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quently lost to the United States, I beg to call your attention to the following official documents, as shown by the files of this office.

First. An extract from the minutes of the Canal Commission of July 1 last, directing the chairman to make formal request of Mr. Wallace for the delivery by him to the Commission of all data or material concerning the canal which he had brought with him from the Isthmus, together with copy of my letter to Wallace pursuant to such resolution and copy of reply made by his secretary.

A copy of my letter to Mr. Wallace, addressed to him at New York, was also sent to his home address at Flossmoor, Ill.

It will be observed that in the resolution of the Commission hereto attached Commissioner Ernst was also directed to inspect the condition of the work for a report as of July 1.

Later directions were issued to Commissioners Hains and Harrod, who sailed for Panama on July 5, that in addition to other duties with which they were charged they should study carefully the condition of the work, with the end in view of making a report as to the things actually accomplished under former Chief Engineer Wallace's supervision, until the time of the taking over of his department by Chief Engineer Stevens.

These actions were taken, not only in order that no loss or embarrassment should accrue by reason of the change in officials, but to afford a proper protection to the incoming chief engineer from disinterested and expert sources.

The reports by Commissioners Hains, llarrod, and Ernst were duly made and considered by the Commission and appear as Exhibit D in its last annual report.

In the joint report by Commissioners Hains and Harrod the following statement is made:

“ We find in the chief engineer's office a series of reports for the fiscal year ending June 30, 1905, which corresponds substantially with the date of the transfer of duties from Mr. Wallace to Mr. Stevens. These reports are by the acting chief engineer and the heads of the several departments under his and give a concise statement of the work accomplished during the past year and its condition at this date. These reports are accompanied by many blueprints.

“ We have taken a set of these reports to Washington to use in the preparation of the presentation to the advisory board of engineers, leaving the originals and copies on file in the chief engineer's office.” The reports of these three Commissioners are self-explanatory. Very truly, yours,

T. P. SHONTS. The SECRETARY OF WAR. (Inclosure as stated.)


New York City, July 2, 1905. Mr. T. P. SHONTS,

Chairman Isthmian Canal Commission, Washington, D. C. DEAR SIR: Your letter of July 1 to Mr. Wallace has just been received by me, Mr. Wallace having left the city yesterday for the West.

Just as he was leaving he directed me to inform you that all the official papers and data relating to canal matters which he brought with him from the Isthmus were taken back to Panama by the chief clerk of his office, Mr. John Seager, who sailed from New York on the City of Savannah Monday, June 26, shortly after the interview with the Secretary of War:

I send you herewith a few letters which have been received since and which have not been answered. I have inclosed in an envelope addressed to the office of the chief engineer at Panama all carbon copies and other correspondence which has been disposed of relative to canal and railroad matters. This envelope I will to-morrow morning turn over to Mr. Drake, in order that he may forward it to the Isthmus, if he so desires, as the papers contained therein relate entirely to routine matters and pertain to the Panama files of the chief engineer.

There are no other official papers or matter relating to the canal or railroad here, and Mr. Wallace did not, of course, take any with him to the West.

Mr. Wallace, as he was boarding the train, also requested me to ask you to kindly have the check for the last half of his June salary forwarded to him at Flossmoor, Cook County, Ill. Very respectfully,

H. F. TENNY, Assistant Secretary.


Washington, D. C., July 1, 1905. DEAR SIR: At a meeting of the Isthmian Canal Commission held to-day your resignation and its acceptance were reported and confirmed.

The Secretary of War informs us that you mentioned to him that you had brought to the United States certain data and studies concerning the canal.

Agreeably to the direction of the Commission, I beg leave to ask you to kindly send us, at your early convenience, all data, studies, and other matters in hand. With regards, Yours, truly,

T. P. SHONTS, Chairman. John F. W'ALLACE, Esq.,

Hotel Marie Antoinette, New York City.

