked danger
GUS Mr.. VoOrhis requested the COM
mittee to initiate a thorough inves-
tigation.
/ The Navy. announcing its Fix
/ Hills contract with Standard Oil
/ December II, l942-three weeks
after il was Signed-described it
! as a deal 10 end dual ownership
in the field through payment 10
Standard in cash and in kind for
/ its holdings.
! The cash was fixed at Si74S.-
40875, and the kind was to be one
third Of the oil withdrawn. repre-
/ senting. as the Navy said, compen-
/ sation for Standards interest in
/ the wells and property IN the res
/ ervation in the ratio of their re-
! Spective interests as determined by
biologists"
Only Private Owner.
Standards acreage represented
about One-flfth of the total, but
| presumably the eXpectable yield was
| higher an acre than that of the
/ Navy-owned land in the Kern Coun-
ty ,CallfD reservation. Standard
was the only private owner in the
field.
The contract first attracted at
/ tention of Congress early this year
when House Appropriations Sub
committee on Naval Affairs. headed
by Representative Sheppard, Demo-
crat. of California, began asking
questions about an item for 81
100000 for carrying out terms of
/ the deal which appeared in Navy
Department supplemental appro-
priation bill The Californian asked
more time to study the item, be-
cause Illc pI IOCCuuIc "dS uIluSudl.
and Admiral Harry A. Stuart agreed
to withhold it until the regular
Navy appropriation bill FOR 1914 was
submitted
Meanwhile the matter was referred
to Secretary of the Interior Ickes.
who assigned it to his assistant, Abe
Fortas. for study Mr.. Ickes sent
Mr.. Fortas' critical report to Secre-
tary of the Navy Knox and it soon
reached the White House. On March
26 Mr.. Roosevelt referred it to At
torney General Biddle for analysis
and recommendation in view, the
Justice Department head said later.
"of criticism of the contract, raising
doubts as to its legality and pro-
priety."
Senator LANCER, Republican. OF
North Dakota described the con-
tract as a "give-away' lease and a
! "hNSh hush" deal