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diff --git a/old/60692-0.txt b/old/60692-0.txt deleted file mode 100644 index 344e812..0000000 --- a/old/60692-0.txt +++ /dev/null @@ -1,33941 +0,0 @@ -The Project Gutenberg EBook of The History of the Standard Oil Company, by -Ida M. Tarbell - -This eBook is for the use of anyone anywhere in the United States and -most other parts of the world at no cost and with almost no restrictions -whatsoever. You may copy it, give it away or re-use it under the terms -of the Project Gutenberg License included with this eBook or online at -www.gutenberg.org. If you are not located in the United States, you'll -have to check the laws of the country where you are located before using -this ebook. - - - -Title: The History of the Standard Oil Company - -Author: Ida M. Tarbell - -Release Date: November 15, 2019 [EBook #60692] - -Language: English - -Character set encoding: UTF-8 - -*** START OF THIS PROJECT GUTENBERG EBOOK STANDARD OIL COMPANY *** - - - - -Produced by Richard Tonsing and the Online Distributed -Proofreading Team at http://www.pgdp.net (This file was -produced from images generously made available by The -Internet Archive) - - - - - - - - - - THE HISTORY OF - THE STANDARD OIL COMPANY - - -[Illustration: - - _Copyright, 1904, by Ames_ - - JOHN DAVISON ROCKEFELLER IN 1904 - - Born July 8, 1839 -] - - - - - THE HISTORY OF - THE STANDARD OIL COMPANY - - - BY - - IDA M. TARBELL - - AUTHOR OF THE LIFE OF ABRAHAM LINCOLN, THE LIFE OF NAPOLEON BONAPARTE, - AND MADAME ROLAND: A BIOGRAPHICAL STUDY - - ILLUSTRATED WITH PORTRAITS, PICTURES AND DIAGRAMS - -[Illustration] - - VOLUME ONE - - NEW YORK - McCLURE, PHILLIPS & CO. - MCMV - - - - - _Copyright, 1904, by_ - McCLURE, PHILLIPS & CO. - - Published, November, 1904 - - SECOND IMPRESSION - - - Copyright, 1902, 1903, 1904, by The S. S. McClure Co. - - - - -“_An Institution is the lengthened shadow of one man._” - - EMERSON, IN ESSAY ON “SELF-RELIANCE.” - -“_The American Beauty Rose can be produced in its splendor and fragrance -only by sacrificing the early buds which grow up around it._” - - J. D. ROCKEFELLER, JR., IN AN ADDRESS ON TRUSTS, - TO THE STUDENTS OF BROWN UNIVERSITY. - - - - - PREFACE - - -This work is the outgrowth of an effort on the part of the editors of -McClure’s Magazine to deal concretely in their pages with the trust -question. In order that their readers might have a clear and succinct -notion of the processes by which a particular industry passes from the -control of the many to that of the few, they decided a few years ago to -publish a detailed narrative of the history of the growth of a -particular trust. The Standard Oil Trust was chosen for obvious reasons. -It was the first in the field, and it has furnished the methods, the -charter, and the traditions for its followers. It is the most perfectly -developed trust in existence; that is, it satisfies most nearly the -trust ideal of entire control of the commodity in which it deals. Its -vast profits have led its officers into various allied interests, such -as railroads, shipping, gas, copper, iron, steel, as well as into banks -and trust companies, and to the acquiring and solidifying of these -interests it has applied the methods used in building up the Oil Trust. -It has led in the struggle against legislation directed against -combinations. Its power in state and Federal government, in the press, -in the college, in the pulpit, is generally recognised. The perfection -of the organisation of the Standard, the ability and daring with which -it has carried out its projects, make it the pre-eminent trust of the -world—the one whose story is best fitted to illuminate the subject of -combinations of capital. - -Another important consideration with the editors in deciding that the -Standard Oil Trust was the best adapted to illustrate their meaning, was -the fact that it is one of the very few business organisations of the -country whose growth could be traced in trustworthy documents. There is -in existence just such documentary material for a history of the -Standard Oil Company as there is for a history of the Civil War or the -French Revolution, or any other national episode which has divided men’s -minds. This has come about largely from the fact that almost constantly -since its organisation in 1870 the Standard Oil Company has been under -investigation by the Congress of the United States and by the -Legislatures of various states in which it has operated, on the -suspicion that it was receiving rebates from the railroads and was -practising methods in restraint of free trade. In 1872 and again in 1876 -it was before Congressional committees, in 1879 it was before examiners -of the Commonwealth of Pennsylvania and before committees appointed by -the Legislatures of New York and of Ohio for investigating railroads. -Its operations figured constantly in the debate which led up to the -creation of the Interstate Commerce Commission in 1887, and again and -again since that time the Commission has been called upon to examine -directly or indirectly into its relation with the railroads. - -In 1888, in the Investigation of Trusts conducted by Congress and by the -state of New York, the Standard Oil Company was the chief subject for -examination. In the state of Ohio, between 1882 and 1892, a constant -warfare was waged against the Standard in the courts and Legislature, -resulting in several volumes of testimony. The Legislatures of many -other states concerned themselves with it. This hostile legislation -compelled the trust to separate into its component parts in 1892, but -investigation did not cease; indeed, in the last great industrial -inquiry, conducted by the Commission appointed by President McKinley, -the Standard Oil Company was constantly under discussion, and hundreds -of pages of testimony on it appear in the nineteen volumes of reports -which the Commission has submitted. - -This mass of testimony, all of it submitted under oath it should be -remembered, contains the different charters and agreements under which -the Standard Oil Trust has operated, many contracts and agreements with -railroads, with refineries, with pipe-lines, and it contains the -experiences in business from 1872 up to 1900 of multitudes of -individuals. These experiences have exactly the quality of the personal -reminiscences of actors in great events, with the additional value that -they were given on the witness stand, and it is fair, therefore, to -suppose that they are more cautious and exact in statements than many -writers of memoirs are. These investigations, covering as they do all of -the important steps in the development of the trust, include full -accounts of the point of view of its officers in regard to that -development, as well as their explanations of many of the operations -over which controversy has arisen. Hundreds of pages of sworn testimony -are found in these volumes from John D. Rockefeller, William -Rockefeller, Henry M. Flagler, H. H. Rogers, John D. Archbold, Daniel -O’Day and other members of the concern. - -Aside from the great mass of sworn testimony accessible to the student -there is a large pamphlet literature dealing with different phases of -the subject, and there are files of the numerous daily newspapers and -monthly reviews, supported by the Oil Regions, in the columns of which -are to be found not only statistics but full reports of all -controversies between oil men. No complete collection of this voluminous -printed material has ever been made, but several small collections -exist, and in one or another of these I have been able to find -practically all of the important documents relating to the subject. Mrs. -Roger Sherman of Titusville, Pennsylvania, owns the largest of these -collections, and in it are to be found copies of the rarest pamphlets. -Lewis Emery, Jr., of Bradford, the late E. G. Patterson of Titusville, -the late Henry D. Lloyd, author of “Wealth _vs._ Commonwealth,” William -Hasson of Oil City, and P. C. Boyle, the editor of the Oil City Derrick, -have collections of value, and they have all been most generous in -giving me access to their books. - -But the documentary sources of this work are by no means all printed. -The Standard Oil Trust and its constituent companies have figured in -many civil suits, the testimony of which is still in manuscript in the -files of the courts where the suits were tried. These manuscripts have -been examined on the ground, and in numerous instances full copies of -affidavits and of important testimony have been made for permanent -reference and study. I have also had access to many files of private -correspondence and papers, the most important being that of the officers -and counsel of the Petroleum Producers’ Union from 1878 to 1880, that -covering the organisation from 1887 to 1895 of the various independent -companies which resulted in the Pure Oil Company, and that containing -the material prepared by Roger Sherman for the suit brought in 1897 by -the United States Pipe Line against certain of the Standard companies -under the Sherman anti-trust law. - -As many of the persons who have been active in the development of the -oil industry are still living, their help has been freely sought. Scores -of persons in each of the great oil centres have been interviewed, and -the comprehension and interpretation of the documents on which the work -is based have been materially aided by the explanations which the actors -in the events under consideration were able to give. - -When the work was first announced in the fall of 1901, the Standard Oil -Company, or perhaps I should say officers of the company, courteously -offered to give me all the assistance in their power, an offer of which -I have freely taken advantage. In accepting assistance from Standard men -as from independents I distinctly stated that I wanted facts, and that I -reserved the right to use them according to my own judgment of their -meaning, that my object was to learn more perfectly what was actually -done—not to learn what my informants thought of what had been done. It -is perhaps not too much to say that there is not a single important -episode in the history of the Standard Oil Company, so far as I know it, -or a notable step in its growth, which I have not discussed more or less -fully with officers of the company. - -It is needless to add that the conclusions expressed in this work are my -own. - - I. M. T. - - - - - CONTENTS - - - PREFACE Pages vii–xi - - - CHAPTER ONE - - THE BIRTH OF AN INDUSTRY - - PETROLEUM FIRST A CURIOSITY AND THEN A - MEDICINE—DISCOVERY OF ITS REAL VALUE—THE STORY OF HOW - IT CAME TO BE PRODUCED IN LARGE QUANTITIES—GREAT FLOW - OF OIL—SWARM OF PROBLEMS TO SOLVE—STORAGE AND - TRANSPORTATION—REFINING AND MARKETING—RAPID EXTENSION - OF THE FIELD OF OPERATION—WORKERS IN GREAT NUMBERS - WITH PLENTY OF CAPITAL—COSTLY BLUNDERS FREQUENTLY - MADE—BUT EVERY DIFFICULTY BEING MET AND OVERCOME—THE - NORMAL UNFOLDING OF A NEW AND WONDERFUL OPPORTUNITY - FOR INDIVIDUAL ENDEAVOUR. Pages 1003–1037 - - - CHAPTER TWO - - THE RISE OF THE STANDARD OIL COMPANY - - JOHN D. ROCKEFELLER’S FIRST CONNECTION WITH THE OIL - BUSINESS—STORIES OF HIS EARLY LIFE IN CLEVELAND—HIS - FIRST PARTNERS—ORGANISATION OF THE STANDARD OIL - COMPANY IN JUNE, 1870—ROCKEFELLER’S ABLE - ASSOCIATES—FIRST EVIDENCE OF RAILWAY DISCRIMINATIONS - IN THE OIL BUSINESS—REBATES FOUND TO BE GENERALLY - GIVEN TO LARGE SHIPPERS—FIRST PLAN FOR A SECRET - COMBINATION—THE SOUTH IMPROVEMENT COMPANY—SECRET - CONTRACTS MADE WITH THE RAILROADS PROVIDING REBATES - AND DRAWBACKS—ROCKEFELLER AND ASSOCIATES FORCE - CLEVELAND REFINERS TO JOIN THE NEW COMBINATION OR - SELL—RUMOUR OF THE PLAN REACHES THE OIL REGIONS. Pages 1038–1069 - - - CHAPTER THREE - - THE OIL WAR OF 1872 - - RISING IN THE OIL REGIONS AGAINST THE SOUTH IMPROVEMENT - COMPANY—PETROLEUM PRODUCERS’ UNION ORGANISED—OIL - BLOCKADE AGAINST MEMBERS OF SOUTH IMPROVEMENT COMPANY - AND AGAINST RAILROADS IMPLICATED—CONGRESSIONAL - INVESTIGATION OF 1872 AND THE DOCUMENTS IT - REVEALED—PUBLIC DISCUSSION AND GENERAL CONDEMNATION - OF THE SOUTH IMPROVEMENT COMPANY—RAILROAD OFFICIALS - CONFER WITH COMMITTEE FROM PETROLEUM PRODUCERS’ - UNION—WATSON AND ROCKEFELLER REFUSED ADMITTANCE TO - CONFERENCE—RAILROADS REVOKE CONTRACTS WITH SOUTH - IMPROVEMENT COMPANY AND MAKE CONTRACT WITH PETROLEUM - PRODUCERS’ UNION—BLOCKADE AGAINST SOUTH IMPROVEMENT - COMPANY LIFTED—OIL WAR OFFICIALLY ENDED—ROCKEFELLER - CONTINUES TO GET REBATES—HIS GREAT PLAN STILL A - LIVING PURPOSE. Pages 1070–1103 - - - CHAPTER FOUR - - “AN UNHOLY ALLIANCE” - - ROCKEFELLER AND HIS PARTY NOW PROPOSE AN OPEN INSTEAD - OF A SECRET COMBINATION—“THE PITTSBURG PLAN”—THE - SCHEME IS NOT APPROVED BY THE OIL REGIONS BECAUSE ITS - CHIEF STRENGTH IS THE REBATE—ROCKEFELLER NOT - DISCOURAGED—THREE MONTHS LATER BECOMES PRESIDENT OF - NATIONAL REFINERS’ ASSOCIATION—FOUR-FIFTHS OF - REFINING INTEREST OF UNITED STATES WITH HIM—OIL - REGIONS AROUSED—PRODUCERS’ UNION ORDER DRILLING - STOPPED AND A THIRTY DAY SHUT-DOWN TO COUNTERACT - FALLING PRICE OF CRUDE—PETROLEUM PRODUCERS’ AGENCY - FORMED TO ENABLE PRODUCERS TO CONTROL THEIR OWN - OIL—ROCKEFELLER OUTGENERALS HIS OPPONENTS AND FORCES - A COMBINATION OF REFINERS AND PRODUCERS—PRODUCERS’ - ASSOCIATION AND PRODUCERS’ AGENCY SNUFFED - OUT—NATIONAL REFINERS’ ASSOCIATION - DISBANDS—ROCKEFELLER STEADILY GAINING GROUND. Pages 1104–1128 - - - CHAPTER FIVE - - LAYING THE FOUNDATIONS OF A TRUST - - EVIDENCE OF REAPPEARANCE OF REBATES SOON AFTER - AGREEMENT OF MARCH 25 IS SIGNED—PRINCIPLE THOROUGHLY - ESTABLISHED THAT LARGE SHIPPERS SHALL HAVE ADVANTAGES - OVER SMALL SHIPPERS IN SPITE OF RAILROADS’ DUTY AS - COMMON CARRIERS—AGREEMENT WORKED OUT BY WHICH THREE - ROADS ARE TO HAVE FIXED PERCENTAGE OF EASTERN - SHIPMENTS—OIL REGIONS ROBBED OF THEIR GEOGRAPHICAL - ADVANTAGE—THE RUTTER CIRCULAR—ROCKEFELLER NOW - SECRETLY PLANS REALISATION OF HIS DREAM OF PERSONAL - CONTROL OF THE REFINING OF OIL—ORGANISATION OF THE - CENTRAL ASSOCIATION—H. H. ROGERS’ DEFENCE OF THE - PLAN—ROCKEFELLER’S QUIET AND SUCCESSFUL CANVASS FOR - ALLIANCES WITH REFINERS—THE REBATE HIS - WEAPON—CONSOLIDATION BY PERSUASION OR FORCE—MORE TALK - OF A UNITED EFFORT TO COUNTERACT THE MOVEMENT. Pages 1129–1166 - - - CHAPTER SIX - - STRENGTHENING THE FOUNDATIONS - - FIRST INTERSTATE COMMERCE BILL—THE BILL PIGEON-HOLED - THROUGH EFFORTS OF STANDARD’S FRIENDS—INDEPENDENTS - SEEK RELIEF BY PROPOSED CONSTRUCTION OF - PIPE-LINES—PLANS FOR THE FIRST SEABOARD - PIPE-LINE—SCHEME FAILS ON ACCOUNT OF MISMANAGEMENT - AND STANDARD AND RAILROAD OPPOSITION—DEVELOPMENT OF - THE EMPIRE TRANSPORTATION COMPANY AND ITS PROPOSED - CONNECTION WITH THE REFINING BUSINESS—STANDARD, ERIE - AND CENTRAL FIGHT THE EMPIRE TRANSPORTATION COMPANY - AND ITS BACKER, THE PENNSYLVANIA RAILROAD—THE - PENNSYLVANIA FINALLY QUITS AFTER A BITTER AND COSTLY - WAR—EMPIRE LINE SOLD TO THE STANDARD—ENTIRE PIPE-LINE - SYSTEM OF OIL REGIONS NOW IN ROCKEFELLER’S HANDS—NEW - RAILROAD POOL BETWEEN FOUR ROADS—ROCKEFELLER PUTS - INTO OPERATION SYSTEM OF DRAWBACKS ON OTHER PEOPLE’S - SHIPMENTS—HE PROCEEDS RAPIDLY WITH THE WORK OF - ABSORBING RIVALS. Pages 1167–1207 - - - CHAPTER SEVEN - - THE CRISIS OF 1878 - - A RISE IN OIL—A BLOCKADE IN EXPORTS—PRODUCERS DO NOT - GET THEIR SHARE OF THE PROFITS—THEY SECRETLY ORGANISE - THE PETROLEUM PRODUCERS’ UNION AND PROMISE TO SUPPORT - PROPOSED INDEPENDENT PIPE-LINES—ANOTHER INTERSTATE - COMMERCE BILL DEFEATED AT WASHINGTON—“IMMEDIATE - SHIPMENT”—INDEPENDENTS HAVE TROUBLE GETTING - CARS—RIOTS THREATENED—APPEAL TO GOVERNOR - HARTRANFT—SUITS BROUGHT AGAINST UNITED PIPE-LINES, - PENNSYLVANIA RAILROAD AND OTHERS—INVESTIGATIONS - PRECIPITATED IN OTHER STATES—THE HEPBURN COMMISSION - AND THE OHIO INVESTIGATION—EVIDENCE THAT THE STANDARD - IS A CONTINUATION OF THE SOUTH IMPROVEMENT - COMPANY—PRODUCERS FINALLY DECIDE TO PROCEED AGAINST - STANDARD OFFICIALS—ROCKEFELLER AND EIGHT OF HIS - ASSOCIATES INDICTED FOR CONSPIRACY. Pages 1208–1240 - - - CHAPTER EIGHT - - THE COMPROMISE OF 1880 - - THE PRODUCERS’ SUIT AGAINST ROCKEFELLER AND HIS - ASSOCIATES USED BY THE STANDARD TO PROTECT - ITSELF—SUITS AGAINST THE TRANSPORTATION COMPANIES ARE - DELAYED—TRIAL OF ROCKEFELLER AND HIS ASSOCIATES FOR - CONSPIRACY POSTPONED—ALL OF THE SUITS WITHDRAWN IN - RETURN FOR AGREEMENTS OF THE STANDARD AND THE - PENNSYLVANIA TO CEASE THEIR PRACTICES AGAINST THE - PRODUCERS—WITH THIS COMPROMISE THE SECOND PETROLEUM - PRODUCERS’ UNION COMES TO AN END—PRODUCERS THEMSELVES - TO BLAME FOR NOT STANDING BEHIND THEIR - LEADERS—STANDARD AGAIN ENFORCES ORDERS OBJECTIONABLE - TO PRODUCERS—MORE OUTBREAKS IN THE OIL - REGIONS—ROCKEFELLER HAVING SILENCED ORGANISED - OPPOSITION PROCEEDS TO SILENCE INDIVIDUAL COMPLAINT. Pages 1241–1262 - - - APPENDIX. Pages 1263–1406 - - - - - LIST OF ILLUSTRATIONS - - - PORTRAIT OF JOHN DAVISON ROCKEFELLER IN 1904 _Frontispiece 1_ - - Born July 8, 1839. - - FACING PAGE - - PORTRAIT OF E. L. DRAKE 1008 - - In 1859 Drake drilled near Titusville, - Pennsylvania, the first artesian well put down - for petroleum. He is popularly said to have - “discovered oil.” - - THE DRAKE WELL IN 1859—THE FIRST OIL WELL 1010 - - FAC-SIMILE OF A LABEL USED BY S. M. KIER IN - ADVERTISING ROCK-OIL OBTAINED IN DRILLING SALT WELLS - NEAR TARENTUM, PENNSYLVANIA 1034 - - FAGUNDUS—A TYPICAL OIL TOWN 1034 - - PORTRAIT OF JOHN D. ROCKEFELLER IN 1872 1040 - - PORTRAIT OF W. G. WARDEN 1053 - - Secretary of the South Improvement Company. - - PORTRAIT OF PETER H. WATSON 1053 - - President of the South Improvement Company. - - PORTRAIT OF CHARLES LOCKHART 1053 - - A member of the South Improvement Company, and - later of the Standard Oil Company. At his death - in 1904 the oldest living oil operator. - - PORTRAIT OF HENRY M. FLAGLER IN 1882 1053 - - Active partner of John D. Rockefeller in the oil - business since 1867. Officer of the Standard - Oil Company since its organization in 1870. - - PORTRAIT OF THOMAS A. SCOTT 1060 - - The contract of the South Improvement Company - with the Pennsylvania Railroad was signed by - Mr. Scott, then vice-president of the road. - - PORTRAIT OF WILLIAM H. VANDERBILT 1060 - - The contract of the South Improvement Company - with the New York Central was signed by Mr. - Vanderbilt, then vice-president of the road. - - PORTRAIT OF JAY GOULD 1060 - - President of the Erie Railroad in 1872. Signer of - the contract with the South Improvement - Company. - - PORTRAIT OF COMMODORE CORNELIUS VANDERBILT 1060 - - President of the New York Central Railroad when - the contract with the South Improvement Company - was signed. - - PORTRAIT OF JOHN D. ARCHBOLD IN 1872 1074 - - Now vice-president of the Standard Oil Company. - Mr. Archbold, whose home, in 1872, was in - Titusville, Pennsylvania, although one of the - youngest refiners of the Creek, was one of the - most active and efficient in breaking up the - South Improvement Company. - - PORTRAIT OF HENRY H. ROGERS IN 1872 1088 - - Now president of the National Transit Company and - a director of the Standard Oil Company. The - opposition to the South Improvement Company - among the New York refiners was led by Mr. - Rogers. - - PORTRAIT OF M. N. ALLEN 1110 - - Independent refiner of Titusville. Editor of the - _Courier_, an able opponent of the South - Improvement Company. - - PORTRAIT OF JOHN FERTIG 1110 - - Prominent oil operator. Until 1893 active in - Producers’ and Refiners’ Company (independent). - - PORTRAIT OF CAPT. WILLIAM HASSON 1110 - - President of the Petroleum Producers’ Association - of 1872. - - PORTRAIT OF JOHN L. McKINNEY 1110 - - Prominent oil operator. Until 1889 an - independent. Now member of the Standard Oil - Company. - - PORTRAIT OF JAMES S. TARR 1122 - - Owner of the “Tarr Farm,” one of the richest oil - territories on Oil Creek. - - PORTRAIT OF WILLIAM BARNSDALL 1122 - - The second oil well on Oil Creek was put down by - Mr. Barnsdall. - - PORTRAIT OF JAMES S. McCRAY 1122 - - Owner of the McCray Farm near Petroleum Centre. - - PORTRAIT OF WILLIAM H. ABBOTT 1122 - - One of the most prominent of the early oil - producers, refiners and pipe-line operators. - - FLEET OF OIL BOATS AT OIL CITY IN 1864 1136 - - PORTRAIT OF GEORGE H. BISSELL 1146 - - Founder of the first oil company in the United - States. - - PORTRAIT OF JONATHAN WATSON 1146 - - One of the owners of the land on which the first - successful well was drilled for oil. - - PORTRAIT OF SAMUEL KIER 1146 - - The first petroleum refined and sold for lighting - purpose was made by Mr. Kier in the ’50s in - Pittsburg. - - PORTRAIT OF JOSHUA MERRILL 1146 - - The chemist and refiner to whom many of the most - important processes now in use in making - illuminating and lubricating oils are due. - - PORTRAIT OF A. J. CASSATT IN 1877 1184 - - Third vice-president of the Pennsylvania Railroad - in charge of transportation when first contract - was made by that road with the Standard Oil - Company. - - PORTRAIT OF GENERAL GEORGE B. McCLELLAN 1184 - - President of the Atlantic and Great Western - Railroad at the time of the South Improvement - Company. General McClellan did not sign the - contract. - - PORTRAIT OF GENERAL JAMES H. DEVEREUX 1184 - - Who in 1868 as vice-president of the Lake Shore - and Michigan Southern Railroad first granted - rebates to Mr. Rockefeller’s firm. - - PORTRAIT OF JOSEPH D. POTTS 1184 - - President of the Empire Transportation Company. - Leader in the struggle between the Pennsylvania - Railroad and the Standard Oil Company in 1877. - - WOODEN CAR TANKS 1212 - - BOILER TANK CARS 1212 - - WOODEN TANKS FOR STORING OIL 1212 - - RAILROAD TERMINAL OF AN EARLY PIPE LINE 1212 - - PORTRAIT OF E. G. PATTERSON 1248 - - From 1872 to 1880 the chief advocate in the Oil - Region of an interstate commerce law. Assisted - in drafting the bills of 1876 and 1880. - Abandoned the independent interests at the time - of the compromise of 1880. - - PORTRAIT OF ROGER SHERMAN 1248 - - Chief counsel of the Petroleum Producers’ Union - from 1878 to 1880. From 1880 to 1885 counsel - for the Standard Oil Company. From 1885 to his - death in 1893 counsel of the allied - independents. - - PORTRAIT OF BENJ. B. CAMPBELL 1248 - - President of the Petroleum Producers’ Union from - 1878 to 1880. Independent refiner and operator - until his death. - - PORTRAIT OF JOSIAH LOMBARD 1248 - - Prominent independent refiner of N. Y. City, - whose firm was the only one to keep its - contract with the Tidewater Pipe Line Company - in 1880. - - - - - THE HISTORY OF - - THE STANDARD OIL COMPANY - - - - - CHAPTER ONE - THE BIRTH OF AN INDUSTRY - - PETROLEUM FIRST A CURIOSITY AND THEN A MEDICINE—DISCOVERY OF ITS REAL - VALUE—THE STORY OF HOW IT CAME TO BE PRODUCED IN LARGE - QUANTITIES—GREAT FLOW OF OIL—SWARM OF PROBLEMS TO SOLVE—STORAGE AND - TRANSPORTATION—REFINING AND MARKETING—RAPID EXTENSION OF THE FIELD - OF OPERATION—WORKERS IN GREAT NUMBERS WITH PLENTY OF CAPITAL—COSTLY - BLUNDERS FREQUENTLY MADE—BUT EVERY DIFFICULTY BEING MET AND - OVERCOME—THE NORMAL UNFOLDING OF A NEW AND WONDERFUL OPPORTUNITY FOR - INDIVIDUAL ENDEAVOUR. - - -One of the busiest corners of the globe at the opening of the year 1872 -was a strip of Northwestern Pennsylvania, not over fifty miles long, -known the world over as the Oil Regions. Twelve years before this strip -of land had been but little better than a wilderness; its chief -inhabitants the lumbermen, who every season cut great swaths of primeval -pine and hemlock from its hills, and in the spring floated them down the -Allegheny River to Pittsburg. The great tides of Western emigration had -shunned the spot for years as too rugged and unfriendly for settlement, -and yet in twelve years this region avoided by men had been transformed -into a bustling trade centre, where towns elbowed each other for place, -into which three great trunk railroads had built branches, and every -foot of whose soil was fought for by capitalists. It was the discovery -and development of a new raw product, petroleum, which had made this -change from wilderness to market-place. This product in twelve years had -not only peopled a waste place of the earth, it had revolutionised the -world’s methods of illumination and added millions upon millions of -dollars to the wealth of the United States. - -Petroleum as a curiosity, and indeed in a small way as an article of -commerce, was no new thing when its discovery in quantities called the -attention of the world to this corner of Northwestern Pennsylvania. The -journals of many an early explorer of the valleys of the Allegheny and -its tributaries tell of springs and streams the surfaces of which were -found covered with a thick oily substance which burned fiercely when -ignited and which the Indians believed to have curative properties. As -the country was opened, more and more was heard of these oil springs. -Certain streams came to be named from the quantities of the substance -found on the surface of the water, as “Oil Creek” in Northwestern -Pennsylvania, “Old Greasy” or Kanawha in West Virginia. The belief in -the substance as a cure-all increased as time went on and in various -parts of the country it was regularly skimmed from the surface of the -water as cream from a pan, or soaked up by woollen blankets, bottled, -and peddled as a medicine for man and beast. - -Up to the beginning of the 19th century no oil seems to have been -obtained except from the surfaces of springs and streams. That it was to -be found far below the surface of the earth was discovered independently -at various points in Kentucky, West Virginia, Ohio and Pennsylvania by -persons drilling for salt-water to be used in manufacturing salt. Not -infrequently the water they found was mixed with a dark-green, -evil-smelling substance which was recognised as identical with the -well-known “rock-oil.” It was necessary to rid the water of this before -it could be used for salt, and in many places cisterns were devised in -which the brine was allowed to stand until the oil had risen to the -surface. It was then run into the streams or on the ground. This -practice was soon discovered to be dangerous, so easily did the oil -ignite. In several places, particularly in Kentucky, so much oil was -obtained with the salt-water that the wells had to be abandoned. Certain -of these deserted salt wells were opened years after, when it was found -that the troublesome substance which had made them useless was far more -valuable than the brine the original drillers sought. - -Naturally the first use made of the oil obtained in quantities from the -salt wells was medicinal. By the middle of the century it was without -doubt the great American medicine. “Seneca Oil” seems to have been the -earliest name under which petroleum appeared in the East. It was -followed by a large output of Kentucky petroleum sold under the name -“American Medicinal Oil.” Several hundred thousand bottles of this oil -are said to have been put up in Burkesville, Kentucky, and to have been -shipped to the East and to Europe. The point at which the business of -bottling petroleum for medicine was carried on most systematically and -extensively was Pittsburg. Near that town, at Tarentum in Alleghany -County, were located salt wells owned and operated in the forties by -Samuel M. Kier. The oil which came up with the salt-water was sufficient -to be a nuisance, and Mr. Kier sought a way to use it. Believing it had -curative qualities he began to bottle it. By 1850 he had worked up this -business until “Kier’s Petroleum, or Rock-Oil” was sold all over the -United States. The crude petroleum was put up in eight-ounce bottles -wrapped in a circular setting forth in good patent-medicine style its -virtues as a cure-all, and giving directions about its use. While it was -admitted to be chiefly a liniment it was recommended for cholera morbus, -liver complaint, bronchitis and consumption, and the dose prescribed was -three teaspoonfuls three times a day! Mr. Kier’s circulars are crowded -with testimonials of the efficacy of rock-oil, dated anywhere between -1848 and 1853. Although his trade in this oil was so extensive he was -not satisfied that petroleum was useful only as a medicine. He was -interested in it as a lubricator and a luminant. That petroleum had the -qualities of both had been discovered at more than one point before -1850. More than one mill-owner in the districts where petroleum had been -found was using it in a crude way for oiling his machines or lighting -his works, but though the qualities of both lubricator and luminant were -present, the impurities of the natural oil were too great to make its -use general. Mr. Kier seems to have been the first man to have attempted -to secure an expert opinion as to the possibility of refining it. In -1849 he sent a bottle of oil to a chemist in Philadelphia, who advised -him to try distilling it and burning it in a lamp. Mr. Kier followed the -advice, and a five-barrel still which he used in the fifties for -refining petroleum is still to be seen in Pittsburg. His trade in the -oil he produced at his little refinery was not entirely local, for in -1858 we find him agreeing to sell to Joseph Coffin of New York at 62½ -cents a gallon 100 barrels of “carbon oil that will burn in the ordinary -coal-oil lamp.” - -Although Mr. Kier seems to have done a good business in rock-oil, -neither he nor any one else up to this point had thought it worth while -to seek petroleum for its own sake. They had all simply sought to -utilise what rose before their eyes on springs and streams or came to -them mixed with the salt-water for which they drilled. In 1854, however, -a man was found who took rock-oil more seriously. This man was George H. -Bissell, a graduate of Dartmouth College, who, worn out by an experience -of ten years in the South as a journalist and teacher, had come North -for a change. At his old college the latest curiosity of the laboratory -was shown him—the bottle of rock-oil—and the professor contended that it -was as good, or better, than coal for making illuminating oil. Bissell -inquired into its origin, and was told that it came from oil springs -located in Northwestern Pennsylvania on the farm of a lumber firm, -Brewer, Watson and Company. These springs had long yielded a supply of -oil which was regularly collected and sold for medicine, and was used -locally by mill-owners for lighting and lubricating purposes. - -Bissell seems to have been impressed with the commercial possibilities -of the oil, for he at once organised a company, the Pennsylvania -Rock-Oil Company, the first in the United States, and leased the lands -on which these oil springs were located. He then sent a quantity of the -oil to Professor Silliman of Yale College, and paid him for analysing -it. The professor’s report was published and received general attention. -From the rock-oil might be made as good an illuminant as any the world -knew. It also yielded gas, paraffine, lubricating oil. “In short,” -declared Professor Silliman, “your company have in their possession a -raw material from which, by simple and not expensive process, they may -manufacture very valuable products. It is worthy of note that my -experiments prove that nearly the whole of the raw product may be -manufactured without waste, and this solely by a well-directed process -which is in practice in one of the most simple of all chemical -processes.”[1] - -The oil was valuable, but could it be obtained in quantities great -enough to make the development of so remote a locality worth while? The -only method of obtaining it known to Mr. Bissell and his associates in -the new company was from the surface of oil springs. Could it be -obtained in any other way? There has long been a story current in the -Oil Regions that the Pennsylvania Rock-Oil Company received its first -notion of drilling for oil from one of those trivial incidents which so -often turn the course of human affairs. As the story goes, Mr. Bissell -was one day walking down Broadway when he halted to rest in the shade of -an awning before a drug store. In the window he saw on a bottle a -curious label, “Kier’s Petroleum, or Rock-Oil,” it read, “Celebrated for -its wonderful curative powers. A natural Remedy; Produced from a well in -Allegheny Co., Pa., four hundred feet below the earth’s surface,” etc. -On the label was the picture of an artesian well. It was from this well -that Mr. Kier got his “Natural Remedy.” Hundreds of men had seen the -label before, for it went out on every one of Mr. Kier’s circulars, but -this was the first to look at it with a “seeing eye.” As quickly as the -bottle of rock-oil in the Dartmouth laboratory had awakened in Mr. -Bissell’s mind the determination to find out the real value of the -strange substance, the label gave him the solution of the problem of -getting oil in quantities—it was to bore down into the earth where it -was stored, and pump it up. - -Professor Silliman made his report to the Pennsylvania Rock-Oil Company -in 1855, but it was not until the spring of 1858 that a representative -of the organisation, which by this time had changed hands and was known -as the Seneca Oil Company, was on the ground with orders to find oil. -The man sent out was a small stockholder in the company, Edwin L. Drake, -“Colonel” Drake as he was called. Drake had had no experience to fit him -for his task. A man forty years of age, he had spent his life as a -clerk, an express agent, and a railway conductor. His only -qualifications were a dash of pioneer blood and a great persistency in -undertakings which interested him. Whether Drake came to Titusville -ordered to put down an artesian well or not is a mooted point. His -latter-day admirers claim that the idea was entirely his own. It seems -hardly credible that men as intelligent as Professor Silliman, Mr. -Bissell, and others interested in the Pennsylvania Rock-Oil Company, -should not have taken means of finding out how the familiar “Kier’s -Rock-Oil” was obtained. Professor Silliman at least must have known of -the quantities of oil which had been obtained in different states in -drilling salt wells; indeed, in his report (see Appendix, Number 1) he -speaks of “wells sunk for the purpose of accumulating the product.” In -the “American Journal of Science” for 1840—of which he was one of the -editors—is an account of a famous oil well struck near Burkesville, -Kentucky, about 1830, when drilling for salt. It seems probable that the -idea of seeking oil on the lands leased by the Petroleum Rock-Oil -Company by drilling artesian wells had been long discussed by the -gentlemen interested in the venture, and that Drake came to Titusville -with instructions to put down a well. It is certain, at all events, that -he was soon explaining to his superiors at home the difficulty of -getting a driller, an engine-house and tools, and that he was employing -the interval in trying to open new oil springs and make the old ones -more profitable. - -[Illustration: - - E. L. DRAKE - - In 1859 Drake drilled near Titusville, Pennsylvania, the first - artesian well put down for petroleum. He is popularly said to have - “discovered oil.” -] - -The task before Drake was no light one. The spot to which he had been -sent was Titusville, a lumberman’s hamlet on Oil Creek, fourteen miles -from where that stream joins the Allegheny River. Its chief connection -with the outside world was by a stage to Erie, forty miles away. This -remoteness from civilisation and Drake’s own ignorance of artesian -wells, added to the general scepticism of the community concerning the -enterprise, caused great difficulty and long delays. It was months -before Drake succeeded in getting together the tools, engine and rigging -necessary to bore his well, and before he could get a driller who knew -how to manipulate them, winter had come, and he had to suspend -operations. People called him crazy for sticking to the enterprise, but -that had no effect on him. As soon as spring opened he borrowed a horse -and wagon and drove over a hundred miles to Tarentum, where Mr. Kier was -still pumping his salt wells, and was either bottling or refining the -oil which came up with the brine. Here Drake hoped to find a driller. He -brought back a man, and after a few months more of experiments and -accidents the drill was started. One day late in August, 1859, -Titusville was electrified by the news that Drake’s Folly, as many of -the onlookers had come to consider it, had justified itself. The well -was full of oil. The next day a pump was started, and twenty-five -barrels of oil were gathered. - -There was no doubt of the meaning of the Drake well in the minds of the -people of the vicinity. They had long ago accepted all Professor -Silliman had said of the possibilities of petroleum, and now that they -knew how it could be obtained in quantity, the whole countryside rushed -out to obtain leases. The second well in the immediate region was -drilled by a Titusville tanner, William Barnsdall—an Englishman who at -his majority had come to America to make his fortune. He had fought his -way westward, watching always for his chance. The day the Drake well was -struck he knew it had come. Quickly forming a company he began to drill -a well. He did not wait for an engine, but worked his drill through the -rock by a spring pole.[2] It took three months, and cost $3,000 to do -it, but he had his reward. On February 1, 1860, he struck -oil—twenty-five barrels a day—and oil was selling at eighteen dollars a -barrel. In five months the English tanner had sold over $16,000 worth of -oil. - -[Illustration: - - THE DRAKE WELL IN 1859. THE FIRST OIL WELL. -] - -A lumberman and merchant of the village, who long had had faith in -petroleum if it could be had in quantity, Jonathan Watson, one of the -firm of Brewer, Watson and Company, whose land the Pennsylvania Rock-Oil -Company had leased, mounted his horse as soon as he heard of the Drake -well, and, riding down the valley of Oil Creek, spent the day in leasing -farms. He soon had the third well of the region going down, this too by -a spring pole. This well started off in March at sixty gallons a minute, -and oil was selling at sixty cents a gallon. In two years the farm where -this third well was struck had produced 165,000 barrels of oil. - -Working an unfriendly piece of land a few miles below the Drake well -lived a man of thirty-five. Setting out for himself at twenty-two, he -had won his farm by the most dogged efforts, working in sawmills, saving -his earnings, buying a team, working it for others until he could take -up a piece of land, hoarding his savings here. For what? How could he -know? He knew well enough when Drake struck oil, and hastened out to buy -a share in a two-acre farm. He sold it at a profit, and with the money -put down a well, from which he realised $70,000. A few years later the -farm he had slaved to win came into the field. In 1871 he refused a -million dollars for it, and at one time he had stored there 200,000 -barrels of oil. - -A young doctor who had buried himself in the wilderness saw his chance. -For a song he bought thirty-eight acres on the creek, six miles below -the Drake well, and sold half of it for the price he had paid to a -country storekeeper and lumberman of the vicinity, one Charles Hyde. Out -of this thirty-eight acres millions of dollars came; one well alone—the -Mapleshade—cleared one and one-half millions. - -On every rocky farm, in every poor settlement of the region, was some -man whose ear was attuned to Fortune’s call, and who had the daring and -the energy to risk everything he possessed in an oil lease. It was well -that he acted at once; for, as the news of the discovery of oil reached -the open, the farms and towns of Ohio, New York, and Pennsylvania poured -out a stream of ambitious and vigorous youths, eager to seize what might -be there for them, while from the East came men with money and business -experience, who formed great stock companies, took up lands in parcels -of thousands of acres, and put down wells along every rocky run and -creek, as well as over the steep hills. In answer to their drill, oil -poured forth in floods. In many places pumping was out of the question; -the wells flowed 2,000, 3,000, 4,000 barrels a day—such quantities of it -that at the close of 1861 oil which in January of 1860 was twenty -dollars a barrel had fallen to ten cents. - -Here was the oil, and in unheard-of quantities, and with it came all the -swarm of problems which a discovery brings. The methods Drake had used -were crude and must be improved. The processes of refining were those of -the laboratory and must be developed. Communication with the outside -world must be secured. Markets must be built up. Indeed, a whole new -commercial machine had to be created to meet the discovery. These -problems were not realised before the region teemed with men to wrestle -with them—men “alive to the instant need of things.” They had to begin -with so simple and elementary a matter as devising something to hold the -oil. There were not barrels enough to be bought in America, although -turpentine barrels, molasses barrels, whiskey barrels—every sort of -barrel and cask—were added to new ones made especially for oil. -Reservoirs excavated in the earth and faced with logs and cement, and -box-like structures of planks or logs were tried at first but were not -satisfactory. A young Iowa school teacher and farmer, visiting at his -home in Erie County, went to the region. Immediately he saw his chance. -It was to invent a receptacle which would hold oil in quantities. -Certain large producers listened to his scheme and furnished money to -make a trial tank. It was a success, and before many months the school -teacher was buying thousands of feet of lumber, employing scores of men, -and working them and himself—day and night. For nearly ten years he -built these wooden tanks. Then seeing that iron tanks—huge receptacles -holding thousands of barrels where his held hundreds—were bound to -supersede him, he turned, with the ready adaptability which -characterised the men of the region, to producing oil for others to -tank. - -After the storing problem came that of transportation. There was one -waterway leading out—Oil Creek, as it had been called for more than a -hundred years,—an uncertain stream running the length of the narrow -valley in which the oil was found, and uniting with the Allegheny River -at what is now known as Oil City. From this junction it was 132 miles to -Pittsburg and a railroad. Besides this waterway were rough country roads -leading to the railroads at Union City, Corry, Erie and Meadville. There -was but one way to get the oil to the bank of Oil Creek or to the -railroads, and that was by putting it into barrels and hauling it. -Teamsters equipped for this service seemed to fall from the sky. The -farms for a hundred miles around gave up their boys and horses and -wagons to supply the need. It paid. There were times when three and even -four dollars a barrel were paid for hauling five or ten miles. It was -not too much for the work. The best roads over which they travelled were -narrow, rough, unmade highways, mere openings to the outer world, while -the roads to the wells they themselves had to break across fields and -through forests. These roads were made almost impassable by the great -number of heavily freighted wagons travelling over them. From the big -wells a constant procession of teams ran, and it was no uncommon thing -for a visitor to the Oil Regions to meet oil caravans of a hundred or -more wagons. Often these caravans were held up for hours by a dangerous -mud-hole into which a wheel had sunk or a horse fallen. If there was a -possible way to be made around the obstruction it was taken, even if it -led through a farmer’s field. Indeed, a sort of guerilla warfare went on -constantly between the farmers and the teamsters. Often the roads became -impassable, so that new ones had to be broken, and not even a shot-gun -could keep the driver from going where the passage was least difficult. -The teamster, in fact, carried a weapon which few farmers cared to face, -his terrible “black snake,” as his long, heavy black whip was called. -The man who had once felt the cruel lash of a “black snake” around his -legs did not often oppose the owner. - -With the wages paid him the teamster could easily become a kind of -plutocrat. One old producer tells of having a teamster in his employ who -for nine weeks drew only enough of his earnings to feed himself and -horses. He slept in his wagon and tethered the team. At the end of the -time he “thought he’d go home for a clean shirt” and asked for a -settlement. It was found that he had $1,900 to his credit. The story is -a fair illustration both of the habits and the earnings of the Oil Creek -teamsters. Indispensable to the business they became the tyrants of the -region—working and brawling as suited them, a genius not unlike the -flatboat-men who once gave colour to life on the Mississippi, or the -cowboys who make the plains picturesque to-day. Bad as their reputation -was, many a man found in their ranks the start which led later to wealth -and influence in the oil business. One of the shrewdest, kindest, oddest -men the Oil Regions ever knew, Wesley Chambers, came to the top from the -teamster class. He had found his way to the creek after eight years of -unsuccessful gold-hunting in California. “There’s my chance,” he said, -when he saw the lack of teams and boats, and he set about organising a -service for transporting oil to Pittsburg. In a short time he was buying -horses of his own and building boats. Wide-awake to actualities, he saw -a few years later that the teamster and the boat were to be replaced by -the pipe-line and the railroad, and forestalled the change by becoming a -producer. - -In this problem of transportation