Oxy Chief Defends Firm’s Funding of Museum : Energy: Armand Hammer tells shareholders that the oil company gains good will from his art collection.

Armand Hammer, chairman of Occidental Petroleum Corp., on Tuesday defended the company’s controversial support of a $95-million museum being built to house his private art collection.

In response to questions during Occidental’s annual shareholders meeting in Santa Monica, Hammer said he was donating his collection for the people of Los Angeles. “Why am I doing this? One reason: You can’t take it with you.” The line brought laughter from shareholders.

“The second reason is, I think it’s good for Occidental,” said the 92-year-old, apparently healthy chairman. The collection has been seen by millions of people on tours around the world, he said, bringing Occidental “a lot of good will, and a lot of the things . . . that Occidental has accomplished have been due to the good will established by these exhibitions.”

The Armand Hammer Museum of Art and Cultural Center, now under construction adjacent to Occidental’s Westwood headquarters, is scheduled for completion in November. Total construction and endowment costs will be about $95 million.

Construction of the museum continues while a Delaware court mulls a proposed settlement of shareholder lawsuits challenging the museum’s construction. The settlement would limit the museum’s construction and financing costs and restrict the amount of money Occidental can give to other Hammer charities.

After the meeting, Hammer said an auditorium shelved when costs ballooned could now be built as early as next year if private fund-raising efforts succeed. He said the Metropolitan Museum of Art in New York was working with Occidental on expanding the new museum’s bookstore as a way to raise money for the auditorium.

He also confirmed that he had “irrevocably deeded” ownership of his $400-million art collection to the controversial museum that will bear his name and that is being paid for by Occidental.

Hammer signed an agreement to transfer ownership of his collections to the museum upon his death, an Occidental spokesman said. Until then, the art will be exhibited in the museum once it opens, but Hammer will retain ownership. The collections include paintings by old masters and notebooks of Leonardo da Vinci.

Previously, questions about the art’s ownership and provenance have arisen during court challenges to the museum’s construction, with documents disclosing that Occidental, not Hammer, paid for significant portions of the collections.

On Tuesday, Hammer also disputed a claim by Joan Weiss, the sole heir of Hammer’s late wife, Frances Hammer, alleging that Weiss is entitled to a half interest in Hammer’s collection.

Also at Tuesday’s meeting:

* Shareholders defeated for the third year in a row a shareholder proposal setting a mandatory retirement age of 72 for directors. Nine of Occidental’s 17 directors are older than 72. For his part, Hammer gave no indication of wanting to step down despite his age. He turned 92 on Monday.

* Occidental also said it would devote half of its $1.4-billion capital budget to oil and gas operations and said it plans to drill 35 exploratory wells in China, Indonesia, Latin America, Malaysia, Oman, Pakistan, Syria and the British North Sea in 1990.