EXHIBIT B DEPARTMENT OF THE INTERIOR, Mr. C. A. OBENCHAIN, City. MY DEAR Mr. OBENCHAIN: You have brought to my attention certain statements made by me in the following letters: August 2, 1929, to Capt. G. E. Hair, chief of field service. August 14, 1929, to Mr. Ernest W. Sawyer, executive assistant to the Secretary. August 17, 1929, to Mr. Ernest W. Sawyer, executive assistant to the Secretary. You refer to specific statements made in the letter of August 2, as follows: "This letter merely scratches the surface of the oil-shale situation as it exists in this State. My great respect for the Secretary, and a sense of duty which I owe to the public to use my best efforts to protect its interests, impel me to suggest that the Secretary's attention be invited to certain decisions of the department rendered several years ago, in order that he may decide for himself whether he believes these decisions should be modified. I may here mention a decision as to what constitutes a discovery upon an oil-shale placer claim as held in the famous Freeman-Summers case. A reading of this decision and the annual report of the Secretary for the following year shows that it was largely based upon information given orally by a group of oil-shale applicants and their attorneys in the office of the Secretary, December 1, 1926. There is a printed record of the proceedings and the statements made at this meeting. My office now has conclusive proof, and more than one year ago submitted it to the department, that the statements upon which this decision was based were false and those who made these statements knew their falsity and made them designedly for the purpose of deceiving the Secretary and inducing him to render a decision favorable to the contention of the oil-shale applicants, which he might otherwise not do. It is my understanding that the report of this office was not permitted to be brought to the attention of the Secretary, and I believe I have further reliable advice that the then Solicitor for the Interior Department and his attorneys were not in accord with the holdings in this decision as promulgated. Upon the promulgation of this decision, the press of Denver reported an interview with Mr. Robert D. Hawley as boastfully saying that as a result, nearly all of the oil-shale placer claims in Colorado could be carried to patent. The oil situation in Colorado is full of dynamite. All the elements of a scandal far outrivaling that of the Sinclair frauds exist therein. It is my unalterable purpose and intention, with the assistance of the department, to prevent any such unfortunate situation coming to pass." Also to the paragraph next to the last in the letter of August 14: "I am writing you this letter in order to bring the matter to your attention if you have not already learned of it, and that you may take such action with respect to the delivery of the letter as you deem advisable, because in past years instances have occurred where letters intended for the personal consideration of the Secretary were, for certain reasons, kept from him." Also to the following paragraph in the letter of August 17: "I dislike very much to annoy you with matters pertaining to my office and the Interior Department, but I have confidence in your judgment and desire that the Secretary himself be advised of the important proceedings pending in his office. From years of experience in the Interior Department I am led to believe that things are kept from the Secretary. This is my only excuse for taking the matter up direct with you." You ask for a brief statement of facts which are the basis of complaints as to the unsatisfactory handling of oil-shale cases in Washington. I assume this has direct reference to the statements quoted above. I do not believe that a matter which involves public property, the potential value of which runs into many billions of dollars and which directly concerns the official integrity of the Secretary's high subordinates, should or can be dismissed with a few pages. You say this letter will be transmitted by you to the Secretary. I trust that will be done and that the Secretary himself will see and read it. Reference will here be made to two specific instances which lead me to believe, or perhaps I should say, which lead me to know, that important matters have been kept from the personal knowledge of the Secretary or attempts have been made to do so. I assumed charge of the Denver field division, June 10, 1924. Very few investigations of oil-shale mining claims were made during that year and during the early half of 1925 for the reason that no field men competent to do this work had yet been assigned to this division. However, on August 20, 1925, the district law officer of this division conducted the hearing in the Krushnic case. The charges upon which this hearing was conducted were based upon a report submitted by my predecessor in office. I believe no oilshale reports had been submitted by me to the Commissioner of the General Land Office prior to the date of this hearing because no investigations had been completed, and personally I was wholly in the dark as to whether or not the few investigations which had already been initiated would result in favor able or adverse reports. I believe only one engineer had devoted a short time to this work. This engineer has since been transferred to the Bureau of Mines, who value his services highly and who pay him a considerably larger salary. However, immediately following the conclusion of this hearing, a scurrilous article appeared in the De Beque (Colo.) News, under