Opinion ID: 1497526
Heading Depth: 1
Heading Rank: 1

Heading: History and Facts.

Text: It is advisable briefly to review the situation with reference to its historical aspect and the matters leading up to the execution of the lease and supplemental agreement. What the policy of the federal government may have been as to oil and mineral lands in the past, or whether it had any policy, may not be clear. However, on September 27, 1909, a federal order was issued, withdrawing as part of the public domain part of the oil lands now constituting a portion of naval reserve No. 3, the subject of this controversy. June 18, 1910, another executive order was issued to the same effect, covering other lands now included in said naval reserve No. 3. April 30, 1915, naval petroleum reserve No. 3 was created by executive order. The General Leasing Act applying to oil and gas lands became a law February 25, 1920 (chapter 85, §§ 1-38, 41 Stat. 437 [Comp. St. Ann. Supp. 1923, §§ 4640¼-4640¼ss]). After the passage of this act it was reasonably probable that the Salt Creek field bordering naval reserve No. 3 would be partially, if not entirely, developed, and that this would probably affect the question of drainage as to said naval reserve. Other naval reserves would also be affected by development of adjacent territory. Actuated presumably by said situation Congress passed the Act of June 4, 1920, c. 228, § 1, 41 Stat. 813 (Comp. St. Ann. Supp. 1923, § 2804i). This section was contained in the Naval Appropriation Act of June 4, 1920, and is as follows: The Secretary of the Navy is directed to take possession of all properties within the naval petroleum reserves as are or may become subject to the control and use by the United States for naval purposes, and on which there are no pending claims or applications for permits or leases under the provisions of an act of Congress approved February 25, 1920, entitled `An act to provide for the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain,' or pending applications for United States patent under any law; to conserve, develop, use, and operate the same in his discretion, directly or by contract, lease, or otherwise, and to use, store, exchange, or sell the oil and gas products thereof, and those from all royalty oil from lands in the naval reserves, for the benefit of the United States: And provided further, that the rights of any claimant under said Act of February 25, 1920, are not affected adversely thereby: And provided further, that such sums as have been or may be turned into the Treasury of the United States from royalties on lands within the naval petroleum reserves prior to July 1, 1921, not to exceed $500,000, are hereby made available for this purpose until July 1, 1922: Provided further, that this appropriation shall be reimbursed from the proper appropriations on account of the oil and gas products from said properties used by the United States at such rate, not in excess of the market value of the oil, as the Secretary of the Navy may direct. Prior to the time that Mr. Denby and Mr. Fall became respectively on March 4, 1921, Secretaries of the Navy and of the Interior, some leases requiring drilling had been made by the retiring Secretary of the Interior for oil drilling on lands in the Salt Creek field, and he had also offered other leases for sale at public auction subsequently to be held. In May, 1921, Secretary Denby suggested to the President that the Secretary of the Interior be placed in charge of the administration of the naval reserves. Secretary Fall on May 11, 1921, wrote to Secretary Denby concerning the matter, and inclosed a letter for him to sign and send to the President, together with an executive order for the President's signature, placing in the Interior Department the control and development of the naval reserves. There was opposition to this order in the Navy Department, and changes were made therein which were assented to by Secretary Fall. The order as finally agreed upon by Secretary Denby and Secretary Fall was taken to the President by Assistant Secretary of the Navy Roosevelt, and signed by the President May 31, 1921. It is as follows: Under the provisions of the Act of Congress approved February 25, 1920 (41 Stat. 437), authorizing the Secretary of the Interior to lease producing oil wells within any navy petroleum reserve; authorizing the President to permit the drilling of additional wells or to lease the remainder or any part of a claim upon which such wells have been drilled, and under authority of the Act of Congress approved June 4, 1920 (41 Stat. 812), directing the Secretary of the Navy to conserve, develop, use and operate, directly or by contract, lease, or otherwise, unappropriated lands in naval reserves, the administration, and conservation, of all oil and gas bearing lands in naval petroleum reserves Nos. 1 and 2, California, and naval petroleum reserve No. 3 in Wyoming and naval shale reserves in Colorado and Utah, are hereby committed to the Secretary of the Interior subject to the supervision of the President but no general policy as to drilling or reserving lands located in a naval reserve shall be changed or adopted except upon consultation and in cooperation with the Secretary or Acting Secretary of the Navy. The Secretary of the Interior is authorized and directed to perform any and all acts necessary for the protection, conservation