[Extract from minutes of the ninety-eighth meeting of the I-thmian Canal Commission, July 1


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The engineering committee members of the Commission stated that they had all available data and information in shape ready for submission (to the Consulting Board) relative to the various levels, but that there was not in the Washington office adequate data and information to enable it to prepare plans for the sea-level project or for the presentation of such plans to the Advisory Board. It was believed that the late chief engineer, Mr. Wallace, had brought with him from the Isthmus some data of this character in accordance with his statement to that effect made to the Secretary of War. Accordingly, the chairman of the Commission was directed to make a formal request of Mr. Wallace for the delivery by him to the Commission of all data and material concerning the canal which he had brought with him from the Isthmus. The chairman at once prepared and dispatched this letter. The Commission realized, however, the urgent necessity of gathering and preparing for submission the requested data for this most important purpose and to avoid the delay incident to correspondence; and also, to obtain the advantage of personal inspection, it was determined that General Hains and Major Harrod and, if possible, also Colonel Ernst, should at once proceed to the Isthmus for this purpose.

Upon motion it was duly and unanimously

Resolved, That the engineering committee of the Commission be, and it is hereby, charged with the duty of preparing the data and plans for submission to this Commission in advance of the meeting of the Advisory Board of Engineers called by the President to be held in Washington September 1 next; and that the engineering committee submit to this Commission this data by the 15th of August; that General Hains and Major Harrod of the engineering committee and, if possible, Colonel Ernst also, proceed as quickly as possible to the Ishmus, there to secure the requisite data for the purpose aforesaid, and also there to inspect the condition of the work for a report as of July 1 or a later date if practicable."




April 9, 1906.

[Memorandum for Mr. Bishop, Isthmian Canal Commission.]

The Secretary desires to see all the letters and papers concerning the franchise granted the Union Oil Company on the Isthmus, and all letters written in connection with that matter to other companies.

FRED W. CARPENTER, Private Secretary.

WASHINGTON, D, C., November 28, 1905. Hon. WILLIAM H. Tart, Secretary of War.

Sir: The Union Oil Company of California desires to construct and operate a pipe line across the Isthmus of Panama for the purpose of transshipping oil from its tank ships at Panama to tank ships at Colon for shipment to Atlantic ports of the United States and elsewhere.

To this end the Union Oil Company of California applied to and secured from the Government of the Republic 'of Panama a concession granting to the company the right to construct docks and pumping facilities at the ports of Panama and Colon, and giving the consent of the Government of Panama (so far as such consent is necessary and proper), as lessor of the territory known as the Canal Zone, and subject to the further consent of the officials of the isthmian canal, to the construction and operation of a pipe line from Panama through said Canal Zone to Colon.

The permission of the officials of the isthmian canal being also necessary to the construction of any pipe line through the territory known as the Canal Zone, the Union Oil Company of California hereby respectfully applies for such permission, and agrees, as a condition to the granting of such permission, that if, at any time during the period of ten years immediately following the completion of such pipe line, the United States Government, the Isthmian Canal Commission, or their contractors or agents desire to use oil for fuel or such other purposes as the oil may be adapted to, the company will deliver the oil at such points along said pipe line as may be desired, at the price of 90 cents gold per barrel of 42 gallons, and to such an amount as will meet the requirements.

It is distinctly understood, however, that the granting of the desired permission to construct a pipe line through the Canal Zone imposes no obligation whatsoever under the above proposition upon the United States or its agents to purchase or use any oil from this company at any time.

