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Canal Commission there is no obstacle in their way. The Commission can advertise for bids, and if the bids are not as low as our contract calls for, we will supply the oil. We submit, however, as a matter of fairness, that applicants for the pipe lines across the Isthmus should be placed upon the same footing we are, and should be subjected to the same conditions we have met.

However, in closing we wish to say that if other companies do not occupy a position sufficiently strong to justify their guaranteeing to furnish oil for a period of ten years at 90 cents per barrel, and this feature of our proposition is looked upon unfavorably, we are pleased to further verify the real object of our pipe line by consenting to have that portion of our proposition canceled. If such obligation on us was withdrawn, we should be perfectly satisfied to have pipe-line privileges granted to other companies on the same basis as ours, with this clause eliminated. We are frank to say, nevertheless, that our Government would probably sustain considerable financial loss by such a modification.

In conclusion, we wish to reiterate that we are going into the eastern markets to introduce genuine competition with most powerful rivals. We think that our actions along these lines should not be hampered by any such proposed changes as are contained in the letter to the President.

Very respectfully,

JNO. BAKER, Jr.

[Sent to Clarence W. De Knight, attorney, Kellogg Building, city.]

MARCH 31, 1906. GENTLEMEN: I beg to say that some time ago I had a conversation with a representative of yours in reference to the making of the Union Oil Company a common carrier of oil through the pipe line which it proposes to construct across the Isthmus of Panama. I have conferred with a representative of the Union Oil Company as to whether it would be practicable for them to consent to this arrangement, and have had correspondence with them which satisfies me that their use of the pipe line they propose to erect, and for the erection of which they now have a revocable license, would be inconsistent with their offering it for use by the public.

Your representative, Matson, I think, was his name, who called on me then inquired whether you would be permitted to construct a pipe line across the Isthmus to be used by the public at rates to be regulated by the Secretary of War or the governor of the Zone. I have submitted this matter to the President in Cabinet, and am authorized to say that should you make an application exactly similar to that made by the Union Oil Company you will be granted exactly the same privilege as the Union Oil Company for the construction of a pipe line, and no objection will be made, if you desire it, to the use by the public of your line as a common carrier at rates which will be fixed by the Secretary of War. I understood your representative to say that this would be what you desire, and I therefore advise you accordingly.

Very respectfully, yours,

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President Isthmian Canal Commission, Washington, D. C.

DEAR SIR: I have the honor to inclose, for convenience of consideration, several copies of a brief digest of the oil pipe line project contemplated under my application, for which careful studies, estimates, and arrangements have been made.

A competitive opportunity is sought on the Isthmus to store, sell, and conveniently deliver this commodity, subject to the following primary conditions: First. That the installation for which permission is granted shall be subject to inspection and approval by the Commission.

Second. That the permit does not give any property titles and does not subject to inspection and approval by the Commission.

Third. That the permit does not give any property titles and does not authorize any invasion of private property or rights.

Fourth. That the permit shall grant no rights precluding the installation of other pipe lines for a similar purpose.

Very truly, yours,

JANUARY 11, 1906.

The SECRETARY OF WAR,

Washington, D. C.

DEAR SIR: May the writer venture to call your attention to his letter sent on October 22, 1904, to the president of the Isthmian Canal Commission, offering to construct an oil pipe line and requesting a competitive opportunity to bid for the necessary right of way across the Isthmus of Panama? This formal letter first suggested a pipe line.

That subsequently, on September 19, 1905, there was sent to you the "System and projects of Lindon W. Bates" for the Panama Canal, in which, pages 115 to 118, all the data concerning the utility of oil and the cost and methods of installation were placed at the disposition of those charged with constructing the canal.

Learning in the daily press that it is proposed to call for public competitive bids for the nonexclusive permit to construct such a pipe line, the writer begs to be advised as to when such will be received.

Very respectfully,

LINDON W. BATES.

JANUARY 18, 1906.

