The Minister in Costa Rica (Hale) to the Secretary of State

No. 88

Sir: I have the honor to enclose, marked Enclosure No. 1, the text (and translation) of an oil contract between the Government of Costa Rica and Dr. Leo J. Greulich, of New York,34 which has been signed by the President of Costa Rica and awaits the action of Congress.

Recalling the Pearson (Lloyd-George) contract, referred to in my telegram of November 11, 1913; the Department’s telegram of November 26, 1913;34 and Department’s unnumbered despatch of December 2, 1913; I respectfully suggest that I be given permission to mention Doctor Greulich’s contract informally to the President as one which would probably prove to be of benefit to both countries. I think that my saying this would cause him to hasten its presentation to an extra session of Congress immediately after the coming elections on December 5th.

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Dr. Greulich’s representative here, Mr. Lincoln G. Valentine, has given me the following analysis of the contract, to wit:

“You will note that the proposition is not intended as a Costa Rican petroleum monopoly, but as a fair business deal, offering a maximum of advantages to Costa Rica and a reasonable amount of latitude and guarantees to the Contractor. The concession was drawn after careful analysis of the Pearson proposition to Costa Rica in 1913 and other Latin American petroleum contracts. We believe that the defects in the latter, which experience has brought to the surface, have been eliminated and that the Government’s participation in the gross product has been fixed as high as is commercially feasible.

“Our concession may be analysed into the following salient features:

  • “1. The Contractor agrees to spend in exploration and exploitation during the first two years, 25,000 colones; during the following three, 250,000 colones; and during the following seven, 1,000,000 colones. Guaranty deposits are made by the Contractor of 15,000, 25,000 and 30,000 colones respectively.
  • “2. The Contractor has the exclusive right during five years to explore for petroleum in the provinces of Limon, Guanacaste and Puntarenas.
  • “3. During these five years, the Contractor may denounce a total area not exceeding four thousand square kilometers for petroleum exploitation during the term of the contract, 50 years. The superficial rights of these denouncements remain the property of their previous owners, except such lands as are indispensable for the works of the enterprise.
  • “4. The Contractor must maintain all the wells found in continuous exploitation.
  • “5. The Government has an arbitral voice in directing the work of the enterprise.
  • “6. The Government receives ten per cent of the gross value of the product at the mouth of the wells; in addition thereto, free oil for fuel of present Government railroads, and free gas for all Government and Municipal buildings, schools, etc.
  • “7. The Contractor must begin work within four months after the Congressional approval of the Concession.

“The following gentlemen are interested in the enterprise:

“W. S. Valentine, 17 Battery Place, New York. For almost forty years largely interested in industrial and mining enterprises in Honduras. President of the New York and Honduras Rosario Mining Co., the largest Central American silver and gold mine. His other enterprises include: San Pedro Electric Light & Power Co.; Morse Timber Co.; Sabana Grande Honduras Mining Co.; etc., etc. Bank: American Exchange National Bank.

“Leo J. Greulich, 42 Broadway, New York, who has exploited the 1,800,000 acres Foster petroleum lease, Osage Reservation, Oklahoma.

“Herbert Noble, lawyer, 115 Broadway.”

I have [etc.]

E. J. Hale
  1. Not printed.
  2. Not printed.