Warren Harding may have shouldered most of the blame, but in the biggest scandal of the 1920s, it’s clear a lot of well-connected people were drinking from the teapot.
Now that the first senatorial hearings on the Teapot Dome Naval Oil Reserve affair have been completed, and now that all the star witnesses have shed their full if not their final rays upon the subject, it becomes possible for the first time to tell in assured detail and in coherent sequence the total story of the policy and behavior of the United States Government in the management of its naval oil estate, called the Teapot Dome, in Wyoming.
The first character in the story is President Roosevelt. He gave support and prestige to the policy of the conservation of oil in the ground for the use of the government at some future time when the customary commercial supplies of oil might be insufficient and when some great impending national emergency might demand a governmentally reserved and controlled abundant source of fuel for our fighting ships.
The second character in the story is President Wilson. Out of the Federal public domain in Wyoming he set aside for exclusively naval purposes a reserve called commonly the Teapot Dome and called technically Naval Oil Reserve Number Three.
The third character is Secretary of the Navy Josephus Daniels. He stood resolutely on the rights of the United States Government in Naval Oil Reserve Number Three and also in all of our other naval oil reserves, totaling five; and he refused to budge from those rights, when attacked by private citizens urging private claims upon naval oil reserve lands. Under him the policy of the Navy Department was to resist private claims by every possible resource of administrative action in the government departments and by every possible resource of legal defense in the courts. Under him, at one time, when a certain other member of the Cabinet proposed to make a surrender of naval oil land to a private claimant without a fight, President Wilson told that other Cabinet member that any such behavior on his part would mean his resignation.
The stage thus having been set and the preliminary dialogue having thus been delivered, the fourth and final great character of the play was ready to make his entrance. This character is Albert B. Fall. Mr. Fall, as a Senator of the United States, had evidenced a great interest in conservation. His interest in it was that he disapproved of it. It was his view that the public domain of the United States should go as rapidly as possible into private hands.
Mr. Fall’s first feat as Secretary of the Interior was to provide the State Department and the chairman of the Foreign Relations Committee of the United States Senate with the oil-exploitation motives and arguments which led to the ratification of our $25,000,000 treaty with Colombia. Mr. Fall, as a Senator of the United States, had taken the position that the United States owed nothing to Colombia for any alleged violation of the national rights of Colombia in the matter of the setting up of the Republic of Panama in the days of President Roosevelt. Mr. Fall, as a Senator of the United States, had sided with the memory of Theodore Roosevelt against the claim of Colombia. As Secretary of the Interior, however, he perceived before him a divided duty. On the one hand there was the memory of Theodore Roosevelt which he had defended. On the other hand there was the opportunity on behalf of American oil interests to get from Colombia a new and open era of oil concessions. Mr. Fall chose oil.
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He sent to the United States Senate a document in which the oil holdings of British oil companies in Colombia were listed; and in this document it was erroneously alleged that these holdings were holdings of the British Government; and on that argument, and in the openly admitted hope that for $25,000,000 out of the public treasury of the United States the Colombian Government would give oil concessions to the oil companies of the United States, the Colombia Treaty was passed.
Having thus demonstrated his willingness, at any cost to what he had once regarded as national honor, to secure oil concessions for oil companies, Mr. Fall was then picked out by Secretary of the Navy Denby to be made the managing master of the navy’s oil reserves with this country. Known to be an anti-conservationist, and known to have been willing to take $25,000,000 out of the United States treasury to buy an entrance for American oil companies into the public domain of Colombia, he was made the supervisor of the navy’s public domain in the United States.
This honor, however, was not heaped upon him by its own spontaneous gravitation toward him. He sought it. He wrote the order transferring the control of the naval oil reserves from the Navy Department to the Department of the Interior. He composed a letter for the Secretary of the Navy to sign, transmitting that order to the President to be signed.
Admiral Griffin, chief of the Navy Department’s Bureau of Engineering, in charge of the naval oil reserves, objected to the transfer. Commander Stewart, in immediate management of the reserves, objected. No naval officer technically familiar with the naval oil-reserve situation is reported to have concurred in the transfer. Nevertheless Mr. Denby, choosing between the proved advice of his technically experienced officers and the proved passion of Mr. Fall for getting public lands into private hands, transmitted the order for the transfer on Mr. Fall’s behalf to President Harding, who signed it on May 3, 1921.
Approximately one year later, on April 7, 1922, Mr. Fall leased the Teapot Dome Naval Oil Reserve to Mr. Harry Sinclair. For two weeks thereafter he made no announcement of his action. He then announced it only in reply to an urgent communication to him from Senator Kendrick of Wyoming who had heard rumors of such an action and who wished to know if those rumors were correct
Mr. Fall, admitting that they were correct, lifted for the first time the curtain of secrecy behind which his action had been consummated. It then simultaneously appeared that the lease, besides being secret, had been non-competitive. No bids by others than Mr. Sinclair were disclosed. Mr. Sinclair, by himself, and in the dark, on his merits as oil man, as campaign contributor, as friend, and as hospitable owner of a private car suitable for personal conferences, had become the sudden owner of the total right to drill oilwells over the whole of the Teapot Dome.
