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taught to fire with coal); furthermore, in derailments, which are inevitable, it would involve additional danger.

With the present data and information the Commission is not inclined, therefore, to substitute oil for coal as fuel.

The Union Company, however, on a later date-November 28-submitted copy of a concession secured from the Panaman Government, authorizing them to lay a pipe line from Chiriqui across to Bocas del Toro, with privilege also of laying a similar line from Panama to Colon, subject to the approval of the officials of the government of the Canal Zone, through which it would have to pass. They state that they have purchased tank steamers, and it is their plan to transport oil to the Pacific terminus and pipe the same across the Isthmus to their steamers for delivery on the Atlantic coast of the United States and elsewhere. They offer as an inducement to the Commission for granting this franchise to cross the Zone that they will agree to sell oil to the Commission or to any future contractor at 90 cents per barrel. They do not, however, make as a condition precedent that the Commission shall purchase its oil, but state their primary object is to secure a pipe line across the Isthmus for transportation purposes.

In so far as the utilization of oil from the Union Company at 90 cents is concerned, the views of the Commission are set forth in a foregoing part of this memorandum.

With reference to the granting of this franchise to the Union Company for through transportation purposes, to my mind there are two dominant objections which present themselves at this time:

1. To grant it to the Union people would be an exclusive concession, contrary to policy, when others are undoubtedly anxious to secure the same privilege. 2. There is considerable talk about changing the Atlantic terminus of the canal, which, if done, would result in the practical ultimate abandonment of Colon as a transportation terminal.

It might be added that as a railroad business proposition pure and simple the granting of a pipe-line concession might in effect take away business from the Panama Railroad, and in future from the Panama Canal.

T. P. SHONTS, Chairman.

WAR DEPARTMENT, Washington, December 29, 1905.

MY DEAR MR. SHONTS: With reference to the application of the Union Oil Company to put a pipe line across the Isthmus, through the Zone, I have submitted the whole matter to the President and the Cabinet, and the President, upon the advice of the Cabinet, has concluded that it would be wise to grant a clearly revocable license to the oil company at a compensation of $500 a month; this to cover the right of way through property belonging to and under the control of the Canal Commission. Of course with reference to the property owned by private persons along the way the licensee will have to make his own terms. My impression is that our license might properly include the license of the railway company as well. I am anxious, however, of course, that such a concession as this shall not in any way interfere with the convenience of the Canal Commission and the railway company in the great works of construction which they have under way. Will you kindly, therefore, confer with Chief Engineer Stevens, and obtain from him a statement of such limitations or restrictions as may be necessary to secure the result I have stated? Perhaps it would be wiser for you to send Stevens to me, and I can confer with him directly as to these limitations which ought to enter into the license which the President has directed me to draw and submit to him. You will observe that this license is not exclusive-we could not make it so even if we wished to do so, as we do not-and that it will end whenever the interests of the Government require it to end. The Union Oil Company, or any other licensee, if other licenses are granted, in building its line must take the risk of being invited to leave at any time. The money which will result from this license will be used for the public schools of the Isthmus.

Very respectfully, yours,

Hon. T. P. SHONTS,

WM. H. TAFT,
Secretary of War.

Chairman Isthmian Canal Commission, Washington, D. C.

ISTHMIAN CANAL AFFAIRS,

OFFICE OF ADMINISTRATION, Washington, D. C., December 29, 1905.

MY DEAR MR. SECRETARY: I beg to acknowledge receipt of your letter of to-day, with reference to granting a revocable license to the Union Oil Company to put a pipe line across the Isthmus, through the Zone, and will ask Mr. Stevens to see you regarding the matter.

I am convinced that other companies will ask a similar privilege, and I presume it will be the disposition of the Government to treat them all alike.

Very truly, yours,

The SECRETARY OF WAR.

T. P. SHONTS, Chairman.

WAR DEPARTMENT, Washington, Janaury 10, 1906.