the most important element after the -team was Oil Creek and the flatboat. A more uncertain stream never ran -in a bed. In the summer it was low, in the winter frozen; now it was -gorged with ice, now running mad over the flats. The best service was -gotten out of it in time of low water through artificial freshets. -Milldams, controlled by private parties, were frequent along the creek -and its tributaries. By arrangement these dams were cut on a certain day -or days of the week, usually Friday, and on the flood or freshet the -flatboats loaded with barrels of oil were floated down stream. The -freshet was always exciting and perilous and frequently disastrous. From -the points where they were tied up the boatmen watched the coming flood -and cut themselves loose the moment after its head had passed them. As -one fleet after another swung into the roaring flood the danger of -collision and jams increased. Rare indeed was the freshet when a few -wrecks did not lie somewhere along the creek, and often scores lay piled -high on the bank—a hopeless jam of broken boats and barrels, the whole -soaked in petroleum and reeking with gas and profanity. If the boats -rode safely through to the river, there was little further danger. - -The Allegheny River traffic grew to great proportions—fully 1,000 boats -and some thirty steamers were in the fleet, and at least 4,000 men. This -traffic was developed by men who saw here their opportunity of fortune, -as others had seen it in drilling or teaming. The foremost of these men -was an Ohio River captain, driven northward by the war, one J. J. -Vandergrift. Captain Vandergrift had run the full gamut of river -experiences from cabin-boy to owner and commander of his own steamers. -The war stopped his Mississippi River trade. Fitting up one of his -steamers as a gun-boat, he turned it over to Commodore Foote and looked -for a new stream to navigate. From the Oil Region at that moment the -loudest cry was for barrels. He towed 4,000 empty casks up the river, -saw at once the need of some kind of bulk transportation, took his hint -from a bulk-boat which an ingenious experimenter was trying, ordered a -dozen of them built, towed his fleet to the creek, bought oil to fill -them, and then returned to Pittsburg to sell his cargo. On one alone he -made $70,000. - -But the railroad soon pressed the river hard. At the time of the -discovery of oil three lines, the Philadelphia and Erie, the Buffalo and -Erie (now the Lake Shore), connecting with the Central, and the Atlantic -and Great Western, connecting with the Erie, were within teaming -distance of the region. The points at which the Philadelphia and Erie -road could be reached were Erie, forty miles from Titusville, Union -City, twenty-two miles, and Corry, sixteen miles. The Buffalo and Erie -was reached at Erie. The Atlantic and Great Western was reached at -Meadville, Union City and Corry, and the distances were twenty-eight, -twenty-two and sixteen miles, respectively. Erie was the favourite -shipping point at first, as the wagon road in that direction was the -best. The amount of freight the railroads carried the first year of the -business was enormous. Of course connecting lines were built as rapidly -as men could work. By the beginning of 1863 the Oil Creek road, as it -was known, had reached Titusville from Corry. This gave an eastern -connection by both the Philadelphia and Erie and the Atlantic and Great -Western, but as the latter was constructing a branch from Meadville to -Franklin, the Oil Creek road became the feeder of the former -principally. Both of these roads were completed to Oil City by 1865. - -The railroads built, the vexatious, time-taking, and costly problem of -getting the oil from the well to the shipping point still remained. The -teamster was still the tyrant of the business. His day was almost over. -He was to fall before the pipe-line. The feasibility of carrying oil in -pipes was discussed almost from the beginning of the oil business. Very -soon after the Drake well was struck oil men began to say that the -natural way to get this oil from the wells to the railroads was through -pipes. In many places gravity would carry it; where it could not, pumps -would force it. The belief that this could be done was so strong that as -early as February, 1862, a company was incorporated in Pennsylvania for -carrying oil in pipes or tubes from any point on Oil Creek to its mouth -or to any station on the Philadelphia and Erie Railroad. This company -seems never to have done more than get a charter. In 1863 at least three -short pipe-lines were put into operation. The first of these was a -two–inch pipe, through which distillate was pumped a distance of three -miles from the Warren refinery at Plumer to Warren’s Landing on the -Allegheny River. The one which attracted the most attention was a line -two and one-half miles in length carrying crude oil from the Tarr farm -to the Humboldt refinery at Plumer. Various other experiments were made, -both gravity and pumps being trusted for propelling the oil, but there -was always something wrong; the pipes leaked or burst, the pumps were -too weak; shifting oil centres interrupted experiments which might have -been successful. Then suddenly the man for the need appeared, Samuel Van -Syckel. He came to the creek in 1864 with some money, hoping to make -more. He handled quantities of oil produced at Pithole, several miles -from a shipping point, and saw his profits eaten up by teamsters. Their -tyranny aroused his ire and his wits and he determined to build a -pipe-line from the wells to the railroad. He was greeted with jeers, but -he went doggedly ahead, laid a two–inch pipe, put in three relay pumps, -and turned in his oil. From the start the line was a success, carrying -eighty barrels of oil an hour. The day that the Van Syckel pipe-line -began to run oil a revolution began in the business. After the Drake -well it is the most important event in the history of the Oil Regions. - -The teamsters saw its meaning first and turned out in fury, dragging the -pipe, which was for the most part buried, to the surface, and cutting it -so that the oil would be lost. It was only by stationing an armed guard -that they were held in check. A second line of importance, that of -Abbott and Harley, suffered even more than that of Van Syckel. The -teamsters did more than cut the pipe; they burned the tanks in which oil -was stored, laid in wait for employees, threatened with destruction the -wells which furnished the oil, and so generally terrorised the country -that the governor of the state was called upon in April, 1866, to -protect the property and men of the lines. The day of the teamster was -over, however, and the more philosophical of them accepted the -situation; scores disappeared from the region, and scores more took to -drilling. They died hard, and the cutting and plugging of pipe-lines was -for years a pastime of the remnant of their race. - -If the uses to which oil might be put and the methods for manufacturing -it had not been well understood when the Drake well was struck, there -would have been no such imperious demand as came for the immediate -opening of new territory and developing methods of handling and carrying -it on a large scale. But men knew already what the oil was good for, -and, in a crude way, how to distil it. The process of distillation also -was free to all. The essential apparatus was very simple—a cast-iron -still, usually surrounded by brickwork, a copper worm, and two tin- or -zinc-lined tanks. The still was filled with crude oil, which was -subjected to a high enough heat to vapourise it. The vapour passed -through a cast-iron goose-neck fitted to the top of the still into the -copper worm, which was immersed in water. Here the vapour was condensed -and passed into the zinc-lined tank. This product, called a distillate, -was treated with chemicals, washed with water, and run off into the -tin-lined tank, where it was allowed to settle. Anybody who could get -the apparatus could “make oil,” and many men did—badly, of course, to -begin with, and with an alarming proportion of waste and explosions and -fires, but with experience they learned, and some of the great -refineries of the country grew out of these rude beginnings. - -Luckily not all the men who undertook the manufacturing of petroleum in -these first days were inexperienced. The chemists to whom are due -chiefly the processes now used—Atwood, Gessner, and Merrill—had for -years been busy making oils from coal. They knew something of petroleum, -and when it came in quantities began at once to adapt their processes to -it. Merrill at the time was connected with Samuel Downer, of Boston, in -manufacturing oil from Trinidad pitch and from coal bought in -Newfoundland. The year oil was discovered Mr. Downer distilled 7,500 -tons of this coal, clearing on it at least $100,000. As soon as -petroleum appeared he and Mr. Merrill saw that here was a product which -was bound to displace their coal, and with courage and promptness they -prepared to adapt their works. In order to be near the supply they came -to Corry, fourteen miles from the Drake well, and in 1862 put up a -refinery which cost $250,000. Here were refined thousands of barrels of -oil, most of which was sent to New York for export. To the Boston works -the firm sent crude, which was manufactured for the home trade and for -shipping to California and Australia. The processes used in the Downer -works at this early day were in all essentials the same as are used -to-day. - -In 1865 William Wright, after a careful study of “Petrolia,” as the Oil -Regions were then often called, published with Harper and Brothers an -interesting volume in which he devotes a chapter to “Oil Refining and -Refiners.” Mr. Wright describes there not only the Downer works at -Corry, but a factory which if much less important in the development of -the Oil Regions held a much larger place in its imagination. This was -the Humboldt works at Plumer. In 1862 two Germans, brothers, the Messrs. -Ludovici, came to the oil country and, choosing a spot distant from oil -wells, main roads, or water courses, erected an oil refinery which was -reported to have cost a half million dollars. The works were built in a -way unheard of then and uncommon now. The foundations were all of cut -stone. The boiler and engines were of the most expensive character. A -house erected in connection with the refinery was said to have been -finished in hard wood with marble mantels, and furnished with rich -carpets, mirrors, and elaborate furniture. The lavishness of the -Humboldt refinery and the formality with which its business was -conducted were long a tradition in the Oil Regions. Of more practical -moment are the features of the refinery which Mr. Wright mentions: one -is that the works had been so planned as to take advantage of the -natural descent of the ground so that the oil would pass from one set of -vessels to another without using artificial power, and the other that -the supply of crude oil was obtained from the Tarr farm three miles -away, being forced by pumps, through pipes, over the hills. - -Mr. Wright found some twenty refineries between Titusville and Oil City -the year of his visit, 1865. In several factories that he visited they -were making naphtha, gasoline, and benzine for export. Three grades of -illuminating oils—“prime white,” “standard white,” and “straw -colour”—were made everywhere; paraffine, refined to a pure white article -like that of to-day, was manufactured in quantities by the Downer works; -and lubricating oils were beginning to be made. - -As men and means were found to put down wells, to devise and build tanks -and boats and pipes and railroads for handling the oil, to adapt and -improve processes for manufacturing, so men were found from the -beginning of the oil business to wrestle with every problem raised. They -came in shoals, young, vigorous, resourceful, indifferent to -difficulties, greedy for a chance, and with each year they forced more -light and wealth from the new product. By the opening of 1872 they had -produced nearly 40,000,000 barrels of oil, and had raised their product -to the fourth place among the exports of the United States, over -152,000,000 gallons going abroad in 1871, a percentage of the production -which compares well with what goes to-day.[3] As for the market, they -had developed it until it included almost every country of the -earth—China, the East and West Indies, South America and Africa. Over -forty different European ports received refined oil from the United -States in 1871. Nearly a million gallons were sent to Syria, about a -half million to Egypt, about as much to the British West Indies, and a -quarter of a million to the Dutch East Indies. Not only were -illuminating oils being exported. In 1871 nearly seven million gallons -of naphtha, benzine, and gasoline were sent abroad, and it became -evident now for the first time that a valuable trade in lubricants made -from petroleum was possible. A discovery by Joshua Merrill of the Downer -works opened this new source of wealth to the industry. Until 1869 the -impossibility of deodorising petroleum had prevented its use largely as -a lubricant, but in that year Mr. Merrill discovered a process by which -a deodorised lubricating oil could be made. He had both the apparatus -for producing the oil and the oil itself patented. The oil was so -favourably received that the market sale by the Downer works was several -hundred per cent. greater in a single year than the firm had ever sold -before. - -The oil field had been extended from the valley of Oil Creek and its -tributaries down the Allegheny River for fifty miles and probably -covered 2,000 square miles. The early theory that oil followed the -streams had been exploded, and wells were now drilled on the hills. It -was known, too, that if oil was found in the first sand struck in the -drilling, it might be found still lower in a second or third sand. The -Drake well had struck oil at 69½ feet, but wells were now drilled as -deep as 1,600 feet. The extension of the field, the discovery that oil -was under the hills as well as under streams, and to be found in various -sands, had cost enormously. It had been done by “wild-catting,” as -putting down experimental wells was called, by following superstitions -in locating wells, such as the witch-hazel stick, or the spiritualistic -medium, quite as much as by studying the position of wells in existence -and calculating how oil belts probably ran. As the cost of a well was -from $3,000 to $8,000,[4] according to its location, and as 4,374 of the -5,560 wells drilled in the first ten years of the business (1859 to -1869) were “dry-holes,” or were abandoned as unprofitable, something of -the daring it took to operate on small means, as most producers did in -the beginning, is evident. But they loved the game, and every man of -them would stake his last dollar on the chance of striking oil. - -With the extension of the field rapid strides had been made in tools, in -rigs, in all of the various essentials of drilling a well. They had -learned to use torpedoes to open up hard rocks, naphtha to cut the -paraffine which coated the sand and stopped the flow of oil, seed bags -to stop the inrush of a stream of water. They lost their tools less -often, and knew better how to fish for them when they did. In short, -they had learned how to put down and care for oil wells. - -Equal advances had been made in other departments, fewer cars were -loaded with barrels, tank cars for carrying in bulk had been invented. -The wooden tank holding 200 to 1,200 barrels had been rapidly replaced -by the great iron tank holding 20,000 or 30,000 barrels. The pipe-lines -had begun to go directly to the wells instead of pumping from a general -receiving station, or “dump,” as it was called, thus saving the tedious -and expensive operation of hauling. From beginning to end the business -had been developed, systematised, simplified. - -Most important was the simplification of the transportation problem by -the development of pipe-lines. By 1872 they were the one oil gatherer. -Several companies were carrying on the pipe-line business, and two of -them had acquired great power in the Oil Regions because of their -connection with trunk lines. These were the Empire Transportation -Company and the Pennsylvania Transportation Company. The former, which -had been the first business organisation to go into the pipe-line -business on a large scale, was a concern which had appeared in the Oil -Regions not over six months before Van Syckel began to pump oil. The -Empire Transportation Company had been organised in 1865 to build up an -east and west freight traffic _via_ the Philadelphia and Erie Railroad, -a new line which had just been leased by the Pennsylvania. Some ten -railroads connected in one way or another with the Philadelphia and -Erie, forming direct routes east and west. In spite of their evident -community of interest these various roads were kept apart by their -jealous fears of one another. Each insisted on its own time-table, its -own rates, its own way of doing things. The shipper _via_ this route -must make a separate bargain with each road and often submit to having -his freight changed at terminals from one car to another because of the -difference of gauge. The Empire Transportation Company undertook to act -as a mediator between the roads and the shipper, to make the route -cheap, fast, and reliable. It proposed to solicit freight, furnish its -own cars and terminal facilities, and collect money due. It did not make -rates, however; it only harmonised those made by the various branches in -the system. It was to receive a commission on the business secured, and -a rental for the cars and other facilities it furnished. - -It was a difficult task the new company undertook, but it had at its -head a remarkable man to cope with difficulties. This man, Joseph D. -Potts, was in 1865 thirty-six years old. He had come of a long and -honourable line of iron-masters of the Schuylkill region of -Pennsylvania, but had left the great forge towns with which his -ancestors had been associated—Pottstown, Glasgow Forge, Valley Forge—to -become a civil engineer. His profession had led him to the service of -the Pennsylvania Railroad, where he had held important positions in -connection with which he now undertook the organisation of the Empire -Transportation Company. Colonel Potts—the title came from his service in -the Civil War—possessed a clear and vigorous mind; he was far-seeing, -forceful in execution, fair in his dealings. To marked ability and -integrity he joined a gentle and courteous nature. - -The first freight which the Empire Transportation Company attacked after -its organisation was oil. The year was a great one for the Oil Regions, -the year of Pithole. In January there had suddenly been struck on -Pithole Creek in a wilderness six miles from the Allegheny River a well, -located with a witch-hazel twig, which produced 250 barrels a day—and -oil was selling at eight dollars a barrel! Wells followed in rapid -succession. In less than ten months the field was doing over 10,000 -barrels a day. This sudden flood of oil caused a tremendous excitement. -Crowds of speculators and investors rushed to Pithole from all over the -country. The Civil War had just closed, soldiers were disbanding, and -hundreds of them found their way to the new oil field. In six weeks -after the first well was struck Pithole was a town of 6,000 inhabitants. -In less than a year it had fifty hotels and boardinghouses; five of -these hotels cost $50,000 or more each. In six months after the first -well the post-office of Pithole was receiving upwards of 10,000 letters -per day and was counted third in size in the state—Philadelphia, -Pittsburg, and Pithole being the order of rank. It had a daily paper, -churches, all the appliances of a town. - -The handling of the great output of oil from the Pithole field was a -serious question. There seemed not enough cars in the country to carry -it and shippers resorted to every imaginable trick to get -accommodations. When the agent of the Empire Transportation Company -opened his office in June, 1865, and demonstrated his ability to furnish -cars regularly and in large numbers, trade rapidly flowed to him. Now -the Empire agency had hardly been established when the Van Syckel -pipe-line began to carry oil from Pithole to the railroad. Lines began -to multiply. The railroads saw at once that they were destined speedily -to do all the gathering and hastened to secure control of them. Colonel -Potts’s first pipe-line purchase was a line running from Pithole to -Titusville, which as yet had not been wet. - -When the Empire Transportation Company took over this line nothing had -been demonstrated but that oil could be driven, by relay pumps, five -miles through a two–inch pipe. The Empire’s first effort was to get a -longer run by fewer pumps. The agent in charge, C. P. Hatch, believed -that oil could be brought the entire ten and one-half miles from Pithole -to Titusville by one pump. He met with ridicule, but he insisted on -trying it in the new line his company had acquired. The experiment was -entirely successful. Improvements followed as rapidly as hands could -carry out the suggestions of ingenuity and energy. One of the most -important made the first year of the business was connecting wells by -pipe directly with the tanks at the pumping stations, thus doing away -with the expensive hauling in barrels to the “dump.” A new device for -accounting to the producer for his oil was made necessary by this -change, and the practice of taking the gauge or measure of the oil in -the producer’s tank before and after the run and issuing duplicate “run -tickets” was devised by Mr. Hatch. The producers, however, were not all -“square”; it sometimes happened that they sold oil by a transfer order -on the pipe-line, which they did not have in the line! To prevent these -the Empire Transportation Company in 1868 began to issue certificates -for credit balances of oil; these soon became the general mediums of -trade in oil, and remain so to-day. - -One of the cleverest of the pipe-line devices of the Empire Company was -its assessment for waste and fire. In running oil through pipes there is -more or less lost by leaking and evaporation. In September, 1868, Mr. -Hatch announced that thereafter he would deduct two per cent. from oil -runs for wastage. The assessment raised almost a riot in the region, -meetings were held, the Empire Transportation Company was denounced as a -highway robber, and threats of violence were made if the order was -enforced. While this excitement was in progress there came a big fire on -the line. Now the company’s officials had been studying the question of -fire insurance from the start. Fires in the Oil Regions were as regular -a feature of the business as explosions used to be on the Mississippi -steamboats, and no regular fire insurance company would take the risk. -It had been decided that at the first fire there should be announced -what was called a “general average assessment,” that is, a fire tax, and -to be ready, blanks had been prepared. Now in the thick of the -resistance to the wastage assessment came a fire and the line announced -that the producers having oil in the line must pay the insurance. The -controversy at once waxed hotter than ever, but was finally compromised -by the withdrawal in this case of the fire insurance if the producers -would consent to the tax for waste. They did consent, and later when -fires occurred the general average assessment was applied without -serious opposition. Both of these practices prevail to-day. By the end -of 1871 the Empire Transportation Company was one of the most efficient -and respected business organisations in the oil country. - -Its chief rival was the Pennsylvania Transportation Company, an -organisation which had its origin in the second pipe-line laid in the -Oil Regions. This line was built by Henry Harley, a man who for fully -ten years was one of the most brilliant figures in the oil country. -Harley was a civil engineer by profession, a graduate of the Troy -Polytechnic Institute, and had held a responsible position for some time -as an assistant of General Herman Haupt in the Hoosac Tunnel. He became -interested in the oil business in 1862, first as a buyer of petroleum, -then as an operator in West Virginia. In 1865 he laid a pipe-line from -one of the rich oil farms of the creek to the railroad. It was a -success, and from this venture Harley and his partner, W. H. Abbott, one -of the wealthiest and most active men in the country, developed an -important transportation system. In 1868 Jay Gould, who as president of -the Erie road was eager to increase his oil freight, bought a -controlling interest in the Abbott and Harley lines, and made Harley -“General Oil Agent” of the Erie system. Harley now became closely -associated with Fisk and Gould, and the three carried on a series of -bold and piratical speculations in oil which greatly enraged the oil -country. They built a refinery near Jersey City, extended their -pipe-line system, and in 1871, when they reorganised under the name of -the Pennsylvania Transportation Company, they controlled probably the -greatest number of miles of pipe of any company in the region, and then -were fighting the Empire bitterly for freight. - -There is no part of this rapid development of the business more -interesting than the commercial machine the oil men had devised by 1872 -for marketing oil. A man with a thousand-barrel well on his hands in -1862 was in a plight. He had got to sell his oil at once for lack of -storage room or let it run on the ground, and there was no exchange, no -market, no telegraph, not even a post-office within his reach where he -could arrange a sale. He had to depend on buyers who came to him. These -buyers were the agents of the refineries in different cities, or of the -exporters of crude in New York. They went from well to well on -horseback, if the roads were not too bad, on foot if they were, and at -each place made a special bargain varying with the quantity bought and -the difficulty in getting it away, for the buyer was the transporter, -and, as a rule, furnished the barrels or boats in which he carried off -his oil. It was not long before the speculative character of the oil -trade due to the great fluctuations in quantity added a crowd of brokers -to the regular buyers who tramped up and down the creek. When the -railroads came in the trains became the headquarters for both buyers and -sellers. This was the more easily managed as the trains on the creek -stopped at almost every oil farm. These trains became, in fact, a sort -of travelling oil exchange, and on them a large percentage of all the -bargaining of the business was done. - -The brokers and buyers first organised and established headquarters in -Oil City in 1869, but there was an oil exchange in New York City as -early as 1866. Titusville did not have an exchange until 1871. By this -time the pipe-lines had begun to issue certificates for the oil they -received, and the trading was done to a degree in these. The method was -simple, and much more convenient than the old one. The producer ran his -oil into a pipe-line, and for it received a certificate showing that the -line held so much to his credit; this certificate was transferred when -the sale was made and presented when the oil was wanted. - -One achievement of which the oil men were particularly proud was -increasing the refining capacity of the region. At the start the -difficulty of getting the apparatus for a refinery to the creek had been -so enormous that the bulk of the crude had been driven to the nearest -manufacturing cities—Erie, Pittsburg, Cleveland. Much had gone to the -seaboard, too, and Boston, New York, Philadelphia and Baltimore were all -doing considerable refining. There was always a strong feeling in the -Oil Regions that the refining should be done at home. Before the -railroads came the most heroic efforts were made again and again to get -in the necessary machinery. Brought from Pittsburg by water, as a rule, -the apparatus had to be hauled from Oil City, where it had been dumped -on the muddy bank of the river—there were no wharfs—over the -indescribable roads to the site chosen. It took weeks—months -sometimes—to get in the apparatus. The chemicals used in the making of -the oil, the barrels in which to store it—all had to be brought from -outside. The wonder is that under these conditions anybody tried to -refine on the creek. But refineries persisted in coming, and after the -railroads came, increased; by 1872 the daily capacity had grown to -nearly 10,000 barrels, and there were no more complete or profitable -plants in existence than two or three of those on the creek. The only -points having larger daily capacity were Cleveland and New York City. -Several of the refineries had added barrel works. Acids were made on the -ground. Iron works at Oil City and Titusville promised soon to supply -the needs of both drillers and refiners. The exultation was great, and -the press and people boasted that the day would soon come when they -would refine for the world. There in their own narrow valleys should be -made everything which petroleum would yield. Cleveland, Pittsburg—the -seaboard—must give up refining. The business belonged to the Oil -Regions, and the oil men meant to take it. - -A significant development in the region was the tendency among many of -the oil men to combine different branches of the business. Several large -producers conducted shipping agencies for handling their own and other -people’s oil. The firm of Pierce and Neyhart was a prominent one -carrying on this double business in the sixties and early seventies. J. -J. Vandergrift, who has been mentioned already as one of the first men -to take hold of the transportation problem, early became interested in -production. As soon as the pipe-line was demonstrated to be a success he -began building lines. He also added to his interests a large refinery, -the Imperial of Oil City. Captain Vandergrift by 1870 produced, -transported and refined his own oil as well as transported and refined -much of other people’s. It was a common practice for a refinery in the -Oil Regions to pipe oil directly to its works by its own line, and in -1872 one refinery in Titusville, the Octave, carried its refined oil a -mile or more by pipe to the railroad. Although most of the refineries at -this period sold their products to dealers and exporters, the building -up of markets by direct contact with new territory was beginning to be a -consideration with all large manufacturers. The Octave of Titusville, -for instance, chartered a ship in 1872 to load with oil and send in -charge of its own agent into South American ports. - -The odds against the oil men in developing the business had not been -merely physical ones. There had been more than the wilderness to -conquer, more than the possibilities of a new product to learn. Over all -the early years of their struggle and hardships hovered the dark cloud -of the Civil War. They were so cut off from men that they did not hear -of the fall of Sumter for four days after it happened, and the news for -the time blotted out interest even in flowing wells. Twice at least when -Lee invaded Pennsylvania the whole business came to a stand-still, men -abandoning the drill, the pump, the refinery to make ready to repel the -invader. They were taxed for the war—taxes rising to ten dollars per -barrel in 1865—one dollar on crude and twenty cents a gallon on refined -(the oil barrel is usually estimated at forty-two gallons). They gave up -their quota of men again and again at the call for recruits, and when -the end came and a million men were cast on the country, this little -corner of Pennsylvania absorbed a larger portion of men probably than -any other spot in the United States. The soldier was given the first -chance everywhere at work, he was welcomed into oil companies, stock -being given him for the value of his war record. There were lieutenants -and captains and majors—even generals—scattered all over the field, and -the field felt itself honoured, and bragged, as it did of all things, of -the number of privates and officers who immediately on disbandment had -turned to it for employment. - -It was not only the Civil War from which the Oil Regions had suffered; -in 1870 the Franco-Prussian War broke the foreign market to pieces and -caused great loss to the whole industry. And there had been other -troubles. From the first, oil men had to contend with wild fluctuations -in the price of oil. In 1859 it was twenty dollars a barrel, and in 1861 -it had averaged fifty-two cents. Two years later, in 1863, it averaged -$8.15, and in 1867 but $2.40. In all these first twelve years nothing -like a steady price could be depended on, for just as the supply seemed -to have approached a fixed amount, a “wildcat” well would come in and -“knock the bottom out of the market.” Such fluctuations were the natural -element of the speculator, and he came early, buying in quantities and -holding in storage tanks for higher prices. If enough oil was held, or -if the production fell off, up went the price, only to be knocked down -by the throwing of great quantities of stocks on the market. The -producers themselves often held their oil, though not always to their -own profit. A historic case of obstinate holding occurred in 1871 on the -“McCray farm,” the most productive field in the region at that time. -Prices were hovering around three dollars, and McCray swore he would not -sell under five dollars. He bought, hired and built iron tankage until -he had upward of 200,000 barrels. There was great loss from leakage and -from evaporation and there were taxes, but McCray held on, refusing four -dollars, $4.50, and even five dollars. Evil times came in the Oil -Regions soon after and with them “dollar oil.” McCray finally was -obliged to sell his stocks at about $1.20 per barrel. To develop a -business in face of such fluctuations and speculation in the raw product -took not only courage—it took a dash of the gambler. It never could have -been done, of course, had it not been for the streams of money which -flowed unceasingly and apparently from choice into the regions. In 1865 -Mr. Wright calculated that the oil country was using a capital of -$100,000,000. In 1872 the oil men claimed the capital in operation was -$200,000,000. It has been estimated that in the first decade of the -industry nearly $350,000,000 was put into it. - -Speculation in oil stock companies was another great evil. It reached -its height in 1864 and 1865—the “flush times” of the business. Stocks in -companies whose holdings were hardly worth the stamps on the -certificates were sold all over the land. In March, 1865, the aggregate -capital of the oil companies whose charters were on file in Albany, New -York, was $350,000,000, and in Philadelphia alone in 1864 and 1865 1,000 -oil companies, mostly bogus, are said to have been formed. These -swindles were dignified by the names of officers of distinction in the -United States army, for the war was coming to an end and the name of a -general was the most popular and persuasive argument in the country. Of -course there came a collapse. The “oil bubble” burst in 1866, and it was -nothing but the irrepressible energy of the region which kept the -business going in the panic which followed. - -Then there was the disturbing effect of foreign competition. What would -become of them if oil was found in quantities in other countries? A -decided depression of the market occurred in 1866 when the government -sent out reports of developments of foreign oil fields. If there was oil -in Japan, China, Burmah, Persia, Russia, Bavaria, in the quantities the -government reports said, why, there was trouble in store for -Pennsylvania, the oil men argued, and for a day the market fell—it was -only for a day. Men forgot easily in the Oil Regions in the sixties. - -An evil in their business which they were only beginning to grasp fully -in 1871 was the unholy system of freight discrimination which the -railroads were practising. Three trunk lines competed for the business -by 1872—the Pennsylvania, which had leased the Philadelphia and Erie, -the Erie and the Central. (The latter road reached the Oil Regions by a -branch from Ashtabula on the Lake Shore and Michigan Southern division -to Oil City; this branch was completed in 1868.) The Pennsylvania -claimed the oil traffic as a natural right; for the Oil Regions were in -Pennsylvania, and did not Tom Scott own that state? The Erie road for -about five years had been in the hands of those splendid pirates, Jay -Gould and “Jim” Fisk. Naturally they took all they could get of the oil -traffic and took it by freebooting methods. “Corners” and “rings” were -their favourite devices for securing trade, and more than once their aid -had carried through daring and unscrupulous speculations in oil. The -Central in this period was waging its famous desperate war on the Erie, -Commodore Vanderbilt having marked that highway for his own along with -most other things in New York State. All three of the roads began as -early as 1868 to use secret rebates on the published freight rates in -oil as a means of securing traffic. This practice had gone on until in -1871 any big producer, refiner, or buyer could bully a freight agent -into a special rate. Those “on the inside,” those who had “pulls,” also -secured special rates. The result was that the open rate was enforced -only on the innocent and the weak. - -Serious as all these problems were, there was no discouragement or -shrinking from them. The oil men had rid themselves of bunco men and -burst the “oil bubbles.” They had harnessed the brokers in exchanges and -made strict rules to govern them. They had learned not to fear the -foreigners, and to take with equal _sang froid_ the “dry-hole” which -made them poor, or the “gusher” which made them rich. For every evil -they had a remedy. They were not afraid even of the railroads, and -loudly declared that if the discriminations were not stopped they would -build a railroad of their own. Indeed, the evils in the oil business in -1871, far from being a discouragement, rather added to the interest. -They had never known anything but struggle—with conquest—and twelve -years of it was far from cooling their ardour for a fair fight. - -More had been done in the Oil Regions in the first dozen years than the -development of a new industry. From the first there had gone with the -oil men’s ambition to make oil to light the whole earth a desire to -bring civilisation to the wilderness from which they were drawing -wealth, to create an orderly society from the mass of humanity which -poured pell-mell into the region. A hatred of indecency first drew -together the better element of each of the rough communities which -sprang up. Whiskey-sellers and women flocked to the region at the -breaking out of the excitement. Their first shelters were shanties built -on flatboats which were towed from place to place: They came to -Rouseville—a collection of pine shanties and oil derricks, built on a -muddy flat—as forlorn and disreputable a town in appearance as the earth -ever saw. They tied up for trade, and the next morning woke up from -their brawl to find themselves twenty miles away, floating down the -Allegheny River. Rouseville meant to be decent. She had cut them loose, -and by such summary vigilance she kept herself decent. Other towns -adopted the same policy. By common consent vice was corralled largely in -one town. Here a whole street was given up to dance-houses and saloons, -and those who must have a “spree” were expected to go to Petroleum -Centre to take it. - -[Illustration: - - FAC-SIMILE OF A LABEL USED BY S. M. KIER IN ADVERTISING ROCK-OIL - OBTAINED IN DRILLING SALT WELLS NEAR TARENTUM, PENNSYLVANIA -] - -[Illustration: - - FAGUNDUS—A TYPICAL OIL TOWN -] - -Decency and schools! Vice cut adrift, they looked for a school teacher. -Children were sadly out of place, but there they were, and these men, -fighting for a chance, saw to it that a shanty, with a school teacher in -it, was in every settlement. It was not long, too, before there was a -church, a union church. To worship God was their primal instinct; to -defend a creed a later development. In the beginning every social -contrivance was wanting. There were no policemen, and each individual -looked after evil-doers. There were no firemen, and every man turned out -with a bucket at a fire. There were no bankers, and each man had to put -his wealth away as best he could until a peripatetic banker from -Pittsburg relieved him. At one time Dr. Egbert, a rich operator, is said -to have had $1,800,000 in currency in his house. There were no -hospitals, and in 1861, when the horrible possibilities of the oil fire -were first demonstrated by the burning of the Rouse well, a fire at -which nineteen persons lost their lives, the many injured found welcome -and care for long weeks in the little shanties of women already -overburdened by the difficulties of caring for families in the rough -community. - -Out of this poverty and disorder they had developed in ten years a -social organisation as good as their commercial. Titusville, the hamlet -on whose outskirts Drake had drilled his well, was now a city of 10,000 -inhabitants. It had an opera house, where in 1871 Clara Louise Kellogg -and Christine Nilsson sang, Joe Jefferson and Janauschek played, and -Wendell Phillips and Bishop Simpson spoke. It had two prosperous and -fearless newspapers. Its schools prepared for college. Oil City was not -behind, and between them was a string of lively towns. Many of the oil -farms had a decent community life. The Columbia farm kept up a library -and reading-room for its employees; there was a good schoolhouse used on -Sunday for services, and there was a Columbia farm band of no mean -reputation in the Oil Regions. - -Indeed, by the opening of 1872, life in the Oil Regions had ceased to be -a mere make-shift. Comforts and orderliness and decency, even -opportunities for education and for social life, were within reach. It -was a conquest to be proud of, quite as proud of as they were of the -fact that their business had been developed until it had never before, -on the whole, been in so satisfactory a condition. - -Nobody realised more fully what had been accomplished in the Oil Regions -than the oil men themselves. Nobody rehearsed their achievements so -loudly. “In ten years,” they were fond of saying, “we have built this -business up from nothing to a net product of six millions of barrels per -annum. We have invented and devised all the apparatus, the appliances, -the forms needed for a new industry. We use a capital of $200,000,000, -and support a population of 60,000 people. To keep up our supply we -drill 100 new wells per month, at an average cost of $6,000 each. We are -fourth in the exports of the United States. We have developed a foreign -market, including every civilised country on the globe.” - -But what had been done was, in their judgment, only a beginning. Life -ran swift and ruddy and joyous in these men. They were still young, most -of them under forty, and they looked forward with all the eagerness of -the young who have just learned their powers, to years of struggle and -development. They would solve all these perplexing problems of -over-production, of railroad discrimination, of speculation. They would -meet their own needs. They would bring the oil refining to the region -where it belonged. They would make their towns the most beautiful in the -world. There was nothing too good for them, nothing they did not hope -and dare. But suddenly, at the very heyday of this confidence, a big -hand reached out from nobody knew where, to steal their conquest and -throttle their future. The suddenness and the blackness of the assault -on their business stirred to the bottom their manhood and their sense of -fair play, and the whole region arose in a revolt which is scarcely -paralleled in the commercial history of the United States. - - - - - CHAPTER TWO - THE RISE OF THE STANDARD OIL COMPANY - - JOHN D. ROCKEFELLER’S FIRST CONNECTION WITH THE OIL BUSINESS—STORIES - OF HIS EARLY LIFE IN CLEVELAND—HIS FIRST PARTNERS—ORGANISATION OF - THE STANDARD OIL COMPANY IN JUNE, 1870—ROCKEFELLER’S ABLE - ASSOCIATES—FIRST EVIDENCE OF RAILWAY DISCRIMINATIONS IN THE OIL - BUSINESS—REBATES FOUND TO BE GENERALLY GIVEN TO LARGE SHIPPERS—FIRST - PLAN FOR A SECRET COMBINATION—THE SOUTH IMPROVEMENT COMPANY—SECRET - CONTRACTS MADE WITH THE RAILROADS PROVIDING REBATES AND - DRAWBACKS—ROCKEFELLER AND ASSOCIATES FORCE CLEVELAND REFINERS TO - JOIN THE NEW COMBINATION OR SELL—RUMOUR OF THE PLAN REACHES THE OIL - REGIONS. - - -The chief refining competitor of Oil Creek in 1872 was Cleveland, Ohio. -Since 1869 that city had done annually more refining than any other -place in the country. Strung along the banks of Walworth and Kingsbury -Runs, the creeks to which the city frequently banishes her heavy and -evil-smelling burdens, there had been since the early sixties from -twenty to thirty oil refineries. Why they were there, more than 200 -miles from the spot where the oil was taken from the earth, a glance at -a map of the railroads of the time will show: By rail and water -Cleveland commanded the entire Western market. It had two trunk lines -running to New York, both eager for oil traffic, and by Lake Erie and -the canal it had for a large part of the year a splendid cheap waterway. -Thus, at the opening of the oil business, Cleveland was destined by -geographical position to be a refining center. - -Men saw it, and hastened to take advantage of the opportunity. There was -grave risk. The oil supply might not hold out. As yet there was no -certain market for refined oil. But a sure result was not what drew -people into the oil business in the early sixties. Fortune was running -fleet-footed across the country, and at her garment men clutched. They -loved the chase almost as they did success, and so many a man in -Cleveland tried his luck in an oil refinery, as hundreds on Oil Creek -were trying it in an oil lease. By 1865 there were thirty refineries in -the town, with a capital of about a million and a half dollars and a -daily capacity of some 2,000 barrels. The works multiplied rapidly. The -report of the Cleveland Board of Trade for 1866 gives the number of -plants at the end of that year as fifty, and it dilates eloquently on -the advantages of Cleveland as a refining point over even Pittsburg, to -that time supposed to be the natural centre for the business. If the -railroad and lake transportation men would but adopt as liberal a policy -toward the oil freights of Cleveland as the Pennsylvania Railroad was -adopting toward that of Pittsburg, aided by her natural advantages the -town was bound to become the greatest oil refining centre in the United -States. By 1868 the Board of Trade reported joyfully that Cleveland was -receiving within 300,000 barrels as much oil as Pittsburg. In 1869 she -surpassed all competitors. “Cleveland now claims the leading position -among the manufacturers of petroleum with a very reasonable prospect of -holding that rank for some time to come,” commented the Board of Trade -report. “Each year has seen greater consolidation of capital, greater -energy and success in prosecuting the business, and, notwithstanding -some disastrous fires, a stronger determination to establish an -immovable reputation for the quantity and quality of this most important -product. The total capital invested in this business is not less than -four millions of dollars and the total product of the year would not -fall short of fifteen millions.” - -Among the many young men of Cleveland who, from the start, had an eye on -the oil-refining business and had begun to take an active part in its -development as soon as it was demonstrated that there was a reasonable -hope of its being permanent, was a young firm of produce commission -merchants. Both members of this firm were keen business men, and one of -them had remarkable commercial vision—a genius for seeing the -possibilities in material things. This man’s name was Rockefeller—John -D. Rockefeller. He was but twenty-three years old when he first went -into the oil business, but he had already got his feet firmly on the -business ladder, and had got them there by his own efforts. The habit of -driving good bargains and of saving money had started him. He himself -once told how he learned these lessons so useful in money-making, in one -of his frequent Sunday-school talks to young men on success in business. -The value of a good bargain he learned in buying cord-wood for his -father: “I knew what a cord of good solid beech and maple wood was. My -father told me to select only the solid wood and the straight wood and -not to put any limbs in it or any punky wood. That was a good training -for me. I did not need any father to tell me or anybody else how many -feet it took to make a cord of wood.” - -And here is how he learned the value of investing money: - -“Among the early experiences that were helpful to me that I recollect -with pleasure was one in working a few days for a neighbour in digging -potatoes—a very enterprising, thrifty farmer, who could dig a great many -potatoes. I was a boy of perhaps thirteen or fourteen years of age, and -it kept me very busy from morning until night. It was a ten-hour day. -And as I was saving these little sums I soon learned that I could get as -much interest for fifty dollars loaned at seven per cent.