Then, after the event, came the setting forward of the alleged reason for it. This reason was, and is, that oil is said to he leaking out of the Teapot Dome Naval Oil Reserve into wells located on other federally owned public land just outside the Reserve. The Department of the Interior had granted the permits for the drilling of those wells. It itself had permitted and procured the activities responsible for the draining of oil out of the navy’s reserved oil supply. It itself had authorized this indirect and partial loss of that supply. Its contention thereupon was, and is, that the loss should become direct and total.
Geological testimony adduced before the Public Lands Committee of the Senate in the course of its Teapot Dome hearings has been strongly to the effect that straight across the Teapot Dome there is a “fault” which protects a certain considerable part of it from leakage. The leakage from the remaining part of it was alleged by geological testimony to be likely to be perhaps not more than 25 per cent. It was convincingly demonstrated that there was a strong technical possibility that if the total oil content of the Teapot Dome is 25,000,000 barrels, then not more than 4,000,000 barrels of it was in danger of flowing away into the private wells on the adjoining public domain.
It now appears that from the wells which on adjacent public domain are draining oil out of the Teapot Dome the government gets royalties averaging from 25 to 50 per cent of the flow, whereas from the wells which Mr. Sinclair has sunk in the Teapot Dome itself the government is getting royalties averaging less than 20 per cent. From the standpoint of income in oil for the government it thus appears that the government was better off when the oil was coming to the surface in the wells which were called a
“menace” to the Teapot Dome than it is now when the oil is coming to the surface within the Teapot Dome in Mr. Sinclair’s wells.
It further appears that perhaps two-thirds of the oil which Mr. Sinclair will pay to the government in royalties will not remain in the possession of the navy in the form of oil. Perhaps two-thirds of it will be paid back to Mr. Sinclair by the navy for some tanks in which to keep the remaining one-third of it.
It has been customary for the Navy Department, when it feels in need of tanks or of guns or of battleships or of money with which to pay its employees, to ask Congress for it. It has also been customary to believe that when the people of the United States gave the Navy Department a lot of oil in the ground of the public domain, it gave it to the Navy Department to be a supply of oil and not to be a means by which it could purchase other supplies without going to Congress for authorization.
Under Mr. Fall’s influence, however, the Navy Department proceeded to sign contracts for the building not only of tanks but also of docks and of channels leading to the docks on the basis of paying for these things with oil out of naval oil reserves. Thus not only was this oil taken out of the ground, where President Roosevelt had wished it to be left, but, having been taken out, a large part of it was spent, or will be spent, in acquiring things other than oil and in escaping the customary legalistic squeamish necessity of going to Congress for the people’s consent to naval expenditures.
If in the Teapot Dome there were originally 25,000,000 barrels of oil, and if Mr. Sinclair now gets all of it out, the government, at the present running rate of royalties, will get—at the most—5,000,000 barrels. Of this 5,000,000 barrels, at the present running cost of materials, it will pay back to Mr. Sinclair some 3,333,000 barrels for tanks. It then in those tanks will have the residuum of its Teapot Dome inheritance—namely, some 1,666,000 barrels of oil out of an original total of 25,000,000; and it will have it not in the ground, where it would be totally safe to be used at some future time in the forms which that future time with new technical developments might unfold and require, but in metal containers in seashore positions and in manufactured forms and qualities which the technique of this passing and changing moment has lived.
Either this result is an absurdity or else President Roosevelt, with his policy of naval oil conservation, was an idiot.
Theodore Roosevelt, Jr., Assistant Secretary of the Navy, did not make the decisions which have brought his father’s naval oil policy to frustration, nor did he have knowledge of them while they were being made.
The Roosevelt naval oil conservation policy is dead, and the final stab given to it was by the same man who stabbed the Roosevelt justification of the Roosevelt Panama policy to the heart in the Colombian Treaty.
Senator Walsh of Montana, a member of the Senate’s Public Lands Committee, a man of the deepest learning, a man of the highest personal probity, a man who morally is not capable of deception and who mentally is not capable of self-deception, has taken the leading part in the toilsome task of eliciting the pivotal facts from the chaos of the bewildering situation presented in testimony to the committee; and he has seemed to be moved toward entertaining the belief that possibly the contract leasing the Teapot Dome to Mr. Sinclair is illegal in that there was no competitive bidding for it and in that it includes provisions for the purchase of naval supplies—namely, tanks—not with money from Congress but with oil which already was naval property and which was not negotiable.
Meanwhile, however, Mr. Sinclair has long been at work drilling the Teapot Dome and draining oil from it; and Mr. Fall, having retired from office has entered the employ of Mr. Sinclair and has visited Russia to induce the Russian Government to allow Mr. Sinclair to drain oil from the Russian public domain in Sakhalin.
Thus Mr. Fall departs from the story, carrying with him his well-known fear of a British world-wide monopoly in oil and having done something to, exhaust our government’s reserved supply of oil in its own country and having done nothing to acquire for it any other reserved supply; and if ever this country comes to be without oil while in Latin America north or south of Panama there still are undrained reservoirs of it, the ultimate chapter, of our abandonment of our naval oil conservation policy will be written.
It will be written in intrigues and aggressions, diplomatic or military or both, to acquire abroad the naval fuel security which was ours for the keeping at home