MY DEAR MR. PRESIDENT: I herewith inclose a draft, of a revocable license to the Union Oil Company of California, permitting it to construct and maintain a pipe line for the conveyance of oil across the Canal Zone, which will include the revocable right to lay the pipe in the lands owned by the United States and the Panama Railroad Company, as well as the revocable power to apply for permission to construct and maintain such a pipe through private lands in the Canal Zone.

The benefit to the Government growing out of this canal license, as will be seen by its terms, is the payment for school purposes in the Canal Zone of $500 per month, and also the privilege reserved to the Government at any time of withdrawing the oil from the pipe at any place along the line, at the price of 90 cents a barrel for crude oil. This is at the rate of $4 a ton for Pocahontas coal. I have conferred with Chief Engineer Stevens in respect to the matter, and he says that it is quite probable that we shall in a short time find it useful to use this oil instead of coal in our locomotives and other engines along the Isthmus. This license, as stated on its face, is not exclusive, and there is no reason why any other company which wishes to accept such a license on the same terms may not be permitted to construct its line in the same way.

The suggestion made by Mr. Shonts that such a line might interfere with the business of the railroad company I find, after consultation with Mr. Stevens, is not likely to have any weight at present for the reason that the oil which is carried by the railroad company is all refined oil, from Colon to Panama, and is not crude oil, which the Union Oil Company, of California, proposes to pipe and which is the only kind of oil that could possibly be sold at 90 cents a barrel. Of course, should unexpected contingencies arise under which this piping of oil should interfere with any legitimate Government business, the absolute right to terminate this license would protect the Government's interest.

I inclose, together with draft of the license, Mr. Shonts's memorandum and copies of the applications of the Union Oil Company.

Very respectfully, yours,

The PRESIDENT.

WM. H. TAFT, Secretary of War.

P. S. The legal authority to grant this revocable license may be found in the act of July 28, 1892 (27 Stat. L.), so far as the lands owned by the United States are concerned. The conferring of the revocable right to maintain the pipe in the Canal Zone generally is the mere exercise of the police power which, in the absence of specific Congressional authority, belongs to the President under his constitutional duty to see that the laws are faithfully executed. It is also authorized by the Spooner Act directing the construction of the canal.

The President of the United States, upon the recommendation of the Secretary of War, hereby grants to the Union Oil Company, of California, a revocable license to construct, operate, and maintain a pipe line and appurtenances for the transmission and delivery of oil over and across the lands owned by the United States or by the Panama Rauroad Company-a company in which the United States is the owner of all the shares of capital stock-and across the territory now controlled by the Government of the United States known as the Canal Zone in the Isthmus of Panama.

The meaning of this revocable license is that with respect to the lands which are owned either by the Government of the United States or the railroad company, authority for such pipe line across such lands is hereby given. With respect to lands owned by private persons in the Canal Zone, said Union Oil Company must also obtain permission from the owners thereof before constructing the pipe line through their lands. This license is intended only to give the revocable right to occupy lands which are the property of the United States and the railroad company with such a pipe, and to extend to the Union Oil Company the revocable right to apply to private owners of the other lands necessary to construct the pipe line, and, after having secured their permission, to maintain a continuous pipe line across the Canal Zone during the continuance of this license.

But said revocable license is granted on the following express conditions: First. That at any time the chief engineer of the Canal Commission may by notice require the removal of the pipe line, not only from the lands owned by the United States and the railroad company, but from the Canal Zone entirely.

Second. That the pipe line is to be constructed by the said company in a suitable location to be designated by said chief engineer.

Third. That any change or changes in the location of said pipe line that may, from time to time, be thought necessary by said chief engineer, shall be made by said company promptly at its own expense.

Fourth. That the said pipe line shall be constructed and in operation on or before the 1st of August, 1906.