—the legal rate -in the state of New York at that time for a year—as I could earn by -digging potatoes for 100 days. The impression was gaining ground with me -that it was a good thing to let the money be my slave and not make -myself a slave to money.” Here we have the foundation principles of a -great financial career. - -[Illustration: - - JOHN D. ROCKEFELLER IN 1872 -] - -When young Rockefeller was thirteen years old, his father moved from the -farm in Central New York, where the boy had been born (July 8, 1839), to -a farm near Cleveland, Ohio. He went to school in Cleveland for three -years. In 1855 it became necessary for him to earn his own living. It -was a hard year in the West and the boy walked the streets for days -looking for work. He was about to give it up and go to the country when, -to quote the story as Mr. Rockefeller once told it to his Cleveland -Sunday-school, “As good fortune would have it I went down to the dock -and made one more application, and I was told that if I would come in -after dinner—our noon-day meal was dinner in those days—they would see -if I could come to work for them. I went down after dinner and I got the -position, and I was permitted to remain in the city.” The position, that -of a clerk and bookkeeper, was not lucrative. According to a small -ledger which has figured frequently in Mr. Rockefeller’s religious -instructions, he earned from September 26, 1855, to January, 1856, fifty -dollars. “Out of that,” Mr. Rockefeller told the young men of his -Sunday-school class, “I paid my washerwoman and the lady I boarded with, -and I saved a little money to put away.” - -[Illustration: - - Fragment of a page in the city directory of Cleveland, Ohio, for 1857. - This is the first year in which the name John D. Rockefeller appears - in the directory. The same entry is made in 1858. The next year, - 1859, Mr. Rockefeller is entered as a member of the firm of Clark - and Rockefeller. -] - -He proved an admirable accountant—one of the early-and-late sort, who -saw everything, forgot nothing and never talked. In 1856 his salary was -raised to twenty-five dollars a month, and he went on always “saving a -little money to put away.” In 1858 came a chance to invest his savings. -Among his acquaintances was a young Englishman, M. B. Clark. Older by -twelve years than Rockefeller he had left a hard life in England when he -was twenty to seek fortune in America. He had landed in Boston in 1847, -without a penny or a friend, and it had taken three months for him to -earn money to get to Ohio. Here he had taken the first job at hand, as -man-of-all-work, wood-chopper, teamster. He had found his way to -Cleveland, had become a valuable man in the houses where he was -employed, had gone to school at nights, had saved money. They were two -of a kind, Clark and Rockefeller, and in 1858 they pooled their earnings -and started a produce commission business on the Cleveland docks. The -venture succeeded. Local historians credit Clark and Rockefeller with -doing a business of $450,000 the first year. The war came on, and as -neither partner went to the front, they had full chance to take -advantage of the opportunity for produce business a great army gives. A -greater chance than furnishing army supplies, lucrative as most people -found that, was in the oil business (so Clark and Rockefeller began to -think), and in 1862, when an Englishman of ability and energy, one -Samuel Andrews, asked them to back him in starting a refinery, they put -in $4,000 and promised to give more if necessary. Now Andrews was a -mechanical genius. He devised new processes, made a better and better -quality of oil, got larger and larger percentages of refined from his -crude. The little refinery grew big, and Clark and Rockefeller soon had -$100,000 or more in it. In the meantime Cleveland was growing as a -refining centre. The business which in 1860 had been a gamble was by -1865 one most promising industries of the town. It was but the -beginning—so Mr. Rockefeller thought—and in that year he sold out his -share of the commission business and put his money into the oil firm of -Rockefeller and Andrews. - -In the new firm Andrews attended to the manufacturing. The pushing of -the business, the buying and the selling, fell to Rockefeller. From the -start his effect was tremendous. He had the frugal man’s hatred of waste -and disorder, of middlemen and unnecessary manipulation, and he began a -vigorous elimination of these from his business. The residuum that other -refineries let run into the ground, he sold. Old iron found its way to -the junk shop. He bought his oil directly from the wells. He made his -own barrels. He watched and saved and contrived. The ability with which -he made the smallest bargain furnishes topics to Cleveland story-tellers -to-day. Low-voiced, soft-footed, humble, knowing every point in every -man’s business, he never tired until he got his wares at the lowest -possible figure. “John always got the best of the bargain,” old men tell -you in Cleveland to-day, and they wince though they laugh in telling it. -“Smooth,” “a _savy_ fellow,” is their description of him. To drive a -good bargain was the joy of his life. “The only time I ever saw John -Rockefeller enthusiastic,” a man told the writer once, “was when a -report came in from the creek that his buyer had secured a cargo of oil -at a figure much below the market price. He bounded from his chair with -a shout of joy, danced up and down, hugged me, threw up his hat, acted -so like a madman that I have never forgotten it.” - -He could borrow as well as bargain. The firm’s capital was limited; -growing as they were, they often needed money, and had none. Borrow they -must. Rarely if ever did Mr. Rockefeller fail. There is a story handed -down in Cleveland from the days of Clark and Rockefeller, produce -merchants, which is illustrative of his methods. One day a well-known -and rich business man stepped into the office and asked for Mr. -Rockefeller. He was out, and Clark met the visitor. “Mr. Clark,” he -said, “you may tell Mr. Rockefeller, when he comes in, that I think I -can use the $10,000 he wants to invest with me for your firm. I have -thought it all over.” - -“Good God!” cried Clark, “we don’t want to invest $10,000. John is out -right now trying to borrow $5,000 for us.” - -It turned out that to prepare him for a proposition to borrow $5,000 Mr. -Rockefeller had told the gentleman that he and Clark wanted to invest -$10,000! - -“And the joke of it is,” said Clark, who used to tell the story, “John -got the $5,000 even after I had let the cat out of the bag. Oh, he was -the greatest borrower you ever saw!” - -These qualities told. The firm grew as rapidly as the oil business of -the town, and started a second refinery—William A. Rockefeller and -Company. They took in a partner, H. M. Flagler, and opened a house in -New York for selling oil. Of all these concerns John D. Rockefeller was -the head. Finally, in June, 1870, five years after he became an active -partner in the refining business, Mr. Rockefeller combined all his -companies into one—the Standard Oil Company. The capital of the new -concern was $1,000,000. The parties interested in it were John D. -Rockefeller, Henry M. Flagler, Samuel Andrews, Stephen V. Harkness, and -William Rockefeller.[5] - -[Illustration: - - Map of Northwestern Pennsylvania, showing the relation of the Oil - Regions to the railroads in 1859, when oil was “discovered.” -] - -The strides the firm of Rockefeller and Andrews made after the former -went into it were attributed for three or four years mainly to his -extraordinary capacity for bargaining and borrowing. Then its chief -competitors began to suspect something. John Rockefeller might get his -oil cheaper now and then, they said, but he could not do it often. He -might make close contracts for which they had neither the patience nor -the stomach. He might have an unusual mechanical and practical genius in -his partner. But these things could not explain all. They believed they -bought, on the whole, almost as cheaply as he, and they knew they made -as good oil and with as great, or nearly as great, economy. He could -sell at no better price than they. Where was his advantage? There was -but one place where it could be, and that was in transportation. He must -be getting better rates from the railroads than they were. In 1868 or -1869 a member of a rival firm long in the business, which had been -prosperous from the start, and which prided itself on its methods, its -economy and its energy, Alexander, Scofield and Company, went to the -Atlantic and Great Western road, then under the Erie management, and -complained. “You are giving others better rates than you are us,” said -Mr. Alexander, the representative of the firm. “We cannot compete if you -do that.” The railroad agent did not attempt to deny it—he simply agreed -to give Mr. Alexander a rebate also. The arrangement was interesting. -Mr. Alexander was to pay the open, or regular, rate on oil from the Oil -Regions to Cleveland, which was then forty cents a barrel. At the end of -each month he was to send to the railroad vouchers for the amount of oil -shipped and paid for at forty cents, and was to get back from the -railroad, in money, fifteen cents on each barrel. This concession -applied only to oil brought from the wells. He was never able to get a -rebate on oil shipped eastward.[6] According to Mr. Alexander, the -Atlantic and Great Western gave the rebates on oil from the Oil Regions -to Cleveland up to 1871 and the system was then discontinued. Late in -1871, however, the firm for the first time got a rebate on the Lake -Shore road on oil brought from the field. - -Another Cleveland man, W. H. Doane, engaged in shipping crude oil, began -to suspect about the same time as Mr. Alexander that the Standard was -receiving rebates. Now Mr. Doane had always been opposed to the -“drawback business,” but it was impossible for him to supply his -customers with crude oil at as low a rate as the Standard paid if it -received a rebate and he did not, and when it was first generally -rumoured in Cleveland that the railroads were favouring Mr. Rockefeller -he went to see the agent of the road. “I told him I did not want any -drawback, unless others were getting it; I wanted it if they were -getting it, and he gave me at that time ten cents drawback.” This -arrangement Mr. Doane said had lasted but a short time. At the date he -was speaking—the spring of 1872—he had had no drawback for two years. - -A still more important bit of testimony as to the time when rebates -first began to be given to the Cleveland refiners and as to who first -got them and why, is contained in an affidavit made in 1880 by the very -man who made the discrimination.[7] This man was General J. H. Devereux, -who in 1868 succeeded Amasa Stone as vice-president of the Lake Shore -Railroad. General Devereux said that his experience with the oil traffic -had begun with his connection with the Lake Shore; that the only written -memoranda concerning oil which he found in his office on entering his -new position was a book in which it was stated that the representatives -of the twenty-five oil-refining firms in Cleveland had agreed to pay a -cent a gallon on crude oil removed from the Oil Regions. General -Devereux says that he soon found there was a deal of trouble in store -for him over oil freight. The competition between the twenty-five firms -was close, the Pennsylvania was “claiming a patent right” on the -transportation of oil and was putting forth every effort to make -Pittsburg and Philadelphia the chief refining centres. Oil Creek was -boasting that it was going to be the future refining point for the -world. All of this looked bad for what General Devereux speaks of as the -“then very limited refining capacity of Cleveland.” This remark shows -how new he was to the business, for, as we have already seen, Cleveland -in 1868 had anything but a limited refining capacity. Between three and -four million dollars were invested in oil refineries, and the town was -receiving within 35,000 barrels of as much oil as New York City, and -within 300,000 as much as Pittsburg, and it was boasting that the next -year it would outstrip these competitors, which, as a matter of fact, it -did. - -The natural point for General Devereux to consider, of course, was -whether he could meet the rates the Pennsylvania were giving and -increase the oil freight for the Lake Shore. The road had a branch -running to Franklin, Pennsylvania, within a few miles of Oil City. This -he completed, and then, as he says in his affidavit, “a sharper contest -than ever was produced growing out of the opposition of the Pennsylvania -Railroad in competition. Such rates and arrangements were made by the -Pennsylvania Railroad that it was publicly proclaimed in the public -print in Oil City, Titusville and other places that Cleveland was to be -wiped out as a refining centre as with a sponge.” General Devereux goes -on to say that all the refiners of the town, without exception, came to -him in alarm, and expressed their fears that they would have either to -abandon their business there or move to Titusville or other points in -the Oil Regions; that the only exception to this decision was that -offered by Rockefeller, Andrews and Flagler, who, on his assurance that -the Lake Shore Railroad could and would handle oil as cheaply as the -Pennsylvania Company, proposed to stand their ground at Cleveland and -fight it out on that line. And so General Devereux gave the Standard the -rebate on the rate which Amasa Stone had made with all the refiners. Why -he should not have quieted the fears of the twenty-four or twenty-five -other refiners by lowering their rate, too, does not appear in the -affidavit. At all events the rebate had come, and, as we have seen, it -soon was suspected and others went after it, and in some cases got it. -But the rebate seems to have been granted generally only on oil brought -from the Oil Regions. Mr. Alexander claims he was never able to get his -rate lowered on his Eastern shipments. The railroad took the position -with him that if he could ship as much oil as the Standard he could have -as low a rate, but not otherwise. Now in 1870 the Standard Oil Company -had a daily capacity of about 1,500 barrels of crude. The refinery was -the largest in the town, though it had some close competitors. -Nevertheless on the strength of its large capacity it received the -special favour. It was a plausible way to get around the theory -generally held then, as now, though not so definitely crystallised into -law, that the railroad being a common carrier had no right to -discriminate between its patrons. It remained to be seen whether the -practice would be accepted by Mr. Rockefeller’s competitors without a -contest, or, if contested, would be supported by the law. - -What the Standard’s rebate on Eastern shipments was in 1870 it is -impossible to say. Mr. Alexander says he was never able to get a rate -lower than $1.33 a barrel by rail, and that it was commonly believed in -Cleveland that the Standard had a rate of ninety cents. Mr. Flagler, -however, the only member of the firm who has been examined under oath on -that point, showed, by presenting the contract of the Standard Oil -Company with the Lake Shore road in 1870, that the rates varied during -the year from $1.40 to $1.20 and $1.60, according to the season. When -Mr. Flagler was asked if there was no drawback or rebate on this rate he -answered, “None whatever.” - -It would seem from the above as if the one man in the Cleveland oil -trade in 1870 who ought to have been satisfied was Mr. Rockefeller. His -was the largest firm in the largest refining centre of the country; that -is, of the 10,000 to 12,000 daily capacity divided among the twenty-five -or twenty-six refiners of Cleveland he controlled 1,500 barrels. Not -only was Cleveland the largest refining centre in the country, it was -gaining rapidly, for where in 1868 it shipped 776,356 barrels of refined -oil, in 1869 it shipped 923,933, in 1870 1,459,500, and in 1871 -1,640,499.[8] Not only did Mr. Rockefeller control the largest firm in -this most prosperous centre of a prosperous business, he controlled one -of amazing efficiency. The combination, in 1870, of the various -companies with which he was connected had brought together a group of -remarkable men. Samuel Andrews, by all accounts, was the ablest -mechanical superintendent in Cleveland. William Rockefeller, the brother -of John D. Rockefeller, was not only an energetic and intelligent -business man, he was a man whom people liked. He was open-hearted, -jolly, a good story-teller, a man who knew and liked a good horse—not -too pious, as some of John’s business associates thought him, not a man -to suspect or fear, as many a man did John. Old oil men will tell you on -the creek to-day how much they liked him in the days when he used to -come to Oil City buying oil for the Cleveland firm. The personal quality -of William Rockefeller was, and always has been, a strong asset of the -Standard Oil Company. Probably the strongest man in the firm after John -D. Rockefeller was Henry M. Flagler. He was, like the others, a young -man, and one who, like the head of the firm, had the passion for money, -and in a hard self-supporting experience, begun when but a boy, had -learned, as well as his chief, some of the principles of making it. He -was untiring in his efforts to increase the business, quick to see an -advantage, as quick to take it. He had no scruples to make him hesitate -over the ethical quality of a contract which was advantageous. Success, -that is, making money, was its own justification. He was not a secretive -man, like John D. Rockefeller, not a dreamer, but he could keep his -mouth shut when necessary and he knew the worth of a financial dream -when it was laid before him. It must have been evident to every business -man who came in contact with the young Standard Oil Company that it -would go far. The firm itself must have known it would go far. Indeed -nothing could have stopped the Standard Oil Company in 1870—the oil -business being what it was—but an entire change in the nature of the -members of the firm, and they were not the kind of material which -changes. - -With such a set of associates, with his organisation complete from his -buyers on the creek to his exporting agent in New York, with the -transportation advantages which none of his competitors had had the -daring or the persuasive power to get, certainly Mr. Rockefeller should -have been satisfied in 1870. But Mr. Rockefeller was far from satisfied. -He was a brooding, cautious, secretive man, seeing all the possible -dangers as well as all the possible opportunities in things, and he -studied, as a player at chess, all the possible combinations which might -imperil his supremacy. These twenty-five Cleveland rivals of his—how -could he at once and forever put them out of the game? He and his -partners had somehow conceived a great idea—the advantages of -combination. What might they not do if they could buy out and absorb the -big refineries now competing with them in Cleveland? The possibilities -of the idea grew as they discussed it. Finally they began tentatively to -sound some of their rivals. But there were other rivals than these at -home. There were the creek refiners! They were there at the mouth of the -wells. What might not this geographical advantage do in time? Refining -was going on there on an increasing scale; the capacity of the Oil -Regions had indeed risen to nearly 10,000 barrels a day—equal to that of -New York, exceeding that of Pittsburg by nearly 4,000 barrels, and -almost equalling that of Cleveland. The men of the oil country loudly -declared that they meant to refine for the world. They boasted of an oil -kingdom which eventually should handle the entire business and compel -Cleveland and Pittsburg either to abandon their works or bring them to -the oil country. In this boastful ambition they were encouraged -particularly by the Pennsylvania Railroad, which naturally handled the -largest percentage of the oil. How long could the Standard Oil Company -stand against this competition? - -There was another interest as deeply concerned as Mr. Rockefeller in -preserving Cleveland’s supremacy as a refining centre, and this was the -Lake Shore and New York Central Railroads. Let the bulk of refining be -done in the Oil Regions and these roads were in danger of losing a -profitable branch of business. This situation in regard to the oil -traffic was really more serious now than in 1868 when General Devereux -had first given the Standard a rebate. Then it was that the -Pennsylvania, through its lusty ally the Empire Transportation Company, -was making the chief fight to secure a “patent right on oil -transportation.” The Erie was now becoming as aggressive a competitor. -Gould and Fisk had gone into the fight with the vigour and the utter -unscrupulousness which characterised all their dealings. They were -allying themselves with the Pennsylvania Transportation Company, the -only large rival pipe-line system which the Empire had. They were -putting up a refinery near Jersey City, and they were taking advantage -shrewdly of all the speculative features of the new business. - -As competition grew between the roads, they grew more reckless in -granting rebates, the refiners more insistent in demanding them. By 1871 -things had come to such a pass in the business that every refiner -suspected his neighbour to be getting better rates than he. The result -was that the freight agents were constantly beset for rebates, and that -the large shippers were generally getting them on the ground of the -quantity of oil they controlled. Indeed it was evident that the rebate -being admitted, the only way in which it could be adjusted with a show -of fairness was to grade it according to the size of the shipment. - -[Illustration: - - W. G. WARDEN - - Secretary of the South Improvement Company. -] - -[Illustration: - - PETER H. WATSON - - President of the South Improvement Company. -] - -[Illustration: - - CHARLES LOCKHART - - A member of the South Improvement Company, and later of the Standard - Oil Company. At his death in 1904 the oldest living oil operator. -] - -[Illustration: - - HENRY M. FLAGLER IN 1882 - - Active partner of John D. Rockefeller in the oil business since 1867. - Officer of the Standard Oil Company since its organization in 1870. -] - -Under these conditions of competition it was certain that the New York -Central system must work if it was to keep its great oil freight, and -the general freight agent of the Lake Shore road began to give the -question special attention. This man was Peter H. Watson. Mr. Watson was -an able patent lawyer who served under the strenuous Stanton as an -Assistant-Secretary of War, and served well. After the war he had been -made general freight agent of the Lake Shore and Michigan Southern -Railroad, and later president of the branch of that road which ran into -the Oil Regions. He had oil interests principally at Franklin, -Pennsylvania, and was well known to all oil men. He was a business -intimate of Mr. Rockefeller and a warm friend of Horace F. Clark, the -son-in-law of W. H. Vanderbilt, at that time president of the Lake Shore -and Michigan Southern Railroad. As the Standard Oil Company was the -largest shipper in Cleveland and had already received the special favour -from the Lake Shore which General Devereux describes, it was natural -that Mr. Watson should consult frequently with Mr. Rockefeller on the -question of holding and increasing his oil freight. It was equally -natural, too, that Mr. Rockefeller should use his influence with Mr. -Watson to strengthen the theory so important to his rapid growth—the -theory that the biggest shipper should have the best rate. - -Two other towns shared Cleveland’s fear of the rise of the Oil Regions -as a refining centre, and they were Pittsburg and Philadelphia, and Mr. -Rockefeller and Mr. Watson found in certain refiners of these places a -strong sympathy with any plan which looked to holding the region in -check. But while the menace in their geographical positions was the -first ground of sympathy between these gentlemen, something more than -local troubles occupied them. This was the condition of the refining -business as a whole. It was unsatisfactory in many particulars. First, -it was overdone. The great profits on refined oil and the growing demand -for it had naturally caused a great number to rush into its manufacture. -There was at this time a refining capacity of three barrels to every one -produced. To be sure, few if any of these plants expected to run the -year around. Then, as to-day, there were nearly always some stills in -even the most prosperous works shut down. But after making a fair -allowance for this fact there was still a much larger amount of refining -actually done than the market demanded. The result was that the price of -refined oil was steadily falling. Where Mr. Rockefeller had received on -an average 58¾ cents a gallon for the oil he exported in 1865, the year -he went into business, in 1870 he received but 26⅜ cents. In 1865 he had -a margin of forty-three cents, out of which to pay for transportation, -manufacturing, barrelling and marketing and to make his profits. In 1870 -he had but 17⅛ cents with which to do all this. To be sure his expenses -had fallen enormously between 1865 and 1870, but so had his profits. The -multiplication of refiners with the intense competition threatened to -cut them down still lower. Naturally Mr. Rockefeller and his friends -looked with dismay on this lowering of profits through gaining -competition. - -Another anxiety of the American refiners was the condition of the export -trade. Oil had risen to fourth place in the exports of the United States -in the twelve years since its discovery, and every year larger -quantities were consumed abroad, but it was crude oil, not refined, -which the foreigners were beginning to demand; that is, they had found -they could import crude, refine it at home, and sell it cheaper than -they could buy American refined. France, to encourage her home -refineries, had even put a tax on American refined. - -In the fall of 1871, while Mr. Rockefeller and his friends were occupied -with all these questions, certain Pennsylvania refiners, it is not too -certain who, brought to them a remarkable scheme, the gist of which was -to bring together secretly a large enough body of refiners and shippers -to persuade all the railroads handling oil to give to the company formed -special rebates on its oil, and drawbacks on that of other people. If -they could get such rates it was evident that those outside of their -combination could not compete with them long and that they would become -eventually the only refiners. They could then limit their output to -actual demand, and so keep up prices. This done, they could easily -persuade the railroads to transport no crude for exportation, so that -the foreigners would be forced to buy American refined. They believed -that the price of oil thus exported could easily be advanced fifty per -cent. The control of the refining interests would also enable them to -fix their own price on crude. As they would be the only buyers and -sellers, the speculative character of the business would be done away -with. In short, the scheme they worked out put the entire oil business -in their hands. It looked as simple to put into operation as it was -dazzling in its results. Mr. Flagler has sworn that neither he nor Mr. -Rockefeller believed in this scheme.[9] But when they found that their -friend Peter H. Watson, and various Philadelphia and Pittsburg parties -who felt as they did about the oil business, believed in it, they went -in and began at once to work up a company—secretly. It was evident that -a scheme which aimed at concentrating in the hands of one company the -business now operated by scores, and which proposed to effect this -consolidation through a practice of the railroads which was contrary to -the spirit of their charters, although freely indulged in, must be -worked with fine discretion if it ever were to be effective. - -The first thing was to get a charter—quietly. At a meeting held in -Philadelphia late in the fall of 1871 a friend of one of the gentlemen -interested mentioned to him that a certain estate then in liquidation -had a charter for sale which gave its owners the right to carry on any -kind of business in any country and in any way; that it could be bought -for what it would cost to get a charter under the general laws of the -state, and that it would be a favour to the heirs to buy it. The -opportunity was promptly taken. The name of the charter bought was the -“South (often written Southern) Improvement Company.” For a beginning it -was as good a name as another, since it said nothing. - -With this charter in hand Mr. Rockefeller and Mr. Watson and their -associates began to seek converts. In order that their great scheme -might not be injured by premature public discussion they asked of each -person whom they approached a pledge of secrecy. Two forms of the -pledges required before anything was revealed were published later. The -first of these, which appeared in the New York Tribune, read as follows: - - - I, A. B., do faithfully promise upon my honour and faith as a - gentleman that I will keep secret all transactions which I may have - with the corporation known as the South Improvement Company; that, - should I fail to complete any bargains with the said company, all - the preliminary conversations shall be kept strictly private; and, - finally, that I will not disclose the price for which I dispose of - my product, or any other facts which may in any way bring to light - the internal workings or organisation of the company. All this I do - freely promise. - - Signed.............................. - - Witnessed by.............................. - - -A second, published in a history of the “Southern Improvement Company,” -ran: - - - The undersigned pledge their solemn words of honour that they will - not communicate to any one without permission of Z (name of director - of Southern Improvement Company) any information that he may convey - to them, or any of them, in relation to the Southern Improvement - Company. - - Witness.............................. - - -That the promoters met with encouragement is evident from the fact that, -when the corporators came together on January 2, 1872, in Philadelphia, -for the first time under their charter, and transferred the company to -the stockholders, they claimed to represent in one way or another a -large part of the refining interest of the country. At this meeting -1,100 shares of the stock of the company, which was divided into 2,000 -$100 shares, were subscribed for, and twenty per cent. of their value -was paid in. Just who took stock at this meeting the writer has not been -able to discover. At the same time a discussion came up as to what -refiners were to be allowed to go into the new company. Each of the men -represented had friends whom he wanted taken care of, and after -considerable discussion it was decided to take in every refinery they -could get hold of. This decision was largely due to the railroad men. -Mr. Watson had seen them as soon as the plans for the company were -formed, and they had all agreed that if they gave the rebates and -drawbacks all refineries then existing must be taken in upon the same -level. That is, while the incorporators had intended to kill off all but -themselves and their friends, the railroads refused to go into a scheme -which was going to put anybody out of business—the plan if they went -into it must cover the refining trade as it stood. It was enough that it -could prevent any one in the future going into the business. - -Very soon after this meeting of January 2 the rest of the stock of the -South Improvement Company was taken. The complete list of stockholders, -with their holdings, was as follows: - - William Frew, Philadelphia 10 shares - W. P. Logan, Philadelphia 10 〃 - John P. Logan, Philadelphia 10 〃 - Charles Lockhart, Pittsburg 10 〃 - Richard S. Waring, Pittsburg 10 〃 - W. G. Warden, Philadelphia 475 〃 - O. F. Waring, Pittsburg 475 〃 - P. H. Watson, Ashtabula, Ohio 100 〃 - H. M. Flagler, Cleveland 180 〃 - O. H. Payne, Cleveland 180 〃 - William Rockefeller, Cleveland 180 〃 - J. A. Bostwick, New York 180 〃 - John D. Rockefeller, Cleveland[10] 180 〃 - ————— - 2,000 shares - -Mr. Watson was elected president and W. G. Warden of Philadelphia -secretary of the new association. It will be noticed that the largest -individual holdings in the company were those of W. G. Warden and O. F. -Waring, each of whom had 475 shares. The company most heavily interested -in the South Improvement Company was the Standard Oil of Cleveland, J. -D. Rockefeller, William Rockefeller and H. M. Flagler, all stockholders -of that company, each having 180 shares—540 in the company. O. H. Payne -and J. A. Bostwick, who soon after became stockholders in the Standard -Oil Company, also had each 180 shares, giving Mr. Rockefeller and his -associates 900 shares in all. - -It has frequently been stated that the South Improvement Company -represented the bulk of the oil-refining interests in the country. The -incorporators of the company in approaching the railroads assured them -that this was so. As a matter of fact, however, the thirteen gentlemen -above named, who were the only ones ever holding stock in the concern, -did not control over one-tenth of the refining business of the United -States in 1872. That business in the aggregate amounted to a daily -capacity of about 45,000 barrels—from 45,000 to 50,000, Mr. Warden put -it—and the stockholders of the South Improvement Company owned a -combined capacity of not over 4,600 barrels. In assuring the railroads -that they controlled the business, they were dealing with their hopes -rather than with facts. - -The organisation complete, there remained contracts to be made with the -railroads. Three systems were to be interested: The Central, which, by -its connection with the Lake Shore and Michigan Southern, ran directly -into the Oil Regions; the Erie, allied with the Atlantic and Great -Western, with a short line likewise tapping the heart of the region; and -the Pennsylvania, with the connections known as the Allegheny Valley and -Oil Creek Railroad. The persons to be won over were: W. H. Vanderbilt, -of the Central; H. F. Clark, president of the Lake Shore and Michigan -Southern; Jay Gould, of the Erie; General G. B. McClellan, president of -the Atlantic and Great Western; and Tom Scott, of the Pennsylvania. -There seems to have been little difficulty in persuading any of these -persons to go into the scheme after they had been assured by the leaders -that all of the refiners were to be taken in. This was a verbal -condition, however, not found in the contracts they signed. This -important fact Mr. Warden himself made clear when three months later he -was on the witness stand before a committee of Congress appointed to -look into the great scheme. “We had considerable discussion with the -railroads,” Mr. Warden said, “in regard to the matter of rebate on their -charges for freight; they did not want to give us a rebate unless it was -with the understanding that all the refineries should be brought into -the arrangement and placed upon the same level.” - - - _Q._ You say you made propositions to railroad companies, which they - agreed to accept upon the condition that you could include all the - refineries? - - _A._ No, sir; I did not say that; I said that was the understanding - when we discussed this matter with them; it was no proposition on - our part; they discussed it, not in the form of a proposition that - the refineries should be all taken in, but it was the intention and - resolution of the company from the first that that should be the - result; we never had any other purpose in the matter. - - _Q._ In case you could take the refineries all in, the railroads - proposed to give you a rebate upon their freight charges? - - _A._ No, sir; it was not put in that form; we were to put the - refineries all in upon the same terms; it was the understanding with - the railroad companies that we were to have a rebate; there was no - rebate given in consideration of our putting the companies all in, - but we told them we would do it; the contract with the railroad - companies was with us. - - _Q._ But if you did form a company composed of the proprietors of - all these refineries, you were to have a rebate upon your freight - charges? - - _A._ No; we were to have a rebate anyhow, but were to give all the - refineries the privilege of coming in. - - _Q._ You were to have the rebate whether they came in or not? - - _A._ Yes, sir. - - - * * * - - - “What effect were these arrangements to have upon those who did not - come into the combination...?” asked the chairman. - - “I do not think we ever took that question up,” answered Mr. Warden. - - -A second objection to making a contract with the company came from Mr. -Scott of the Pennsylvania road and Mr. Potts of the Empire -Transportation Company. The substance of this objection was that the -plan took no account of the oil producer—the man to whom the world owed -the business. Mr. Scott was strong in his assertion that they could -never succeed unless they took care of the producers. Mr. Warden -objected strongly to forming a combination with them. “The interests of -the producers were in one sense antagonistic to ours: one as the seller -and the other as the buyer. We held in argument that the producers were -abundantly able to take care of their own branch of the business if they -took care of the quantity produced.” So strongly did Mr. Scott argue, -however, that finally the members of the South Improvement Company -yielded, and a draft of an agreement, to be proposed to the producers, -was drawn up in lead pencil; it was never presented. It seems to have -been used principally to quiet Mr. Scott. - -[Illustration: - - THOMAS A. SCOTT - - The contract of the South Improvement Company with the Pennsylvania - Railroad was signed by Mr. Scott, then vice-president of the road. -] - -[Illustration: - - JAY GOULD - - President of the Erie Railroad in 1872. Signer of the contract with - the South Improvement Company. -] - -[Illustration: - - WILLIAM H. VANDERBILT - - The contract of the South Improvement Company with the New York - Central was signed by Mr. Vanderbilt, then vice-president of the - road. -] - -[Illustration: - - COMMODORE CORNELIUS VANDERBILT - - President of the New York Central Railroad when the contract with the - South Improvement Company was signed. -] - -The work of persuasion went on swiftly. By the 18th of January the -president of the Pennsylvania road, J. Edgar Thompson, had put his -signature to the contract, and soon after Mr. Vanderbilt and Mr. Clark -signed for the Central system, and Jay Gould and General McClellan for -the Erie. The contracts to which these gentlemen put their names fixed -gross rates of freight from all _common points_, as the leading shipping -points within the Oil Regions were called, to all the great refining and -shipping centres—New York, Philadelphia, Baltimore, Pittsburg and -Cleveland. For example, the open rate on crude to New York was put at -$2.56. On this price the South Improvement Company was allowed a rebate -of $1.06 for its shipments; but it got not only this rebate, it was -given in cash a like amount on each barrel of crude shipped by parties -outside the combination. - -The open rate from Cleveland to New York was two dollars, and fifty -cents of this was turned over to the South Improvement Company, which at -the same time received a rebate enabling it to ship for $1.50. Again, an -independent refiner in Cleveland paid eighty cents a barrel to get his -crude from the Oil Regions to his works, and the railroad sent forty -cents of this money to the South Improvement Company. At the same time -it cost the Cleveland refiner in the combination but forty cents to get -his crude oil. Like drawbacks and rebates were given for all -points—Pittsburg, Philadelphia, Boston and Baltimore. - -An interesting provision in the contracts was that full way-bills of all -petroleum shipped over the roads should each day be sent to the South -Improvement Company. This, of course, gave them knowledge of just who -was doing business outside of their company—of how much business he was -doing, and with whom he was doing it. Not only were they to have full -knowledge of the business of all shippers—they were to have access to -all books of the railroads. - -The parties to the contracts agreed that if anybody appeared in the -business offering an equal amount of transportation, and having equal -facilities for doing business with the South Improvement Company, the -railroads might give them equal advantages in drawbacks and rebates, but -to make such a miscarriage of the scheme doubly improbable each railroad -was bound to co-operate as “far as it legally might to maintain the -business of the South Improvement Company against injury by competition, -and lower or raise the gross rates of transportation for such times and -to such extent as might be necessary to overcome the competition. The -rebates and drawbacks to be varied _pari passu_ with the gross -rates.”