and administration of the said reserves subject to the conditions and limitations contained in this order and the existing laws or such laws as may hereafter be enacted by Congress pertaining thereto. Warren G. Harding. The White House, May 31, 1921. July 8, 1921, Secretary Fall wrote to Mr. Doheny, who was interested in a lease upon other naval reserves, as follows: There will be no possibility of any further conflict with Navy officials and this department, as I have notified Secretary Denby that I should conduct the matter of naval leases under direction of the President, without calling any of his force in consultation, unless I conferred with himself personally upon a matter of policy. He understands the situation and that I shall handle matters exactly as I think best, and will not consult with any officials of any bureau of his department, but only with himself, and such consultation will be confined strictly and entirely to matters of general policy. On July 23, 1921, Secretary Fall wrote Secretary Denby as to the use of the government's royalty crude oil in exchange for storage facilities. This letter is as follows: In connection with the recent authorization to the Pan-American Petroleum Company and the United Midway Oil Company to drill 22 offset wells in naval petroleum reserve No. 1, California, I would like to be advised, as promptly as possible, what arrangements the Navy desires to be made for the handling and disposition of its royalty oil from said wells, as well as from any other wells in naval reserves, to which the Navy is entitled to royalty in kind. As the lease provides that purchasers will take care of the oil only for a limited period, it is important that provision be made to dispose of same promptly. I suggest the desirability of effecting an exchange of the crude oil received as royalty for an equivalent value of fuel oil, to be stored without expense to the United States by the other party to the exchange, preferably the exchange should be not only of crude oil for fuel oil in storage but for the tanks containing the Navy's stored oil. In other words, my suggestion is that the crude oil be exchanged for tanks and fuel oil, the title to both to be vested in the Navy as a result of the exchange. If this plan meets with your approval, and you desire me to undertake to consummate the arrangement, I shall be glad to do so. In any event, I should like to hear from you on the subject as soon as possible. Secretary Denby acquiesced in this suggestion by letter of July 29, 1921, as follows: Replying to your letter of the 23rd of July, I am glad to acquiesce in the suggestion made by you. It will be of great benefit to the Navy to have the royalty crude oil from wells on the naval reserves (both those already in operation and those to be drilled by the Pan-American Petroleum Company and the United Midway Oil Company) exchanged for fuel oil at tidewater, to be stored if practicable without expense to the government, and if possible for tanks in which such fuel oil can be stored. As the Navy has no appropriation to pay for the cost of construction of tank storage, the acquisition of tanks by exchange for crude oil from naval reserve wells will be most acceptable. While these tanks could be readily utilized at any point at tidewater, the usefulness to the Navy would be increased if they could be located at any one of the following points: San Diego, San Pedro, San Francisco Bay, Puget Sound, Honolulu, or Pearl Harbor, Hawaii. In view of the greatly reduced amount available under the appropriation `fuel and transportation' for the present fiscal year, it would be of special benefit to the Navy to obtain royalty fuel oil at this time, as such oil would not involve a charge against the appropriation. Shortly thereafter Secretary Fall went West to confer with oil men and returned in October, 1921. In September, 1921, Harry Foster Bain, Director of the Bureau of Mines, Department of the Interior, made an inspection trip to the West and inspected naval reserve No. 3. He was accompanied by Arthur W. Ambrose, Chief Petroleum Technologist of the Bureau of Mines. They conferred at Denver with Mr. C. A. Fisher, a geologist, and Mr. Carroll H. Wegemann, who had previously been connected with the Geological Survey, and had made an examination and report as to the geological structure of naval reserve No. 3. In September, 1921, Wegemann submitted a report to the Geological Survey differing somewhat from the previous report in that it placed the saddle between Salt Creek and Teapot Dome further south than in the preceding report. This later report states: From consideration of the above facts, it is obvious that as wells are drilled along the northwest line of the naval reserve, part of the oil produced by these wells will be drawn from the naval reserve itself. October 1, 1921, Admiral John K. Robison became Chief of the Bureau of Navy Engineering in charge of the Naval Petroleum Reserves, and on October 8, 1921, took personal charge of all naval petroleum reserve matters on the part of the Navy. In October, 1921, Secretary Fall, Robison, Bain, and Ambrose in conference discussed the Wegemann report recently submitted. As a result of this meeting, through instructions by Secretary Fall to the Director of the Geological Survey, Mr. K. C. Heald was selected to make further investigation of the drainage question as affecting Teapot Dome. He submitted a written report on November 30, 1921, which contains the following: At the present rate of production a year or more must elapse before any part of the reserve is appreciably damaged. Only one producing well has been drilled within one location of the line of the reserve, and this well will not be likely to affect the territory more than 300 to 400 feet distant for some months. That part of the reserve which it will affect must be regarded as one of its poorest portions.    