Fifth. That after the pipe line is constructed and ready for the flowing of the oil the Union Oil Company shall pay into the treasury of the Canal Zone the sum of five hundred dollars ($500.00) a month in money to the United States for the support of the public schools of the Canal Zone on the first of each and every month in advance. Should the line be constructed before the first of August, then the monthly payments are to be made from the time that oil begins to flow in the pipe at the monthly rate before stated. Should this license be revoked, the revocation to take effect at any time after the first of the month, there shall be a repayment to the Union Oil Company of the rental for the part of the month remaining after the revocation of the license.

This revocable license is granted on the further condition that oil shall be furnished, at any convenient point to be selected by the chief engineer of the Canal Commission along the line of the pipe line in the Zone, to the railroad company or the Canal Commission at the rate of ninety cents ($0.90) a barrel for the crude oil, if either the Canal Commission or the railroad company desires it.

It is distinctly understood that this is not an exclusive privilege granted to the Union Oil Company, and that the President reserves the right to grant other such revocable licenses as it may seem proper and in the public interest. As the railroad company exists under a charter, as a New York corporation, and is under the technical control of the president and board of directors, this revocable license should be accompanied by a revocable license from the railroad company, concurring in the grant of this revocable license upon the terms and conditions herein stated, in order that the revocable right to enter upon the lands of the railroad company for the construction and maintenance of the pipe line may be made technically complete.

By the President :

WM. H. TAFT,
Secretary of War.

JANUARY 10, 1906.

THEODORE ROOSEVELT.

JANUARY 11, 1906.

MY DEAR MR. SHONTS: I inclose herewith a license which the President has issued in the Union Oil Company matter. Will you be good enough to bring the matter before the board of directors of the railroad, and authorize the issue of a license in accordance with the last paragraph in the document which the President has signed?

Very respectfully, yours,

Hon. T. P. SHONTS,

Chairman Isthmian Canal Commission, Washington, D. C.

WM. II. TAFT.

ISTHMIAN CANAL AFFAIRS,

OFFICE OF ADMINISTRATION, Washington, D. C., January 11, 1906.

MY DEAR MR. SECRETARY: We have just received a copy of the revocable license granted by President Roosevelt to the Union Oil Company, of California, and observe that one of the conditions for granting the license is that

"Oil shall be furnished at any convenient point to be selected by the chief engineer of the Canal Commission along the line of the pipe line in the Zone to the Railroad Company or the Canal Commission at the rate of 90 cents per barrel for the crude oil, if either the Canal Commission or the Railroad Company desires it."

I would urge that this paragraph be changed, as at 90 cents a barrel there is nothing in it for the Commission or the railroad company unless it could be the question of transportation, and this is largely offset by a certain charge resulting from the change of the fireboxes of locomotives, steam shovels, and other similar machines.

The language as used in the license makes a fixed price of 90 cents for oil, regardless of market fluctuations. This language should be changed to read "a maximum of 90 cents a barrel." If the Commission had felt that it was ready to take up the question of using oil as fuel and had advertised for proposals, I am sure we would have received bids at considerably less than 90 cents per barrel, as I have said to the representative of every oil company who has called on me that 90 cents per barrel for crude oil was simply a stand off as against Pocahontas coal at $4, and that in order to induce us to use oil a much lower price would have to be made.

Very truly, yours,

The SECRETARY OF WAR.

T. P. SHONTS, Chairman.

WAR DEPARTMENT, Washington, January 12, 1906.

MY DEAR MR. SHONTS: I have your note concerning the revocable license granted by President Roosevelt to the Union Oil Company.

You will observe there is no obligation whatever on the part of the United States to take the crude oil at 90 cents a barrel; therefore, should there be other pipe companies upon the Isthmus there is nothing in this contract to prevent you inviting bids and getting a lower rate. In other words, it is unilateral. The contract fixes the maximum at which you can demand oil, and is exactly the same as if it had been changed to read "a maximum of 90 cents a barrel." send a copy of this letter to the Union Oil Company. Very sincerely, yours,

Hon. T. P. SHONTS,

Chairman Isthmian Canal Commission.