date of August 28, 1925, charging the head of this office with almost all crimes, and principally that because of this hearing it was apparent that he intended to adverse all oilshale placer mining claims regardless of their merits. As said above, inasmuch as the head of this division knew little or nothing about the status of the oil-shale claims and had concluded no investigations nor written any reports either favorable or adverse, and had no knowledge at that time whether all reports might not be favorable, the absurdity of these charges is apparent. They must have been based entirely on the knowledge that this chief of field division had a reputation for going to the bottom of things. It was not what had been done but what was feared might be done. September 10, 1925, a 30-page letter was addressed to Hon. Hubert Work, then Secretary of the Interior, discussing the Krushnic hearing and the oilshale situation as it then was known to the writer. The then commissioner, William Spry, was in my office at the time this letter was in preparation, and after suggesting certain modifications, requested that I forward the original direct to the Secretary, a copy each to First Assistant Secretary Finney and Captain Hair, then chief of field service. Commissioner Spry, who was en route to Los Angeles, took a copy with him. That it may be clear to you that Mr. Finney received a copy of this letter, herewith is quoted my letter of September 15, 1925, to Captain Hair, transmitting to him a copy of the letter: DENVER, COLO., September 15, 1925. Capt. GEORGE E. HAIR, Department of the Interior, San Francisco, Calif. MY DEAR CAP: I am inclosing herewith copies of the complete correspondence which I am to-day transmitting to the Secretary. The original newspapers in which these articles were published were sent to the Secretary with my letter, so I am sending you copies of these articles. The commissioner was here yesterday and I spent two or three hours with him going over the whole situation. He suggested that I address my report to the Secretary and send a copy of it to Mr. Finney, which I have done. The commissioner also took a complete copy with him. He left here last night en route for Durango. Would reach there this evening, and intends leaving to-morrow morning for Santa Fe, where he will probably arrive about Thursday or Friday. From there he tells me he intends going to Los Angeles. With regard to the last page of my letter to the Secretary, I merely want to say that I had no purpose of going over your head in regard to obtaining additional men for oil-shale work, but merely wished to impress on the Secretary the situation as it actually exists, so that he may be able, if he desires, to remedy this unfortunate situation by securing special funds for the purpose. As the matter now stands, I don't see any daylight ahead for the next five or six years at least in oil-shale matters, unless something special is done. You can see from my statements that the amount involved is too great to permit any laxity in our investigations. The public would never stand for it. When you reach Denver I want to take this matter up further with you, as there are numerous angles to it that naturally are not contained in the written correspondence. Sincerely yours, RALPH S. KELLEY, What happened to my letter addressed to the Secretary was not learned until the following letters, dated November 4 and 12, 1925, were received from Captain Hair. These letters explain themselves: WASHINGTON, D. C., November 4, 1925. MY DEAR KELLEY: The Secretary is leaving this afternoon for Colorado, but whether on official business or not I do not know. Possibly on matters concerning his son. That letter you wrote to the Secretary has become quite celebrated and has been the subject of considerable discussion and the cause of making some of the employees run around in circles. When I got to my office, on my return from the field, I found it on my desk. It bearing no notation from the Secretary showing he had seen it (he always initials every letter called to his personal attention before returning it for the files), I asked Mr. Gartland if it had been shown him. The reply was "No," as it had been considered by "them "-Mr. Burlew, Mr. Donald, and Mr. Gartland-as ill advised to "bother" the Secretary with "details" and "unimportant" matters. I said nothing, except that it seemed to me the matter was of great importance and for the sake of the Secretary, and particularly of our field service, I believed the Secretary should be forewarned. Notwithstanding, the letter was not shown the Secretary. A day or two after I told the commission what had occurred and he was very much surprised. He insisted that the letter go to the Secretary and go immediately. He expressed surprise that the Secretary had not discussed the matter with him before, because of its importance, but when he learned the Secretary knew nothing about it he saw why nothing had been said. In consonance with the commissioner's suggestion I wrote a very strong memorandum, addressed to Mr. Gartland, urging the letter be submitted the Secretary at once, for the protection of everybody concerned, saying the situation was "full of dynamite" and we wanted no more trouble over oil, etc. I attached this mem to your letter and placed it on Mr. Gartland's desk. heard nothing from it for over a week, when on returning from lunch one day, I found your letter-with the memorandum removed-on my desk. No explanation was made, and no indication that the Secretary had seen it. I again told the governor what had happened. He went into the air at once, saying that if we did not show it to the Secretary he would take over to him the carbon copy in his possession. He was exceeding wroth, if you know what that means. I was in an awkward position. The commissioner said "do it"; my immediate superior, the chief inspector, had said "nay, nay.” "So what could the robin do then, poor thing." 