Opinion ID: 1497526
Heading Depth: 1
Heading Rank: 2

Heading: Legality of the Lease and Contract.

Text: These instruments were made under the authority of the Act of Congress of June 4, 1920 (hereinbefore set out). The government contends that this act is not an independent act, is dependent on other general statutes preceding it, and must be construed in connection therewith. Appellees' contention is that the act is full and complete, covering without reference to other statutes the method of doing the things therein provided. The Act of June 4, 1920, deals entirely with the naval petroleum reserves. These had been only incidentally referred to, if not practically excluded from the Act of February 25, 1920. The purpose of the Act of June 4, 1920, was to preserve the oil in these naval reserves for the benefit of the government in such manner as Congress at that time deemed wise, viz. to place the matter almost exclusively in the hands of the Secretary of the Navy. It is of vital importance that the government's oil in these reserves shall not be drained away for the benefit of private enterprise, but that it shall be preserved in the interest of national defense. This act is as broad as an act dealing with this subject could well be. It confers upon the Secretary of the Navy wide discretion as to administering the naval reserves, directing him to take possession of the properties within the same as are or may become subject to the control and use by the United States for naval purposes, and to conserve, develop, use and operate these properties in his discretion. He may do this directly or he may do it by contract, lease or otherwise, and he is further given the right to use the oil that may be secured by contract, lease or otherwise, or to store, exchange or sell the same. Counsel for appellees argue that the language of this act compels the Secretary of the Navy to employ all of the methods suggested, and that the term in his discretion applies to the method by which he shall conserve, develop, use and operate. We do not agree with this view. It is apparent that, although the conjunction and is used, Congress intended that the Secretary should employ any or all of these methods as his discretion should dictate. Certainly if the oil can be properly conserved in the ground the Secretary of the Navy is not under compulsion to develop the properties. What he does must be for the benefit of the United States. That is the limitation of his discretion. If he shall determine that the oil cannot be properly conserved within the ground, then he has the right to develop, use, and operate the properties directly or by contract, lease or otherwise. Having decided in the exercise of a wise discretion that it is for the interest of the Navy, and therefore of the United States, to develop and operate the properties, he may do this directly, which will require the expenditure of money, or he may do it by contract or by lease. Having made a lease, which in its very nature implies the taking of the oil from the ground, and such oil being crude and not fuel oil in proper condition to be used by the Navy, he may store it. He may sell it, in which case the proceeds must be turned into the Treasury of the United States, or he may exchange the same. While appellant concedes that the right to exchange crude oil for fuel oil is proper and legal, it denies the right to exchange the crude oil for storage facilities for fuel oil. If the Act of June 4, 1920, as it seems clear it did, authorized the Secretary of the Navy to store the fuel oil, it would follow that it could be stored at established fuel depots, and, if none such existed, then places for the storage of the oil would have to be fixed and provision made for storage tanks. It would not be an arbitrary discretion exercised by the Secretary of the Navy, if he in exchanging royalty crude oil for fuel oil provided also for an exchange of crude oil for storage tanks. There was no restriction upon the Secretary of the Navy as to the amount of oil that he might have extracted from the ground either directly or by contract or lease. The argument does not appear to us sound that under this act it must be held that the Secretary of the Navy could exchange oil for anything, such as battleships or airplanes, or else that it was limited to exchange of crude oil for fuel oil. If such limitation was intended it would have been a simple matter to have expressed it in the act. It is not for the court to supply the same. The purpose of the act was to protect the oil of the government. It would not be in consonance with the purpose of the act to exchange the oil for battleships or airplanes, or land to raise a food supply for the Navy, or materials to weave cloth for the uniforms of marines, but it would be consonant with the purpose of the act to provide storage places for the oil. And under the act express authority is given to store the oil and gas products received from the naval reserves. It may be that the use of the oil certificates provided in the lease in payment for the construction of storage tanks was intended to prevent the proceeds of the sale of the oil going into the Treasury of the United States. If Congress, however, had passed an act that permitted this, then the Navy Department had the right to exercise the power so granted. Nor do we think the act invaded the exclusive right of Congress to appropriate funds for naval uses. There is a distinction between the appropriation of moneys by Congress, and the use of government property incidental to administration under an adequate grant of authority. We are convinced that the appropriation of $500,000 is not a limitation upon the construction of storage tanks. Certainly it does not limit the amount of royalty oil to be exchanged for fuel oil. The appropriation ended July 1, 1922, but the right to arrange for the extraction of oil in the method provided by the act was not limited to July 1, 1922. If the Secretary of the Navy attempted to develop and operate the naval reserves directly, this appropriation would undoubtedly be necessary to commence such operations. It would have been necessary then to call upon Congress for further money, but the appropriation was not necessary where the properties were to be developed by contract or lease. If the Secretary of the Navy should find it essential to immediately develop a naval reserve in order to prevent waste of the oil or depletion