No further leasing should be done. The lands last leased will permit some slight drainage of unleased land within the reserve, but this is unavoidable, if an effective barrier is to be maintained between the producing wells and the underground storage. On October 25, 1921, Secretary Denby wrote Secretary Fall as follows: Rear Admiral J. K. Robison reported to me that, as a result of his interview with you on Saturday, October 22, the following general agreement in connection with the naval petroleum reserves was reached: 1. That arrangements will be made by the Interior Department to have naval petroleum reserves Nos. 1 and 2 drilled with offset wells in every case where adjacent property is drilled.    7. That all leases and contracts, except as provided in paragraph 6, will be arranged and consummated by the Interior Department, copies of same being furnished to the Navy Department as a matter of information and record only.    9. That the development of naval petroleum reserve No. 3 is not to be undertaken, except to protect the government against depletion of the reserve by other parties. Secretary Fall ratifying this arrangement, replied: Washington, October 30, 1921. My Dear Mr. Secretary: I have your letter of October 25 and have just consulted Admiral Robison about the subject-matter. Responding to your request for information as to whether the policies set forth in the letter are agreeable to the Department of the Interior, I can say without hesitation that they are entirely agreeable and will be carried out to the very best of my ability. Of course, should any new matter come up at any time, I will unhesitatingly and immediately consult you personally or through Admiral Robison. As to the definite date when you may expect fuel oil as payment of your royalties, I can give you accurate information within a very few days. Several of your wells are coming in, one or two are in, and we can exchange immediately for fuel oil certificates through which you can draw fuel oil as needed at Pacific ports. Very sincerely yours, Albert B. Fall. The question of exchange of royalty crude oil for fuel was discussed November 29, 1921, at a meeting of the Navy Council, which consisted of chiefs of bureaus of the Navy, and as a result Admiral Robison on November 30, 1921, wrote to the Judge Advocate General as follows: It is proposed to exchange the royalty crude oil for fuel oil in storage at Pearl Harbor or other points to be later designated by the United States Navy. It is planned that the tanks in which this exchange oil shall be stored shall be provided by the lessor of the oil wells. Will this be legal, it being presumed that the oil in storage at Pearl Harbor, as well as the tanks and appurtenances, are to become the property of the United States? The Judge Advocate General on November 30, 1921, answered as follows: 4. Answering your questions, specifically, you are advised: (a) It would be legal to exchange the royalty crude oil for fuel oil in storage at Pearl Harbor or other points to be designated by the Secretary of the Navy under arrangement whereby the exchanged oil (shall) be stored in tanks provided by the lessee of the oil wells, such tanks and their appurtenances to become the property of the United States. (b) It would be legal to use the royalty oil on board vessels of the United States Navy, and, if so used, it should be expended at such rate, not in excess of the market value of the oil, as the Secretary of the Navy may direct, and should be debited at the rate so fixed by the Secretary to the appropriation `fuel and transportation.' This opinion was approved by the Secretary of the Navy. Secretary Fall was familiar with a somewhat contrary opinion rendered by the counsel of one of the companies interested in the Pearl Harbor tank-storage matter. December 9, 1921, Assistant Secretary Roosevelt wrote Secretary Fall with relation to the storage of fuel oil in tanks at Pearl Harbor as follows: In view of the fact that this project is embodied in the war plans of the Navy Department we request that all the matters in connection therewith be regarded as confidentially as possible. December 31, 1921, Mr. Sinclair and his counsel, Mr. Zevely, visited Secretary Fall at his home at Three Rivers, N. M. The leasing of naval reserve No. 3 was discussed. After the visit of Sinclair and Zevely to New Mexico, and before Fall's return to Washington, witness Eddy, who was in the General Land Office in charge of leasing oil lands, was instructed by Mr. Safford, Administration Assistant to Secretary Fall, to make a memorandum relating to claims of record on Teapot Dome, the same to be given to the Secretary upon his return. This investigation was conducted by Roy W. Tallman. His report January 12, 1922, referred to the report on the subject of one Glenn B. Morgan (formerly mineral surveyor in the department) of date July 26, 1917. In his