MY DEAR SIR: The Union Oil Company, of California, applied to me for a revocable license to lay an oil pipe line across the Canal Zone from the Panama line on the one hand to the Colon line on the other. I declined to consider the matter until they had obtained permission from the authorities of the Republic of Panama to enter the Republic at the Panama side and to leave it at Colon, and then after consulting with the chief engineer and Mr. Shonts, chairman of the Canal Commission, I submitted the matter to the President in Cabinet, and it was decided to be proper under the circumstances to grant to the Union Oil Company a revocable license to construct a pipe line across the Canal Zone on condition:

First. That its position should be determined by the chief engineer.

Second. That any part of it should be removed at any time by direction of the chief engineer.

Third. That it all should be removed at any time the Canal Commission chose to have it removed.

Fourth. That while it was maintained it should pay in advance, after its construction, on or before the 1st of August, $500 per month.

Fifth. That it should furnish the oil conveyed in the pipes at a maximum price of 90 cents per barrel to the Government whenever the Government should desire it.

Sixth. That the license should be nonexclusive.

It is intended to grant similar licenses to other companies who may apply on similar conditions. There is no agreement on the part of the Government to take any oil from this company, and there is full opportunity for the Government, should it desire to use the oil, to invite competition with respect to the price and manner of furnishing. At present the Government engines and locomotives are not arranged with a view to the use of oil, but the chief engineer advises me that in the course of six months or a year it is quite possible that it would be thought wise to make the changes. Whenever it is thought wise, competition at the price at which the oil may be furnished will be invited by advertisement.

Very sincerely, yours,

LINDON W. BATES, Esq.,

111 Broadway, New York, N. Y.

WM. H. TAFT,
Secretary of War.

TO ACCOMPANY STATEMENT OF HON. WILLIAM H. TAFT, SECRETARY OF WAR, BEFORE COMMITTEE ON INTEROCEANIC CANALS OF THE UNITED STATES SENATE.

ADDITIONAL CORRESPONDENCE BETWEEN MR. WALLACE AND THE SECRETARY OF WAR, MR. WALLACE AND ADMIRAL WALKER, E. A. DRAKE, AND T. P. SHONTS.

Hon. Wм. H. TAFT,

ISTHMIAN CANAL COMMISSION,
Panama, December 20, 1904.

Secretary of War, Washington, D C.

MY DEAR MR. SECRETARY: 'If you will kindly pardon me for doing so I would like to make the personal suggestion that if the President and yourself should decide at any time to reduce the Commission to three members, resident on the Isthmus, the governor of the Zone and the chief engineer should be members of this Commission ex officio.

An orginization of this kind, with the chairman of the Commission resident in Washington to look after general and departmental matters, would no doubt work satisfactorily and be much less cumbersome than the present one.

Of course this would not prevent the employment of eminent engineers in a consulting capacity, to such an extent as might be deemed desirable.

Very truly, yours,

JOHN F. WALLACE,
Chief Engineer.

[Personal.]

ISTHMIAN CANAL COMMISSION,
Panama, February 23, 1905.

Hon. WILLIAM H. TAFT,

Secretary of War, Washington, D. C.

MY DEAR MR. SECRETARY: Your letter was handed me by Mr. Bristow.

While Mr. Bristow was here I made every possible effort to post him as to the situation on the Isthmus from a practical standpoint. I took particular pains to explain to him my general ideas as to the operation of the Panama Railroad and Steamship Line; its connection with commercial traffic, as well as its relations to the construction of the canal.

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In regard to canal matters, I presume by the time this reaches you the Isthmian Canal Commission will have acted upon the recommendations contained in the report of the engineering committee, consisting of Professor Burr, Mr. Parsons, and General Davis, which was recently in session for three weeks on the Isthmus. I placed at the disposal of this committee the results of my studies during the eight months I have held the position of chief engineer of this work, as contained in my report to the Commission dated February 1.