[11] - -The reason given by the railroads in the contract for granting these -extraordinary privileges was that the “magnitude and extent of the -business and operations” purposed to be carried on by the South -Improvement Company would greatly promote the interest of the railroads -and make it desirable for them to encourage their undertaking. The -evident advantages received by the railroad were a regular amount of -freight,—the Pennsylvania was to have forty-five per cent. of the -East-bound shipments, the Erie and Central each 27½ per cent., while -West-bound freight was to be divided equally between them—fixed rates, -and freedom from the system of cutting which they had all found so -harassing and disastrous. That is, the South Improvement Company, which -was to include the entire refining capacity of the company, was to act -as the evener of the oil business.[12] - -It was on the second of January, 1872, that the organisation of the -South Improvement Company was completed. The day before the Standard Oil -Company of Cleveland increased its capital from $1,000,000 to -$2,500,000, “all the stockholders of the company being present and -voting therefor.”[13] These stockholders were greater by five than in -1870, the names of O. B. Jennings, Benjamin Brewster, Truman P. Handy, -Amasa Stone, and Stillman Witt having been added. The last three were -officers and stockholders in one or more of the railroads centring in -Cleveland. Three weeks after this increase of capital Mr. Rockefeller -had the charter and contracts of the South Improvement Company in hand, -and was ready to see what they would do in helping him carry out his -idea of wholesale combination in Cleveland. There were at that time some -twenty-six refineries in the town—some of them very large plants. All of -them were feeling more or less the discouraging effects of the last -three or four years of railroad discriminations in favour of the -Standard Oil Company. To the owners of these refineries Mr. Rockefeller -now went one by one, and explained the South Improvement Company. “You -see,” he told them, “this scheme is bound to work. It means an absolute -control by us of the oil business. There is no chance for anyone -outside. But we are going to give everybody a chance to come in. You are -to turn over your refinery to my appraisers, and I will give you -Standard Oil Company stock or cash, as you prefer, for the value we put -upon it. I advise you to take the stock. It will be for your good.” -Certain refiners objected. They did not want to sell. They did want to -keep and manage their business. Mr. Rockefeller was regretful, but firm. -It was useless to resist, he told the hesitating; they would certainly -be crushed if they did not accept his offer, and he pointed out in -detail, and with gentleness, how beneficent the scheme really -was—preventing the creek refiners from destroying Cleveland, ending -competition, keeping up the price of refined oil, and eliminating -speculation. Really a wonderful contrivance for the good of the oil -business. - -That such was Mr. Rockefeller’s argument is proved by abundant testimony -from different individuals who succumbed to the pressure. Mr. -Rockefeller’s own brother, Frank Rockefeller, gave most definite -evidence on this point in 1876 when he and others were trying to -interest Congress in a law regulating interstate commerce. - -“We had in Cleveland at one time about thirty establishments, but the -South Improvement Company was formed, and the Cleveland companies were -told that if they didn’t sell their property to them it would be -valueless, that there was a combination of railroad and oil men, that -they would buy all they could, and that all they didn’t buy would be -totally valueless, because they would be unable to compete with the -South Improvement Company, and the result was that out of thirty there -were only four or five that didn’t sell.” - -“From whom was that information received?” asked the examiner. - -“From the officers of the Standard Oil Company. They made no bones about -it at all. They said: ‘If you don’t sell your property to us it will be -valueless, because we have got advantages with the railroads.’” - -“Have you heard those gentlemen say what you have stated?” Frank -Rockefeller was asked. - -“I have heard Rockefeller and Flagler say so,” he answered. - -W. H. Doane, whose evidence on the first rebates granted to the -Cleveland trade we have already quoted, told the Congressional committee -which a few months after Mr. Rockefeller’s great coup tried to find out -what had happened in Cleveland: “The refineries are all bought up by the -Standard Oil works; they were forced to sell; the railroads had put up -the rates and it scared them. Men came to me and told me they could not -continue their business; they became frightened and disposed of their -property.” Mr. Doane’s own business, that of a crude oil shipper, was -entirely ruined, all of his customers but one having sold. - -To this same committee Mr. Alexander, of Alexander, Scofield and -Company, gave his reason for selling: - - - “There was a pressure brought to bear upon my mind, and upon almost - all citizens of Cleveland engaged in the oil business, to the effect - that unless we went into the South Improvement Company we were - virtually killed as refiners; that if we did not sell out we should - be crushed out. My partner, Mr. Hewitt, had some negotiations with - parties connected with the South Improvement Company, and they gave - us to understand, at least my partner so represented to me, that we - should be crushed out if we did not go into that arrangement. He - wanted me to see the parties myself; but I said to him that I would - not have any dealings with certain parties who were in that company - for any purpose, and I never did. We sold at a sacrifice, and we - were obliged to. There was only one buyer in the market, and we had - to sell on their terms or be crushed out, as it was represented to - us. It was stated that they had a contract with railroads by which - they could run us into the ground if they pleased. After learning - what the arrangements were I felt as if, rather than fight such a - monopoly, I would withdraw from the business, even at a sacrifice. I - think we received about forty or forty-five cents on the dollar on - the valuation which we placed upon our refinery. We had spent over - $50,000 on our works during the past year, which was nearly all that - we received. We had paid out $60,000 or $70,000 before that; we - considered our works at their cash value worth seventy-five per - cent. of their cost. According to our valuation our establishment - was worth $150,000, and we sold it for about $65,000, which was - about forty or forty-five per cent. of its value. We sold to one of - the members, as I suppose, of the South Improvement Company, Mr. - Rockefeller; he is a director in that company; it was sold in name - to the Standard Oil Company, of Cleveland, but the arrangements - were, as I understand it, that they were to put it into the South - Improvement Company. I am stating what my partner told me; he did - all the business; his statement was that all these works were to be - merged into the South Improvement Company. I never talked with any - members of the South Improvement Company myself on the subject; I - declined to have anything to do with them.” - - -Mr. Hewitt, the partner who Mr. Alexander says carried on the -negotiations for the sale of the business, appeared before an -investigating committee of the New York State Senate in 1879 and gave -his recollections of what happened. According to his story the entire -oil trade in Cleveland became paralysed when it became known that the -South Improvement Company had “grappled the entire transportation of oil -from the West to the seaboard.” Mr. Hewitt went to see the freight -agents of the various roads; he called on W. H. Vanderbilt, but from no -one did he get any encouragement. Then he saw Peter H. Watson of the -Lake Shore Railroad, the president of the company which was frightening -the trade. “Watson was non-committal,” said Mr. Hewitt. “I got no -satisfaction except, ‘You better sell—you better get clear—better sell -out—no help for it.’” After a little time Mr. Hewitt concluded with his -partners that there was indeed “no help for it,” and he went to see Mr. -Rockefeller, who offered him fifty cents on the dollar on the -constructive account. The offer was accepted. There was nothing else to -do, the firm seems to have concluded. When they came to transfer the -property Mr. Rockefeller urged Mr. Hewitt to take stock in the new -concern. “He told me,” said Mr. Hewitt, “that it would be sufficient to -take care of my family for all time, what I represented there, and -asking for a reason, he made this expression, I remember: ‘_I have ways -of making money that you know nothing of_.’” - -A few of the refiners contested before surrendering. Among these was -Robert Hanna, an uncle of Mark Hanna, of the firm of Hanna, Baslington -and Company. Mr. Hanna had been refining since July, 1869. According to -his own sworn statement he had made money, fully sixty per cent. on his -investment the first year, and after that thirty per cent. Some time in -February, 1872, the Standard Oil Company asked an interview with him and -his associates. They wanted to buy his works, they said. “But we don’t -want to sell,” objected Mr. Hanna. “You can never make any more money, -in my judgment,” said Mr. Rockefeller. “You can’t compete with the -Standard. We have all the large refineries now. If you refuse to sell, -it will end in your being crushed.” Hanna and Baslington were not -satisfied. They went to see Mr. Watson, president of the South -Improvement Company and an officer of the Lake Shore, and General -Devereux, manager of the Lake Shore road. They were told that the -Standard had special rates; that it was useless to try to compete with -them. General Devereux explained to the gentlemen that the privileges -granted the Standard were the legitimate and necessary advantage of the -larger shipper over the smaller, and that if Hanna, Baslington and -Company could give the road as large a quantity of oil as the Standard -did, with the same regularity, they could have the same rate. General -Devereux says they “recognised the propriety” of his excuse. They -certainly recognised its authority. They say that they were satisfied -they could no longer get rates to and from Cleveland which would enable -them to live, and “reluctantly” sold out. It must have been reluctantly, -for they had paid $75,000 for their works, and had made thirty per cent. -a year on an average on their investment, and the Standard appraiser -allowed them $45,000. “Truly and really less than one-half of what they -were absolutely worth, with a fair and honest competition in the lines -of transportation,” said Mr. Hanna, eight years later, in an -affidavit.[14] - -Under the combined threat and persuasion of the Standard, armed with the -South Improvement Company scheme, almost the entire independent oil -interest of Cleveland collapsed in three months’ time. Of the twenty-six -refineries, at least twenty-one sold out. From a capacity of probably -not over 1,500 barrels of crude a day, the Standard Oil Company rose in -three months’ time to one of 10,000 barrels. By this manœuvre it became -master of over one-fifth of the refining capacity of the United -States.[15] Its next individual competitor was Sone and Fleming, of New -York, whose capacity was 1,700 barrels. The Standard had a greater -capacity than the entire Oil Creek Regions, greater than the combined -New York refiners. The transaction by which it acquired this power was -so stealthy that not even the best informed newspaper men of Cleveland -knew what went on. It had all been accomplished in accordance with one -of Mr. Rockefeller’s chief business principles—“Silence is golden.” - -While Mr. Rockefeller was working out the “good of the oil business” in -Cleveland, his associates were busy at other points. Charles Lockhart in -Pittsburg and W. G. Warden in Philadelphia were particularly active, -though neither of them accomplished any such sweeping benefaction as Mr. -Rockefeller had. It was now evident what the stockholders of the South -Improvement Company meant when they assured the railroads that all the -refiners were to go into the scheme, that, as Mr. Warden said, they -“never had any other purpose in the matter!” A little more time and the -great scheme would be an accomplished fact. And then there fell in its -path two of those never-to-be-foreseen human elements which so often -block great manœuvres. The first was born of a man’s anger. The man had -learned of the scheme. He wanted to go into it, but the directors were -suspicious of him. He had been concerned in speculative enterprises and -in dealings with the Erie road which had injured these directors in -other ways. They didn’t want him to have any of the advantages of their -great enterprise. When convinced that he could not share in the deal, he -took his revenge by telling people in the Oil Regions what was going on. -At first the Oil Regions refused to believe, but in a few days another -slip born of human weakness came in to prove the rumour true. The -schedule of rates agreed upon by the South Improvement Company and the -railroads had been sent to the freight agent of the Lake Shore Railroad, -but no order had been given to put them in force. The freight agent had -a son on his death-bed. Distracted by his sorrow, he left his office in -charge of subordinates, but neglected to tell them that the new -schedules on his desk were a secret compact, whose effectiveness -depended upon their being held until all was complete. On February 26, -the subordinates, ignorant of the nature of the rates, put them into -effect. The independent oil men heard with amazement that freight rates -had been put up nearly 100 per cent. They needed no other proof of the -truth of the rumours of conspiracy which were circulating. It now -remained to be seen whether the Oil Regions would submit to the South -Improvement Company as Cleveland had to the Standard Oil Company. - - - - - CHAPTER THREE - THE OIL WAR OF 1872 - - RISING IN THE OIL REGIONS AGAINST THE SOUTH IMPROVEMENT - COMPANY—PETROLEUM PRODUCERS’ UNION ORGANISED—OIL BLOCKADE AGAINST - MEMBERS OF SOUTH IMPROVEMENT COMPANY AND AGAINST RAILROADS - IMPLICATED—CONGRESSIONAL INVESTIGATION OF 1872 AND THE DOCUMENTS IT - REVEALED—PUBLIC DISCUSSION AND GENERAL CONDEMNATION OF THE SOUTH - IMPROVEMENT COMPANY—RAILROAD OFFICIALS CONFER WITH COMMITTEE FROM - PETROLEUM PRODUCERS’ UNION—WATSON AND ROCKEFELLER REFUSED ADMITTANCE - TO CONFERENCE—RAILROADS REVOKE CONTRACTS WITH SOUTH IMPROVEMENT - COMPANY AND MAKE CONTRACT WITH PETROLEUM PRODUCERS’ UNION—BLOCKADE - AGAINST SOUTH IMPROVEMENT COMPANY LIFTED—OIL WAR OFFICIALLY - ENDED—ROCKEFELLER CONTINUES TO GET REBATES—HIS GREAT PLAN STILL A - LIVING PURPOSE. - - -It was not until after the middle of February, 1872, that the people of -the Oil Regions heard anything of the plan which was being worked out -for their “good.” Then an uneasy rumour began running up and down the -creek. Freight rates were going up. Now an advance in a man’s freight -bill may ruin his business; more, it may mean the ruin of a region. -Rumour said that the new rate meant just this; that is, that it more -than covered the margin of profit in any branch of the oil business. The -railroads were not going to apply the proposed tariffs to everybody. -They had agreed to give to a company unheard of until now—the South -Improvement Company—a special rate considerably lower than the new open -rate. It was only a rumour and many people discredited it. _Why_ should -the railroads ruin the Oil Regions to build up a company of outsiders? - -But facts began to be reported. Mr. Doane, the Cleveland shipper already -quoted, told how suddenly on the 22d of February, without notice, his -rate from the Oil Regions to Cleveland was put up from thirty-five cents -a barrel to sixty-five cents, an advance of twenty-four dollars on a -carload.[16] Mr. Josiah Lombard of the New York refining firm of Ayres, -Lombard and Company was buying oil for his company at Oil City. Their -refinery was running about 12,000 barrels a month. On the 19th of -February the rate from Oil City to Buffalo, which had been forty cents a -barrel, was raised to sixty-five cents, and a few days later the rate -from Warren to New York was raised from eighty-seven cents to $2.14. Mr. -Lombard was not aware of this change until his house in New York -reported to him that the bills for freight were so heavy that they could -not afford to ship and wanted to know what was the matter.[17] - -On the morning of February 26, 1872, the oil men read in their morning -papers that the rise which had been threatening had come; moreover, that -all members of the South Improvement Company were exempt from the -advance. At the news all oildom rushed into the streets. Nobody waited -to find out his neighbour’s opinion. On every lip there was but one -word, and that was “conspiracy.” In the vernacular of the region, it was -evident that “a torpedo was filling for that scheme.” - -In twenty-four hours after the announcement of the increase in freight -rates a mass-meeting of 3,000 excited, gesticulating oil men was -gathered in the opera house at Titusville. Producers, brokers, refiners, -drillers, pumpers were in the crowd. Their temper was shown by the -mottoes on the banners which they carried: “Down with the -conspirators”—“No compromise”—“Don’t give up the ship!” Three days later -as large a meeting was held at Oil City, its temper more warlike if -possible; and so it went. They organised a Petroleum Producers’ -Union,[18] pledged themselves to reduce their production by starting no -new wells for sixty days and by shutting down on Sundays, to sell no oil -to any person known to be in the South Improvement Company, but to -support the creek refiners and those elsewhere who had refused to go -into the combination, to boycott the offending railroads, and to build -lines which they would own and control themselves. They sent a committee -to the Legislature asking that the charter of the South Improvement -Company be repealed, and another to Congress demanding an investigation -of the whole business on the ground that it was an interference with -trade. They ordered that a history of the conspiracy, giving the names -of the conspirators and the designs of the company, should be prepared, -and 30,000 copies sent to “judges of all courts, senators of the United -States, members of Congress and of State Legislatures, and to all -railroad men and prominent business men of the country, _to the end that -enemies of the freedom of trade may be known and shunned by all honest -men_.” - -They prepared a petition ninety-three feet long praying for a free -pipe-line bill, something which they had long wanted, but which, so far, -the Pennsylvania Railroad had prevented their getting, and sent it by a -committee to the Legislature; and for days they kept 1,000 men ready to -march on Harrisburg at a moment’s notice if the Legislature showed signs -of refusing their demands. In short, for weeks the whole body of oil men -abandoned regular business and surged from town to town intent on -destroying the “Monster,” the “Forty Thieves,” the “Great Anaconda,” as -they called the mysterious South Improvement Company. Curiously enough, -it was chiefly against the combination which had secured the -discrimination from the railroads—not the railroads which had granted -it—that their fury was directed. They expected nothing but robbery from -the railroads, they said. They were used to that; but they would not -endure it from men in their own business. - -When they began the fight the mass of the oil men knew nothing more of -the South Improvement Company than its name and the fact that it had -secured from the railroads advantages in rates which were bound to ruin -all independent refiners of oil and to put all producers at its mercy. -Their tempers were not improved by the discovery that it was a secret -organisation, and that it had been at work under their very eyes for -some weeks without their knowing it. At the first public meeting this -fact came out, leading refiners of the region relating their experience -with the “Anaconda.” According to one of these gentlemen, J. D. -Archbold—the same who afterward became vice-president of the Standard -Oil Company, which office he now holds—he and his partners had heard of -the scheme some months before. Alarmed by the rumour, a committee of -independent refiners had attempted to investigate, but could learn -nothing until they had given a promise not to reveal what was told them. -When convinced that a company had been formed actually strong enough to -force or persuade the railroads to give it special rates and refuse them -to all persons outside, Mr. Archbold said that he and his colleagues had -gone to the railway kings to remonstrate, but all to no effect. The -South Improvement Company by some means had convinced the railroads that -they owned the Oil Regions, producers and refiners both, and that -hereafter no oil of any account would be shipped except as they shipped -it. Mr. Archbold and his partners had been asked to join the company, -but had refused, declaring that the whole business was iniquitous, that -they would fight it to the end, and that in their fight they would have -the backing of the oil men as a whole. They excused their silence up to -this time by citing the pledge[19] exacted from them before they were -informed of the extent and nature of the South Improvement Company. - -Naturally the burning question throughout the Oil Regions, convinced as -it was of the iniquity of the scheme, was, Who are the conspirators? -Whether the gentlemen concerned regarded themselves in the light of -“conspirators” or not, they seem from the first to have realised that it -would be discreet not to be identified publicly with the scheme, and to -have allowed one name alone to appear in all signed negotiations. This -was the name of the president, Peter H. Watson. However anxious the -members of the South Improvement Company were that Mr. Watson should -combine the honours of president with the trials of scapegoat, it was -impossible to keep their names concealed. The Oil City Derrick, at that -time one of the most vigorous, witty, and daring newspapers in the -country, began a black list at the head of its editorial columns the day -after the raise in freight was announced, and it kept it there until it -was believed complete. It stood finally as it appears on the opposite -page. - -This list was not exact, but it was enough to go on, and the oil -blockade, to which the Petroleum Producers’ Union had pledged itself, -was now enforced against the firms listed, and as far as possible -against the railroads. All of these refineries had their buyers on the -creek, and although several of them were young men generally liked for -their personal and business qualities, no mercy was shown them. They -were refused oil by everybody, though they offered from seventy-five -cents to a dollar more than the market price. They were ordered at one -meeting “to desist from their nefarious business or leave the Oil -Region,” and when they declined they were invited to resign from the oil -exchanges of which they were members. So strictly, indeed, was the -blockade enforced that in Cleveland the refineries were closed and -meetings for the relief of the workmen were held. In spite of the -excitement there was little vandalism, the only violence at the opening -of the war being at Franklin, where a quantity of the oil belonging to -Mr. Watson was run on the ground. - -[Illustration: - - JOHN D. ARCHBOLD IN 1872 - - Now vice-president of the Standard Oil Company. Mr. Archbold, whose - home, in 1872, was in Titusville, Pennsylvania, although one of the - youngest refiners of the Creek, was one of the most active and - efficient in breaking up the South Improvement Company. -] - - THE BLACK LIST. - -[Illustration: - - Behold “The Anaconda” in all his hideous deformity! -] - -The sudden uprising of the Oil Regions against the South Improvement -Company did not alarm its members at first. The excitement would die -out, they told one another. All that they needed to do was to keep quiet -and stay out of the oil country. But the excitement did not die out. -Indeed, with every day it became more intense and more wide-spread. When -Mr. Watson’s tanks were tapped he began to protest in letters to a -friend, F. W. Mitchell, a prominent banker and oil man of Franklin. The -company was misunderstood, he complained. “Have a committee of leading -producers appointed,” he wrote, “and we will show that the contracts -with the railroads are as favourable to the producing as to other -interests; that the much-denounced rebate will enhance the price of oil -at the wells, and that our entire plan in operation and effect will -promote every legitimate American interest in the oil trade.” Mr. -Mitchell urged Mr. Watson to come openly to the Oil Regions and meet the -producers as a body. A mass-meeting was never a “deliberative body,” Mr. -Watson replied, but if a few of the leading oil men would go to Albany -or New York, or any place favourable to calm investigation and -deliberation, and therefore outside of the atmosphere of excitement -which enveloped the oil country, he would see them. These letters were -read to the producers, and a motion to appoint a committee was made. It -was received with protests and jeers. Mr. Watson was afraid to come to -the Oil Regions, they said. The letters were not addressed to the -association, they were private—an insult to the body. “We are lowering -our dignity to treat with this man Watson,” declared one man. “He is -free to come to these meetings if he wants to.” “What is there to -negotiate about?” asked another. “To open a negotiation is to concede -that we are wrong. Can we go halves with these middlemen in their -swindle?” “He has set a trap for us,” declared another. “We cannot treat -with him without guilt,” and the motion was voted down. - -The stopping of the oil supply finally forced the South Improvement -Company to recognise the Producers’ Union officially by asking that a -committee of the body be appointed to confer with them on a compromise. -The producers sent back a pertinent answer. They believed the South -Improvement Company meant to monopolise the oil business. If that was so -they could not consider a compromise with it. If they were wrong, they -would be glad to be enlightened, and they asked for information. First: -the charter under which the South Improvement Company was organised. -Second: the articles of association. Third: the officers’ names. Fourth: -the contracts with the railroads which signed them. Fifth: the general -plan of management. Until we know these things, the oil men declared, we -can no more negotiate with you than we could sit down to negotiate with -a burglar as to his privileges in our house. - -The Producers’ Union did not get the information they asked from the -company at that time, but it was not long before they had it, and much -more. The committee which they had appointed to write a history of the -South Improvement Company reported on March 20, and in April the -Congressional Committee appointed at the insistence of the oil men made -its investigation. The former report was published broadcast, and is -readily accessible to-day. The Congressional Investigation was not -published officially, and no trace of its work can now be found in -Washington, but while it was going on reports were made in the -newspapers of the Oil Regions, and at its close the Producers’ Union -published in Lancaster, Pennsylvania, a pamphlet called “A History of -the Rise and Fall of the South Improvement Company,” which contains the -full testimony taken by the committee. This pamphlet is rare, the writer -never having been able to find a copy save in three or four private -collections. The most important part of it is the testimony of Peter H. -Watson, the president, and W. G. Warden, the secretary of the South -Improvement Company. It was in these documents that the oil men found -full justification for the war they were carrying on and for the losses -they had caused themselves and others. Nothing, indeed, could have been -more damaging to a corporation than the publication of the charter of -the South Improvement Company. As its president told the Congressional -Investigating Committee, when he was under examination, “this charter -was a sort of clothes-horse to hang a scheme upon.” As a matter of fact -it was a clothes-horse big enough to hang the earth upon. It granted -powers practically unlimited. There really was no exaggeration in the -summary of its powers made and scattered broadcast by the irate oil men -in their “History of the Rise and Fall of the South Improvement -Company”:[20] - - - The South Improvement Company can own, contract, or operate any - work, business, or traffic (save only banking); may hold and - transfer any kind of property, real or personal; hold and operate on - any leased property (oil territory, for instance); make any kind of - contract; deal in stock, securities, and funds; loan its credit, - guarantee any one’s paper; manipulate any industry; may seize upon - the lands of other parties for railroading or _any other purpose_; - may absorb the improvements, property or franchises of any other - company, _ad infinitum_; may fix the fares, tolls, or freights to be - charged on lines of transit operated by it, or on any business it - gives to _any other company_ or line, without limit. - - Its capital stock can be expanded or “watered” at liberty; it can - change its name and location at pleasure; can go anywhere and do - almost anything. It is not a Pennsylvania corporation only; it can, - so far as these enactments are valid, or are confirmed by other - Legislatures, operate in any state or territory; its directors must - be only citizens of the United States—not necessarily of - Pennsylvania. It is responsible to no one; its stockholders are only - liable to the amount of their stock in it; its directors, when - wielding all the princely powers of the corporation, are also - responsible only to the amount of their stock in it; it may control - the business of the continent and hold and transfer millions of - property, and yet be rotten to the core. It is responsible to no - one; makes no reports of its acts or financial condition; its - records and deliberations are secret; its capital illimitable; its - object unknown. It can be here to-day, to-morrow away. Its domain is - the whole country; its business everything. Now it is petroleum it - grasps and monopolises; next year it may be iron, coal, cotton, or - breadstuffs. They are landsmen granted perpetual letters of marque - to prey upon all commerce everywhere. - - -When the course of this charter through the Pennsylvania Legislature -came to be traced, it was found to be devious and uncertain. The company -had been incorporated in 1871, and vested with all the “powers, -privileges, duties and obligations” of an earlier company—incorporated -in April, 1870—the Pennsylvania Company; both of them were children of -that interesting body known as the “Tom Scott Legislature.” The act -incorporating the company was not published until after the oil war; its -sponsor was never known, and no votes on it are recorded. The origin of -the South Improvement Company has always remained in darkness. It was -one of several “improvement” companies chartered in Pennsylvania at -about the same time, and enjoying the same commercial _carte blanche_. - -Bad as the charter was in appearance, the oil men found that the -contracts which the new company had made with the railroads were worse. -These contracts advanced the rates of freight from the Oil Regions over -100 per cent.—an advance which more than covered the margin of profit on -their business—but it was not the railroad that got the greater part of -this advance; it was the South Improvement Company. Not only did it ship -its own oil at fully a dollar a barrel cheaper on an average than -anybody else could, but it received fully a dollar a barrel “rake-off” -on every barrel its competitors shipped. It was computed and admitted by -the members of the company who appeared before the investigating -committee of Congress that this discrimination would have turned over to -them fully $6,000,000 annually on the carrying trade. The railroads -expected to receive about one and a half millions more than from the -existing rates. That is, an additional cost of about $1.25 a barrel was -added to crude oil, and it was computed that this would enable the -refiners to advance their wholesale price at least four cents a gallon. -It is hardly to be wondered at that when the oil men had before them the -full text of these contracts they refused absolutely to accept the -repeated assertions of the members of the South Improvement Company that -their scheme was intended only for “the good of the oil business.” The -committee of Congress could not be persuaded to believe it either. “Your -success meant the destruction of every refiner who refused for any -reason to join your company, or whom you did not care to have in, and it -put the producers entirely in your power. It would make a monopoly such -as no set of men are fit to handle,” the chairman of the committee -declared. Of course Mr. Warden, the secretary of the company, protested -again and again that they meant to take in all the refiners, but when he -had to admit that the contracts with the railroads were not made on this -condition, his protestations met with little credence. Besides, there -was the damning fact that no refiners had come in except those in -Cleveland, and that they with one accord testified that they had yielded -to force. Not a single factory in either New York or the Oil Regions was -in the combination. The fact that the producers had never been -approached in any way looked very bad for the company, too. Mr. Watson -affirmed and reaffirmed before the committee that it was the intention -of the company to take care of the producers. “It was an essential part -of this contract that the producers should join it,” he declared. But no -such condition was embodied in the contract. It was verbal only, and, -besides, it had never been submitted to the producers themselves in any -form until after the trouble in the Oil Regions began. The committee, -like the oil men, insisted that under the circumstances no such verbal -understanding was to be trusted.[21] - -No part of the testimony before the committee made a worse impression -than that showing that the chief object of the combination was to put up -the price of refined oil to the consumer, though nobody had denied from -the first that this was the purpose. In a circular, intended for private -circulation, which appeared in the newspapers about this time explaining -the objects of the South Improvement Company, this was made clear: - -“The object of this combination of interests,” ran the circular, “is -understood to be twofold: firstly, to do away, at least in a great -measure, with the excessive and undue competition now existing between -the refining interest, by reason of there being a far greater refining -capacity than is called for or justified by the existing -petroleum-consuming requirements of the world; secondly, to avoid the -heretofore undue competition between the various railroad companies -transporting oil to the seaboard, by fixing a uniform rate of freight, -which it is thought can be adhered to by some such arrangement as -guaranteeing to each road some such percentages of the profit of the -aggregate amount of oil transported, whether the particular line carries -it or not. It is also asserted that a prominent feature of the -combination will be to limit the production of refined petroleum to such -amounts as may serve, in a great measure, to do away with the serious -periodical depressions in the article. Is it also to be expected that, -desiring to curtail the production of refined petroleum in this country, -the railroads will not offer any additional facilities for exportation -of the crude article.” - -A writer in the Oil City Derrick, quoted in the Cleveland Herald, March -2, 1872, said: “The ring pretend that they will make their margin out of -the consumers. That is, that they will put refined up to a figure that -will enable them to pay well for crude.... The consumers are the avowed -victims, since they must pay a price which will warrant the ring in -going on with their operations. And the producers’ security for the -price is a mere matter of discretion.” - -Wherever the members of the company discussed the subject they put -forward this object as one sufficient to justify the combination. If -refined oil was put up everybody in the trade would make more money. To -this end the public ought to be willing to pay more. - -When Mr. Warden was under examination by the committee the chairman said -to him: “Under your arrangement, the public would have been put to an -additional expense of $7,500,000 a year.” “What public?” said Mr. -Warden. “They would have had to pay it in Europe.” “But to keep up the -price abroad you would have to keep up the price at home,” said the -chairman. Mr. Warden conceded the point: “You could not get a better -price for that exported without having a better price here,” he -said.[22] - -Mr. Watson contended that the price could be put up with benefit to the -consumer. And when he was asked how, he replied: “By steadying the -trade. You will notice what all those familiar with this trade know, -that there are very rapid and excessive fluctuations in the oil market; -that when these fluctuations take place the retail dealers are always -quick to note a rise in price, but very slow to note a fall. Even if two -dollars a barrel had been added to the price of oil under a steady -trade, I think the price of the retail purchaser would not have been -increased. That increased price would only amount to one cent a quart -(four cents a gallon), and I think the price would not have been -increased to the retail dealer because the fluctuations would have been -avoided. That was one object to be accomplished.”[23] - -The committee were not convinced, however, that a scheme which began by -adding four cents to the price of a gallon of oil could be to the good -of the consumer. Nor did anything appear in the contracts which showed -how the fluctuations in the price of oil were to be avoided. These -fluctuations were due to the rise and fall in the crude market, and that -depended on the amount of crude coming from the ground. The South -Improvement Company might assert that they meant to bring the producers -into their scheme and persuade them to keep down the amount of -production in the same way they meant to keep down refined, so that the -price could be kept steadily high, but they had nothing to prove that -they were sincere in the intention, nothing to prove that they had -thought of the producer seriously until the trouble in the Oil Regions -began. It looked very much to the committee as if the real intention of -the company was to keep up the price of refined to a certain figure by -limiting the output, and that there was nothing to show that it would -not go up with crude though it might not go down with it! Under these -circumstances it seemed as if a fluctuating market which gave a moderate -average was better for the consumer than the steady high price which Mr. -Watson thought so good for the public. Thirty-two cents a gallon was the -ideal price they had in view, though refined had not sold for that since -1869, the average price in 1870 being 26⅜ and in 1871 24¼. The refiner -who in 1871 sold his oil at 24¼ cents a gallon cleared easily fifty-two -cents a barrel—a large profit on his investment,—but the refiners in the -early stages of this new industry had made much larger profits. It was -to perpetuate these early profits that they had gone into the South -Improvement Company. - -It did not take the full exposition of the objects of the South -Improvement Company, brought out by the Congressional Investigating -Committee, with the publication of charters and contracts, to convince -the country at large that the Oil Regions were right in their -opposition. From the first the sympathy of the press and the people were -with the oil men. It was evident to everybody that if the railroads had -made the contracts as charged (and it daily became more evident they had -done so), nothing but an absolute monopoly of the whole oil business by -this combination could result. It was robbery, cried the newspapers all -over the land. “Under the thin guise of assisting in the development of -oil-refining in Pittsburg and Cleveland,” said the New York Tribune, -“this corporation has simply laid its hand upon the throat of the oil -traffic with a demand to ‘stand and deliver.’” And if this could be done -in the oil business, what was to prevent its being done in any other -industry? Why should not a company be formed to control wheat or beef or -iron or steel, as well as oil? If the railroads would do this for one -company, why not for another? The South Improvement Company, men agreed, -was a menace to the free trade of the country. If the oil men yielded -now, all industries must suffer from their weakness. The railroads must -be taught a lesson as well as would-be monopolists. - -The oil men had no thought of yielding. With every day of the war their -backbone grew stiffer. The men were calmer, too, for their resistance -had found a ground which seemed impregnable to them, and arguments -against the South Improvement Company now took the place of -denunciations. On all sides men said, This is a transportation question, -and now is the time to put an end once and forever to the rebates. The -sentiment against discrimination on account of amount of freight or for -any other reason had been strong in the country since its beginning, and -it now crystallised immediately. The country so buzzed with discussion -on the duties of the railroads that reporters sent from the Eastern -newspapers commented on it. Nothing was commoner, indeed, on the trains -which ran the length of the region and were its real forums, than to -hear a man explaining that the railways derived their existence and -power from the people, that their charters were contracts with the -people, that a fundamental provision of these contracts was that there -should be no discriminating in favour of one person or one town, that -such a discrimination was a violation of charter, that therefore the -South Improvement Company was founded on fraud, and the courts must -dissolve it if the railways did not abandon it. The Petroleum Producers’ -Union which had been formed to grapple with the “Monster” actually -demanded interstate regulation, for in a circular sent out to newspapers -and boards of trade asking their aid against the conspiracy they -included this paragraph: “We urge you to exert all your influence with -your representatives in Congress to support such measures offered there -as will prohibit for all future time any monopoly of railroads or other -transportation companies from laying embargoes upon the trade between -states by a system of excessive freights or unjust discrimination -against buyers or shippers in any trade by the allowance of rebates or -drawbacks to any persons whatever. This is a matter of national -importance, and only the most decided action can protect you and us from -the scheming strength of these monopolies.” - -How the whole question appeared to an intelligent oil man, one, too, who -had had the courage to resist in the attack on the trade in Cleveland, -and who still was master of his own refinery, is shown by the following -letter to the Cleveland Herald: - - - EDS. HERALD: As I understand, the financial success of this South - Improvement Company is based upon contracts made with the officers - (either individually or otherwise) of all the railroads leading out - of the Oil Region, by which they (the South Improvement Company) - receive as a drawback certain excess of freights, not only on every - barrel of oil shipped out of the Oil Regions by or to themselves, - but also on every barrel of oil shipped out of the Oil Regions by or - to other refiners, or dealers, or consumers. - - The first advance in freights to Cleveland has already been made, - viz.: on crude oil, from forty cents to sixty-five cents per barrel. - This seemingly slight advance has already caused one party that I - know of to pay an excess of over $2,000. Other firms have paid - larger or smaller sums, according to the quantity of oil they were - compelled to have. This excess, we suppose, goes directly to swell - the profits of the South Improvement Company. - - _This is only the beginning._ The whole extent of the evil that may - be done to producers, refiners, dealers and consumers, and to the - public generally, if this corporation—or rather combination of - corporations—is successful, is so deep and varied and far reaching, - that it cannot be fully comprehended and I will not attempt it in - detail, but only suggest a few inquiries. - - Where will be their limits? - - How high will they advance freights? - - How low will they force the price of crude? - - How high refined? - - Will they adopt a liberal policy for producers, or will they destroy - their interests and _crush out_ the oil production entirely? Will - they be liberal with dealers and consumers and adopt uniform rules - with steady prices, or will they take advantage of times and - circumstances and force ruinous corners upon the trade? - - These and many other questions are pertinent, for clearly if they - can control the shipment they can control the price of oil, and if - they can control the price to the