report Tallman said: It may be stated that there are no mineral claims to any of the lands in the said Naval Reserve which deserve serious consideration. When Secretary Fall returned to Washington on January 27, 1922, he had a conference with Bain, Ambrose, and Robison, at which the subject of drainage on naval reserve No. 3 was again discussed. This conference was in the nature of a continuance of the October conference. The opinion of Ambrose and Bain, as expressed at this meeting, was, according to Ambrose's testimony, that in all probability the drainage at that time was not serious, but that, if the leases in the southern end of the Salt Creek field were developed, they would actually drain the second Wall Creek sand, and that, as time went on, this drainage would become quite serious. Bain, as to the conference, testifies: I certainly did not realize at that time that that conversation was going to dispose of 9,000 acres of oil land by lease. I know that in that conversation we did enter into the question of whether we ought to do something with regard to No. 3; that is, what they would do. Ambrose was of the opinion that the danger of drainage in naval reserve No. 3 was not immediately serious, but that it would become so as development under the leases of the Salt Creek field proceeded; that it was not such as to necessitate a lease on April 7, 1922. He filed a report on the subject February 18, 1922, having been instructed by Secretary Fall to prepare a memorandum thereon. It contained this: In conclusion, it is believed that, if oil is found in the saddle in the second Wall Creek sand, the leases which have been granted along the northern zigzag boundary separating the two structures will result in drainage of this sand in the Teapot Dome during the next six or seven years to a point on the south section line of section 28, T. 39 N., R. 78 W., and if conditions are favorable the productivity of the sand will be affected even farther to the south. The question of the danger of drainage of Teapot Dome arose entirely as to the second Wall Creek sands. The first Wall Creek sand, according to estimates, contained between 50,000,000 and 55,000,000 barrels of oil, and was sealed off by a water seal from the first Wall Creek sand in the adjoining Salt Creek field, and was not subject to drainage. The second Wall Creek sand was estimated to contain about 85,000,000 barrels. After the conference in January, 1922, Robison reported to Secretary Denby that the danger of drainage to reserve No. 3 was grave, and recommended that some action be taken. The Secretary became convinced thereof and instructed him to proceed to accomplish the opening of Teapot Dome reserve as a whole. Robison's reasons for reaching his conclusion as to Teapot Dome, as stated in his testimony, were: First, there was the experience we had had in California, where in my opinion we had suffered the loss of several millions of dollars by failing, by delaying too long in putting down offset wells; second, there was what I regarded as a pressing national emergency regarding our state of security; third, and in connection only with the use of the word `entire,' the leasing of the entire Teapot Dome, there was a conviction in my mind that by handling it as one matter we could make better terms than we could make if we handled it as a series of small affairs; that it would involve much less cost to us and much less trouble to the government and would produce better terms. Further, I was of the opinion that to do it in that way would be the only way in which we could secure the big capital expenditures that would be required on the part of the contractor to accomplish some of the, perhaps, overambitious ideas that I had. Those considerations were the major ones that actuated me. If they were not the only ones, they are the only ones that I now recall. They were all potent in reaching that decision. Shortly after the decision was reached to open and develop the entire reserve No. 3, Secretary Fall, Sinclair, Zevely, and Robison had a meeting in Fall's office and discussed the subject of a lease thereof. Robison was instructed by Secretary Fall to set forth the Navy's requirements as to a lease. He advised Sinclair that a pipe line must be constructed of adequate capacity to care for the production of the field; that the proceeds from the royalty crude oil should be used in the erecting and building of specified storage facilities on the Atlantic coast; that the royalties were not to be taken in cash, because the cash would have to be covered into the United States Treasury. Robison at that time had no notice as to the outstanding placer mining claims. February 3, 1922, Sinclair submitted a tentative proposition to the Secretary of the Interior as to the terms on which he would undertake the lease. This contained an undertaking to quiet the outstanding placer mining claims known as the Pioneer and Belgo claims. Negotiations continued respecting the terms of the lease over a considerable period of time. There was extended discussion as to the subject of royalties. Likewise the rate of exchange of royalty crude oil for fuel oil. Secretary Fall instructed Ambrose (Sinclair and Zevely being present in his office) to prepare a rough draft of a lease embodying the terms of the proposed lease. The lease was prepared chiefly in the Washington office of Mr. Zevely. Mr. G. T. Sanford, also