66 I don't know what happened, but a day or so afterwards Mr. Gartland and Mr. Donald came rushing in to my room asking in considerable excitement where that Kelley letter" was. Having it in my desk I brought it out. They said the Secretary had called for it. Mr. Donald said he thought the Secretary had seen it; that he passed it to him when it first reached his desk some weeks ago, etc. He had my memorandum in his hand, which he had held in his desk, without action. I do not know how the Secretary learned of it, nor what he said to Gartland and Donald and Burlew, but I do know they were very much excited when they came to me for it. I talked pretty straight to them, insisting on the importance of the letter, the necessity of your knowing where you stood in the department, and having its complete backing in your work in oil-shale investigations. They got out of my room in a hurry, taking your letter with them, and that was the last I heard of the matter for a time. Subsequently-just two or three days ago-Mr. Gartland advised me the Secretary had seen the letter and was very much interested in it. I understand he said, among other things, "Who is this fellow Potter? I don't know him." It is said he cussed considerably, and remarked that Kelley was going to have his backing as long as he conducted the business of his office properly, etc. From what reaches me he is on his guard with these Colorado fellows, and they do not know him as well as they would try to make you believe. At any rate, he has his back bowed now. What he said to his assistants about withholding the letter I can only surmise, but judging by their actions they will not keep from him any more important correspondence. The letter is now in my private files, initialed by the Secretary, but without my memorandum attached. Don't know whether he saw that or not, but think he probably did. After things quieted down, Mr. Gartland came to me and requested that, if I had retained a copy of my memorandum I ought to What became of the original Guess the files can get along I do not know whether any reply has been made to you or not; probably not. Thought you should know the situation and what had been done in connection with your letter. Sincerely, HAIR. Mr. RALPH S. KELLEY, 66 Denver, Colo. WASHINGTON, November 12, 1925. MY DEAR KELLEY: Referring to your personal letter of the 9th, which I have allowed the commissioner to read, he desires me to inform you that it was not the carbon copy of the letter addressed by you to the Secretary, which was called for by the Secretary when the governor casually asked him if he had seen it. The Secretary asked what letter he referred to and the governor said, a letter written by Kelley to you two months ago." The Secretary said "I have not seen it," and immediately called Mr. Burlew and asked about it, and Mr. Burlew said he thought the commissioner or Captain Hair had it. The commissioner immediately denied the allegation, stating that neither he nor I had it, but that it had been turned over, as it was mailed directly to the Secretary. The Secretary then demanded immediate production of the letter. Then was the time that Mr. Gartland and Mr. Donald came to me and asked for it, seemingly quite excited. I am glad the Secretary called on you, and that you discussed the situation with him. Probably he now has had the matter impressed so strongly on his mind that he will not forget it. I note your "guess work," and while only a surmise, it was very interesting both to the commissioner and myself. Sincerely, G. E. HAIR. Some time thereafter the commissioner verbally confirmed the statements made by Captain Hair. Another instance where important letters or reports were intercepted and the Secretary prevented from knowing of their contents will require, for full understanding, a rather complete outline, especially so inasmuch as the particular instance now to be discussed is considered of vastly greater importance than the one to which reference has already been made. May 10, 1920, George L. Summers made homestead entries embracing 640 acres of land in the oil-shale territory. May 22, 1923, final proof was submitted upon these entries, which was protested by the Standard Shales Products Co. and by J. D. Freeman, each alleging ownership and possession of certain oil shale placer mining claims embracing the same area. A hearing was held in which the Government was not represented. First Assistant Secretary Finney, by decision rendered December 20, 1924, dismissed the protests and held the mining claims to be null upon the ground that on February 25, 1920, the date of approval of the leasing act, no discovery of a valuable mineral deposit of oil shale had been made upon any of the claims. Motion by the owners of the shale claims for rehearing and retrial was denied by Mr. Finney, May 23, 1925, and his previous decisions affirmed. The mineral claimants thereafter filed a petition for the exercise of supervisory authority, and on July 29, 1925, Mr. Finey granted the petition and authorized another hearing at which the Government would be permitted to intervene to protect its rights. The rehearing was held before the United States Land Office at