extent of twenty-five cents per - barrel, they can control it entirely. If they can control it - entirely, where will be their limit? Who will dictate a line of - policy to them? And may not one of the greatest and most important - industries of this country be destroyed and hundreds of thousands of - business men be made bankrupt if this combination is successful and - has the disposition to work ruin? I do not say that I think they - will work ruin. They undoubtedly will attempt to make all the money - they can and will pursue such a policy as in their judgment will - bring them the utmost amount of profits, regardless of consequences, - but what that policy will be, of course, we can not judge. - - It is understood that the parties to this combination excuse - themselves and their action before the public by reciting the - undoubted facts in the case. They are these: that the refining of - oil as a business has been of late and is now overdone; that the - capacity for refining petroleum in this country exceeds the - production in the ratio of three barrels to one; that the railroads - have reduced freights to the lowest extreme, and were even losing - money; that refiners, in spite of all their efforts, could not earn - their running expenses; that the _special interests of Cleveland_ as - a refining point were in danger of being lost; and that this great - business might go to other points, and the millions of dollars in - refining property here be sacrificed, and thousands of men thrown - out of employment; that real estate would depreciate, and that many - other collateral troubles connected with the loss of this business - would follow; and that _now_, by the consummation of the plans of - this monopoly, all these evils will be avoided. - - In answer to this—assuming that the refining interest of Cleveland - is a _unit_ in this corporation, that of Pittsburg another, that of - New York another, and that of Philadelphia another—it follows that - it is immaterial to the stockholders of the “South Improvement - Company” whether the oil produced at the Oil Regions is refined by - them at their works in Cleveland, or at Pittsburg, or in New York, - or in Philadelphia. It would not affect their dividends at all, - provided they refined the oil at the cheapest point for them to do - so. That place might be Cleveland; it might be Pittsburg, or it - might _not_ be either of them; but it might be New York or - Philadelphia. Therefore, so long as it is for the pecuniary - advantage of this combination to refine at Cleveland they may do so, - but no longer, and should it be for the interest of the combination - to discontinue their works at Cleveland, what would become of the - oil-refining interest at this point? That question everyone can - answer. Therefore I see little weight to the argument used that this - monopoly is for the benefit of Cleveland. Hence, I do not consider - the _special danger_ to Cleveland by any means as averted. - - But without discussing this position, its advantages or - disadvantages, as an oil-refining center—for it has both in a marked - degree—on general principles I will assert that the laws of business - and manufacturing interests, like the laws of supply and demand, are - unchangeable, and that a prosperity such as this monopoly would - bring us is a forced prosperity, consequently not permanent, but - temporary and fictitious in character, and damaging in its ultimate - results; and more than all this, if the refining prosperity of - Cleveland could be re-established permanently by means of the - success of this monopoly, we could not afford to accept it at the - cost proposed, viz., that of enriching ourselves at the expense of - those who are weaker, but are in power. - - We have just refused to build an opera house because we should, by - using the only means we could command to do so, compromise our - morality. How much more emphatically should we refuse to accept any - benefits to our city which have their origin in unmitigated fraud! - In the opera house instance just cited the managers use no - compulsion, no unwilling man was to be forced by them to buy a - ticket and take his chances; but the South Improvement Company force - every producer to take a less price for his oil without rendering - him an equivalent. - - They force every refiner who is in their way to prosecute his - business against them as competitors at fearful odds, and perhaps at - the expense of a royalty on every barrel; or to sell his works and - abandon his business to the South Improvement Company at any paltry - price they may dictate. - - They also force every consumer of oil on this broad continent, after - paying all the legitimate cost of producing, refining, and - transportation on oil, to pay them also an additional tribute—for - what? Absolutely nothing. - - The railroad companies derive their existence and power to act under - charters granted them by the citizens (through their Legislatures) - of the several states in which they exist. This charter is a - contract made by and between the citizens of the one part and the - railroad company on the other, and both parties bind themselves - alike to the faithful performance of the conditions of the contract. - One of the fundamental provisions of this contract is that there - shall be no discrimination shown to any individuals, or body of - individuals, as to facilities or privileges of doing business with - such railroad company; on the contrary, the railroad company is - expressly required in all cases to charge uniform rates for the - transportation of freight and passengers. - - They must, if desired, carry the freight for A that they do for B, - AND ALWAYS AT THE SAME PRICE. Any deviation from this stipulated - condition is a wilful and fraudulent violation of their contract. If - it is by means of such violations of contracts on the part of the - several railroad companies connected with them that the South - Improvement Company expects success, then the whole gigantic - STRUCTURE IS ESTABLISHED UPON FRAUD AS A BASIS, AND IT OUGHT TO COME - DOWN. - - Very respectfully, - F. M. BACKUS. - - CLEVELAND, OHIO, March 5, 1872. - - -The oil men now met the very plausible reasons given by the members of -the company for their combination more intelligently than at first. -There were grave abuses in the business, they admitted; there was too -great refining capacity; but this they argued was a natural development -in a new business whose growth had been extraordinary and whose limits -were by no means defined. Time and experience would regulate it. Give -the refiners open and regular freights, with no favours to any one, and -the stronger and better equipped would live, the others die—but give all -a chance. In fact, time and energy would regulate all the evils of which -they complained if there were fair play. - -[Illustration: - - HENRY H. ROGERS IN 1872 - - Now President of the National Transit Company and a director of the - Standard Oil Company. The opposition to the South Improvement - Company among the New York refiners was led by Mr. Rogers. -] - -The oil men were not only encouraged by public opinion and by getting -their minds clear on the merits of their case; they were upheld by -repeated proofs of aid from all sides; even the women of the region were -asking what they could do, and were offering to wear their “black velvet -bonnets” all summer if necessary. Solid support came from the -independent refiners and shippers in other parts of the country who were -offering to stand in with them in their contest. New York was already -one of the chief refining centres of the country, and the South -Improvement Company had left it entirely out of its combination. As -incensed as the creek itself, the New York interests formed an -association, and about the middle of March sent a committee of three, -with H. H. Rogers, of Charles Pratt and Company, at its head, to Oil -City, to consult with the Producers’ Union. Their arrival in the Oil -Regions was a matter of great satisfaction. What made the oil men most -exultant, however, was their growing belief that the railroads—the crux -of the whole scheme—were weakening. - -However fair the great scheme may have appeared to the railroad kings in -the privacy of the council chamber, it began to look dark as soon as it -was dragged into the open, and signs of a scuttle soon appeared. General -G. B. McClellan, president of the Atlantic and Great Western, sent to -the very first mass-meeting this telegram: - - - NEW YORK, February 27, 1872. - - Neither the Atlantic and Great Western, nor any of its officers, are - interested in the South Improvement Company. Of course the policy of - the road is to accommodate the petroleum interest. - - G. B. MCCLELLAN. - - -A great applause was started, only to be stopped by the hisses of a -group whose spokesman read the following: - - - Contract with South Improvement Company signed by George B. - McClellan, president for the Atlantic and Great Western Railroad. I - only signed it after it was signed by all the other parties. - - JAY GOULD. - - -The railroads tried in various ways to appease the oil men. They did not -enforce the new rates. They had signed the contracts, they declared, -only after the South Improvement Company had assured them that all the -refineries and producers were to be taken in. Indeed, they seem to have -realised within a fortnight that the scheme was doomed, and to have been -quite ready to meet cordially a committee of oil men which went East to -demand that the railroads revoke their contracts with the South -Improvement Company. This committee, which was composed of twelve -persons, three of them being the New York representatives already -mentioned, began its work by an interview with Colonel Scott at the -Colonial Hotel in Philadelphia. With evident pride the committee wrote -back to the Producers’ Union: “Mr. Scott, differing in this respect from -the railroad representatives whom we afterwards met, notified us that he -would call upon us at our hotel.” An interesting account of their -interview was given to the Hepburn Committee in 1879 by W. T. Scheide, -one of the number: - - - We saw Mr. Scott on the 18th of March, 1872, in Philadelphia, and he - said to us that he was very much surprised to hear of this agitation - in the Oil Regions; that the object of the railroads in making this - contract with the South Improvement Company was to obtain an evener - to pool the freight—pool the oil freights among the different roads; - that they had been cutting each other on oil freights for a number - of years, and had not made any money out of it, although it was a - freight they should have made money from; that they had endeavoured - to make an arrangement among themselves, but had always failed; he - said that they supposed that the gentlemen representing the South - Improvement Company represented the petroleum trade, but as he was - now convinced they did not, he would be very glad to make an - arrangement with this committee, who undoubtedly did represent the - petroleum trade; the committee told him that they could not make any - such contract; that they had no legal authority to do so; he said - that could be easily fixed, because the Legislature was then in - session, and by going to Harrisburg a charter could be obtained in a - very few days; the committee still said that they would not agree to - any such arrangement, that they did not think the South Improvement - Company’s contract was a good one, and they were instructed to have - it broken, and so they did not feel that they could accept a similar - one, even if they had the power. - - -Leaving Colonel Scott the committee went on to New York, where they -stayed for about a week, closely watched by the newspapers, all of which -treated the “Oil War” as a national affair. Their first interview of -importance in New York was with Commodore Vanderbilt, who said to them -very frankly at the beginning of their talk: “I told Billy (W. H. -Vanderbilt) not to have anything to do with that scheme.” The committee -in its report said that the Commodore fully agreed with them upon the -justice of their claims, and frequently asserted his objections to any -combination seeking a monopoly of other men’s property and interests. He -told them that if what they asked was that the railroads should fix a -tariff which, while giving them a paying rate, would secure the oil men -against drawbacks, rebates, or variations in the tariff, he would -willingly co-operate. The Commodore ended his amiable concessions by -reading the committee a letter just received from the South Improvement -Company offering to co-operate with the producers and refiners or to -compromise existing differences. The oil men told the Commodore -emphatically that they would not treat with the South Improvement -Company or with anyone interested in it nor would they recognise its -existence. And this stand they kept throughout their negotiations though -repeated efforts were made by the railroad men, particularly those of -the Central system, to persuade them to a compromise. - -At the meeting with the officials of the Erie and the Atlantic and Great -Western the committee was incensed by being offered a contract similar -to that of the South Improvement Company—on consideration that the -original be allowed to stand. It seemed impossible to the railroad men -that the oil men really meant what they said and would make no terms -save on the basis of no discriminations of any kind to anybody. They -evidently believed that if the committee had a chance to sign a contract -as profitable as that of the South Improvement Company, all their fair -talk of “fair play”—“the duty of the common carrier”—“equal chance to -all in transportation”—would at once evaporate. They failed utterly at -first to comprehend that the Oil War of 1872 was an uprising against an -injustice, and that the moral wrong of the thing had taken so deep a -hold of the oil country that the people as a whole had combined to -restore right. General McClellan of the Atlantic and Great Western and -Mr. Diven, one of the Erie’s directors, were the only ones who gave the -committee any support in their position. - -The final all-important conference with the railroad men was held on -March 25, at the Erie offices. Horace Clark, president of the Lake Shore -and Michigan Southern Railroad, was chairman of this meeting, and, -according to H. H. Rogers’ testimony before the Hepburn Committee, in -1879, there were present, besides the oil men, Colonel Scott, General -McClellan, Director Diven, William H. Vanderbilt, Mr. Stebbins, and -George Hall. The meeting had not been long in session before Mr. Watson, -president of the South Improvement Company, and John D. Rockefeller -presented themselves for admission. Up to this time Mr. Rockefeller had -kept well out of sight in the affair. He had given no interviews, -offered no explanations. He had allowed the president of the company to -wrestle with the excitement in his own way, but things were now in such -critical shape that he came forward in a last attempt to save the -organisation by which he had been able to concentrate in his own hands -the refining interests of Cleveland. With Mr. Watson he knocked for -admission to the council going on in the Erie offices. The oil men -flatly refused to let them in. A dramatic scene followed, Mr. Clark, the -chairman, protesting in agitated tones against shutting out his -“lifelong friend, Watson.” The oil men were obdurate. They would have -nothing to do with anybody concerned with the South Improvement Company. -So determined were they that although Mr. Watson came in he was obliged -at once to withdraw. A Times reporter who witnessed the little scene -between the two supporters of the tottering company after its president -was turned out of the meeting remarked sympathetically that Mr. -Rockefeller soon went away, “looking pretty blue.” - -The acquiescence of the “railroad kings” in the refusal of the oil men -to recognise representatives of the South Improvement Company was -followed by an unwilling promise to break the contracts with the -company. Another strong effort was made to persuade the independents to -make the same contracts on condition that they shipped as much oil, but -they would not hear of it. They demanded open rates, with no rebates to -anyone. Horace Clark and W. H. Vanderbilt particularly stuck for this -arrangement. Their opposition to the oil men’s position was so strong -that the latter in reporting it to the Union said: “We feel it proper to -say that we are in no wise indebted to these gentlemen for any courtesy -or consideration received at their hands.” So well did the committee -fight its battle and so strongly were they supported by the New York -refiners that the railroads were finally obliged to consent to revoke -the contracts and to make a new one embodying the views of the Oil -Regions. The contract finally signed at this meeting by H. F. Clark for -the Lake Shore road, O. H. P. Archer for the Erie, W. H. Vanderbilt for -the Central, George B. McClellan for the Atlantic and Great Western, and -Thomas A. Scott for the Pennsylvania, agreed that all shipping of oil -should be made on “a basis of perfect equality to all shippers, -producers, and refiners, and that no rebates, drawbacks, or other -arrangements of any character shall be made or allowed that will give -any party the slightest difference in rates or discriminations of any -character whatever.”[24] It was also agreed that the rates should not be -liable to change either for increase or decrease without first giving -William Hasson, president of the Producers’ Union, at least ninety days’ -notice. - -The same rate was put on refined oil from Cleveland, Pittsburg and the -creek, to Eastern shipping points; that is, Mr. Rockefeller could send -his oil from Cleveland to New York at $1.50 per barrel; so could his -associates in Pittsburg; and this was what it cost the refiner on the -creek; but the latter had this advantage: he was at the wells. Mr. -Rockefeller and his Pittsburg allies were miles away, and it cost them, -by the new contract, fifty cents to get a barrel of crude to their -works. The Oil Regions meant that geographical position should count, -that the advantages Mr. Rockefeller had by his command of the Western -market and by his access to a cheap Eastward waterway should be -considered as well as their own position beside the raw product. - -This contract was the first effective thrust into the great bubble. -Others followed in quick succession. On the 28th the railroads -officially annulled their contracts with the company. About the same -time the Pennsylvania Legislature repealed the charter. On March 30 the -committee of oil men sent to Washington to be present during the -Congressional Investigation, now about to begin, spent an hour with -President Grant. They wired home that on their departure he said: -“Gentlemen, I have noticed the progress of monopolies, and have long -been convinced that the national government would have to interfere and -protect the people against them.” The President and the members of -Congress of both parties continued to show interest in the -investigation, and there was little or no dissent from the final -judgment of the committee, given early in May, that the South -Improvement Company was the “most gigantic and daring conspiracy” a free -country had ever seen. This decision finished the work. The “Monster” -was slain, the Oil Regions proclaimed exultantly. - -And now came the question, What should they do about the blockade -established against the members of the South Improvement Company? The -railroads they had forgiven; should they forgive the members of the -South Improvement Company? This question came up immediately on the -repeal of the charter. The first severe test to which their temper was -put was early in April, when the Fisher Brothers, a firm of Oil City -brokers, sold some 20,000 barrels of oil to the Standard Oil Company. -The moment the sale was noised a perfect uproar burst forth. Indignant -telegrams came from every direction condemning the brokers. “Betrayal,” -“infamy,” “mercenary achievement,” “the most unkindest cut of all,” was -the gist of them. From New York, Porter and Archbold telegraphed -annulling all their contracts with the guilty brokers. The Oil Exchange -passed votes of censure, and the Producers’ Union turned them out. A few -days later it was learned that a dealer on the creek was preparing to -ship 5,000 barrels to the same firm. A mob gathered about the cars and -refused to let them leave. It was only by stationing a strong guard that -the destruction of the oil was prevented. - -But something had to be done. The cooler heads argued that the blockade, -which had lasted now forty days, and from which the region had of course -suffered enormous loss, should be entirely lifted. The objects for which -it had been established had been accomplished—that is, the South -Improvement Company had been destroyed—now let free trade be -established. If anybody wanted to sell to “conspirators,” it was his -lookout. A long and excited meeting of men from the entire oil country -was held at Oil City to discuss the question. - -The president of the Petroleum Producers’ Union, Captain William Hasson, -in anticipation of the meeting, had sent to the officers of all the -railroads which had been parties to the South Improvement Company, the -following telegram: - - - OFFICE PETROLEUM PRODUCERS’ UNION, - OIL CITY, PENNSYLVANIA, April 4, 1872. - - We are informed by parties known as members of the South Improvement - Company, now representing the Standard Oil Company, who are in the - market overbidding other shippers, that all contracts between the - railroad companies and South Improvement and Standard Companies are - cancelled. Will you please give us official notice whether such - contracts are cancelled or not? The people in mass-meeting assembled - have instructed the executive committee not to sell or ship any oil - to these parties until we receive such notice. Please answer at - once, as we fear violence and destruction of property. - - Signed WILLIAM HASSON, _President_. - - -General McClellan, Horace F. Clark, Thomas A. Scott, and W. H. -Vanderbilt all sent emphatic telegrams in reply, asserting that the -South Improvement contracts had been cancelled and that their roads had -no understanding of any nature in regard to freights with the Standard -Oil Company. “The only existing arrangement is with you,” telegraphed -General McClellan. W. H. Vanderbilt reminded Mr. Hasson that the -agreement of March 25, between the railroad companies and the joint -committee of producers and refiners, was on a basis of perfect equality -for all, and the inference was, how could Mr. Vanderbilt possibly make a -special arrangement with the Standard? From the Standard Oil Company the -following was received: - - - CLEVELAND, OHIO, April 8, 1872. - - TO CAPTAIN WILLIAM HASSON: In answer to your telegram, this company - holds no contract with the railroad companies or any of them, or - with the South Improvement Company. The contracts between the South - Improvement Company and the railroads have been cancelled, and I am - informed you have been so advised by telegram. I state unqualifiedly - that reports circulated in the Oil Region and elsewhere, that this - company, or any member of it, threatened to depress oil, are false. - - JOHN D. ROCKEFELLER, _President_. - - -After reading all the telegrams the committee submitted its report. The -gist of it was that since they had official assurance that the hated -contracts were cancelled, and that since they had secured from all the -trunk lines a “fair rate of freight, equal to all shippers and -producers, great or small, with an abolition of the system of rebates -and drawbacks,” the time had arrived “to open the channels of trade to -all parties desiring to purchase or deal in oil on terms of equality.” -The report was received with “approbation and delight” and put an -official end to the “Oil War.” - -But no number of resolutions could wipe out the memory of the forty days -of terrible excitement and loss which the region had suffered. No -triumph could stifle the suspicion and the bitterness which had been -sown broadcast through the region. Every particle of independent manhood -in these men whose very life was independent action had been outraged. -Their sense of fair play, the saving force of the region in the days -before law and order had been established, had been violated. These were -things which could not be forgotten. There henceforth could be no trust -in those who had devised a scheme which, the producers believed, was -intended to rob them of their property. - -It was inevitable that under the pressure of their indignation and -resentment some person or persons should be fixed upon as responsible, -and should be hated accordingly. Before the lifting of the embargo this -responsibility had been fixed. It was the Standard Oil Company of -Cleveland, so the Oil Regions decided, which was at the bottom of the -business, and the “Mephistopheles of the Cleveland company,” as they put -it, was John D. Rockefeller. Even the Cleveland Herald acknowledged this -popular judgment. “Whether justly or unjustly,” the editor wrote, -“Cleveland has the odium of having originated the scheme.” This opinion -gained ground as the days passed. The activity of the president of the -Standard in New York, in trying to save the contracts with the -railroads, and his constant appearance with Mr. Watson, and the fact -brought out by the Congressional Investigation that a larger block of -the South Improvement Company’s stock was owned in the Standard than in -any other firm, strengthened the belief. But what did more than anything -else to fix the conviction was what they had learned of the career of -the Standard Oil Company in Cleveland. Before the Oil War the company -had been known simply as one of several successful firms in that city. -It drove close bargains, but it paid promptly, and was considered a -desirable customer. Now the Oil Regions learned for the first time of -the sudden and phenomenal expansion of the company. Where there had been -at the beginning of 1872 twenty-six refining firms in Cleveland, there -were but six left. In three months before and during the Oil War the -Standard had absorbed twenty plants. It was generally charged by the -Cleveland refiners that Mr. Rockefeller had used the South Improvement -scheme to persuade or compel his rivals to sell to him. “Why,” cried the -oil men, “the Standard Oil Company has done already in Cleveland what -the South Improvement Company set out to do for the whole country, and -it has done it by the same means.” - -By the time the blockade was raised, another unhappy conviction was -fixed on the Oil Regions—the Standard Oil Company meant to carry out the -plans of the exploded South Improvement Company. The promoters of the -scheme were partly responsible for the report. Under the smart of their -defeat they talked rather more freely than their policy of silence -justified, and their remarks were quoted widely. Mr. Rockefeller was -reported in the Derrick to have said to a prominent oil man of Oil City -that the South Improvement Company could work under the charter of the -Standard Oil Company, and to have predicted that in less than two months -the gentlemen would be glad to join him. The newspapers made much of the -following similar story reported by a New York correspondent: - - - A prominent Cleveland member of what was the South Improvement - Company had said within two days: “The business _now_ will be done - by the Standard Oil Company. We have a rate of freight by water from - Cleveland to New York at seventy cents. No man in the trade shall - make a dollar this year. We purpose to manipulating the market as to - run the price of crude on the creek as low as two and a half. We - mean to show the world that the South Improvement Company was - organised for business and means business in spite of opposition. - The same thing has been said in substance by the leading - Philadelphia member.” - - -“The trade here regards the Standard Oil Company as simply taking the -place of the South Improvement Company and as being ready at any moment -to make the same attempt to control the trade as its progenitors did,” -said the New York Bulletin about the middle of April. And the Cleveland -Herald discussed the situation under the heading, “South Improvement -Company _alias_ Standard Oil Company.” The effect of these reports in -the Oil Regions was most disastrous. Their open war became a kind of -guerilla opposition. Those who sold oil to the Standard were ostracised, -and its president was openly scorned. - -If Mr. Rockefeller had been an ordinary man the outburst of popular -contempt and suspicion which suddenly poured on his head would have -thwarted and crushed him. But he was no ordinary man. He had the -powerful imagination to see what might be done with the oil business if -it could be centered in his hands—the intelligence to analyse the -problem into its elements and to find the key to control. He had the -essential element of all great achievement, a steadfastness to a purpose -once conceived which nothing can crush. The Oil Regions might rage, call -him a conspirator, and all those who sold him oil, traitors; the -railroads might withdraw their contracts and the Legislature annul his -charter; undisturbed and unresting he kept at his great purpose. Even if -his nature had not been such as to forbid him to abandon an enterprise -in which he saw promise of vast profits, even if he had not had a mind -which, stopped by a wall, burrows under or creeps around, he would -nevertheless have been forced to desperate efforts to keep up his -business. He had increased his refining capacity in Cleveland to 10,000 -barrels on the strength of the South Improvement Company contracts. -These contracts were annulled, and in their place was one signed by -officials of all the oil-shipping roads refusing rebates to everybody. -His geographical position was such that it cost him under these new -contracts fifty cents more to get oil from the wells to New York than it -did his rivals on the creek. True, he had many counterbalancing -advantages—a growing Western market almost entirely in his hands, lake -traffic, close proximity to all sorts of accessories to his -manufacturing, but this contract put him on a level with his rivals. By -his size he should have better terms than they. What did he do? - -He got a rebate. Seven years later Mr. Rockefeller’s partner, H. M. -Flagler, was called before a commission of the Ohio State Legislature -appointed to investigate railroads. He was asked for the former -contracts between his company and the railroads, and among others he -presented one showing that from “the first of April until the middle of -November, 1872,” their East-bound rate was $1.25, twenty-five cents less -than that set by the agreement of March 25th, between the oil men and -the railroads.[25] The discrepancy between the date Mr. Flagler gives -for this contract and that of Mr. Vanderbilt’s telegram to Mr. Hasson -stating that his road had no contract with the Standard Oil Company, -April 6, and of Mr. Rockefeller’s own telegram stating he had no -contracts with the railroads, April 8, the writer is unable to explain. -How had Mr. Rockefeller been able to get this rebate? Simply as he had -always done—by virtue of the quantity he shipped. He was able to say to -Mr. Vanderbilt, I can make a contract to ship sixty car-loads of oil a -day over your road—nearly 4,800 barrels; I cannot give this to you -regularly unless you will make me a concession; and Mr. Vanderbilt made -the concession while he was signing the contract with the oil men. Of -course the rate was secret, and Mr. Rockefeller probably understood now, -as he had not two months before, how essential it was that he keep it -secret. His task was more difficult now, for he had an enemy active, -clamorous, contemptuous, whose suspicions had reached that acute point -where they could believe nothing but evil of him—the producers and -independent refiners of the Oil Regions. It was utterly impossible that -he should ever silence this enemy, for their points of view were -diametrically opposed. - -They believed in independent effort—every man for himself and fair play -for all. They wanted competition, loved open fight. They considered that -all business should be done openly; that the railways were bound as -public carriers to give equal rates; that any combination which favoured -one firm or one locality at the expense of another was unjust and -illegal. This belief long held by many of the oil men had been -crystallised by the uprising into a common sentiment. It had become the -moral code of the region. - -Mr. Rockefeller’s point of view was different. He believed that the -“good of all” was in a combination which would control the business as -the South Improvement Company proposed to control it. Such a combination -would end at once all the abuses the business suffered. As rebates and -special rates were essential to this control, he favoured them. Of -course Mr. Rockefeller must have known that the railroad was a common -carrier, and that the common law forbade discrimination. But he knew -that the railroads had not obeyed the laws governing them, that they had -regularly granted special rates and rebates to those who had large -amounts of freight. That is, you were able to bargain with the railroads -as you did with a man carrying on a strictly private business depending -in no way on a public franchise. Moreover, Mr. Rockefeller probably -believed that, in spite of the agreements, if he did not get rebates -somebody else would; that they were for the wariest, the shrewdest, the -most persistent. If somebody was to get rebates, why not he? This point -of view was no uncommon one. Many men held it and felt a sort of scorn, -as practical men always do for theorists, when it was contended that the -shipper was as wrong in taking rates as the railroads in granting them. - -Thus, on one hand there was an exaggerated sense of personal -independence, on the other a firm belief in combination; on one hand a -determination to root out the vicious system of rebates practised by the -railway, on the other a determination to keep it alive and profit by it. -Those theories which the body of oil men held as vital and fundamental -Mr. Rockefeller and his associates either did not comprehend or were -deaf to. This lack of comprehension by many men of what seems to other -men to be the most obvious principles of justice is not rare. Many men -who are widely known as good, share it. Mr. Rockefeller was “good.” -There was no more faithful Baptist in Cleveland than he. Every -enterprise of that church he had supported liberally from his youth. He -gave to its poor. He visited its sick. He wept with its suffering. -Moreover, he gave unostentatiously to many outside charities of whose -worthiness he was satisfied. He was simple and frugal in his habits. He -never went to the theatre, never drank wine. He gave much time to the -training of his children, seeking to develop in them his own habits of -economy and of charity. Yet he was willing to strain every nerve to -obtain for himself special and unjust privileges from the railroads -which were bound to ruin every man in the oil business not sharing them -with him. He was willing to array himself against the combined better -sentiment of a whole industry, to oppose a popular movement aimed at -righting an injustice, so revolting to one’s sense of fair play as that -of railroad discriminations. Religious emotion and sentiments of -charity, propriety and self-denial seem to have taken the place in him -of notions of justice and regard for the rights of others. - -Unhampered, then, by any ethical consideration, undismayed by the -clamour of the Oil Regions, believing firmly as ever that relief for the -disorders in the oil business lay in combining and controlling the -entire refining interest, this man of vast patience and foresight took -up his work. That work now was to carry out some kind of a scheme which -would limit the output of refined oil. He had put his competitors in -Cleveland out of the way. He had secured special privileges in -transportation, but there were still too many refineries at work to make -it possible to put up the price of oil four cents a gallon. It was -certain, too, that no scheme could be worked to do that unless the Oil -Regions could be mollified. That now was Mr. Rockefeller’s most -important business. Just how he began is not known. It is only certain -that the day after the newspapers of the Oil Regions printed the report -of the Congressional Committee on Commerce denouncing the South -Improvement Company as “one of the most gigantic and dangerous -conspiracies ever attempted,” and declaring that if it had not been -checked in time it “would have resulted in the absorption and arbitrary -control of trade in all the great interests of the country.”[26] Mr. -Rockefeller and several other members of the South Improvement Company -appeared in the Oil Regions. They had come, they explained, to present a -new plan of co-operation, and to show the oil men that it was to their -interest to go into it. Whether they would be able to obtain by -persuasion what they had failed to obtain by assault was now an -interesting uncertainty. - - - - - CHAPTER FOUR - “AN UNHOLY ALLIANCE” - - ROCKEFELLER AND HIS PARTY NOW PROPOSE AN OPEN INSTEAD OF A SECRET - COMBINATION—“THE PITTSBURG PLAN”—THE SCHEME IS NOT APPROVED BY THE - OIL REGIONS BECAUSE ITS CHIEF STRENGTH IS THE REBATE—ROCKEFELLER NOT - DISCOURAGED—THREE MONTHS LATER BECOMES PRESIDENT OF NATIONAL - REFINERS’ ASSOCIATION—FOUR-FIFTHS OF REFINING INTEREST OF UNITED - STATES WITH HIM—OIL REGIONS AROUSED—PRODUCERS’ UNION ORDER DRILLING - STOPPED AND A THIRTY DAY SHUT-DOWN TO COUNTERACT FALLING PRICE OF - CRUDE—PETROLEUM PRODUCERS’ AGENCY FORMED TO ENABLE PRODUCERS TO - CONTROL THEIR OWN OIL—ROCKEFELLER OUTGENERALS HIS OPPONENTS AND - FORCES A COMBINATION OF REFINERS AND PRODUCERS—PRODUCERS’ - ASSOCIATION AND PRODUCERS’ AGENCY SNUFFED OUT—NATIONAL REFINERS’ - ASSOCIATION DISBANDS—ROCKEFELLER STEADILY GAINING GROUND. - - -The feeling of outrage and resentment against the Standard Oil Company, -general in the Oil Regions at the close of the Oil War because of the -belief that it intended to carry on the South Improvement Company in -some new way, was intensified in the weeks immediately following the -outbreak by the knowledge that Mr. Rockefeller had been so enormously -benefited by the short-lived concern. Here he was shipping Eastward over -one road between 4,000 and 5,000 barrels of refined oil a day—oil wrung -from his neighbours by an outrageous conspiracy, men said bitterly. This -feeling was still keen when Mr. Rockefeller and several of his -colleagues in the South Improvement scheme suddenly, in May, 1873, -appeared on the streets of Titusville. The men who had fought him so -desperately now stared in amazement at the smiling, unruffled -countenance with which he greeted them. Did not the man know when he was -beaten? Did he not realise the opinion the Oil Regions held of him? His -placid demeanour in the very teeth of their violence was disconcerting. - -Not less of a shock was given the country by the knowledge that Mr. -Rockefeller, Mr. Flagler, Mr. Waring and the other gentlemen in their -party were pressing a new alliance, and that they claimed that their new -scheme had none of the obnoxious features of the defunct South -Improvement Company, though it was equally well adapted to work out the -“good of the oil business.” - -For several days the visiting gentlemen slipped around, bland and -smiling, from street corner to street corner, from office to office, -explaining, expostulating, mollifying. “You misunderstand our -intention,” they told the refiners. “It is to save the business, not to -destroy it, that we are come. You see the disorders competition has -wrought in the oil industry. Let us see what combination will do. Let us -make an experiment—that is all. If it does not work, then we can go back -to the old method.” - -Although Mr. Rockefeller was everywhere, and heard everything in these -days, he rarely talked. “I remember well how little he said,” one of the -most aggressively independent of the Titusville refiners told the -writer. “One day several of us met at the office of one of the refiners, -who, I felt pretty sure, was being persuaded to go into the scheme which -they were talking up. Everybody talked except Mr. Rockefeller. He sat in -a rocking-chair, softly swinging back and forth, his hands over his -face. I got pretty excited when I saw how those South Improvement men -were pulling the wool over our men’s eyes, and making them believe we -were all going to the dogs if there wasn’t an immediate combination to -put up the price of refined and prevent new people coming into the -business, and I made a speech which, I guess, was pretty warlike. Well, -right in the middle of it John Rockefeller stopped rocking and took down -his hands and looked at me. You never saw such eyes. He took me all in, -saw just how much fight he could expect from me, and I knew it, and then -up went his hands and back and forth went his chair.” - -For fully a week this quiet circulation among the oil men went on, and -then, on May 15 and 16, public meetings were held in Titusville, at -which the new scheme which they had been advocating was presented -publicly. This new plan, called the “Pittsburg Plan”[27] from the place -of its birth, had been worked out by the visiting gentlemen before they -came to the Oil Regions. It was a most intelligent and comprehensive -proposition. - -As in the case of the South Improvement scheme, a company was to be -formed to run the refining business of the whole country, but this -company was to be an open instead of a secret organisation, and all -refiners were to be allowed to become stockholders in it. The owners of -the refineries who went into the combination were then to run them in -certain particulars according to the direction of the board of the -parent company; that is, they were to refine only such an amount of oil -as the board allowed, and they were to keep up the price for their -output as the board indicated. The buying of crude oil and the -arrangements for transportation were also to remain with the directors. -Each stockholder was to receive dividends whether his plant operated or -not. The “Pittsburg Plan” was presented tentatively. If anything better -could be suggested they would gladly accept it, its advocates said. “All -we want is a practical combination. We are wed to no particular form.” - -The first revelation of the public meetings at which the “Pittsburg -Plan” was presented was that in the days Mr. Rockefeller and his friends -had been so diligently shaking hands with the oil men from Titusville to -Oil City they had made converts—that they had not entered these open -meetings until they had secured the assurance of co-operation in any -plan of consolidation which might be effected from some of the ablest -refiners and business men of the creek, notably from J. J. Vandergrift -of Oil City, and from certain firms of Titusville with which John D. -Archbold was connected. All of these persons had fought the South -Improvement Company, and they all now declared that if the proposed -organisation copied that piratical scheme they would have nothing to do -with it, that their allegiance to the plan was based on their conviction -that it was fair to all—who went in!