counsel for Mr. Sinclair, attended to the mechanics of the lease. Fall dictated the preamble and settled the questions that arose, inserted something in the contract with respect to the common carrier, and made changes in the wording of the oil certificates. The draft of this lease was not submitted to any lawyer in the Department of the Interior for an opinion thereon. February 28, 1922, the Mammoth Oil Company was incorporated by Sinclair, he being the owner of all its capital stock. While the lease and the subject thereof were under negotiation, there was pending in the Department of the Interior application for leases by the Pioneer and Belgo Companies under the Leasing Law of February 25, 1920. The officers of these companies came to Washington and entered into negotiations with Sinclair for sale of their placer mining claims, and a written contract was made dated March 11, 1922, by Mammoth Oil Company with the Pioneer and Belgo Companies, claimants, providing for the payment of the equivalent of $1,000,000 for the claims, subject to the execution of the lease in question here, and quitclaim deeds were executed by the Pioneer and Belgo Companies to the Mammoth Oil Company. On March 11, 1922, the Mammoth Oil Company applied formally to the Secretary of the Interior for a lease of the entire petroleum reserve No. 3, tendering quitclaim deeds to the United States for the Pioneer and Belgo claims, and accompanying the application with a letter from Sinclair to the Secretary of the Interior as follows: New York, March 11, 1922. To the Honorable the Secretary of the Interior  Sir: The Mammoth Oil Company has this date made application for an oil and gas lease covering that part of the public lands of the United States designated in executive order of withdrawal issued by the President of the United States on April 30, 1915, creating naval petroleum reserve No. 3, Wyoming No. 1, involving 9,321 acres, more or less, situated in Natrona county, state of Wyoming, and more fully described in said application. In the event said application is granted, and a contract of lease is made between the United States and the Mammoth Oil Company covering said lands, I will become the owner of all the capital stock of said Mammoth Oil Company. In consideration of the United States granting said application and making a contract of lease with the Mammoth Oil Company, I hereby personally guarantee the performance on the part of said Mammoth Oil Company of all its obligations under said contract of lease. This guaranty shall become effective upon delivery to Mammoth Oil Company by the United States of said contract of lease. Respectfully, H. F. Sinclair. Secretary Fall signed the lease on April 7, 1922, as Secretary of the Interior, and also subscribed himself and for the Secretary of the Navy. Secretary Denby formally signed the lease April 12, 1922, after having had it in his possession for a number of days. The preamble of the lease dictated by Secretary Fall contained several paragraphs reciting the objects to be attained, as follows: Whereas, the government of the United States is charged with the duty of securing and storing a supply of fuel oil for naval purposes, and is desirous of acquiring suitable storage for such fuel oil at points easily accessible to the United States Navy; and Whereas, the government is desirous of avoiding in so far as possible any risks of loss of the supply of crude oil available for the United States Navy by a reduction of gas pressure resulting from the drilling and operating of wells located outside of naval reserve No. 3, Wyoming; and Whereas, the government is desirous of creating a competitive market and securing the best prices obtainable for royalty oil received and to be received by the government of the United States from the public domain in the Salt Creek field in Wyoming; and Whereas, the government is desirous of exchanging crude oil that may be received by it as royalty from the said naval reserve No. 3, for fuel oil for the use of the United States Navy, and is desirous of securing adequate storage facilities for the storing of such fuel oil as is received by it in exchange for said crude oil over and above the requirements for use of the United States Navy. Article 1 provides for the leasing of the lands comprising Teapot Dome to the Mammoth Oil Company. Article 2 provides for bond and the sinking of certain test wells and operations concerning the construction of a pipe line, additional wells and fixing royalties to be paid, and that in lieu of delivering royalty oil to the lessor in kind, the lessee shall issue oil certificates to the lessor as evidence thereof. The lease contains this provision: The lessee agrees, if and when requested so to do by the lessor, to construct or to pay the cost of construction of steel storage tankage up to, but not in excess of, such an amount as shall be estimated to be necessary or required for the storage by the lessor of the fuel oil to be received by it as hereinbefore provided in exchange for royalty crude oil from the lands hereby leased; said storage to be constructed as and when the same shall become necessary or shall be required for the storage of such fuel oil so delivered by the lessee or its nominee, and said storage to be located at points designated by the lessor; the cost of such tankage to be liquidated by lessor by delivering to