Here is the memo I promised. It was from G-2 Intelligence at 5th Army Headquarters. Ft. Hayes (Columbus, Ohio). Here it is.

"July 15, 1941

SUBJECT: Standard Oil Company of New Jersey
Ships under Panamanian Registry.

To: A.C. of S., G-2 War Department, Washington

1. A report has been received from Cleveland, Ohio, in which it is stated that the source of this information is unquestionable, to the effect that Standard Oil Company of New Jersey now ships under Panamanian registry transporting oil (fuel) from Aruba, Dutch West Indies to Tenerife, Canary Islands, and is apparently diverting about 20% of this fuel oil to the present German government.

2. About six of the ships operating on this route are reputed to be manned by Nazi officers. Seamen have reported to the informant that they have seen submarines in the immediate vicinity of the Canary Islands & have learned that these submarines are refueling. The informant also stated that the Standard Oil Company has not lost any ships to date by torpedoes as have other companies whose ships operate to other ports."

That memo was sent here by CHARLES HIGHAM (35-1984)

The Committee met at 10:38am pursuant to adjournment on Friday, March 27 in Room 318, Senate Office Building with Senator James M. Mead presiding. This piece began in KTB #153. We continue:

Mr. Fulton: "What was the reason then, for stopping deliveries from Aruba if the same thing was to be done in another manner?"

Mr. Farish: "I don't think deliveries from Aruba were ever stopped. The gasoline that went to Rio was shipped from Aruba."

Mr. Fulton: "But I thought that Mr. Arnold read papers which indicated that the State Department was opposed to the delivery of gasoline from Aruba, and that it was stated in the Standard Oil paper that it was decided it could be done though the Brazilian subsidiary."

Mr. Farish: "That is correct, and it was done through the Brazilian subsidiary, with the American Ambassador in Rio checking and passing on those deliveries."

Mr. Fulton: "But what I wanted to know is why, in the first instance, should they say it shouldn't be done from Aruba and at the same time that they were willing to approve it in a less obvious form in Brazil."

Mr. Farish: "I can't answer for anybody on that. The story of all that is clear and plain, and we will turn the file over to you, but all I want to register here with you gentlemen is we did nothing in that case except cooperate with the State Department. That record will clearly give you that, and it is clear, and you can study it as you like, but I want to make the point that we made no deliveries that they didn't know about and hadn't checked."

Mr. Fulton: "Thank You."

Mr. Farish: "It's attitude toward the company in this matter is shown in a letter written in September 1941 - this was months after the instance sited - in which the State Department expressed its appreciation of the steps taken by the company to control supplies and deliveries of aviation gasoline to air lines and other American republics. The Department stated that it had been gratified at our readiness to work toward the Department's objectives in cooperation with the Government. I pressure that because of the confidential nature of this letter, it is inappropriate to offer it as an exhibit. It is, however, available for confidential examination by the committee.

Next, the German refinery: I call your attention to two points in connection with the reports which Mr. Arnold introduced in evidence showing that in 1938 and 1939 our German subsidiary was planning to erect at Hamburg a plant for producing some 2,000 or 3,000 barrels per day of aviation gasoline and that we were cooperating in designing this plant.

Our German subsidiary is a German corporation managed and operated by German personnel. It is accountable to the German Government & to no other government. The German Government in 1938 and 1939 was expanding their aviation gasoline facilities, and our company was behind other American and British controlled companies in Germany's refining program. Under the circumstances, our German subsidiary could do nothing less than the others had done.

During 1938 and 1939 this country was not at war with Germany. In fact, every effort was being made to avoid involving ourselves in war. Commercial relations with Germany were continuing on a normal basis. Under these circumstances, refusal to assist in the design of this plant would have been unwarranted.

Next, synthetic toluol: Among the processes which we acquired under the 1929 agreements there was one which had in it the germ of synthetic toluol production. All normal demands for toluol are met by the by-product toluol from coke production, which totals only about 30,000 gallons per year. In 1939 the Ordnance Department of the Army asked us whether we thought it would be feasible to produce on a large scale synthetic toluol for the manufacture of TNT from petroleum, pointing out that there was requirements far in excess of natural production. They said that to determine whether the product would be of any military value, they would need 20,000 gallons, so that it could be put through a regular commercial TNT plant to determine whether it would give operating toluol.

Prior experience had shown that some toluol which seemed all right on laboratory tests would not work commercially. The problems for us therefore, was not only to develop a laboratory process of producing synthetic toluol, but actually to turn out at least 20,000 gallons of the product. We first tackled the problem in our laboratories entirely at our own expense and came out with what we thought was a theoretically practical solution. We then agreed with the Army that we would undertake for them the production of the 20,000 gallons, which we estimated would cost about $86,000, if they would pay half the estimated cost, or $43,000. To work out this matter under the Army purchasing regulations they advised us that they would proceed as follows:

They would arranged for an experimental production of TNT from this experimental 20,000 gallons of toluol, at some TNT plant which they thought would have the best chance of working the problem out successfully if any difficulties were encountered. They picked a Dupont plant for this purpose. But the Ordnance Department had no appropriations which it could use for experimental purposes of this kind.

That is worthy of note, gentlemen. Here is our Ordnance Department of our Government that had no money to use in experimental purposes as vital as a thing as toluol.

They advised us in that form the transaction would be a regular purchase agreement. They would ask for bids on TNT produced from synthetic toluol of petroleum origin and specifications which would result in their getting a bid from the Dupont Company, and it would then be up to us to supply Dupont with toluol on the terms agreed on with the Army."

EDITOR NOTE - Isn't this called 'bid rigging?

"This plan was proceeded with. To make the 20,000 gallons of toluol required us to utilize the facilities of refineries at Bayway, NJ; Baytown, Tex; and Baton Rouge, La, shipping trains of tank cars from one location to another. Instead of costing $86,000 as we had estimated, this 20,000 gallons of toluol actually cost more than $135,000, so that our loss was $92,000. That is not material, but the important point was that the toluol was good. The nitration experiment in the Dupont plant turned out successfully, and as a result of this experiment, the cost of which was mostly bome by us, it was demonstrated that any required amount of toluol could be produced synthetically from petroleum in the United States as fast as the Army thought it necessary to build the plants for use of the process which we had developed.

The Ordnance Department then arranged with the Humble Oil and Refining Co., as affiliate of ours operating in Texas, where an important part of the experimental program had been conducted, to erect and operate an Ordnance Department plant for carrying out this process. This plant, costing about $12,000,000 and having a minimum capacity of 30,000,000 gallons of toluol per annum, was successfully put into operation on schedule in 1941. The completion date of the plant was advanced 2 months as a result of Standard having done extensive engineering work on its own responsibility before the Army was able to clear the contract. Standard Oil Development Co. offered this process for licensing throughout the oil industry, and when the Army desired to increase its toluol production, it arranged for many additional plants, some of which are now far advaticed or possibly in operation."

This amazing story will continue in KTB #156 next month. The surprises, and shocks, seem to be never-ending.