—and that it was made necessary by -over-refining, underselling, and by the certainty that the railroads -could not be trusted to keep their contracts. It was evident that the -possible profits and power to be gained by a successful combination had -wiped out their resentment against the leaders of the South Improvement -Company, and that if they had the assurance, as they must have had, that -rebates were a part of the game, they justified themselves by the -reflection that somebody was sure to get them, and that it might as well -be they as anybody. - -The knowledge that a considerable body of the creek refiners had gone -over to Mr. Rockefeller awakened a general bitterness among those who -remained independent. “Deserters,” “ringsters,” “monopolists,” were the -terms applied to them, and the temper of the public meetings, as is -evident from the full reports the newspapers of the Oil Region -published, became at once uncertain. There were long pauses in the -proceedings, everybody fearing to speak. Mr. Rockefeller is not reported -as having spoken at all, the brunt of defense and explanation having -fallen on Mr. Flagler, Mr. Frew and Mr. Waring. Two or three times the -convention wrangled to the point of explosion, and one important -refiner, M. N. Allen, who was also the editor of the Titusville Courier, -one of the best papers in the region, took his hat and left. Before the -end of the convention the supporters of combination ought to have felt, -if they did not, that they had been a little too eager in pressing an -alliance on the Oil Regions so soon after outraging its moral sentiment. - -The press and people were making it plain enough, indeed, that they did -not trust the persuasive advocates of reform. On every street corner and -on every railroad train men reckoned the percentage of interest the -stockholders of the South Improvement Company would have in the new -combination. It was too great. But what stirred the Oil Region most -deeply was its conviction that the rebate system was regarded as the -keystone of the new plan. “What are you going to do with the men who -prefer to run their own business?” asked a representative of the Oil -City Derrick of one of the advocates of the plan. “Go through them,” was -reported to be his laconic reply. “But how?” “By the co-operation of -transportation”—that is, by rebates. Now the Oil Region had been too -recently convicted of the sin of the rebate, and had taken too firm a -determination to uproot the iniquitous practice to be willing to ally -itself with any combination which it suspected of accepting privileges -which its neighbours could not get or would not take. - -At the very time the association of refiners was under consideration an -attempt was made to win over the producers by offering, through their -union, to buy all their oil at five dollars a barrel for five years. Oil -was four dollars at the time. The producers refused. Such an agreement -could only be kept, they said, by an association which was an absolute -monopoly, fixing prices of refined to satisfy its own greed. All they -wanted of the producer was to be a party to their conspiracy. When they -had destroyed his moral force and completed their monopoly they would -pay him what they pleased for oil, and the price would not be five -dollars! What could he do then? He would be their slave, there would be -no other buyer—could be none, since they would control the entire -transportation system. - -The upshot of the negotiations was that again the advocates of -combination had to retire from the Oil Regions defeated. “_Sic semper -tyrannis, sic transit gloria_ South Improvement Company,” sneered the -Oil City Derrick, which was given to sprinkling Latin phrases into its -forceful and picturesque English. But the Derrick underrated both the -man and the principle at which it sneered. A great idea was at work in -the commercial world. It had come to them saddled with crime. They now -saw nothing in it but the crime. The man who had brought it to them was -not only endowed with far vision, he was endowed with an indomitable -purpose. He meant to control the oil business. By one manœuvre, and that -a discredited one, he had obtained control of one-fifth of the entire -refining output of the United States. He meant to secure the other -four-fifths. He might retire now, but the Oil Region would hear of him -again. It did. Three months later, in August, 1872, it was learned that -the scheme of consolidation which had been presented in vain at -Titusville in May had been quietly carried out, that four-fifths of the -refining interest of the United States, including many of the creek -refiners, had gone into a National Refiners’ Association, of which Mr. -Rockefeller was president, and one of their own men, J. J. Vandergrift, -was vice-president. The news aroused much resentment in the Oil Regions. -The region was no longer solid in its free-trade sentiment, no longer -undividedly true to its vow that the rebate system as applied to the oil -trade must end. There was an enemy at home. The hard words which for -months men had heaped on the distant heads of Cleveland and Pittsburg -refiners, they began to pour out, more discreetly to be sure, on the -heads of their neighbours. It boded ill for the interior peace of the -Oil Regions. - -The news that the refiners had actually consolidated aroused something -more than resentment. The producers generally were alarmed. If the -aggregation succeeded they would have one buyer only for their product, -and there was not a man of them who believed that this buyer would ever -pay them a cent more than necessary for their oil. Their alarm aroused -them to energy. The association which had scattered the South -Improvement Company was revived, and began at once to consider what it -could do to prevent the consolidated refiners getting the upper hand in -the business. - -The association which now prepared to contest the mastery of the oil -business with Mr. Rockefeller and those who had joined him was a curious -and a remarkable body. Its membership, drawn from the length and breadth -of the Oil Regions, included men whose production was thousands of -barrels a day and men who were pumping scarcely ten barrels; it included -college-bred men who had come from the East with comfortable sums to -invest, and men who signed their names with an effort, had never read a -book in their lives, and whose first wells they had themselves “kicked -down.” There were producers in it who had made and lost a half-dozen -fortunes, and who were, apparently, just as buoyant and hopeful as when -they began. There were those who had never put down a dry well, and were -still unsatisfied. However diverse their fortunes, their breeding, and -their luck, there was no difference in the spirit which animated them -now. - -[Illustration: - - M. N. ALLEN - - Independent refiner of Titusville. Editor of the _Courier_, an able - opponent of the South Improvement Company. -] - -[Illustration: - - JOHN FERTIG - - Prominent oil operator. Until 1893 active in Producers’ and Refiners’ - Company (independent). -] - -[Illustration: - - CAPT. WILLIAM HASSON - - President of the Petroleum Producers’ Association of 1872. -] - -[Illustration: - - JOHN L. MC KINNEY - - Prominent oil operator. Until 1889 an independent. Now member of the - Standard Oil Company. -] - -The president of the association was Captain William Hasson, a young man -both by his knowledge of the Oil Regions and the oil business well -fitted for the position. Captain Hasson was one of the few men in the -association who had been in the country before the discovery of oil. His -father had bought, in the fifties, part of the grant of land at the -mouth of Oil Creek, made in 1796 to the Indian chief Cornplanter, and -had moved on it with his family. Four years after the discovery of oil -he and his partner disposed of 300 acres of the tract they owned for -$750,000. Young Hasson had seen Cornplanter, as the site of his father’s -farm was called, become Oil City; he had seen the mill, blacksmith shop -and country tavern give way to a thriving town of several thousand -inhabitants. All of his interests and his pride were wrapped up in the -industry which had grown up about him. Independent in spirit, vigorous -in speech, generous and just in character, William Hasson had been -thoroughly aroused by the assault of the South Improvement Company, and -under his presidency the producers had conducted their successful -campaign. The knowledge that the same man who had been active in that -scheme had now organised a national association had convinced Captain -Hasson of the necessity of a counter move, and he threw himself -energetically into an effort to persuade the oil producers to devise an -intelligent and practical plan for controlling their end of the -business, and then stand by what they decided on. - -Captain Hasson and those who were working with him would have had a much -more difficult task in arousing the producers to action if it had not -been for the general dissatisfaction over the price of oil. The average -price of crude in the month of August, 1872, was $3.47½. The year before -it had been $4.42½, and that was considered a poverty price. It was -pretty certain that prices would fall still lower, that “three-dollar -oil” was near at hand. Everybody declared three dollars was not a -“living price” for oil, that it cost more than that to produce it. The -average yield of the wells in the Oil Region in 1872 was five barrels a -day. Now a well cost at that time from $2,500 to $8,000, exclusive of -the price of the lease. It cost eight to ten dollars a day to pump a -well, exclusive of the royalty interest—that is, the proportion of the -production turned over to the land-owner, usually one-fourth.[28] If a -man had big wells, and many of them, he made big profits on -“three-dollar oil,” but there were comparatively few “big producers.” -The majority of those in the business had but few wells, and these -yielded only small amounts. - -If he had been contented to economise and to accept small gains, even -the small producer could live on a much lower price than three dollars; -but nobody in the Oil Regions in 1872 looked with favour on economy, and -everybody despised small things. The oil men as a class had been brought -up to enormous profits, and held an entirely false standard of values. -As the Derrick told them once in a sensible editorial, “their business -was born in a balloon going up, and spent all its early years in the -sky.” They had seen nothing but the extreme of fortune. One hundred per -cent. per annum on an investment was in their judgment only a fair -profit. If their oil property had not paid for itself entirely in six -months, and begun to yield a good percentage, they were inclined to -think it a failure. Now nothing but five-dollar oil would do this, so -great were the risks in business; and so it was for five-dollar oil, -regardless of the laws of supply and demand, that they struggled. They -were notoriously extravagant in the management of their business. Rarely -did an oil man write a letter if he could help it. He used the telegraph -instead. Whole sets of drilling tools were sometimes sent by express. It -was no uncommon thing to see near a derrick broken tools which could -easily have been mended, but which the owner had replaced by new ones. -It was anything to save bother with him. Frequently wells were abandoned -which might have been pumped on a small but sure profit. In those days -there were men who looked on a ten-barrel (net) well as hardly worth -taking care of. And yet even at fifty cents a barrel such a well would -have paid the owner $1,800 a year. The simple fact was that the profits -which men in trades all over the country were glad enough to get, the -oil producer despised. The one great thing which the Oil Regions did not -understand in 1872 was economy. As a matter of fact the oil-producing -business was going through a stage in its natural development similar to -oil refining. Both, under the stimulus of the enormous profits in the -years immediately following the discovery of oil, had been pushed until -they had outstripped consumption. The competition resulting from the -inrush of producers and refiners and the economies which had been worked -out were bringing down profits. The combinations attempted by both -refiners and producers in these years were really efforts to keep up -prices to the extravagant point of the early speculative years. - -Now the drop in the price of oil everybody recognised to be due to a -natural cause. Where a year before the production had been 12,000 -barrels a day, it was now 16,000. The demand for refined had not -increased in proportion to this production of crude, and oil stocks had -accumulated until the tanks of the region were threatening to overflow. -And there was no sign of falling off. Under these circumstances it -needed little argument to convince the oil men that if they were to get -a better price they must produce no more than the world would use. There -was but one way to effect this—to put down no new wells until the stocks -on hand were reduced and the daily production was brought down to a -marketable amount. - -Under the direction of the Producers’ Association an agitation at once -began in favour of stopping the drill for six months. It was a drastic -measure. There was hardly an oil operator in the entire region who had -not on hand some piece of territory on which he was planning to drill, -or on which he had not wells under way. Stopping the drill meant that -all of the aggressive work of his business should cease for six months. -It meant that his production, unreplenished, would gradually fall off, -until at the end of the period he would have probably not over half of -what he had now; that then he must begin over again to build up. It -meant, too, that he was at the mercy of neighbours who might refuse to -join the movement, and who by continuing to drill would drain his -territory. It seemed to him the only way of obtaining a manageable -output of crude, however, and accordingly, when late in the month of -August the following pledge to stop the drill was circulated, the great -majority of the producers signed it: - - - _Whereas_, The extreme low price of oil requires of producers that - operations therefor shall cease for the present: Now we, the - producers, land-owners and others, residents of the Pennsylvania Oil - Region, do hereby bind ourselves to each other not to commence the - drilling of any more wells for the period of six months from the - first day of September next, not to lease any lands owned or - controlled by us for the purpose of operations during the same - period, and we also agree to use all honourable means to prevent - others from boring. This we agree to, and bind ourselves to each - other under a forfeiture of $2,000 for each well commenced by either - of us within the period above limited—the same to be collected as - any other debt. It is, however, understood by the undersigned that - this forfeiture is not to apply to any wells where the erection of - rigs is completed or under way, or that may be commenced before the - first day of September aforesaid. - - -The chief objection to this pledge came from land-owners in Clarion -County. They were the “original settlers,” plodding Dutch farmers, whose -lives had always been poor and hard and shut-in. The finding of oil had -made them rich and greedy. They were so ignorant that it was difficult -to transact business of any nature with them. It was not unusual for a -Clarion County farmer, if offered an eighth royalty, to refuse it on the -ground that it was too little, and to ask a tenth. A story used to be -current in the Oil Regions of a producer who, returning from an -unsuccessful land hunt in Clarion County was asked why he had not -secured a certain lease. “Well,” he said, “farmers wanted seven-eighths -of the oil as a royalty, wanted me to furnish barrels and to paint -_both_ heads. I agreed to everything but the last. I could afford to -paint but one head, and so he wouldn’t sign the lease.” When the -proposition to stop the drill for six months was brought to these men, -who at the time owned the richest territory in the oil field, no amount -of explanation could make them understand it. They regarded it simply as -a scheme to rob them, and would not sign. Outside of this district, -however, the drill stopped over nearly all the field on the first of -September. - -There was nothing but public opinion to hold the producers to their -pledge. But public opinion in those days in the Oil Regions was fearless -and active and asserted itself in the daily newspapers and in every -meeting of the association. The whole body of oil men became a vigilance -committee intent on keeping one another loyal to the pledge. Men who -appeared at church on Sunday in silk hats, carrying gold-headed -canes—there were such in the Oil Region in 1872—now stole out at night -to remote localities to hunt down rumours of drilling wells. If they -found them true, their dignity did not prevent their cutting the tools -loose or carrying off a band wheel. - -Stopping the drill afforded no immediate relief to the producers. It was -for the future. And as soon as the Petroleum Producers’ Association had -the movement well under way, it proposed another drastic measure—a -thirty days’ shut-down—by which it was meant that all wells should cease -pumping for a month. Nothing shows better the compact organisation and -the determination of the oil producers at this time than the immediate -response they gave to this suggestion. In ten days scarcely a barrel of -oil was being pumped from end to end of the Oil Regions. “That a -business producing three million dollars a month, employing 10,000 -labouring men and fifty million dollars of capital, should be entirely -suspended, dried up, stopped still as death by a mutual voluntary -agreement, made and perfected by all parties interested, within a space -of ten days—this is a statement that staggers belief—a spectacle that -takes one’s breath away,” cried the Derrick, which was using all its -wits to persuade the producers to limit their production. It was -certainly a spectacle which saddened the heart, however much one might -applaud the grim resolution of the men who were carrying it out. The -crowded oil farms where creaking walking-beams sawed the air from -morning until night, where engines puffed, whistles screamed, great gas -jets flared, teams came and went, and men hurried to and fro, became -suddenly silent and desolate, and this desolation had an ugliness all -its own—something unparalleled in any other industry of this country. -The awkward derricks, staring cheap shanties, big tanks with miles and -miles of pipe running hither and thither, the oil-soaked ground, -blackened and ruined trees, terrible roads—all of the common features of -the oil farm to which activity gave meaning and dignity—now became -hideous in inactivity. Oil seemed a curse to many a man in those days as -he stood by his silent wells and wondered what was to become of his -business, of his family, in this clash of interests. - -While the producers were inaugurating these movements, Captain Hasson -and a committee were busy making out the plan of the permanent -association which was to control the business of oil-producing and -prevent its becoming the slave of the refining interest. The knowledge -that such an organisation was being worked out kept the oil country in a -ferment. In every district suggestions, practical and impractical, wise -and foolish, occupied every producers’ meeting and kept the idle oil men -discussing from morning until night. At one mass-meeting the following -resolution was actually passed by a body of revengeful producers: - - - _Resolved_, that to give a wider market throughout the world to - petroleum, to enhance its price and to protect producers from unjust - combinations of home refiners, a committee be appointed to ask the - representatives of foreign governments at Washington to request - their respective governments to put a proper tariff on refined oil - and to admit crude oil free into the ports of their respective - governments. - - -Toward the end of October Captain Hasson presented the scheme which he -and the committee had prepared. It proposed that there should be -established what was called a Petroleum Producers’ Agency.[29] This -agency was really an incorporated company with a capital of one million -dollars, the stock of which was to be subscribed to only by the -producers or their friends. This agency was to purchase all the oil of -the members of the association at at least five dollars a barrel. If -stocks could be kept down so that the market took all of the oil at -once, the full price was to be paid at once in cash; if not, the agency -was to store the oil in tanks it was to build, and a portion of the -price was to be paid in tank certificates. By thus controlling all the -oil, the agency expected to protect the weakest as well as the strongest -producer, to equalise the interest of different localities, to prevent -refiners and exporters from accumulating stocks, and to prevent gambling -in oil. The agency was to take active means to collect reliable -information about the oil business—the number of wells drilling, the -actual production, the stocks on hand—things which had never been done -to anybody’s satisfaction. Indeed, one of the standing causes for -quarrels between the various newspapers of the region was their -conflicting statistics about production and stocks. It was to make a -study of the market and see what could be done to increase consumption. -It was to oppose monopolies and encourage competition, and, if -necessary, it was to provide co-operative refineries which the producers -should own and control. - -The spirit of the agency, as explained by Captain Hasson, was most -liberal, considering the interests of even the drillers and pumpers. -“Advise every employee to take at least one share of stock for himself,” -he said in his address, “and one for his wife and each of his children, -and encourage him to pay for it out of his saved earnings or out of his -monthly pay. If he is not able to keep up his instalments, assure him -that you will help him, and then take care to do it. You will thus do -him a double kindness, and benefit his family by encouraging habits of -thrift and economy. You owe this much to him who so nobly seconded your -efforts to gain control of the market by stopping work. You had all to -gain, and he had nothing to hope for but your benefit. Now show your -appreciation of his acts by this evidence of your regard for his -welfare.” - -The plan was received with general enthusiasm, and when it came up for -adoption it went through with a veritable whoop. Indeed, within a few -moments after its official acceptance, which took place in Oil City on -October 24, $200,000 worth of stock was taken, and less than two weeks -later it was announced that more than the desired million dollars had -been subscribed, that the trustees and officers had been elected, and -that the agency was ready for work. For the first time in the history of -the oil business the producers were united in an organisation, which, if -carried out, would regulate the production of oil to something like the -demand for it, would prevent stocks from falling into the hands of -speculators, and would provide a strong front to any combination with -monopolistic tendencies. Only one thing was necessary now to make the -producer a fitting opponent to his natural enemy, the refiner. That -thing was loyalty to the agency he had established. The future of the -producer at that moment was in his own hand. Would he stick? By every -sign he would. He thought so himself. He had acted so resolutely and -intelligently up to this point that even Mr. Rockefeller seems to have -thought so. - -During the entire three months that the producers had been organising, -the refiners had been making divers overtures to them. In August several -of the refiners sought certain of the big producers and privately -proposed a two-headed combination which should handle the whole -business, from drilling to exportation. The proposition they made was -most alluring to men suffering from low prices. “Carry out your plans to -limit your production and guarantee to sell only to us,” said Mr. -Rockefeller’s representative, “and we will give you four dollars a -barrel for your oil. We will also establish a sliding scale, and for -every cent a gallon that refined oil advances we will give you -twenty-five cents more on your barrel of crude.” The market price of -crude oil, when this offer was made, was hovering around three dollars. -“How,” asked the producer, “can you do this?” “We expect, by means of -our combination, to get a rebate of seventy-five cents a barrel,” was -the answer. “But the railroads have signed an agreement to give no -rebates,” objected the producers. - -“As if the railroads ever kept an agreement,” answered the worldly-wise -refiners. “Somebody will get the rebates. It is the way the railroads do -business. If it is to be anybody, we propose it shall be our -combination.” Now it was clear enough to the men approached that the -great body of their association would never go into any scheme based on -rebates, and they said so. The refiners saw no disadvantage in that -fact. “We don’t want _all_ the producers. We only want the big ones. The -small producer under our arrangement must die, as the small refiner -must.” The proposition never got beyond the conference chamber. It was -too cynical. Several conferences of the same nature took place later -between representatives of the two interests, but nothing came of them. -The two associations were kept apart by the natural antagonism of their -ideals and their policy. Captain Hasson and his followers were working -on an organisation which aimed to protect the weakest as well as the -strongest; which welcomed everybody who cared to come into the business; -which encouraged competition and discountenanced any sort of special -privilege. Mr. Rockefeller and his associates proposed to save the -strong and eliminate the weak, to limit the membership to those who came -in now, to prevent competition by securing exclusive privileges. Their -program was cold-blooded, but it must be confessed that it showed a much -firmer grasp on the commercial practices of the day, and a much deeper -knowledge of human nature as it operates in business, than that of the -producers. - -The formation of the Producers’ Agency brought the refiners back to the -Oil Regions in greater earnest than ever. The success of that -organisation gave them an active antagonist, one which, as it held the -raw material, could at any time actually shut up their refineries by -withholding oil. The vigour, the ability, the determination the new -organisation had displayed made it a serious threat to the domination -Mr. Rockefeller and his associates had dreamed. It must be placated. On -November 8, immediately after it was announced that the entire million -dollars’ worth of stock was taken, an agent of the Standard Oil Company -in Oil City was ordered to buy oil from the agency—6,000 barrels of oil -at $4.75 a barrel—and the order was followed by this telegram from Mr. -Rockefeller: - - - “It has been represented to us that if we would buy of the - producers’ agent at Oil City and pay $4.75 per barrel, they would - maintain the price. We are willing to go farther and buy only of the - producers’ agent, hence the order we have given you. See Hasson and - others and let there be a fair understanding on this point. We will - do all in our power to maintain prices, and continue to buy, - provided our position is fully understood. We do this to convince - producers of our sincerity, and to assist in establishing the - market.” - - -A more adroit move could not have been made at this moment. This -purchase was a demonstration that the Refiners’ Association could and -would pay the price the producers asked; that they asked nothing better, -in fact, than to ally themselves with the agency. The events of the next -three weeks, on the contrary, showed the agency that it would be some -time before anybody else would pay them any such price as that Mr. -Rockefeller promised. The reason was evident enough. In spite of the -stopping of the drill, in spite of the thirty days’ shut-down, -production was increasing. Indeed, the runs[30] for November were -greater than they had ever been in any single month since the beginning -of the oil business. A large number of wells under way when the drill -was stopped had “come in big.” New territory had been opened up by -unexpected wildcats. The shut-down had done less than was expected to -decrease stocks. It was evident that the Producers’ Association had a -long and severe task before it to bring the crude output down to -anything like the demand. Could the great body of producers be depended -upon to take still further measures to lessen their production, and at -the same time would they hold their oil until the agency had the mastery -of the situation? Their tanks were overflowing. Many of them were in -debt and depending on their sales to meet their obligations—even to meet -their daily personal expenses. It was little wonder that they grew -restive as they began to realise that the agency in which they had seen -immediate salvation from all their ills could only be made effective by -months more of self-sacrifice, of agitation, of persistent effort from -every man of them. With every day they became more impatient of the -bonds the agency had set for them, and the leaders soon realised that -some immediate tangible results must be given the mass of oil men, or -there was danger of a stampede. - -A strong feature of the genius of John D. Rockefeller has always been -his recognition of the critical moment for action in complicated -situations. He saw it now, and his representatives again came to the -creek seeking an alliance. Their arguments, as they found their way from -the private meetings into the press and the street, ran something like -this: “Our combination is the only big buyer. We are in the thing to -stay, and shall remain the only big buyer. You might erect refineries -and oppose us, but it would take months, and while you are waiting how -are you going to hold the producers? You cannot do it. We can easily get -all the oil we want to-day at our own price from the men who sell from -necessity, and yet your agency is in the first flush of enthusiasm. Sell -only to us and we will buy 15,000 barrels a day from you. Refuse an -alliance with us and you will fail.” - -Overwhelmed by the length and severity of the struggle before them if -they insisted on independence, fearful lest the scattered and restless -producers could not be held much longer, convinced by their confident -arguments that the refiners could keep their promise, the council -finally agreed to a plan of union which the Derrick dubbed the “Treaty -of Titusville.” A terrible hubbub followed the announcement that a -treaty was proposed and would probably be adopted by the association. -The same old arguments which had greeted each overture from the refiners -were gone over again. It would be a monopoly. The price they offered for -crude depended upon their getting an unnaturally high price for refined. -The markets of the world would refuse to pay this price when it was -discovered that it was kept up by an agreement which was contrary to the -laws of supply and demand. And, besides, the parties could not trust -each other. “_Timeo Danaos et dona ferentes._” Liberal translation—“Mind -your eye when the Cleveland refiners get generous,” cautioned the -Derrick. As always, the ghost of the South Improvement Company was -between them. On the other hand, it was argued that it was Hobson’s -choice, “combine or bust,” there is no other market. We cannot wait for -one. We have a million barrels of oil on hand—the refiners will take -15,000 barrels a day for “spot cash.” And after all, concluded the -“philosophical,” if you can’t do as well as you want to, do the best you -can. - -[Illustration: - - JAMES S. TARR - - Owner of the “Tarr Farm,” one of the richest oil territories on Oil - Creek. -] - -[Illustration: - - WILLIAM BARNSDALL - - The second oil well on Oil Creek was put down by Mr. Barnsdall. -] - -[Illustration: - - JAMES S. MCCRAY - - Owner of the McCray Farm near Petroleum Centre. -] - -[Illustration: - - WILLIAM A. ABBOTT - - One of the most prominent of the early oil producers, refiners and - pipe-line operators. -] - -On December 12 the proposed treaty was laid before the producers at Oil -City. It aroused a debate so acrimonious that even the Derrick -suppressed it. Captain Hasson led the opposition. In his judgment there -was but one course for the producers—to keep themselves free from all -entanglements and give themselves time to build up solidly the structure -they had planned. If they had followed his advice the whole history of -the Oil Regions would have been different. But they did not follow it. -The treaty was ratified by a vote of twenty-seven to seven. The -excitement and the personalities the association indulged in at their -meeting augured ill for its future, but when a week later a committee -sent to see the refiners came back from New York with a contract signed -by Mr. Rockefeller,[31] the president, and bearing with them an order -for 200,000 barrels of oil at $3.25, there was a general feeling that, -after all, an alliance might not be so bad a thing. 200,000 barrels was -a big order and would do much to relieve their distress. Their formal -sense was quieted, too, by the assurance that the producers before -signing the contract had insisted that the Refiners’ Combination enter -into an agreement to take no rebates as long as the alliance lasted. The -main points of the agreement decided upon were that the Refiners’ -Association should admit all _existing_ refiners to its society, and the -Producers’ Association _all_ producers present and to come—that the -former company should buy only of the latter, the latter sell only to -the former, and that the agency should bind all producers enjoying its -privileges to handle their oil through it. The refiners were to buy such -daily quantities as the markets of the world would take and at a price -governed by the price of refined, five dollars per barrel when refined -was selling at twenty-six cents a gallon. Either association could -discontinue the agreement on ten days’ notice. The producers, before -signing the contract, insisted that the Refiners’ Combination sign an -agreement to take no rebates as long as the alliance lasted. This -agreement in regard to rebates read as follows: - - - “_Whereas_, it is deemed desirable to execute a contract of even - date herewith between the Petroleum Producers’ Association and the - Petroleum Refiners’ Association for the purpose of securing a - co-operation for mutual protection, it is agreed by the Refiners’ - Association that sections one and three of a contract made the 25th - of March, 1872, between certain trunk lines of railroads and a - committee of producers and refiners shall be and remain in full - force. - - “Petroleum Refiners’ Association, - “JOHN D. ROCKEFELLER, _President_.” - - -The sections of the contract of the 25th of March referred to agreed -that no rebates or contracts or other arrangements should be made which -would give any party the slightest difference in rates, and that the -rates should not be changed either for increase or decrease without -first giving Mr. Hasson, the president of the Producers’ Union, at least -ninety days’ notice in writing. As we now know, Mr. Rockefeller himself -was receiving rebates when he signed this agreement. - -And now, at last, after five months of incessant work, the agency was -ready to begin disposing of oil. They set to work diligently at once to -apportion the 200,000 barrels the refiners had bought among the -different districts. It was a slow and irritating task, for a method of -apportionment and of gathering had to be devised, and, as was to be -expected, it aroused more or less dissatisfaction and many charges of -favouritism. The agency had the work well under way, however, and had -shipped about 50,000 barrels when, on January 14, it was suddenly -announced that the refiners had _refused to take any more of the -contract oil_! - -There was a hurried call of the Producers’ Council and a demand for an -explanation. A plausible one was ready from Mr. Rockefeller. “You have -not kept your part of the contract—you have not limited the supply of -oil[32]—there is more being pumped to-day than ever before in the -history of the region. We can buy all we want at $2.50, and oil has sold -within the week at two dollars. If you will not, or cannot, stop -over-production, can you expect us to pay your price? We keep down the -output of refined, and so keep up the price. If you will not do the -same, you must not expect high prices.” - -What could the producers reply? In spite of their heroic measures, they -had not been able to curtail their output. It seemed as if Nature, -outraged that her generosity should be so manipulated as to benefit only -the few, had opened her veins to flood the earth with oil, so that all -men might know that here was a light cheap enough for the poorest of -them. Her lavish outpouring now swept away all of the artificial -restraints the producers and refiners had been trying to build. The -Producers’ Association seemed suddenly to comprehend their folly in -supposing that when 5,000 barrels more of oil was produced each day than -the market demanded any combination could long keep the contract the -refiners had made with them; and their unhappy session, made more -unhappy by the reading of bitter and accusing letters from all over the -discontented region, ended in a complete stampede from the refiners, the -vote for dissolving the alliance having but one dissenting voice. - -There were few tears shed in the Oil Regions over the rupture of the -contract. The greater part of the oil men had called it from the -beginning an “unholy alliance,” and rejoiced that it was a fiasco. If -the alliance had been all that came to an end, the case would not have -been so serious, but it was not. The breaking of the alliance proved the -death of the agency and the association. The leaders who had disapproved -of the treaty withdrew from active work; the supporters of the alliance, -demoralised by its failure, were glad to keep quiet. A few spasmodic -efforts to stop the drill, to inaugurate another shut-down, were made, -but failed. Most of the producers felt that, as oil was so low, their -only safety was in getting as large a production as they could, and a -perfect fever of development followed. The Producers’ Association, after -ten months of as exciting and strenuous effort as an organisation has -ever put in, was snuffed out almost in a day. It was to be five years -before the oil men recovered sufficiently from the shock of this -collapse to make another united effort. If Mr. Rockefeller felt in the -fall of 1872 that the “good of the oil business” required the -dissolution of the Producers’ Agency, he could not have acted with more -acumen than he did in leading them into an alliance, and at the -psychological moment throwing up his contract. - -Humiliated as the producers were by their failure, they soon found -consolation in the knowledge that the Refiners’ Association was in -trouble. A serious thing, in fact, had happened. When the official -report of the year’s exports and imports came out, it was shown that the -exports of refined oil had fallen off for the first time in the history -of the business. In 1871, 132,178,843 gallons had been exported. In -1872, only 118,259,832 were exported. Just as alarming was the proof -that the shale and coal-oil refineries of Europe had taken a fresh -start—that they were selling their products more cheaply than kerosene -could be imported and sold. There was a general outcry from all over the -country that Mr. Rockefeller and his associates were running the oil -business by keeping up the price of refined oil beyond what the price of -crude justified. The producers, eager for a scapegoat, argued that the -low price of crude was due to decreased consumption as well as -over-production, and their ill-will against Mr. Rockefeller flared up -anew. In the meantime the Refiners’ Association was having troubles of -its own. The members were not limiting their output as they had -agreed—that is, it was discovered every now and then that a refinery was -making more oil than Mr. Rockefeller had directed. Again, what was more -fatal to the success of the association, members sometimes sold at a -lower price than that set by Mr. Rockefeller. These restrictions were -fundamental to the success of the combination, and the members were -called together at Saratoga in June, 1873, and after a long session the -association was dissolved. - -There was loud exultation in the unthinking part of the Oil Regions over -the dissolution of the refiners. The “Junior Anaconda” was dead. The -wiser part of the region did not exult. They knew that though the -combination might dissolve, the Standard Oil Company of Cleveland still -controlled its one-fifth of the capacity of the country; that not only -had Mr. Rockefeller been able to hold the twenty refineries he had -bolted so summarily at the opening of 1872, but he had assimilated them -so thoroughly that he was making enormous profits. Mr. Rockefeller’s -contracts with the Central Railroad alone in 1873 and 1874 obliged him -for seven months of the year to ship at least 100,000 barrels of refined -oil a month to the seaboard. As a matter of fact he never shipped less -than 108,000 barrels, and in one month of the period it rose to -180,000.[33] Now in 1873 he made, at the very lowest figure, three cents -a gallon on his oil. Estimating his shipments simply at 700,000 barrels -a year—and they were much more—his profits for that year were -$1,050,000, and this accounts for no profits on about thirty-five per -cent. of the Standard output, which was sold locally or shipped -Westward. Little wonder that the Cleveland refiners who had been snuffed -out the year before, and who saw their plants run at such advantage, -grew bitter, or that gossip said the daily mail of the president of the -Standard Oil Company was enlivened by so many threats of revenge that he -took extraordinary precautions about appearing unguarded in public. - -It is worth noticing that these great profits were not being used for -private purposes. In 1872 the Standard Oil Company paid a dividend of -thirty-seven per cent., but in 1873 they cut it to fifteen per cent. The -profits were going almost solidly into the extension and solidification -of the business. Mr. Rockefeller was building great barrel factories, -thus cutting down to the minimum one of a refiner’s heaviest expenses. -He was buying tank cars that he might be independent of the vagaries of -the railroads in allotting cars. He was gaining control of terminal -facilities in New York. He was putting his plants into the most perfect -condition, introducing every improved process which would cheapen his -manufacturing by the smallest fraction of a cent. He was diligently -hunting methods to get a larger percentage of profit from crude oil. -There was, perhaps, ten per cent. of waste at that period in crude oil. -It hurt him to see it unused, and no man had a heartier welcome from the -president of the Standard Oil Company than he who would show him how to -utilise any proportion of his residuum. In short, Mr. Rockefeller was -strengthening his line at every point, and to no part of it was he -giving closer attention than to transportation. - - - - - CHAPTER FIVE - LAYING THE FOUNDATIONS OF A TRUST - - EVIDENCE OF REAPPEARANCE OF REBATES SOON AFTER AGREEMENT OF MARCH 25 - IS SIGNED—PRINCIPLE THOROUGHLY ESTABLISHED THAT LARGE SHIPPERS SHALL - HAVE ADVANTAGES OVER SMALL SHIPPERS IN SPITE OF RAILROADS’ DUTY AS - COMMON CARRIERS—AGREEMENT WORKED OUT BY WHICH THREE ROADS ARE TO - HAVE FIXED PERCENTAGE OF EASTERN SHIPMENTS—OIL REGIONS ROBBED OF - THEIR GEOGRAPHICAL ADVANTAGE—THE RUTTER CIRCULAR—ROCKEFELLER NOW - SECRETLY PLANS REALISATION OF HIS DREAM OF PERSONAL CONTROL OF THE - REFINING OF OIL—ORGANISATION OF THE CENTRAL ASSOCIATION—H. H. - ROGERS’ DEFENCE OF THE PLAN—ROCKEFELLER’S QUIET AND - SUCCESSFUL CANVASS FOR ALLIANCES WITH REFINERS—THE REBATE HIS - WEAPON—CONSOLIDATION BY PERSUASION OR FORCE—MORE TALK OF A UNITED - EFFORT TO COUNTERACT THE MOVEMENT. - - -Throughout 1872, while the producers and refiners were working out -associations and alliances to regulate the output of crude and refined -oil, the freight rates over the three great oil-carrying roads were -publicly supposed to be those settled by the agreement of March 25. -Except by the sophisticated it was believed that the railroads were -keeping their contracts. The Lake Shore and Michigan Southern and the -New York Central had never kept them, as we have seen. Mr. Flagler’s -statement that the Standard received a rebate of twenty-five cents a -barrel from April 1 to November 15, 1872, would seem to show that while -with one hand Mr. Clark and Mr. Vanderbilt signed the agreement with the -oil men that henceforth freights should be “on a basis of perfect -equality to all shippers, producers and refiners, and that no rebates, -drawbacks, or other arrangements of any character should be made or -allowed that would give any party the slightest difference in rates or -discriminations of any character whatever,” with the other they had -signed an arrangement to give a twenty-five-cent rebate to Mr. -Rockefeller! They certainly had a strong incentive for ignoring their -pledge. Consider what Mr. Rockefeller could offer the road—sixty -car-loads of oil a day, over 4,000 barrels. General Devereux points out -in the affidavit already mentioned[34] what this meant. It permitted -them to make up a solid oil train and run it out every day. By running -nothing else they reduced the average time of a freight car from -Cleveland to New York and return from thirty days to ten days. The -investment for cars to handle their freight was reduced by this -arrangement to about one-third what it would have been if several -different persons were shipping the same amount every day. Promptness -was insured in forwarding and returning (a drawback of from fifty -dollars to $150 a day accrued if it was late, so that the Standard was -bound to ship promptly), and all the inconvenience of dealing with many -shippers each with his peculiar whim or demand was avoided. It was -certainly worth a rebate to the Central, and the Central not having any -prejudices in favour of keeping agreements because they were agreements -naturally conceded what Mr. Rockefeller wanted. There was another point. -If the Central did not concede to Mr. Rockefeller’s terms it undoubtedly -would lose the freight. There was the lake and the canal and there was -the Erie! - -Now it is not supposable that such an arrangement would go on long -without leaking out in the upper oil circles. We have evidence that it -did not. Indeed, there was among certain intelligent oil men a -conviction when the agreement was signed that the New York roads would -not regard it—that if they did it would ruin the refining business of -Cleveland. W. T. Scheide, a member of the oil men’s committee making -this contract, the agent of one of the largest oil shippers in the -country, Adnah Neyhart, in some frank and suggestive testimony given to -the Hepburn Committee in 1879, said that at the time the arrangement was -made he did not think anybody connected with the business expected it -would last. “My reason for that was that it was an impossible -agreement,” said Mr. Scheide. “The immediate effect of it would have -been to have utterly destroyed fifty-five per cent. of the refining -interest of the country; that is to say, Cleveland and Pittsburg, which -during the previous four years had shipped fifty-five per cent. of all -the oil out of the Oil Regions—they, in addition to paying the rates of -freights which all other refiners would have had to pay, were required -to pay fifty cents a barrel on their crude oil to their works.” The -refiners in Cleveland and Pittsburg had of course always paid to get -crude oil to their works, even the South Improvement Company tariffs -provided for that, and under that arrangement Cleveland had come to be -in 1871 the chief refining centre of the country. The chairman of the -committee examining Mr. Scheide suggested it was a “temporary -impossibility which would have adjusted itself,” which Mr. Scheide -admitted. “Yes, sir, naturally, it would have adjusted itself I suppose, -but the effect was very marked at the time.” - -So strong was Mr. Scheide’s conviction that the New York roads would not -stand the new rates that on the 10th of April he went to the -Pennsylvania railroad and asked for a rebate on Mr. Neyhart’s crude -shipments—and got it. What the rebate was he does not state, but Mr. -Flagler tells us in his testimony[35] that in December he discovered -that the Pennsylvania was shipping for as low as $1.05 a barrel. And for -one month he got from Mr. Vanderbilt a rate of $1.05 on his 4,000 -barrels a day. - -Mr. Scheide was also shipping refined oil over the Erie. George R. -Blanchard, who in October, 1872, became the general freight agent of the -Erie, told the Hepburn Committee in 1879 that he found on entering his -position that $7,000 in rebates had been paid Mr. Scheide for Mr. -Neyhart in the month of September, 1872, on this refined. He does not -say how long this had been going on. Mr. Blanchard found at the same -time the March 25 agreement. He asked why it was not observed, and the -reply convinced him that it had not been kept more than two weeks by the -Pennsylvania and Central systems. “The representations made to me,” says -Mr. Blanchard, “also convinced the Atlantic and Great Western as to what -our rivals were doing, and that railway company and our own decided to -continue to pay the twenty-four cents per barrel drawback then being -paid on the rate of $1.35, provided by their producers’ agreement of -March 25, 1872.” - -But Mr. Blanchard was shipping only Mr. Neyhart’s refined, and naturally -he looked for more business and was willing to give a rebate to get it. -He soon had some from another of the oil men who had signed the -agreement of March 25. This was Mr. Bennett, of Titusville, who with J. -D. Archbold and his other partners entered into a contract with Mr. -Blanchard to ship their entire product for a year at a rate considerably -below the one agreed upon on March 25.