the lessee or its nominee crude oil certificates hereinbefore referred to, said certificates so delivered to be of the face amount in value equal to the cost of such tankage for which the lessee or its nominee shall have paid or become liable. No public notice of the intent to lease Teapot Dome was ever given. The representatives of various oil companies learning in some way that there was a prospect for the lease of the Dome wrote to or called upon Secretary Fall or other officials of the Navy or Interior Departments. All were unsuccessful, except two parties, viz. John C. Shaffer and possibly Gerald Hughes. Secretary Fall suggested to Sinclair that he wanted Shaffer to have 200 acres of Teapot Dome reserve and Gerald Hughes 80 acres. After conferences between Sinclair and Shaffer, it was agreed that Shaffer should have approximately 400 acres, the record not disclosing the exact amount. Shaffer wired Fall March 23, 1922, thanking him for his interest and help in the matter. Whether Hughes received any of the leasehold the evidence does not indicate. The oil interests applying to Secretary Fall for leases on parts or all of Teapot Dome were the following: The Producers' & Refiners' Corporation of Wyoming, a company with a capital of more than $50,000,000, was represented by one Frank E. Kistler, who called on Assistant Secretary Finney in March 1922, to discuss the matter. Finney referred him to Secretary Fall, who informed him he was not ready to receive applications or to consider the leasing of reserve No. 3, but promised to notify him and give him an opportunity to bid on the reserve if he did decide to lease. Kistler heard nothing further until he saw in the newspapers that a lease of Teapot Dome Reserve had been made to the Mammoth Oil Company. Mr. Amos L. Beaty, president of the Texas Company, with a capital of approximately $165,000,000, sought an interview with Secretary Fall on the subject of leasing Teapot Dome, and had the same on March 30, 1922. Secretary Fall informed him that he had a satisfactory proposition from Sinclair, but he would be glad to have the Texas Company submit a bid. Secretary Fall also advised him of the outstanding placer mining claims on the reserve, and that it would be his policy to require that these be satisfied, and that the company acquiring and taking care of them would be given preference treatment. He also advised him that Sinclair had acquired these claims. There was some telegraphic correspondence between Secretary Fall and Beaty with reference to Salt Creek prospects. Birch Helms, vice president of the Texas-Pacific Coal & Oil Company, on or about September 1, 1921, called on Assistant Secretary of the Navy Roosevelt and Judge Finney, Assistant Secretary of the Interior, in regard to leasing of Teapot Dome. He was informed that it was not to be leased. In April, 1922, he called on Secretary Denby with relation to the same matter. Secretary Denby informed him it was out of his hands and in the hands of the Interior Department. He saw Secretary Fall on or about April 10, 1922. Fall told him he would entertain a bid from the Texas-Pacific Coal & Oil Company, first inquiring if it was in any way connected with the Standard Oil, as he wished this contract to be made with a company independent of the Standard Oil. Helms knew nothing of the lease to the Mammoth Oil Company until April 19, 1922, when he noticed it in a newspaper report from Washington. Some time after negotiating the lease, the government requested the Mammoth Oil Company, in the exercise of the option provided in the lease (hereinbefore set forth), to provide for the construction of steel storage tanks necessary to store the fuel oil which it elected to receive in exchange for royalty oil. Negotiations were entered into between representatives of the Mammoth Oil Company and of the United States respecting the preparation of a supplemental agreement to provide for the storage of fuel oil in accordance with said option. These negotiations culminated in the execution of what is known as the supplemental agreement of February 9, 1923. Secretary Denby and Secretary Fall signed the supplemental agreement on behalf of the United States. Robison testifies that before Secretary Denby signed it he had gone over it thoroughly and familiarized himself with it; that he assisted the Secretary of the Navy in doing this. This contract, which is inextricably interwoven with the lease, provides for the construction by the Mammoth Oil Company of storage tankage and facilities at the navy yard at Portsmouth, N. H., the naval fuel depot, Melville, R. I., Governor's Island, Boston Harbor, and naval fuel station, Yorktown, Va. Appellees, Sinclair Crude Oil Purchasing Company and Sinclair Pipe Line Company, were made defendants because of certain rights derived from the Mammoth Oil Company. Both companies have incurred heavy expenditures in carrying out their obligations to Mammoth Oil Company. The United States alleged in its complaint that both were trespassers. Their rights stand or fall with the lease and contract of the Mammoth Oil Company. We do not further set forth the facts shown by the evidence, as of necessity they must be considered in the discussion subsequently of the question of fraud, and there is no need of duplication. The foregoing covers the important matters leading up to the execution of the lease and contract in question.