The most that can be said for such an epistle is that it indicated an anxiety to keep within the letter of the law.
Government Victory and Defeat
Besides falsely swearing that he had made an examination of the lands involved in the Elk Hills case, Mr. Eberlein made the positive statement in his affidavit that none of the lands covered by his application were mineral lands, in so far as he was informed. Now in this matter it is clear that the evidence before Mr. Eberlein, such as it was, pointed to a mineral and not to a non-mineral content of the land in question. This evidence consisted primarily in the results of work of Southern Pacific geologists in the general region of which the Elk Hills were a part, and in the presence there of a certain number of producing wells. It is on record that in 1902 the Southern Pacific withdrew from sale many of its patented lands which surrounded or were adjacent to the land in controversy “because they were in or near oil territory.” The following year the company decided to lease such of its lands as were considered valuable for oil purposes to a subsidiary company—the Kern Trading and Oil Company. The proposed lease was laid before Eberlein in August, 1904. He at once objected. In a letter to C. H. Markham, general manager of the Southern Pacific Company and second vice-president of the Southern Pacific Railroad Company, Eberlein set forth (September 10, 1904) the reasons for his opposition in these words:
In addition to this there is a very urgent reason for delaying the execution of these papers. We have selected a large body of lands interspersed with the lands sought to be conveyed by this lease and which we have represented as non-mineral in character. Should the existence of this lease become known, it would go a long way toward establishing the mineral character of the lands referred to and which are still unpatented.[605]
A similar letter addressed the week before to Judge Cornish in New York contained arguments of a similar nature. The protests were heeded, and the leases of lands in the McKittrick and Coalinga districts were held up. It was recognized, moreover, that the matter was a delicate one, and the papers relating to the proposed leases were placed in a special and private file separate from the general file of the land department of the railroad company. Summing up the evidence in the case, the United States Supreme Court later observed that the natural, if not the only, conclusion from the facts was that in pressing the selection the officers of the railroad company were not acting in good faith, but were attempting to obtain the patent by representing that the lands (covered by the Elk Hills litigation) were not mineral when they believed the fact was otherwise.[606] The decree of the United States Supreme Court requiring the cancellation of the railroad patents to the 6,000 acres of land in the Elk Hills district was given on November 17, 1919.
Three months before this Supreme Court decision, Judge Bledsoe, in the District Court for the Southern District of California, dismissed a suit challenging title to some 165,000 acres of land in the oil territory on the west side of the San Joaquin Valley.[607] This suit represented a consolidation of the oil land suits other than those included in the Elk Hills case. Perhaps 156,000 of the acres under litigation were claimed by the railroad. Cases are seldom alike, and the Bledsoe case differed from the Elk Hills controversy in several important details. In this case, for example, it appeared that the railroad had sold lands in the disputed territory at agricultural prices—a policy which it presumably would not have followed had it believed that these lands had mineral value. There was also lacking much of the direct evidence which had helped to demonstrate the fact that Mr. Eberlein had distorted the truth in his representations to the government. On the other hand, the refusal of Judge Bledsoe to believe that men like the general manager of the Southern Pacific, its land agent, and its vice-president would lend themselves to fraud, is less impressive after a perusal of the Elk Hills material. The government has announced that it will not appeal from Judge Bledsoe’s ruling—a decision which, on the face of things, appears to be a mistake.
Sale of Oil Lands
The most recent development in connection with the Southern Pacific oil lands is associated with the organization of the Pacific Oil Company. The formation of this company was announced in March, 1921. It purchased from the Southern Pacific Land Company, for the sum of $43,750,000, about 259,000 acres of lands in California, most of which were proven oil lands, and 200,690 shares (50.48 per cent) of the capital stock of the Associated Oil Company. This was the whole of the Southern Pacific interest in the oil fields. The Southern Pacific Company provided the funds for the purchase by subscribing to 3,500,000 shares of the Pacific Oil Company at $15 per share, but the railroad disposed of its newly acquired shares by extending to holders of its own stock the right to purchase Pacific Oil stock at $15 per share, one share of stock of the new company for each share of the Southern Pacific Company stock so held. This transaction will transfer the ownership of the railroad oil lands from the Southern Pacific Company to the stockholders of that company as fast as the subscription rights are taken up. Commenting on the plan for the separation of the oil and railroad properties, President Sproule observed that the plan was simply responsive to the spirit of the times. It seems likely, however, that it will have the additional result of preventing further action tending to disturb the railroad title. The president of the Pacific Oil Company is Mr. Shoup and its directors are men of influence in the East.[608]
Timber Land Grant
This summary discussion of the oil land litigation in California brings us to the last of the great cases with which the Southern Pacific has, in recent years, been concerned, namely, to the dispute between the federal government and the Oregon and California Railroad over the administration of timber lands in Oregon. By the Act of July 25, 1866,[609] Congress authorized the California and Oregon Railroad to build a railroad and telegraph line in the state of California from a point on the Central Pacific in the Sacramento Valley to the northern boundry of the state. The same act empowered “such company, organized under the laws of Oregon, as that state should designate,” to construct a railroad from Portland, Oregon, to a junction with the California and Oregon upon the Oregon-California boundary line. The legislature granted to the company mentioned a right-of-way, and in addition ten alternate sections of public land on each side of its track.