If the Commission shall have taken favorable action on the engineering committee's report by the time you receive this letter, the principal engineering questions requiring expert council will have been settled. Those that remain for further consideration will be connected with the details of the Gamboa dam and spillway, and the utilization of this dam for the generation of electrical power; but all of the problems in reference to the general plan and design of the canal itself will have been disposed of, except those which will of necessity have to be decided by the chief enginner on the ground from time to time as they may arise.

These problems will be of such a nature that it should be left to the chief engineer to decide whether the cases require immediate settlement and solution on the ground, or whether they are of such importance that he should refer them to the expert consideration of a body of consulting engineers.

This council, however, should be advisory and not dictatorial, and the advisory board should consist of an even number of men, either four or six, of which the chief engineer should be the head, giving him the deciding voice in case of difference of opinion.

I think you will see the necessity for this, as the responsibility for all engineering questions will ultimately have to rest with the chief engineer.

In passing I desire to say that I do not shirk these responsibilities provided I have the authority and power to execute them in my own way, although I desire to have placed at my disposal the wisest and best professional counsel.

It would not be necessary for this advisory body of engineers to give their entire time to the work. You will find that the best service will be obtained from men whose ability and reputation are such that they are in constant demand. The judgment of such men will be much more valuable to me than that of men of less experience. An instance of this is the fact that the Commissioners who had been of the most service to the Government in the settlement of large questions have been the men who have had the most numerous outside engagements, and who have given the least of their personal time to the business of the Commission. These men should not be detail men in any sense, but accustomed to look at engineering questions in a broad way and decide matters on principle.

It would be very unfortunate if a commission should be stationed on the ground at Panama charged with the direction of the work, and the position would be an unbearable one to any chief engineer who had to remain here and attempt to execute the work under such direction. If the Commission is retained in its present form, the governor of the Zone and the chief engineer, resident on the Isthmus, should both be members thereof, with a chairman acting in an administrative capacity at Washington, who should be the line of communication from the

Commission to the Secretary of War, and be charged with the executive business connected with the other departments of the Government having general control over the purchasing of and contracting for provisions and supplies and the miscellaneous business connected with the work, which would necessarily have to be transacted in the United States.

The engineering members of the Commission could then constitute an advisory board, to whom could be referred such engineering questions of a general or special nature as the chief engineer might consider necessary from time to time, and who could meet in council with him alternately at Washington or on the Isthmus, as occasion or convenience might require.

As you know, I have been very loath to express my opinion in regard to matters connected with the organization of the Commission; but Congress will have adjourned by the time you receive this letter, which is being written on the supposition that no radical change has been made in existing legislation and that it will remain for yourself and the President to determine in what way you will organize the work of the present Commission by Executive action in order to obtain more satisfactory results. I only do so in this case for the reason that I feel that my relations to this work are important enough to justify at least the consideration of my views by yourself and the President. This letter will probably reach you about the time the matter will be up for consideration.

I hope you will pardon the length at which I have addressed you. Very truly, yours,

[Personal.]

JOHN F. WALLACE,

Chief Engineer.

Hon. WILLIAM H. TAFT,

WAR DEPARTMENT,

ISTHMIAN CANAL COMMISSION,
Panama, March 15, 1905.

Secretary of War, Washington, D. C.

MY DEAR MR. SECRETARY: I have heretofore refrained from writing you direct on any matters connected with this work, except in direct answer to your communications.

I have seen and heard a great deal lately indicating that the President was considering the appointment of a hundred thousand dollar man to take charge of the construction of the Panama Canal and reside in Washington, and have also had it intimated by personal friends that Mr. Burt, formerly president of the Union Pacific Railroad, Mr. Felton, president of the Chicago and Alton, Mr. Loree, formerly president of the Rock Island, and Mr. Shontz, have all been suggested and pushed for this position.

I am personally acquainted with three of these men, and know the other well through mutual friends and acquaintances. Three of them are my juniors, both in age and professional attainments, and of the three there is only one with whom there would be the slightest possibility of my working in harmony.

My professional instincts and patriotism have induced me to sacrifice the benefits of a pleasant home, a lucrative position with the possi

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