WM. H. TAFT.

I

JANUARY 18, 1906.

MY DEAR MR. SECRETARY: I have your letter of the 15th, inclosing one from Mr. Gates, of the Union Oil Company, commenting upon my memorandum to you relative to the use of oil for fuel on the Isthmus.

We have not, ourselves, made comparative tests on the Isthmus as to the relative value of oil for fuel as compared with coal. However, when the matter was up last spring, the best information I could get from representatives of the various oil companies, including the Standard, was that 90-cent oil was equivalent to Pocahontas coal at $4 per ton.

I recently had a verbal offer for fuel oil delivered on the Isthmus at 75 cents per barrel.

I return to you herewith the letter of Mr. Gates, addressed to you.

Very truly, yours,

Hon. WILLIAM H. TAFT,

Chairman.

Secretary of War.

Hon. WM. H. TAFT,

THE ONTARIO, Washington, D. C., January 13, 1906.

Secretary of War, Washington, D. C. DEAR SIR: I have the honor to acknowledge receipt of your letter of the 12th instant, inclosing copy of a letter addressed to you by Mr. T. P. Shonts, dated the 11th instant, and your reply thereto, for which I thank you.

It would seem from this correspondence that Mr. Shonts has failed to grasp all the advantages of the offer of the Union Oil Company of California. If you will kindly call his attention to the correspondence from the company, he will see that not only does the company offer its oil to the Government at a price not to exceed 90 cents per barrel, but that this maximum price of 90 cents is in force for the period of ten consecutive years from the date the pipe line is installed.

I desire to say further that 90 cents per barrel for oil is equivalent to coal at $3.20 per ton of 2,000 pounds, which is at least 25 per cent lower than any other available fuel.

It might be interesting to know whether or not any of the other companies referred to by Mr. Shonts in his letter have agreed in writing, or will agree in writing, to make an offer equal, both in price and continued length of time, to that made by the Union Oil Company of California.

Very respectfully,

R. WOODLAND GATES.

JANUARY 20, 1906.

MY DEAR MR. SHONTS: I have your letter of January 18, returning the letter of Mr. Gates, attorney for the Union Oil Company, commenting upon your memorandum to me relative to the use of oil for fuel on the Isthmus.

I am glad you made your comment, because it leaves no doubt with respect to the construction which the revocable license is to have. As you will see from your records (388-41), I have received a letter from Lindon W. Bates, and yesterday made reply to him, which explain themselves.

Very sincerely, yours,

Hon. T. P. SHONTS,

Chairman Isthmian Canal Commission.

WM. H. TAFT.

Resolved, That the Panama Railroad Company concur in the said revocable license granted by the President of the United States to the Union Oil Company, of California, so far as the same concerns lands held by this company upon the Isthmus of Panama.

Resolved, therefore, That a revocable license is hereby granted to the Union Oil Company, of California, to construct, operate, and maintain a pipe line and appurtenances for the transmission and delivery of oil over and across the lands owned or held by this company upon the Isthmus of Panama in accordance with the said license of the President of the United States, and subject to all the terms and conditions in said license expressed; and upon the further condition, with respect to any lands held by private persons as lessees of this company, that said Union Oil Company also obtain permission from such lessee before constructing said pipe line or any appurtenances thereof through or upon said leased lands. Said license to cease upon the revocation or other termination of said license granted by the President of the United States, or at any time at the pleasure of this company.

Resolved, That the executive officers of this company be authorized to execute and deliver any and all documents, permits, and licenses which they may deem necessary or advisable for the carrying into effect of the license hereby granted,a with the approval by the Secretary of War as representative of the United States of America as a stockholder of this company.

Whereas the President of the United States did, on January 10, 1906, grant to the Union Oil Company of California, a revocable license to construct and maintain a pipe line and appurtenances within the Canal Zone, in the Republic of Panama, and across the lands of the United States within said Zone, upon certain terms and conditions in said license expressed; and

a As second letter describes.

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