The Union Oil Company of California further agrees that as soon as the desired permission is granted it will proceed with due dispatch to install its pipe line and appurtenances in such locations as may be designated by the chairman of the Isthmian Canal Commission or the engineer in charge, so as not to interfere with the canal or auxiliaries. If at any time it becomes necessary to change the location of any portion of the pipe line to avoid interference with the canal works, the company will promptly make such changes, at its own expense, whenever and as directed to so do by the officials of the isthmian canal. Respectfully,



Washington, D. C., December 4, 1905. Hon. WILLIAM H. TAFT,

Secretary of War, Washington, D. C. DEAR SIR: In the very limited interview which you were able to accord me on the 1st instant, at which time I presented to you the request of the Union Oil Company, of California, for permission to construct and operate a pipe line across the Isthmus of Panama, through the Canal Zone, I was unable to acquaint you with certain features of the proposition which are of national importance. Permit me, please, to do so herein.

The Union Oil Company, of California, is anticipating by this undertaking the principal purpose for which the isthmian canal is being constructed.

The carrying out of its plans to deliver California oil in the markets of the world will result in a vast increase in American commerce. The business already assured the company will necessitate its building a fleet of tank steamers and vessels in American shipyards. Having learned of opposition to its plans by competitors and realizing that every possible effort will be made to retard its efforts to reach the oil markets of the world, and also having in view the delay which would be necessitated by building steamers and vessels, the company last month purchased all the American tank steamers which were not owned by its competitors, viz: Lansing, Roma, Washtenau', and Argyll. The Lansing is the largest and fastest American tank steamer afloat. The acquisition of these steamers places the company in the position of having as much

in the point of capacity-American oil tank steamer transportation as any other oil company in the United States. These steamers, however, represent but a small portion of the fleet the company will have to provide to carry out its plans.

During this year the Union Oil Company has been offered a market for large quantities of its oil on long-term contracts in some of the principal Atlantic coast ports of the United States, and also in England. The great cost of transportation via the long route around Cape Horn or the Straits of Magellan operated against the acceptance of this business. Via the much shorter and cheaper route across the Isthmus of Panama by means of a pipe line, pending the opening of the Panama Canal, California oil can be profitably marketed in competition with other oil in Atlantic coast ports of the United States and in Europe.

In order to meet the demands above referred to for its oil and to generally extend its business the Union Oil Company decided to institute a transisthmian route, to enable it to reach the Atlantic seaboard and European markets. To this end it applied to and received from the Republic of Panama a concession granting to the company the right to construct and operate a pipe line from Pacific ports of that Republic to ports on the Atlantic side. A translated copy of this concession has been furnished you.

A perusal of this document will show that the company can install its terminal plants and pipe line in strictly Panama territory. The route the company would adopt would be the Government road across the Province of Chiriqui from the Port of David on the Pacific coast to Bocas del Toro on the Atlantic coast, a route practically parallel with the canal, but about 200 miles farther north.

The other route, to the use of which the consent of the isthmian canal officials is necessary, is through the Canal Zone. Of the two routes the company frankly admits its preference of the Zone route, for the following reasons :

First. It is about 20 miles shorter than the Chiriqui route, and does not require the maintenance of intermediate pumping stations, which would be necessary at Chiriqui.

Second. The existence of the Panama Railroad would greatly facilitate the distribution of the 4,000 tons of pipe along the route through the Zone, as against wagon distribution over the Chiriqui road.

Third. In the Zone the company's property would mostly be under the jurisdiction of the United States.

Because of these advantages of the Zone route the company asks permission to lay its pipe line there, and in consideration for such permission gives the United States or its agents the privilege, if desired, of obtaining fuel oil at an exceptionally low rate, which would mean saving of at least 25 per cent over coal.

Respecting the question whether oil will or will not be used in place of coal in the work on the canal, that is a matter quite apart from the purpose of the company's request to you, which is, to enable it to get its oil from the Pacific to the Atlantic ocean. But, as the use of oil for fuel has, wherever tried, shown such a great saving over coal-in cost as well as labor—it is more than probable that it will ultimately be used at Panama.