[36] The contract was a -short-lived one, for in November Mr. Bennett and his partners turned -their shipments over to the Pennsylvania. The Erie had some -compensation, however, in the fact that in July, 1873, Mr. Neyhart’s -crude shipments had all come to them. Mr. Scheide, Mr. Neyhart’s agent, -explained to the Hepburn Commission that he left the Pennsylvania -because of what he considered “very bad treatment—a discrimination -against us in furnishing us cars.” The Pennsylvania had indeed -undertaken to carry out the clause in the agreement of March 25 which -stipulated that there should be no discrimination in furnishing cars. -Mr. Scheide, considering himself “their shipper,” that is, shipping -larger quantities more regularly than anybody else, and as a consequence -having better rates, thought it unfair that the cars should be pro -rated,[37] and left the road, giving his business to the Erie, where -presumably he got assurances that cars would be furnished to shippers -according to the quantity and regularity of shipments. Mr. Scheide’s -excellent testimony is good evidence of how deep a hold the principle -that the large shippers are to have all the advantages had taken hold of -some of the best men in the oil country, although the oil country as a -whole utterly repudiated the “rebate business.” These details, all drawn -from sworn testimony, show how, before a year had passed after the end -of the Oil War, all the roads were practising discrimination, how a few -shippers were again engaged in a scramble for advantages, and how the -big shippers were bent on re-establishing the principle supposed to have -been overthrown by the Oil War that one shipper is more convenient and -profitable for a road than many, and this being so, the matter of a -road’s duty as a common carrier has nothing to do with the question.[38] - -This was the situation when in June, 1873, General Devereux, whom we -have met on the Lake Shore road, became president of the Atlantic and -Great Western. Now at this time Peter H. Watson, the president of the -South Improvement Company, was president of the Erie. The two at once -looked into the condition of their joint oil traffic. They found the -rebate system abolished a year before again well intrenched. -Nevertheless the Erie was not doing much business. The entire shipments -of oil over the Erie for 1873 were but 762,000 barrels out of a total of -4,963,000. Naturally they went to work to build up a trade, and their -relations being what they had been with the Standard, the company -controlling a third of the country’s refining capacity, they went to -them to see if they could not get a percentage of their seaboard -shipments from Cleveland. Mr. Rockefeller was willing to give them -shipments if they would make the rates as low as were given to any of -his competitors on any of the roads, and if they would deliver his oil -at Hunter’s Point, Brooklyn, where he had oil yards, and where the -Central delivered, or if they would not do that if they would lease -their own oil yards to him. There was an excellent business reason for -making that latter demand, which Mr. Blanchard explained to the Hepburn -Commission: - -“The Standard,” said Mr. Blanchard, “had a force of men, real estate, -houses, tanks and other facilities at Hunter’s Point for receiving and -coopering the oil; and they had their cooperage materials delivered over -there. The arrangement prior to that time was that the Erie Company -performed this service for its outside refiners at Weehawken, for which -the Erie Company made specific charges and added them to their rates for -freight. The Standard Company said to us: ‘We do the business at low -cost at Hunter’s Point because we are expert oil men and know how to -handle it; we pay nobody a profit, and cannot and ought not to pay you a -profit for a service that is not transportation any more than inspecting -flour or cotton; and the New York Central delivers our oil at that -point. Now if you will deliver our oil at Hunter’s Point and permit us -to do this business, you may do so; we want to do that business, and we -cannot pay to the Erie Railway Company at Weehawken a profit on all of -those staves, heads, cooperage, filling, refilling and inspection, for -we have our own forces of men and our own yards necessary for this work -in another part of the harbour of New York; and it is not a part of your -business as a carrier, anyway.’ - -“In lieu thereof and for the profits that we could have made from the -aggregate of these charges, we said to them: ‘If you will pay us a fixed -profit upon each one of these barrels of oil arriving here, you may take -the yards and run them subject to certain limitations as to what you -shall do for other people who continue to ship oil to the same yards.’ -They were only able to make this arrangement with us because of their -controlling such a large percentage of shipment, and because of -permanent facilities in Brooklyn; if the larger percentage of shipments -had belonged to outside parties, and they had had no yards of their own, -we would probably have retained the yards ourselves.” - -A contract was signed on April 17, 1874. By it the Standard agreed to -ship fifty per cent. of the products of its refineries by the Erie at -rates “no higher than is paid by the competitors of the Standard Oil -Company from competing Western refineries to New York by all rail -lines,” and to give all oil patrons of the Erie system a uniform price -and fair and equal facilities at the Weehawken yards.[39] It was a very -wise business deal for both parties. It made Mr. Rockefeller the -favoured shipper of a second trunk line (the Central system was already -his) and it gave him the control of that road’s oil terminal so that he -could know exactly what other oil patrons of the road were doing—one of -the advantages the South Improvement contract looked out for, it will be -remembered. As for the Erie, it tied up to them an important trade and -again put them into a position to have something to say about the -division of the oil traffic, the bulk of which outside of the Standard -Oil Company the Pennsylvania was handling. In connection with the -Central the Erie now said to the Pennsylvania that henceforth they -proposed to maintain their position as oil shippers. - -The natural result of the determination of the Central and Erie to get -from the Pennsylvania a percentage of its freight was, of course, -increased cutting, and it looked as if a rate war was inevitable. At -this juncture Colonel Potts of the Empire Transportation Company, -handling all of the Pennsylvania freight, suggested to his rivals that -it would be a favourable time for the three trunk lines to pool their -seaboard oil freight. In the discussions of this proposition, which, of -course, involved a new schedule of rates, there being now practically -none, it was suggested that henceforth freights be so adjusted that they -would be equal to all refiners, on crude and refined from all points. -Such an equalisation seems at first glance an unsolvable puzzle. The -agents found it intricate enough. Throughout the summer of 1874 they -worked on it, holding meetings at Long Branch and Saratoga and calling -into their counsels a few of the leading refiners, pipe-line men and -producers whom they could trust to keep quiet about the project. - -By the first of September they had an agreement worked out by which each -of the three roads was to have a fixed percentage of Eastern shipments. -The rates to the seaboard were to amount to the same for all refiners -wherever located. That is, to use one of the illustrations employed by -Mr. Blanchard in explaining the scheme to the Hepburn Commission: -“Suppose 100 barrels of refined oil to have been sent from Cleveland to -New York by rail; the consignee was required to first pay freight -therefor at New York upon delivery $1.90; to make this quantity of -refined oil at that time, he had already paid freight on say 133½ -barrels of crude oil from the pipes to Cleveland at thirty-five cents -per barrel or say $46.67; he had therefore paid out from the pipes to -the refinery and thence to New York by transportation only, on 100 -barrels refined and the quantity of crude oil required to make it, -$236.67 or $2.37 per barrel; therefore, at the end of the month we -refunded the $46.67 already paid on the crude oil. So that the rate paid -net was $1.90 to him and all other refiners.” - -[Illustration: - - FLEET OF OIL BOATS AT OIL CITY IN 1864 -] - -In case of the refineries situated at the seaboard the cost of carrying -from the Oil Regions the 133½ barrels of crude oil required to make 100 -barrels of refined was made exactly the same as carrying the 100 barrels -of refined made in the West and transported East. This really amounted -to charging nothing for getting the crude oil to a refinery wherever it -was situated, as the following clause in the agreement shows: “The roads -transporting the refined oil shall refund to the refiners as a drawback -the charges paid by them upon the crude oil reaching their refineries by -rail.” This paragraph provided for this crude rebate contained a second -clause, which read: “And the roads transporting through crude oil to the -Eastern seaboard shall refund to the shippers twenty-two cents per -barrel; both of said drawbacks to be paid only on oil reaching the -initial points of rail shipment, through pipes, the owners of which -maintain agreed rates of pipage.” The paragraph announced two new and -startling intentions on the part of the oil-carrying roads: first, that -they intended to strip the Oil Regions of the advantage of geographical -position at the wells by sending oil free to Cleveland and Pittsburg, -New York and Philadelphia, at the same time leaving these cities the -advantages accruing from their position as manufacturing centres and -close to domestic markets; second, that they had entered into a -combination with certain pipe-lines to drive certain others out of -existence. - -Mr. Blanchard gave the reasons of these two revolutionary moves to the -Hepburn Committee. It was “urgently represented to the trunk lines,” he -said, “by some refiners at the West as well as by others at the -seaboard, and also by crude shippers and receivers and by owners of -pipe-lines, that it was in every way desirable that the refiners of -Cleveland and Pittsburg, and those at the seaboard be put upon a basis -of equalisation in the gross rates of transportation to and from the -refineries.” Now to do this the element of distance had to be -disregarded. Cleveland was 150 miles west of the Oil Regions, but she -must be treated as if she were at the same distance from the seaboard. -As soon as the proposition was made, certain of the refiners and -producers objected unless the railroads went further and equalised rates -on coal, acids, cooperage, etc. This, however, the roads declined to do. - -As for the second clause—the rebate on all oil coming from pipes which -kept up a fixed pipage—it came about in this way. While the railroad men -were in conference at Long Branch, Henry Harley, the president of the -Pennsylvania Transportation Company, came to them and said that he -believed the scheme of equalisation could not be carried out unless some -kind of an alliance was made with the pipe-lines. There had been a large -increase in the number of pipes in the four or five years preceding, and -a situation had arisen not unlike that in every other branch of the oil -business. There was perhaps twice the pipe capacity needed for gathering -all the oil produced, and as the pipes were under at least a dozen -different managements, each fighting for business, the result was, of -course, just what it had been on the railroads and in the markets—severe -cutting of prices, rebates, special secret arrangements, confusion and -loss. It had been only nine years since the first pipe-line had been a -success, and considering the phenomenal growth of the business and the -important part the pipe played in it, it was of course a situation -natural enough. Like the overgrowth of refining and of production, it -was something only time and solidification of business could remedy. - -Mr. Harley laid the situation before the railroad men and said to them: -“We want you to help us keep up an even and equal pipage rate. Here we -are representatives of the nine most important lines in the Oil Regions. -We want to put a stop to cutting and keep up a rate of thirty cents. -Can’t you help us?” Now up to this time the railroad had had nothing to -do with pipe-line charges. It was, and still is, the custom for the -buyer of the oil to pay the pipage, that is, the oil producer on running -the oil into the pipe-line received a credit certificate for the oil. If -he held it in the line long he paid a storage charge. When he sold the -oil, the line ran it, and the buyer paid the charge for running. Now the -United Pipe Lines proposed to the railroads a through rate from the -wells to the seaboard as low as they currently made from the receiving -points on the railway, the pipes to get twenty per cent. of this through -rate. The railroads were to agree not to receive oil from buyers except -at as high a rate as the pipes charged; and to allow no pipe-line -outside of the alliance a through rate from the wells. The memorandum -said squarely that the intent and purpose of this was to make the United -Pipes the sole feeders of the railroads. It was a plan not unlike the -South Improvement Company in design—to put everybody but yourself out of -business, and it had the merit of stating its intent and purpose with -perfect candour.[40] - -The railroad men seem not to have objected to the purpose, only to the -terms of the proposed arrangement. Mr. Blanchard told the pipe committee -that he regarded it as the most violent attempt on the part of the tail -to wag the dog that he had ever seen, and the representatives of the -other roads agreed. They saw at once, however, how much more solid their -own position would be if they could be sure that no pipe-line delivering -to them would cut its rate, if there could be in effect a through rate -from the wells, and after some discussion they proposed to the -pipe-lines to add twenty-two cents a barrel to the rail charges; that -is, if the rate to the seaboard was $1.25, to collect from the shipper -$1.47, and in case he could show that he had taken his oil from one of -the United Pipes to give him a rebate of twenty-two cents. Mr. Blanchard -said that they proposed to do this until proof was had that the -associated pipe-lines were acting in good faith. Of course this -arrangement did not change the pipe-lines’ methods of collecting in the -least. It simply forced a uniform charge, and this charge was to be, it -should be noticed, regardless of distance. The charge for collecting and -delivering oil was to be thirty cents a barrel whether it was carried -one or ten miles—a practice which prevails to-day. - -While these negotiations were going on, the Oil Regions as a whole was -troubled by a vague rumour that freight rates were to be advanced. In -the two years since the Oil War the region, as a whole, had adjusted -itself to the tariff schedule of March 25, 1872, and was doing very well -though working on a very much smaller margin of profits than ever -before. The margin was sufficient, however, to keep the refineries in -the valley running most of the time, and several of the large ones were -increasing their plants. Detailed accounts of the condition of the works -are to be had in the newspapers of the day. Thus, in the summer of 1874 -an editor of the Oil City Derrick made a tour of the creek refineries -and reported all of the larger ones in Titusville and Oil City as -prosperous and growing, and the small ones in the little towns between -these two points as “jogging along pleasantly.” The keen competition -between the different refining points made it necessary to do business -with economy, and a rumour of a raise of freight rates naturally was -looked on with dread. It was not until September 12, however, that the -new arrangements were made known, and this was some time earlier than -was intended. The slip came about in this way. The general freight agent -of the New York Central road, James H. Rutter, sent out on September 9 a -private circular announcing the new arrangement,[41] an advance of fifty -cents a barrel on refined oil shipped to the seaboard, no corresponding -advance for Cleveland and Pittsburg, a rebate of the cost of getting oil -to the refineries and a rebate of twenty-two cents to those who -patronised certain pipe-lines. And to this new schedule was appended -this consoling paragraph: “You will observe that under this system the -rate is even and fair to all parties, preventing one locality taking -advantage of its neighbour by reason of some alleged or real facility it -may possess. Oil refiners and shippers have asked the roads from time to -time to make all rates even and they would be satisfied. This scheme -does it and we trust will work satisfactorily to all.” - -Among the refiners to whom the circular went was M. N. Allen of -Titusville. Now Mr. Allen was the editor of an aggressive and lively -newspaper—the Courier. He had fought rings and deals from the beginning -of his career as a refiner and as an editor. He had been one of the -strong opponents of the South Improvement Company and of the Refiners’ -Association which followed, and he saw at once the cloven foot in the -Rutter circular and hastened to denounce it in a strong editorial: - - - If by an agreement of the New York Central, the Erie, and the - Pennsylvania Railway Companies, crude oil—delivered from the - Titusville pipe—should be hauled from Titusville to Chicago, and - there refined, and the refined product then hauled to New York, all - at two dollars a barrel, for the refined thus carried, it would be - placing, by the railway companies, Chicago refiners upon the same - level with the Titusville refiners who, on and after October 1, - shall ship to New York refined made from crude oil taken from the - Titusville pipe. The new freight arrangement does not make such - provision for refiners at Chicago. But a Cleveland refiner may come - to Titusville and buy oil for delivery from the Titusville, the - Pennsylvania, the Church Run, or the Octave pipes, at this point, - take it to Cleveland, and, after refining, carry the product to the - seaboard at the same expense of freight, all told, that a refiner - here, taking his crude oil directly from the above pipes, would have - in placing his refined oil at the seaboard. This is stating the - matter exactly, and we see no necessity for comment hereupon. - - Again, 1,000 barrels of crude oil are to be carried to the seaboard - for the same amount of money that will be required for carrying - there 715 barrels of refined, notwithstanding that crude oil is a - much more hazardous article of freight, from fire, than refined. If - this is not a very large discrimination in favour of seaboard - refiners, for which there is no compensation given to refiners in - the Oil Region, our perceptions are utterly weak. - - Now, before putting into effect this new freight arrangement, it may - be well for the railway officials having the matter in charge to - take into consideration a certain little article of agreement, which - the people of Pennsylvania, on the 16th day of December last, - entered into among themselves, respecting railroads in this state. - In Article 17, Section 7, of our new constitution is the following - decree of the sovereign people of this commonwealth: “No - discrimination in charges or facilities for transportation shall be - made between transportation companies and individuals, or in favour - of either, by abatement, drawback or otherwise.” - - Petroleum is a product of this state, and transportation companies - in taking it away must respect the fundamental law of the state. - And, while we ask for no favours, always supporting free trade from - principle, speaking in behalf of the refining interests of the Oil - Region, we do not propose quietly to submit to any discrimination by - transportation companies, doing business in the state, against our - interests. If by reason of our position we possess advantages for - refining oil here, over refiners outside, we have strong objections - against the action of the railway companies in taking from us such - advantages, by requiring us to pay for hauling a given quantity of - oil as much as they require of Cleveland refiners for hauling the - same amount of oil 300 miles greater distance; or for requiring us - to pay as much for hauling 715 barrels of refined oil as they - require for hauling 1,000 barrels of crude oil the same distance. If - the railroad companies will make all expenses of refining oil equal - to all points, we shall be satisfied. If they will make the price of - sulphuric acid 1½ cents a pound, the same as it is in New York, - instead of 2½ cents; if they will deliver caustic soda here free of - freight from New York; if they will put paints and glues here at the - same prices as those articles sell for in New York; if they will put - staves and heading and hoops for barrels here at the same figures - those articles cost in Cleveland, whether they do all these by - giving us rebates sufficient to cover all differences now against - us, or in any other way that will bring the same results, we will - accept the new arrangement without complaint. Until this shall be - done we shall ask the railway companies in hauling oil to confine - themselves to legitimate business, and to obey the new constitution, - in letter and spirit. It will behoove our citizens to see that their - new constitution is carefully respected. - - We are opposed to the new arrangement for the large advance in the - price of freight upon oil. If the railroad companies have lost money - in carrying oil for the Cleveland refineries during several years - past, let not the whole petroleum interest, in its depressed - condition, be required to sustain the penalty. We submit to the - railway managers whether it is not right to charge for hauling goods - in proportion to the distance hauled, allowing a small discount, - perhaps, upon the rate per mile for the greater distance. - - Our remarks upon this subject may have the colour of assurance, but, - from the large majority given last winter in favour of the new - constitution of this state, we have great confidence that the people - will not part with their sovereign rights, nor allow themselves to - be ruled by King Pool. - - -At first the Oil Region was puzzled by the Rutter circular. It certainly -was plausible. Was it not true that every man shared equally under it? -As the days passed, the dazed mental condition into which it had thrown -the oil men cleared up. Mr. Allen’s editorials began to take effect. The -pipe-lines left out of the pool began to ask how it could be legal that -the railroads should enter into an arrangement which obviously would -drive them out of business. The creek refiners began to ask by what -right the advantage of geographical position at the wells should be -taken from them, and Cleveland be allowed to retain the advantages of -her proximity to the Western market; Pittsburg her position on the Ohio -River and the market it commanded; all of the cities the advantage of -their proximity to great local markets and to such necessary supplies as -barrels and acids. Besides, was it constitutional for the railroads thus -to regulate interstate commerce? Was not the arrangement, as far as the -Pennsylvania was concerned, plainly prohibited by the new constitution -of the state of Pennsylvania? The producers slowly began to realise, -too, that the Rutter circular, like the South Improvement charter and -contracts, did not recognise them as a body. The contract of March 25, -1872, provided that the rates fixed should not be “liable to any change -either for increase or decrease without first giving to William Hasson, -president of the Producers’ Union, at Oil City, at least ninety days’ -notice in writing of such contemplated change.” This agreement was -totally ignored. It was an “insolent equalisation,” the oil men -concluded, and the sum total of their dissatisfaction finally found -expression at a mass-meeting at Parker’s Landing, on October 2. Directly -after this meeting a committee appointed sent to Messrs. Scott, -Vanderbilt and Jewett, the new president of the Erie, letters calling -their attention to the Rutter circular, and stating the objections of -the producers to it. These letters sent on October 6 received no -attention from any of the railroad presidents addressed for over three -weeks, when the following was received from the Pennsylvania: - - - _Gentlemen_:—Your communication of the 6th inst., to Thomas A. - Scott, president, was received, and has been referred to me. - - In establishing the recent rates and arrangements for the - transportation of oil, the object which was at all times kept in - view was to place all interests on an equality, giving to no one an - undue advantage over any other. - - We believe that this object has been accomplished, and that by - adhering to our present rates the interests both of the producers, - refiners and transporters will be promoted. - - Very truly yours, - A. J. CASSATT. - - -“Brief, tardy and unsatisfactory,” was the Derrick’s characterisation of -Mr. Cassatt’s letter. It was evidence to the oil men that if anything -was to be done to break the new tariff it would have to be done in -court, for the railroads meant to stand by their creation. - -In this discussion of the Rutter circular Mr. Rockefeller’s name -scarcely appeared. It was known that he had been admitted to the -conferences at which the tariff was arranged. This was taken as a matter -of course. There was nothing which concerned the oil business which John -Rockefeller was not on the inside of. Mr. Blanchard later stated that -the “crude equivalent” scheme was suggested by certain Western refiners. -The tremendous advantage Cleveland secured by the new arrangement, -practically 300 miles of free transportation, seemed to prove, too, that -Mr. Rockefeller had not been inactive during the conference. Whether he -had or had not suggested the points in the “Rutter circular” so -advantageous to his interests, he used them now to aid him in -accomplishing one of the shrewdest and most far-reaching moves of his -life—the move which was to lead at last to the realisation of his Great -Purpose—the concentration of the oil business in his own hands. For Mr. -Rockefeller, quiet as he had been since the breaking up of the Refiners’ -Association in the summer of 1873, had by no means given up the idea of -doing for the refining interest of the whole country what he had done -for that of Cleveland through the South Improvement Company. - -Mr. Rockefeller has shown repeatedly in his conquering business career -remarkable ability to learn from experience. The breaking up of the -Refiners’ Association _may_ have seemed a disaster to him. He did not -allow it to be a profitless disaster. He extracted useful lessons from -the experience, and, armed with this new wisdom, bent his whole mind to -working out a third plan of campaign. He now knew that he could not hope -to make again so rich a haul as he had made through the defunct South -Improvement scheme. The experience of the past year with the refiners -convinced him that it would take time to educate them to his idea of -combination; but he had learned who of them were capable of this -education. As for the producers, the alliance attempted with them was -enough to demonstrate that they would never endure long the restraints -of any association. Besides, the bulk of them still held the, to him, -unpractical belief that rebates were _wrong_. Mr. Rockefeller had also -re-learned in these eighteen months what he knew pretty well before, -that the promise to give or take away a heavy freight traffic was enough -to persuade any railroad king of the day to break the most solemn -compact. - -With all these reflections fresh in mind, Mr. Rockefeller again bent -over a map of the refining interests of the United States. Here was the -world he sighed to conquer. If we may suppose him to have begun his -campaign as a great general with whom he has many traits in common—the -First Napoleon—used to begin his, by studding a map with red-headed pegs -marking the points he must capture, Mr. Rockefeller’s chart would have -shown in and around Boston perhaps three pegs, representing a crude -capacity of 3,500 barrels; in and around New York fifteen pegs, a -capacity of 9,790 barrels; in and around Philadelphia twelve pegs, a -capacity of 2,061 barrels; in Pittsburg twenty-two pegs, a capacity of -6,090 barrels; on the creek twenty-seven pegs, a capacity of 9,231 -barrels.[42] His work was to get control of this multitude of red pegs -and to fly above them the flag of what the irreverent call the “holy -blue barrel.”[43] - -Some time in the summer of 1874, after it had become certain that -Colonel Potts’s plan for an equalisation of oil freights would be -carried out, Mr. Rockefeller wrote to his former colleague in the South -Improvement Company, W. G. Warden, of Philadelphia, telling him he -wanted to talk over the condition of the oil business with him, and -inviting him to bring Charles Lockhart, of Pittsburg, to that Mecca of -American schemers, Saratoga, for a conference with him and Mr. Flagler. -Mr. Warden hesitated. He had been much abused for his relation with the -South Improvement Company. He had seen the National Refiners’ -Association fail. He had begun to feel a distaste for combination. -Besides, he was doing very well in Philadelphia. However, after some -hesitation, he and Mr. Lockhart went to Saratoga. The four gentlemen -breakfasted together and later strolled out to a pavilion. Here they -discussed again, as they had nearly three years before, when they -prepared the South Improvement assault, the condition of the oil -business. - -[Illustration: - - GEORGE H. BISSELL - - Founder of the first oil company in the United States. -] - -[Illustration: - - JONATHAN WATSON - - One of the owners of the land on which the first successful well was - drilled for oil. -] - -[Illustration: - - SAMUEL KIER - - The first petroleum refined and sold for lighting purpose was made by - Mr. Kier in the ’50s in Pittsburg. -] - -[Illustration: - - JOSHUA MERRILL - - The chemist and refiner to whom many of the most important processes - now in use in making illuminating and lubricating oils are due. -] - -Mr. Rockefeller now had something besides a theory to present to the -gentlemen he wished to go into his third scheme. He had the most -persuasive of all arguments—an actual achievement. “Three years ago,” he -could tell them, “I took over the Cleveland refineries. I have managed -them so that to-day I pay a profit to nobody. I do my own buying, I make -my own acid and barrels, I control the New York terminals of both the -Erie and Central roads, and ship such quantities that the railroads give -me better rates than they do any other shipper. In 1873 I shipped over -700,000 barrels by the Central, and my profit on my capitalisation, -$2,500,000, was over $1,000,000. This is the result of combination in -one city. The railroads now have arranged a new tariff, by which they -mean to put us all on an equal footing. They say they will give no -rebates to anyone, but if we can join with Cleveland the strongest -forces in other great shipping points, and apply to them the same -tactics I have employed, we shall become the largest shipper, and can -demand a rebate in return for an equal division of our freight. We -proved in 1872–1873 that we could not do anything by an open -association. Let us who see what a combination strictly carried out will -effect unite secretly to accomplish it. Let us become the nucleus of a -_private_ company which gradually shall acquire control of all -refineries everywhere, become the only shippers, and consequently the -master of the railroads in the matter of freight rates.” It was six -hours before the gentlemen in conference left the pavilion, and when -they came out Mr. Warden and Mr. Lockhart had agreed to transfer their -refineries in Philadelphia and Pittsburg to the Standard Oil Company, of -Cleveland, taking stock in exchange. They had also agreed to absorb, as -rapidly as persuasion or other means could bring it about, the -refineries in their neighbourhood. Their union with the Standard was to -remain an absolute secret—the concerns operating under their respective -names.[44] - -On October 15, 1874, Mr. Rockefeller consummated another purchase of as -great importance. He bought the works of Charles Pratt and Company, of -New York city. As before, the purchase was secret. The strategic -importance of these purchases for one holding Mr. Rockefeller’s vast -ambition was enormous. It gave him as allies men who were among the most -successful refiners, without doubt, in each of the three greatest -refining centres of the country outside of Cleveland, where he ruled, -and of the creek, where he had learned that neither he nor any member of -the South Improvement Company could do business with facility. To meet -these purchases the stock of the Standard Oil Company was increased, on -March 10, 1875, to $3,500,000.[45] The value of the concern as a -money-earner at this early date, 1874, is shown by the fact that Pratt -and Company paid not less than $265 for the Standard stock they received -in exchange for their works.[46] - -The first intimation that the Oil Region had that Mr. Rockefeller was -pushing another combination was in March of 1875, when it was announced -that an organisation of refiners, called the Central Association, of -which he was president, had been formed. Its main points were that if a -refiner would lease to the association his plant for a term of months he -would be allowed to subscribe for stock of the new company. The lease -allowed the owner to do his own manufacturing, but gave Mr. -Rockefeller’s company “irrevocable authority” to make all purchases of -crude oil and sales of refined, to decide how much each refinery should -manufacture, and _to negotiate for all freight and pipe-line expenses_. -The Central Association was a most clever device. It furnished the -secret partners of Mr. Rockefeller a plausible proposition with which to -approach the firms of which they wished to obtain control. - -Little as the Oil Regions knew of the real meaning of the Central -Association, the news of its organisation raised a cry of monopoly, and -the advocates of the new scheme felt called upon to defend it. The -defense took the line that the conditions of the trade made such a -combination of refineries necessary. Altogether the ablest explanation -was that of H. H. Rogers, of Charles Pratt and Company, to a reporter of -the New York Tribune: - - - “There are five refining points in the country,” said Mr. Rogers, - “Pittsburg, Philadelphia, Cleveland, the Oil Regions and New York - city. Each of these has certain local advantages which may be - briefly stated as follows: Pittsburg, cheap oil; Philadelphia, the - seaboard; Cleveland, cheap barrels, and canal as well as railroad - transportation; the Oil Regions, crude oil at the lowest figure; and - all the products of petroleum have the best market in New York city. - The supply of oil is three or four times greater than the - demand.[47] If the oil refineries were run to their full capacity, - the market would be overstocked. The business is not regular, but - spasmodic. When the market is brisk and oil is in demand, all the - oil interests are busy and enjoy a fair share of prosperity. At - other times, the whole trade is affected by the dullness. It has - been estimated that not less than twenty millions of dollars are - invested in the oil business. It is therefore to the interest of - every man who has put a dollar in it to have the trade protected and - established on a permanent footing. Speculators have ruined the - market. The brokers heretofore have been speculating upon the market - with disastrous effects upon the trade, and this new order of things - will force them to pursue their legitimate calling, and realise - their profits from their industry and perseverance. Two years ago an - attempt was made to organise an oil refiners’ association, but it - was subsequently abandoned. There was no cohesion of interests, and - agreements were not kept. The movement at the present time is a - revival of the former idea, and, it is believed, has already secured - fully nine-tenths of the oil refiners in the country in its favour. - I do not believe there is any intention among the oil men to ‘bull’ - the market. The endeavour is to equalise all around and protect the - capital invested. If by common consent, in good faith, the refiners - agree to reduce the quantities to an allotment for each, made in - view of the supply and demand, and the capacity for production, the - market can be regulated with a reasonable profit for all. The price - of oil to-day is fifteen cents per gallon. The proposed allotment of - business would probably advance the price to twenty cents. To make - an artificial increase, with immense profits, would be recognised as - speculative instead of legitimate, and the oil interests would - suffer accordingly. Temporary capital would compete with permanent - investment and ruin everything. The oil producers to-day are - bankrupt. There have been more failures during the last five months - than in five years previously. An organisation to protect the oil - capital is imperatively needed. Oil to yield a fair profit should be - sold for twenty-five cents per gallon. That price would protect - every interest and cover every outlay for getting out the crude - petroleum, transporting by railroad, refining and the incidental - charges of handling, etc. The foreign markets will regulate the - price to a great extent, because they are the greatest consumers. - The people of China, Germany, and other foreign countries cannot - afford to pay high prices. Kerosene oil is a luxury to them, and - they do not receive sufficient compensation for their labour to - enable them to use this oil at an extravagant price. The price, - therefore, must be kept within reasonable limits.” - - -The Oil Regions refused flatly to accept this view of the situation. The -world would not buy refined at twenty-five cents, they argued. “You -injured the foreign market in 1872 by putting up the price. Our only -hope is in increasing consumption. The world is buying more oil to-day -than ever before, because it is cheap. We must learn to accept small -profits, as other industries do.” “The formation of the Refiners’ -Association has thrust upon the trade an element of uncertainty that has -unsettled all sound views as to the general outlook,” said the Derrick. -“The scope of the Association,” wrote a Pittsburg critic, “is an attempt -to control the refining of oil, with the ultimate purpose of advancing -its price and reaping a rich harvest in profits. This can only be done -by reducing the production of refined oil, and this will in turn act on -crude oil, making the stock so far in excess of the demand as to send it -down to a lower figure than it has yet touched.” - -“The most important feature of this contract,” said a “veteran refiner,” -“is perhaps that part which provides that the Executive Committee of the -Central Association are to have the exclusive power to arrange with the -railroads for the carrying of the crude and refined oil. It is intended -by this provision to enable the Executive Committee to speak for the -whole trade in securing special rates of freight, whereby independent -shippers of crude oil, and such refiners as refuse to join the -combination, and any new refining interest that may be started, may be -driven out of the trade. The whole general purpose of the combination is -to reap a large margin by depressing crude and raising the price of -refined oil, and the chief means employed is the system of -discrimination in railroad freights to the seaboard.” - -“The veteran refiner” was right in his supposition that Mr. Rockefeller -intended to use the enormous power his combination gave him to get a -special rate. As a matter of fact he had seen to that before the -“veteran refiner” expressed his mind. It will be remembered that in -April, 1874, Mr. Rockefeller had made a contract with the Erie by which -he was to ship fifty per cent. of his refined oil over that road at a -rate as low as any competing line gave any shipper and he was to have a -lease of the Weehawken oil terminal. Now this contract remained in force -until the first of March, 1875, when a new one was made with the Erie -guaranteeing the road the same percentage of freight and giving the -Standard a ten per cent. rebate on whatever open tariff should be fixed. -This rebate Mr. Blanchard says was quite independent of what the Central -might be giving the Standard. He says that one reason the Standard was -given the rebate was that it was suspected the Pennsylvania was allowing -the Empire Transportation Company an even larger one. If true, this -would not affect any refiner necessarily as the Empire was not a refiner -in March, 1875. The real reason, of course, was what Mr. Blanchard gives -later—that by this rebate they kept the Standard trade, now greatly -increased by the purchase of the outside works already mentioned, -although it should be noticed the Erie officials knew nothing of the -Standard having control of any other refinery than that of Charles Pratt -and Company. - -The announcement of the Central Association put an altogether new -feature on oil transportation. If this organisation succeeded, and the -refiners in it claimed nine-tenths of the capacity of the country—it -gave Mr. Rockefeller “irrevocable authority” to negotiate freights. The -Pennsylvania road immediately felt the pressure. The oil they had -carried for big firms like those of Charles Lockhart in Pittsburg and of -Warden, Frew and Company in Philadelphia was in the hands of the -Standard Oil Company, and Mr. Rockefeller asked a rebate of ten per -cent. on open rates. The road demurred. Colonel Potts objected -strenuously. Three years later in a paper discussing this rebate and its -consequences he said: - - - “The rebate was a modest one, as was its recipient. Yet the railway - Cassandras prophesied from it a multitude of evils—a gradual - destruction of all other refiners and a gradual absorption of their - property by the favourite, who, with this additional armament, would - rapidly progress towards a control of all cars, all pipes, all - production, and finally of the roads themselves. Their prophecies - met but little faith or consideration. The Standard leaders - themselves were especially active in discouraging any such radical - purpose. Their little rebate was enough for them. Everybody else - should prosper, as would be shortly seen. They needed no more - refineries; they had already more than they could employ—why should - they hunger after greater burdens? It was the railroads they chiefly - cared for, and next in their affections stood the 100 rival - refineries. Such beneficent longings as still remained (and their - bosoms overflowed with them) spread out their steady waves toward - the poor producers whom, not to be impious, they had always been - ready to gather under their wings, yet they would not. - - “This unselfish language soothed all alarm into quiet slumbering. It - resembles the gentle fanning of the vampire’s wings, and it had the - same end in view—the undisturbed abstraction of the victim’s blood.” - - -Colonel Potts’s argument against the rebate—doubtless clothed in much -less picturesque language in 1875 than his feelings stirred him to in -1878, for a good enough reason, too, as we shall see—failed to convince -the Pennsylvania officials. They decided to yield to the Standard. Mr. -Cassatt, then third vice-president of the road, in charge of -transportation, said in 1879 that the rebate was given because they -found the Standard was getting very strong, that they had the backing of -the other roads, and that if the Pennsylvania wanted to retain its full -share of business and at fair rates they must make arrangements to -protect themselves. - -No one of the roads knew certainly what the others were doing for the -Standard until October 1, 1875. The freight agents then met to discuss -again the freight pool they had formed in 1874. It had not been working -with perfect satisfaction. The clause granting the rebate of twenty-two -cents to the pipe-lines which sustained an agreed rate of pipage had -been abandoned after about five months’ experiment. It was thought to -stimulate new pipes. The roads in making a new adjustment made no effort -to regulate pipe-line tariffs. The “crude rebate” as it was -called—carrying oil to a refinery for nothing—was left in force. At this -meeting Mr. Blanchard found that both of the Erie’s big rivals were -granting the Standard a ten per cent. rebate. He also found that he was -not getting fifty per cent. of the Standard’s business as the contract -called for—that the Standard controlled not only the Cleveland and New -York works of which he knew, but large works in Pittsburg and -Philadelphia.