Glenwood Springs, Colo., in January, 1926, and a decision signed by Secretary Work, dated September 30, 1927, reversed the two previous decisions of the department and held the mining claims to be valid and the homestead entries for cancellation. Each decision was based upon the question as to whether a discovery of mineral had been made by the mining claimants. Following the rehearing in January, 1926, the oil shale owners, embracing nearly all of the largest oil companies operating in the United States, banded themselves together for the purpose of bringing pressure upon the Secretary of the Interior and to induce him to render a decision in favor of the mineral claimants. Much preparatory work was done and cash contributions made by the various oil companies or their representatives to defray the expenses incurred not only in investigations made by engineers but in political pressure to be exerted upon the Interior Department in Washington. Although from the middle of 1925 political pressure had constantly been brought to bear upon the Secre tary's office for the purpose of calling off the contemplated field investigations which had as yet scarcely been initiated, this pressure was redoubled and the Senators from this State used their entire influence in behalf of the mineral claimants. At the express request of the combined oil-shale interests, the Secre tary called an ex parte hearing to be held in his office December 1, 1926, at which the question of what constituted a discovery of mineral under the mining laws upon oil-shale placer claims would be discussed. A large number of persons attended this meeting and 13 representatives of oil interests addressed the Secretary. The speeches were taken down in shorthand, transcribed, and printed in an 81-page report. The undisputed facts are that the oil-shale deposits occur in what is termed the Green River formation of Tertiary age. It is approximately 3,000 feet in thickness and of sedimentary origin. The particular mining claims in controversy in what is termed the Freeman-Summers case, were situated near the very top of this formation. The workable beds of oil shale did not outcrop on the claims but their existence and approximate depth below the_surface could be ascertained by geologic inference. The courts and the Land Department have uniformly said that one can not make a discovery of mineral under the mining laws by mere geologic inference; that there may be a good discovery of mineral without finding ore in commercial quantities, the rule being that a discovery of mineral has been made if it is such as would lead a reasonably prudent man to expend his time and money in developing it with the hope or expectation of finally reaching commercial ore. However, there must be an actual physical discovery of mineral and that discovery must be on the vein or lode or deposit within which the prospector expects to find his paying deposit. A discovery can not be made on one lode or vein or deposit and be applied upon another vein. In other words, a discovery and the mineral deposits which the prospector hopes to find, must both be on the same vein or lode. In an attempt to show that the 3,000 feet of sedimentary beds constituting the Green River formation was analagous to a lode or vein, those who made speeches at the meeting in the Secretary's office December 1, 1926, informed him that every foot and every inch of the 3,000 feet of the Green River formation contained, upon distillation, oil, some parts of it being lean and some parts rich, but absolutely not an inch of it barren of oil and for this reason it might be considered as one deposit containing oil from top to bottom and analagous in this respect to a vein or lode, the latter being a continuous deposit of lode material all the way, some richer and some poorer, parts of which might contain ore chutes rich enough to mine. Had these speakers stated that these 3,000 feet of sedimentary beds were made up, for instance, partly of sandstones and partly of shales, and that the sandstones and some of the shales were absolutely barren of any oil content, the result of such an admission would have been to admit that there was no direct relation, connection or contiguity between the barren and prolific parts of the sedimentary formation, and the theory that was being advanced that the deposit was a continuous one from top to bottom, containing mineral in all parts, would have fallen to the ground and with it the contention that a discovery under the mining laws could be made in any part of the Green River formation. This office was convinced that the facts had been misrepresented to the Secretary and that he might be advised of the true situation, I directed two of my most competent mining engineers to cut a section as complete as possible across the upper 500 to 600 feet of the Green River formation within which the mining claims involved in the Freeman-Summers case were situated. These sections were carefully taken by Mining Engineers Paul F. Cutter and Wade V. Lewis, and were thereafter retorted by them in a retort owned by this department with the utmost care and skill. The engineers made these tests for the purpose of ascertaining whether oil even in the faintest traces could be recovered from these formations. Great care was taken to have the retorting apparatus clean. Upon the conclusion of their work, these engineers prepared a cross-section and jointly with me prepared a report setting forth their findings and the bearing these had upon the question of discovery involved in the Freeman-Summers case. |