Therefore it seems obviously to the advantage of the United States Government in its work on the canal to have this pipe line and oil supply paralleling the whole line of the work. Such a plant provides transportation for delivering the oil at any point required at a very low rate for a long term of years, obviates expense to the United States for tanks and railroad transportation, provides a supply of fuel oil at the terminal ports of the canal for use by naval vessels of the United States, if desired, and the pipe line will in no way interfere with canal or railroad construction. All this without the United States Government being obligated in any way to purchase oil from or deal with this company in preference to any other.

A brief statement respecting the company and its affairs may not be amiss :

The Union Oil Company, of California, is the oldest (established over twenty years ago) and largest oil company on the Pacific coast. It owns and controls 172,000 acres of oil-producing land in California ; has extensive systems of pipe lines connecting its oil fields with three seaports; operates two large refineries; maintains over 40 distributing stations, and owns and operates between California and the Hawaiian Islands and ports of the northwest coast a fleet of American tank steamers and barges. The company's supply of crude or fuel oil is believed to be the largest in the world.

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During the twenty years and more that the company has been in the oil business it has expended over $12,000,000, and its present plans contemplate and it is prepared to invest $12,000,000 more, the greater portion of which will be expended in transportation facilities to enable the company to reach distant domestic and foreign markets. This means business for American shipyards and the development of American trade in foreign lands. For many years it has been the policy of the company to enter into long-time contracts with consumers at fixed prices. This it has been justified in doing because of its large holdings of oil territory, and it has proven mutually beneficial to the consumers and the company, as the former are warranted in investing the money required for converting their plants to burn oil and the company is justified in providing the facilities necessary for supplying the business, as it is practically assured interest on its investment.

The shares of the company are largely held by the representative business men of California. There are also many shareholders throughout the East, quite a large number being resident of New Jersey.

The company owns every branch of the oil business, including more proven territory than any other oil company in the world. Its position as owner, together with its policy of making long-time contracts, has been the basis of its


The dry season has now begun on the Isthmus, and the company desires to take immediate advantage of this condition to more quickly construct its pipe line and terminal facilities. While the company would exceedingly regret a refusal of its application for permission to traverse the Canal Zone, such refusal would, for reasons given above, force it to immediately begin constructing its pipe line via the Chiriqui route. Once established there—200 miles north of the Canal Zone—the pipe line never could be utilized for supplying oil along the route of the canal, should oil at any time be desired there, and the company would not feel warranted in establishing another half million dollar pipe-line plant in the Canal Zone, nor could it name so low a rate for oil as it has in its formal application of November 28. Very respectfully,

JNO. BAKER, Jr., Manager Union Oil Company, of California.

[Memorandum for the Secretary of War.]

DECEMBER 6, 1905. With reference to the request of the Union Oil Company, of California, for a franchise to construct a pipe line across the Isthmus, and following up our conversation of Monday, I find that the following-named individuals and corporations have from time to time addressed the Commission on this general subject : Union Oil Company

California. Lindon W. Bates--

New York. The Texas Company

_Texas. Associated Oil Company.

California. Gulf Refining Company.

Pittsburg. Higgins Oil & Fuel Company

Beaumont, Tex. The foregoing companies, while not in every instance expressly so stating, have as an underlying motive or desire to furnish to the Commission oil for fuel, but do not make specific proposals setting forth the price at which they would agree to deliver oil.

There is a consensus of opinion that the equivalent of oil for fuel, as compared with coal, is 90 cents per barrel to $4 per ton. We have been paying approximately $4 for Pocahontas coal delivered on the Isthmus, although the last contract for coal was with the Fairmont people at $3.70 per ton. This Fairmont coal at $3.70 has been thoroughly tested out and found to be no cheaper and, if anything, less desirable than Pocahontas at $4.

At the ratio above set forth the only economy in the use of oil would be cheaper cost of handling between points on the Isthmus. It would cost approximately $350 to convert each locomotive into an oil burner, and Chief Engineer Stevens states that it would be a troublesome matter to educate the class of firemen on which we are dependent to the use of oil (as they have now been

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