thereof by wells on adjacent property, and said oil could not be used for the current needs of the Navy, it would be his duty to store the same or sell or exchange it in his discretion. If it could not be sold, it must be stored, and the appropriation of $500,000 under circumstances easily imaginable and entirely possible would obviously be inadequate to provide storage facilities, and were Congress not in session no relief from that source could be found. We think the appropriation in the act referred to expenditures made necessary if the Secretary in his discretion entered into a direct development and operation of the properties. That the Act of June 4, 1920, even though a rider to an appropriation bill, was complete in itself, and that it did not repeal, nor was it dependent on, other acts with relation to the public lands, is our conclusion. It constitutes an exception thereto. In Washington v. Miller, 235 U. S. 422, 428, 35 S. Ct. 119, 122 (59 L. Ed. 295) the Supreme Court said: Where there are two statutes upon the same subject, the earlier being special and the later general, the presumption is, in the absence of an express repeal, or an absolute incompatibility, that the special is intended to remain in force as an exception to the general. In Witte v. Shelton et al., 240 F. 265, 268, 153 C. C. A. 191, 194, this court said: Specific legislation upon a particular phase of a single subject is not affected by a subsequent law relating to a general subject which neither refers to the earlier law nor is repugnant to nor inconsistent with it, but the two laws must stand together, the former as the law of its specific phase of the subject, and the latter as the general law relating thereto. Walla Walla City v. Walla Walla Water Co., 172 U. S. 1, 19 S. Ct. 77, 43 L. Ed. 341; Townsend v. Little & Others, 109 U. S. 504, 512, 3 S. Ct. 357, 27 L. Ed. 1012; Kepner v. United States, 195 U. S. 100, 125, 24 S. Ct. 797, 49 L. Ed. 114, 1 Ann. Cas. 655; Rodgers v. United States, 185 U. S. 83, 87, 22 S. Ct. 582, 46 L. Ed. 816; Hemmer v. United States, 204 F. 898, 903, 123 C. C. A. 194; United States v. Matthews, 173 U. S. 381, 19 S. Ct. 413, 43 L. Ed. 738. This special statute, not repealing the general statutes, the two stand together, one as the law relating to a special thing, viz. the naval reserves; the other relating to general public land matters. It was therefore unnecessary that there be competitive bidding or advertising as to the making of the lease and contract, and other statutes with relation to the method of transacting the general public business of the United States were not applicable to this situation, the special statute fully covering the same. It is urged that the lease is void because the Secretary of the Navy had abdicated the powers conferred on him by the act. This record shows great activity on the part of Secretary Fall in leasing naval reserve No. 3, and more or less passivity on the part of the Secretary of the Navy. Fall's letter to Doheny of July 8, 1921 (hereinbefore set out), and Denby's letter to Fall of October 25, 1921, in which he said 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, would seem to come close to the assumption of exclusive authority by the Secretary of the Interior, and an abdication on the part of the Secretary of the Navy of the powers granted by the Act of June 4, 1920. The executive order of May 31, 1921, however, while giving great power to the Secretary of the Interior, did not of necessity remove absolutely the administration and control of these reserves from the Secretary of the Navy in such a way as to violate the congressional act. In fact, it seemed to retain just enough control in the Navy to be within the law of June 4, 1920. It provided that no general policy as to drilling or conserving lands located in a naval reserve should be changed or adopted, except upon consultation and in co-operation with the Secretary or Acting Secretary of the Navy. The President had no authority to transfer from the Secretary of the Navy to the Secretary of the Interior powers which Congress had provided should be exercised by the former. The validity of this executive order does not seem to have been seriously questioned in the presentation of the case to this court. It was proper, of course, for the Secretary of the Navy to act through competent subordinates. Of necessity this must be so. We conclude that enough control was exercised by the Secretary of the Navy through Admiral Robison to preclude a court from holding that the entire power granted by the Act of June 4, 1920, to the Secretary of the Navy had been assumed by the Secretary of the Interior. The Act of June 4, 1920, creates no power in the Secretary of the Navy to establish fuel depots. That is a matter for the Congress, long so recognized. The lease, however, does not necessarily involve the establishment of fuel depots other than those existing. It does involve the providing of facilities for storage. Such storage might have been at fuel depots already established, and, so construed, the lease and contract are not open to the objection that by their terms they established fuel depots. Exceeding power granted does not destroy it. We are not satisfied that the acts contemplated by the lease were beyond the authority granted to the Secretary of the Navy, and the supplemental agreement must be considered as merely a necessary incident of the lease. The work thus far done in constructing storage facilities has been at the Portsmouth navy yard. The record does not disclose whether or not this navy yard was a fuel depot. The Circuit Court of Appeals for the Ninth Circuit in Pan-American Petroleum Co. et al. v. United States, 9 F. (2d) 761, has held that contracts with reference to another naval reserve, executed under the authority of the same act and involving a similar question of legality, were not authorized by the act. With great respect for the ability and learning of that distinguished court, we find ourselves unable to arrive at the same conclusion as to this lease and contract. That case is now in the Supreme Court of the United States and this legal question will there be settled. We content ourselves with saying that on this branch of the case, as at present advised, we are in accord with the conclusion reached by the trial court, that the authority granted by the Act of June 4, 1920, is sufficient to authorize the lease and contract in question.