[48] - -Mr. Rockefeller was certainly now in an excellent condition to work out -his plan of bringing under his own control all the refineries of the -country. The Standard Oil Company owned in each of the great refining -centres, New York, Pittsburg and Philadelphia, a large and aggressive -plant run by the men who had built it up. These works were, so far as -the public knew, still independent and their only relation that of the -“Central Association.” As a matter of fact they were the “Central -Association.” Not only had Mr. Rockefeller brought these powerful -interests into his concern; he had secured for them a rebate of ten per -cent. on a rate which should always be as low as any one of the roads -gave any of his competitors. He had done away with middlemen, that is, -he was “paying nobody a profit.” He had undeniably a force wonderfully -constructed for what he wanted to do and one made practically -impregnable as things were in the oil business then, by virtue of its -special transportation rate. - -As soon as his new line was complete the work of acquiring all outside -refineries began at each of the oil centres. Unquestionably the -acquisitions were made through persuasion when this was possible. If the -party approached refused to lease or sell, he was told firmly what Mr. -Rockefeller had told the Cleveland refiners when he went to them in 1872 -with the South Improvement contracts, that there was no hope for him; -that a combination was in progress which was bound to work; and that -those who stayed out would inevitably go to the wall. Naturally the -first fruits to fall into the hands of the new alliance were those -refineries which were embarrassed or discouraged by the conditions which -Mr. Rogers explains above. Take as an example the case of the Citizens’ -Oil Refining Company of Pittsburg, as it was explained in 1888 to the -House Committee on Manufactures in its trust investigation. A. H. Tack, -a partner in the company, told the story:[49] - - - “We began in 1869 with a capacity of 1,000 barrels a day. At the - start everything was _couleur de rose_, so much so that we put our - works in splendid shape. We manufactured all the products. We even - got it down to making wax, and using the very last residuum in the - boilers. We got the works in magnificent order and used up - everything. We began to feel the squeeze in 1872. We did not know - what was the matter. Of course we were all affected the same way in - Pennsylvania, and of course we commenced shifting about, and meeting - together, and forming delegations, and going down to Philadelphia to - see the Pennsylvania Railroad, meeting after meeting and delegation - after delegation. We suspected there was something wrong, and told - those men there was something wrong somewhere; that we felt, so far - as position was concerned, we had the cheapest barrels, the cheapest - labour, and the cheapest coal, and the route from the crude district - was altogether in our favour. We had a railroad and a river to bring - us our raw material. We had made our investment based on the - seaboard routes, and we wanted the Pennsylvania Railroad to protect - us. But none of our meetings or delegations ever amounted to - anything. They were always repulsed in some way, put off, and we - never got any satisfaction. The consequence was that in two or three - years there was no margin or profit. In order to overcome that we - commenced speculating, in the hope that there would be a change some - time or other for the better. We did not like the idea of giving up - the ship. Now, during these times the Standard Oil Company increased - so perceptibly and so strong that we at once recognised it as the - element. Instead of looking to the railroad I always looked to the - Standard Oil Company. In 1874 I went to see Rockefeller to find if - we could make arrangements with him by which we could run a portion - of our works. It was a very brief interview. He said there was no - hope for us at all. He remarked this—I cannot give the exact - quotation—‘There is no hope for us,’ and probably he said, ‘There is - no hope for any of us’; but he says, ‘The weakest must go first.’ - And we went.” - - -All over the country the refineries in the same condition as Mr. Tack’s -firm sold or leased. Those who felt the hard times and had any hope of -weathering them resisted at first. With many of them the resistance was -due simply to their love for their business and their unwillingness to -share its control with outsiders. The thing which a man has begun, cared -for, led to a healthy life, from which he has begun to gather fruit, -which he knows he can make greater and richer, he loves as he does his -life. It is one of the fruits of his life. He is jealous of it—wishes -the honour of it, will not divide it with another. He can suffer heavily -his own mistakes, learn from them, correct them. He can fight -opposition, bear all—so long as the work is his. There were refiners in -1875 who loved their business in this way. Why one should love an oil -refinery the outsider may not see; but to the man who had begun with one -still and had seen it grow by his own energy and intelligence to ten, -who now sold 500 barrels a day where he once sold five, the refinery was -the dearest spot on earth save his home. He walked with pride among its -evil-smelling places, watched the processes with eagerness, experimented -with joy and recounted triumphantly every improvement. To ask such a man -to give up his refinery was to ask him to give up the thing which, after -his family, meant most in life to him. - -To Mr. Rockefeller this feeling was a weak sentiment. To place love of -independent work above love of profits was as incomprehensible to him as -a refusal to accept a rebate because it was _wrong_! Where persuasion -failed then, it was necessary, in his judgment, that pressure be -applied—simply a pressure sufficient to demonstrate to these blind or -recalcitrant individuals the impossibility of their long being able to -do business independently. It was a pressure varied according to -locality. Usually it took the form of cutting their market. The system -of “predatory competition” was no invention of the Standard Oil Company. -It had prevailed in the oil business from the start. Indeed, it was one -of the evils Mr. Rockefeller claimed his combination would cure, but -until now it had been used spasmodically. Mr. Rockefeller never did -anything spasmodically. He applied underselling for destroying his -rivals’ market with the same deliberation and persistency that -characterised all his efforts, and in the long run he always won. There -were other forms of pressure. Sometimes the independents found it -impossible to get oil; again, they were obliged to wait days for cars to -ship in; there seemed to be no end to the ways of making it hard for men -to do business, of discouraging them until they would sell or lease, and -always at the psychological moment a purchaser was at their side. Take -as an example the case of the Harkness refinery in Philadelphia, a story -told to the same committee as that of Mr. Tack: - - - “I was the originator of the enterprise,” said William W. Harkness, - “believing that there was no better place than Philadelphia to - refine oil, particularly for export. We commenced then, as near as I - can now recollect, about 1870, and we made money up to probably - 1874. We managed our business very close and did not speculate in - oil. We bought and we sold, and we paid a great deal of attention to - the statistical part of our business so as to save waste, and we did - a nice business. But we found in some years that probably five - months out of a year we could not sell our oil unless it would be at - a positive loss, and then we stopped. Then when we could sell our - oil, we found a difficulty about getting cars. My brother would - complain of it, but I believed that the time would come when that - would be equalised. I had no idea of the iniquity that was going on; - I could not conceive it. I went on in good faith until about 1874, - and then the trouble commenced. We could not get our oil and were - compelled to sell at a loss. Then Warden, Frew and Company formed - some kind of running arrangement where they supplied the crude, and - we seemed to get along a little better. After a while the business - got complicated, and I got tired and handed it over to my brother; I - backed out. That was about 1875. I was dissatisfied and wanted to do - an independent business, or else I wanted to give it up. In 1876—I - recollect that very well, because it was the year of the Centennial - Exposition—we were at the Centennial Exposition. I was sitting in - front of the great Corliss engine, admiring it, and he told me there - was a good opportunity to get out. Warden, Frew and Company, he - said, were prepared to buy us out, and I asked him whether he - considered that as the best thing to do; whether we had not better - hold on and fight it through, for I believed that these difficulties - would not continue; that we would get our oil. I knew he was a - competent refiner, and I wanted to continue business, but he said he - thought he had better make this arrangement, and I consented, and we - sold out; we got our investment back.”[50] - - -Here we have a refiner discouraged by the conditions which Mr. -Rockefeller claims his aggregation will cure. Under the Rutter circular -and the discrimination in freight to the Standard which followed, his -difficulty in getting oil increases, and he consents to a running -arrangement with Mr. Rockefeller’s partner in Philadelphia, but he wants -to do an “independent business.” Impossible. As he sits watching the -smooth and terrible power of that famous Corliss engine of 1876, an -engine which showed to thousands for the first time what great power -properly directed means, he realised that something very like it was at -work in the oil business—something resistless, silent, perfect in its -might—and he sold out to that something. Everywhere men did the same. -The history of oil refining on Oil Creek from 1875 to 1879 is almost -uncanny. There were at the beginning of that period twenty-seven plants -in the region, most of which were in a fair condition, considering the -difficulties in the business. During 1873 the demand for refined oil had -greatly increased, the exports nearly doubling over those of 1872. The -average profit on refined that year in a well-managed refinery was not -less than three cents a gallon. During the first half of 1874 the oil -business had been depressed, but the oil refiners were looking for -better times when the Rutter circular completely demoralised them by -putting fifty cents extra freight charges on their shipments without an -equivalent raise on competitive points. It was not only this extra -charge, enough to cut off their profits, as business then stood, but it -was that the same set of men who had thrown their business into -confusion in 1872 was again at work. The announcement of the Central -Association with Mr. Rockefeller’s name at its head confirmed their -fears. Nevertheless at first none of the small refiners would listen to -the proposition to sell or lease made them in the spring of 1875 by the -representative first sent out by the Central Association. They would -have nothing to do, they said bluntly, with any combination engineered -by John D. Rockefeller. The representative withdrew and the case was -considered. In the mean time conditions on the creek grew harder. All -sorts of difficulties began to be strewn in their way—cars were hard to -get, the markets they had built up were cut under them—a demoralising -conviction was abroad in the trade that this new and mysterious -combination was going to succeed; that it was doing rapidly what its -members were reported to be saying daily: “We mean to secure the entire -refining business of the world.” Such was the state of things on the -creek when in the early fall of 1875 an energetic young refiner and oil -buyer well known in the Oil Regions, J. D. Archbold, appeared in -Titusville as the representative of a new company, the Acme Oil Company, -a concern which everybody believed to be an offshoot of the Standard Oil -Company of Cleveland, though nobody could prove it. As a matter of fact -the Acme was capitalised and controlled entirely by Standard men, its -stockholders being, in addition to Mr. Archbold, William Rockefeller, -William G. Warden, Frank Q. Barstow, and Charles Pratt. It was evident -at once that the Acme Oil Company had come into the Oil Regions for the -purpose of absorbing the independent interests as Mr. Rockefeller and -his colleagues were absorbing them elsewhere. The work was done with a -promptness and despatch which do great credit to the energy and -resourcefulness of the engineer of the enterprise. In three years, by -1878, all but two of the refineries of Titusville had “retired from the -business gloriously,” as Mr. Archbold, flushed with victory, told the -counsel of the Commonwealth of Pennsylvania in 1879, when the state -authorities were trying to find what was at work in the oil interests to -cause such a general collapse. Most of the concerns were bought -outright, the owners being convinced that it was impossible for them to -do an independent business, and being unwilling to try combination. All -down the creek the little refineries which for years had faced every -difficulty with stout hearts collapsed. “Sold out,” “dismantled,” “shut -down,” is the melancholy record of the industry during these four years. -At the end practically nothing was left in the Oil Regions but the Acme -of Titusville and the Imperial of Oil City, both of them now under -Standard management. To the oil men this sudden wiping out of the score -of plants with which they had been familiar for years seemed a crime -which nothing could justify. Their bitterness of heart was only -intensified by the sight of the idle refiners thrown out of business by -the sale of their factories. These men had, many of them, handsome sums -to invest, but what were they to put them in? They were refiners, and -they carried a pledge in their pockets not to go into that business for -a period of ten years. Some of them tried the discouraged oil man’s -fatal resource, the market, and as a rule left their money there. One -refiner who had, according to popular report, received $200,000 for his -business, speculated the entire sum away in less than a year. Others -tried new enterprises, but men of forty learn new trades with -difficulty, and failure followed many of them. The scars left in the Oil -Regions by the Standard Combination of 1875–1879 are too deep and ugly -for men and women of this generation to forget them. - -In Pittsburg the same thing was happening. At the beginning of the work -of absorption—1874—there were between twenty-two and thirty refineries -in the town.[51] As we have seen, Lockhart and Frew sold to the Standard -Oil Company of Cleveland some time in 1874. In the fall of that year a -new company was formed in Pittsburg, called the Standard Oil Company of -Pittsburg. Its president was Charles Lockhart; its directors William -Frew, David Bushnell, H. M. Flagler, and W. G. Warden—all members of the -Standard Oil Company and four of them stockholders in the South -Improvement Company. This company at once began to lease or buy -refineries. Many of the Pittsburg refiners made a valiant fight to get -rates on their oil which would enable them to run independently. To save -expense they tried to bring oil from the oil fields by barge; the -pipe-lines in the pool refused to run oil to barges, the railroad to -accept oil brought down by barge. An independent pipe-line attempted to -bring it to Pittsburg, but to reach the works the pipe-line must run -under a branch of the Pennsylvania railroad. It refused to permit this, -and for months the oil from the line was hauled in wagons from the point -where it had been held up, over the railroad track, and there repiped -and carried to Pittsburg. At every point they met interference until -finally one by one they gave in. According to Mr. Frew, who in 1879 was -examined as to the condition of things in Pittsburg, the company began -to “acquire refiners” in 1875. In 1877 they bought their last one; and -at the time Mr. Frew was under examination he could not remember but -_one_ refinery in operation in Pittsburg not controlled by his company. - -Nor was it refiners only who sold out. All departments of the trade -began to yield to the pressure. There was in the oil business a class of -men known as shippers. They bought crude oil, sent it East, and sold it -to refineries there. Among the largest of these was Adnah Neyhart, whose -active representative was W. T. Scheide. Now to Mr. Rockefeller the -independent shipper was an incubus; he did a business which, in his -judgment, a firm ought to do for itself, and reaped a profit which might -go direct into the business. Besides, so long as there were shippers to -supply crude to the Eastern refineries at living prices, so long these -concerns might resist offers to sell or lease. - -Some time in the fall of 1872 Mr. Scheide began to lose his customers in -New York. He found that they were making some kind of a working -arrangement with the Standard Oil Company, just what he did not know. -But at all events they no longer bought from him but from the Standard -buyer, J. A. Bostwick and Company. At the same time he became convinced -that Mr. Rockefeller was after his business. “I knew that they were -making some strenuous efforts to get our business,” he told the Hepburn -Commission in 1879, “because I used to meet Mr. Rockefeller in the Erie -office.” At the same time that he was facing the loss of customers and -the demoralising conviction that the Standard Oil Company wanted his -business, he was experiencing more or less disgust over business -conditions in New York. “I did not like the character of my customers -there,” Mr. Scheide told the committee. “I did not think they were -treating us fairly and squarely. There was a strong competition in -handling oil. The competition had got to be so strong that ‘outside -refiners,’ as they called themselves then, used to go around bidding up -the price of their works on the Standard Oil Company, and they were -using me to sell their refineries to the Standard. They would say to -refiners: ‘Neyhart will do so and so, and we are going to continue -running.’ And they would say to us that the Standard was offering lower -prices. I recollect one instance in which they, after having made a -contract to buy oil from me if I would bring it over the Erie Railway, -broke that contract for the 1–128th part of a cent a gallon. I sold out -the next week.” When Mr. Scheide went to the freight agent of the Erie -road, Mr. Blanchard, and told him of his decision to sell, Mr. Blanchard -tried to dissuade him. During the conversation he let out a fact which -must have convinced Mr. Scheide more fully than ever that he had been -wise in determining to give up his business. Mr. Blanchard told him as a -reason for his staying and trusting to the Erie road to keep its -contracts with him that the Standard Oil Company had been offering him -five cents more a barrel than Mr. Scheide was paying them, and would -take all their cars, and load them all regularly if they would throw him -over and give them the business. It is interesting to note that when Mr. -Scheide sold in the spring of 1875, it was, as he supposed, to Charles -Pratt and Company. Well informed as he was in all the intricacies of the -business—and there were few abler or more energetic men in trade at the -time—he did not know that Charles Pratt and Company had been part and -parcel of the Standard Oil Company since October, 1874. - -Of course securing a large crude shipping business like Mr. Neyhart’s -was a valuable point for the Standard. It threw all of the refiners whom -he had supplied out of crude oil and forced several of them to come to -the Standard buyer—a first step, of course, toward a lease or sale. At -every point, indeed, making it difficult for the refiner to get his raw -product was one of the favourite manœuvres of the combination. It was -not only to crude oil it was applied. Factories which worked up the -residuum or tar into lubricating oil and depended on Standard plants for -their supply were cut off. There was one such in Cleveland—the firm of -Morehouse and Freeman. Mr. Morehouse had begun to experiment with -lubricating oils in 1861, and in 1871 the report of the Cleveland Board -of Trade devoted several of its pages to a description of his business. -According to this account he was then making oils adapted to lubricating -all kinds of machinery—he held patents for several brands and trade -marks, and had produced that year over 25,000 barrels of different -lubricants besides 120,000 boxes of axle grease. At this time he was -buying his stock or residuum from one or another of the twenty-five -Cleveland refiners. Then came the South Improvement Company and the -concentration of the town’s refining interest in Mr. Rockefeller’s -hands. Mr. Morehouse, according to the testimony he gave the Hepburn -Commission in 1879, went to Mr. Rockefeller, after the consolidation, to -arrange for supplies. He was welcomed—the Standard Oil Company had not -at that time begun to deal in lubricating oils—and encouraged to build a -new plant. This was done at a cost of $41,000, and a contract was made -with the Standard Oil Company for a daily supply of eighty-five barrels -of residuum. Some time in 1874 this supply was cut down to twelve -barrels. The price was put up too, and contracts for several months were -demanded so that Mr. Morehouse got no advantage from the variation in -crude prices. Then the freights went up on the railroads. He paid $1.50 -and two dollars for what he says he felt sure his big neighbour was -paying but seventy or seventy-five cents (there is no evidence of any -such low rate to the Standard from Cleveland to New York by rail). Now -it was impossible for Mr. Morehouse to supply his trade on twelve -barrels of stock. He begged Mr. Rockefeller for more. It was there in -the Standard Oil works. Why could he not have it? He could pay for it. -He and his partner offered to buy 5,000 barrels and store it, but Mr. -Rockefeller was firm. All he could give Mr. Morehouse was twelve barrels -a day. “I saw readily what that meant,” said Mr. Morehouse, “that meant -squeeze you out—buy your works. They have got the works and are running -them; I am without anything. They paid about $15,000 for what cost me -$41,000. He said that he had facilities for freighting and that the -coal-oil business belonged to them; and any concern that would start in -that business, they had sufficient money to lay aside a fund to wipe -them out—these are the words.”[52] - -At every refining centre in the country this process of consolidation -through persuasion, intimidation, or force, went on. As fast as a -refinery was brought in line its work was assigned to it. If it was an -old and poorly equipped plant it was usually dismantled or shut down. If -it was badly placed, that is, if it was not economically placed in -regard to a pipe-line and railroad, it was dismantled even though in -excellent condition. If it was a large and well-equipped plant -advantageously located it was assigned a certain quota to manufacture, -and it did nothing but manufacture. The buying of crude, the making of -freight rates, the selling of the output remained with Mr. Rockefeller. -The contracts under which all the refineries brought into line were run -were of the most detailed and rigid description, and they were executed -as a rule with a secrecy which baffles description. Take, for example, a -running arrangement made by Rockefeller in 1876, with a Cleveland -refinery, that of Scofield, Shurmer and Teagle. The members of this -concern had all been in the refining business in Cleveland in 1872 and -had all handed over their works to Mr. Rockefeller, when he notified -them of the South Improvement Company’s contracts. Mr. Shurmer declared -once in an affidavit that he alone lost $20,000 by that manœuvre. The -members of the firm had not stayed out of business, however. Recovering -from the panic caused by the South Improvement Company, they had united -in 1875, building a refinery worth $65,000, with a yearly capacity of -180,000 barrels of crude. On the first year’s business they made -$40,000. Although this was doing well, they were convinced they might do -better if they could get as good freight rates as the Standard Oil -Company, and in the spring of 1876 they brought suit against the Lake -Shore and Michigan Southern and the New York Central and Hudson River -Railroads for “unlawful and unjust discrimination, partialities and -preferences made and practised ... in favour of the Standard Oil -Company, enabling the said Standard Oil Company to obtain to a great -extent the monopoly of the oil and naphtha trade of Cleveland.” The suit -was not carried through at the time. Mr. Rockefeller seems to have -suggested a surer way to the firm of getting the rates they wanted. This -was to make a running arrangement with him. He seems to have -demonstrated to them that they could make more money under his plan than -outside, and they signed a contract for a remarkable “joint adventure.” -According to this document Scofield, Shurmer and Teagle put into the -business a plant worth at that time about $73,000 and their entire time. -Mr. Rockefeller put in $10,000 and his rebates! That is, he secured for -the firm the same preferential rates on their shipments that the -Standard Oil Company enjoyed. The firm bound itself not to refine over -85,000 barrels a year and neither jointly nor separately to engage in -any other form of oil business for ten years—the life of the contract. -Scofield, Shurmer and Teagle were guaranteed a profit of $35,000 a year. -Profits over $35,000 went to Mr. Rockefeller up to $70,000; any further -profits were divided. - -The making of this contract and its execution were attended by all the -secret rites peculiar to Mr. Rockefeller’s business ventures. According -to the testimony of one of the firm given a few years later on the -witness stand in Cleveland the contract was signed at night at Mr. -Rockefeller’s house on Euclid Avenue in Cleveland, where he told the -gentlemen that they must not tell even their wives about the new -arrangement, that if they made money they must conceal it—they were not -to drive fast horses, “put on style,” or do anything to let people -suspect there were unusual profits in oil refining. That would invite -competition. They were told that all accounts were to be kept secret. -Fictitious names were to be used in corresponding, and a special box at -the post-office was employed for these fictitious characters. In fact, -smugglers and house-breakers never surrounded their operations with more -mystery. - -But make his operations as thickly as he might in secrecy, the effect of -Mr. Rockefeller’s steady and united attack on the refining business was -daily becoming more apparent. Before the end of 1876 the alarm among oil -producers, the few independent refineries still in business, and even in -certain railroad circles was serious. On all sides talk of a united -effort to meet the consolidation was heard. - - - - - CHAPTER SIX - STRENGTHENING THE FOUNDATIONS - - FIRST INTERSTATE COMMERCE BILL—THE BILL PIGEON-HOLED THROUGH EFFORTS - OF STANDARD’S FRIENDS—INDEPENDENTS SEEK RELIEF BY PROPOSED - CONSTRUCTION OF PIPE-LINES—PLANS FOR THE FIRST SEABOARD - PIPE-LINE—SCHEME FAILS ON ACCOUNT OF MISMANAGEMENT AND STANDARD AND - RAILROAD OPPOSITION—DEVELOPMENT OF THE EMPIRE TRANSPORTATION COMPANY - AND ITS PROPOSED CONNECTION WITH THE REFINING BUSINESS—STANDARD, - ERIE AND CENTRAL FIGHT THE EMPIRE TRANSPORTATION COMPANY AND ITS - BACKER, THE PENNSYLVANIA RAILROAD—THE PENNSYLVANIA FINALLY QUITS - AFTER A BITTER AND COSTLY WAR—EMPIRE LINE SOLD TO THE - STANDARD—ENTIRE PIPE-LINE SYSTEM OF OIL REGIONS NOW IN ROCKEFELLER’S - HANDS—NEW RAILROAD POOL BETWEEN FOUR ROADS—ROCKEFELLER PUTS INTO - OPERATION SYSTEM OF DRAWBACKS ON OTHER PEOPLE’S SHIPMENTS—HE - PROCEEDS RAPIDLY WITH THE WORK OF ABSORBING RIVALS. - - -From the time the Central Association announced itself, independent -refiners and the producers as a body watched developments with -suspicion. They had little to go on. They had no means of proving what -was actually the fact that the Central Association was the Standard Oil -Company working secretly to bring its competitors under control or drive -them out of business. They had no way of knowing what was actually the -fact that the Standard had contracts with the Central, Erie and the -Pennsylvania which gave them rebates on the lowest tariff which others -paid. That this must be the case, however, they were convinced, and they -determined early in 1876 to call on Congress for another investigation. -A hearing was practically insured, for Congress since 1872 had given -serious attention to the transportation troubles. The Windom Committee -of 1874 had made a report, the sweeping recommendations of which gave -much encouragement to those who suffered from the practices of the -railroads. Among other things this committee recommended that all rates, -drawbacks, etc., be published at every point and no changes allowed in -them without proper notification. It recommended the Bureau of Commerce -which, in 1902, twenty-eight years later, was created. So serious did -the Windom Committee consider the situation in 1874, that it made the -following radical recommendations: - - - The only means of securing and maintaining reliable and effective - competition between railways is through national or state ownership, - or control of one or more lines which, being unable to enter into - combinations, will serve as a regulation of other lines. - - One or more double-track freight-railways honestly and thoroughly - constructed, owned or controlled by the government, and operated at - a low rate of speed, would doubtless be able to carry at a much less - cost than can be done under the present system of operating fast and - slow trains on the same road; and, being incapable of entering into - combinations, would no doubt serve as a very valuable regulator of - existing railroads within the range of their influence. - - -With Congress in such a temper the oil men felt that there might be some -hope of securing the regulation of interstate commerce they had asked -for in 1872. The agitation resulted in the presentation in the House of -Representatives, in April, of the first Interstate Commerce Bill which -promised to be effective. The bill was presented by James H. Hopkins of -Pittsburg. Mr. Hopkins had before his eyes the uncanny fate of the -independent oil interests of Pittsburg, some twenty-five factories in -that town having been reduced to two or three in three and one-half -years. He had seen the oil-refining business of the state steadily -reduced, and he thought it high time that something was done. In aid of -his bill a House investigation was asked. It was soon evident that the -Standard was an enemy of this investigation. Through the efforts of a -good friend of the organisation—Congressman H. B. Payne, of -Cleveland—the matter was referred to the Committee on Commerce, where a -member of the house, J. N. Camden, whose refinery, the Camden -Consolidated Oil Company, if it had not already gone, soon after went -into the Standard Oil Alliance, appeared as adviser of the chairman! Now -what Mr. Hopkins wanted was to compel the railroads to present their -contracts with the Standard Oil Company. The Committee summoned the -proper railroad officers, Messrs. Cassatt, Devereux and Rutter, and O. -H. Payne, treasurer of the Standard Oil Company. Of the railroad men, -only Mr. Cassatt appeared, and he refused to answer the questions asked -or to furnish the documents demanded. Mr. Payne refused also to furnish -the committee with information. The two principal witnesses of the oil -men were E. G. Patterson of Titusville, to whose energy the -investigation was largely due, and Frank Rockefeller of Cleveland, a -brother of John D. Rockefeller. Mr. Patterson sketched the history of -the oil business since the South Improvement Company identified the -Standard Oil Company with that organisation, and framed the specific -complaint of the oil men, as follows: “The railroad companies have -combined with an organisation of individuals known as the Standard Ring; -they give to that party the sole and entire control of all the petroleum -refining interest and petroleum shipping interest in the United States, -and consequently place the whole producing interest entirely at their -mercy. If they succeed they place the price of refined oil as high as -they please. It is simply optional with them how much to give us for -what we produce.” - -Frank Rockefeller gave a pretty complete story of the trials of an -independent refiner in Cleveland during the preceding four years. His -testimony in regard to the South Improvement Company has already been -quoted. He declared that at the moment, his concern, the Pioneer Oil -Company, was unable to get the same rates as the Standard; the freight -agent frankly told him that unless he could give the road the same -amount of oil to transport that the Standard did he could not give the -rate the Standard enjoyed. Mr. Rockefeller said that in his belief there -was a pooling arrangement between the railroads and the Standard and -that the rebate given was “divided up between the Standard Oil Company -and the railroad officials.” He repeatedly declared to the committee -that he did not know this to be a positive fact, that he had no proof, -but that he believed such was the truth. Among the railroad officials -whom he mentioned as in his opinion enjoying spoils were W. H. -Vanderbilt, Thomas Scott and General Devereux. Of course the newspapers -had it that he had sworn that such was the fact. Colonel Scott promptly -wired the following denial: - - - “The papers of this morning publish that a man named Rockefeller - stated before your committee that myself and other officers of this - company were participants in rebates made to the Standard Oil - Company. So far as the statement relates to myself and the officers - of this company it is unqualifiedly false, and I have to ask that - you will summon the officers of the Standard Oil Company, or any - other parties that may have any knowledge of that subject, in order - that such villainous and unwarranted statements may be corrected.” - - -General Devereux published in the Cleveland press an equally emphatic -denial. Although Mr. Rockefeller promptly declared that he had stated to -the committee that he had no personal knowledge that there was such a -pool as he had intimated between the railroad men and the Standard, that -he had only given his suspicions, there were plenty of people to -overlook his explanation and assert that he had given proof of such a -division of spoils. The belief spread and is met even to-day in oil -circles. Now the only basis for any such assertion was the fact that W. -H. Vanderbilt, Peter H. Watson and Amasa Stone were at that time, 1876, -stockholders in the Standard Oil Company. There is no evidence of which -the writer knows that General Devereux or Colonel Scott ever held any -stock in the concern. Indeed, in 1879, when A. J. Cassatt was under -examination as to the relations of the Pennsylvania Railroad and the -Standard Oil Company, his own lawyer took pains to question him on this -point—an effort, no doubt, to silence the accusation which at that date -was constantly repeated. - - - “Mr. Cassatt,” Mr. MacVeagh said, “I want to direct your attention - to a personal matter which was asked you to a certain extent. You - were asked whether you had any knowledge that Mr. Vanderbilt, - representing the New York Central, or Mr. Jewett, representing the - Erie, had any interest whatever in the Standard Oil Company or any - of its affiliated companies. I wish to extend that question to the - other trunk lines. I wish you would state whether or not to your - knowledge Mr. Garrett, or anybody representing the Baltimore and - Ohio, had any such interest?” - - “They have not to my knowledge.” - - * * * * * - - “Then I wish you would state whether Mr. Scott or yourself, or any - other officers of the Pennsylvania Railroad Company, had any such - interest?” - - “Never to my knowledge. I speak of absolute knowledge as to myself, - but as to Mr. Scott to the best of my knowledge and belief.” - - -Of course after this controversy the railroads were more obdurate than -ever. Mr. Payne and Mr. Camden were active, too, in securing the -suppression of the investigations and they soon succeeded not only in -doing that but in pigeon-holing for the time Mr. Hopkins’s Interstate -Commerce Bill. - -But the oil men had not been trusting entirely to Congressional relief. -From the time that they became convinced that the railroads meant to -stand by the terms of the “Rutter Circular” they began to seek an -independent outlet to the sea. The first project to attract attention -was the Columbia Conduit Pipe Line. This line was begun by one of the -picturesque characters of Western Pennsylvania, “Dr.” David Hostetter, -the maker of the famous Hostetter’s Bitters. Dr. Hostetter’s Bitters’ -headquarters were in Pittsburg. He had become interested in oil there, -and had made investments in Butler County. In 1874 he found himself -hampered in disposing of his oil and conceived the idea of piping it to -Pittsburg, where he could make a connection with the Baltimore and Ohio -road, which up to this time had refused to go into the oil pool. Now at -that time the right of eminent domain for pipes had been granted in but -eight counties of Western Pennsylvania. Allegheny County, in which -Pittsburg is located, was not included in the eight, a restriction which -the oil men attributed rightly, no doubt, to the influence of the -Pennsylvania Railroad in the State Legislature. That road could hardly -have been expected to allow the pipes to go to Pittsburg and connect -with a rival road if it could help it. Dr. Hostetter succeeded in buying -a right of way through the county, however, and laid his pipes within a -few miles of the city to a point where he had to pass under a branch of -the Pennsylvania Railroad. The spot chosen was the bed of a stream over -which the railroad passed by a bridge. Dr. Hostetter claimed he had -bought the bed of the run and that the railroad owned simply the right -to span the run. He put down his pipes, and the railroad sent a force of -armed men to the spot, tore up the pipes, fortified their position and -prepared to hold the fort. The oil men came down in a body, and, seizing -an opportune moment, got possession of the disputed point. The railroad -had thirty of them arrested for riot, but was not able to get them -committed; it did succeed, however, in preventing the relaying of the -pipes and a long litigation over Dr. Hostetter’s right to pass under the -road ensued. Disgusted with this turn of affairs Dr. Hostetter leased -the line to three young independent oil men of whom we are to hear more -later. They were B. D. Benson, David McKelvy and Major Robert E. -Hopkins, all of Titusville. Resourceful and determined they built tank -wagons into which the oil from the pipe was run and was carted across -the tracks on the public highway, turned into storage tanks and again -repiped and pumped to Pittsburg. They were soon doing a good business. -The fight to get the Columbia Conduit Line into Pittsburg aroused again -the agitation in favour of a free pipe-line bill, and early in 1875 -bills were presented in both the Senate and House of the state and -bitter and long fights over them followed. It was charged that the bills -were in the interest of Dr. Hostetter. He wants to transport his blood -bitters cheaply, sneered one opponent! Many petitions for the bill were -circulated, but there were even stronger remonstrances and the source of -some of them was suspicious enough; for instance, that of the “Pittsburg -refiners representing about one-third of the refining capacity of the -Pennsylvania district and nearly one-third of the entire capacity now in -business.” As the Pittsburg refiners were nearly all either owned or -leased by the Standard concern, and the few independents had no hope -save in a free pipe-line, there seems to be no doubt about the origin of -that remonstrance. Although the bills were strongly supported, they were -defeated, and the Columbia Conduit Line continued to “break bulk” and -cart its oil over the railroad track. - -Another route was arranged which for a time promised success. This was -to bring crude oil by barges to Pittsburg, then to carry the refined -down the Ohio River to Huntington and thence by the Richmond and -Chesapeake road to Richmond. This scheme, started in February, was well -under way by May, and “On to Richmond!” was the cry of the independents. -Everything possible was done to make this attempt fail. An effort was -even made to prevent the barges which came down the Allegheny River from -unloading, and this actually succeeded for some time. There seemed to be -always some hitch in each one of the channels which the independents -tried, some point at which they could be so harassed that the chance of -a living freight rate which they had seen was destroyed. - -Some time in April, 1876, the most ambitious project of all was -announced. This was a seaboard pipe-line to be run from the Oil Regions -to Baltimore. Up to this time the pipe-lines had been used merely to -gather the oil from the wells and carry it to the railroads. The longest -single line in operation was the Columbia Conduit, and it was built -thirty miles long. The idea of pumping oil over the mountains to the sea -was regarded generally as chimerical. To a trained civil engineer it did -not, however, present any insuperable obstacles, and in the winter of -1875 and 1876 Henry Harley, whose connection with the Pennsylvania -Transportation Company has already been noted, went to his old chief in -the Hoosac Tunnel, General Herman Haupt, and laid the scheme before him. -If it was a feasible idea would General Haupt take charge of the -engineering for the Pennsylvania Transportation Company? At the same -time Mr. Harley employed General Benjamin Butler to look after the legal -side of such an undertaking. Both General Haupt and General Butler were -enthusiastic over the idea and took hold of the work with a will. It was -not long before the scheme began to attract serious attention. The -Eastern papers in particular took it up. The references to it were, as a -whole, favourable. It was regarded everywhere as a remarkable -undertaking: “Worthy,” the New York Graphic said, “to be coupled with -the Brooklyn Bridge, the blowing up of Hell Gate, and the tunnelling of -the Hudson River.” As General Haupt’s plans show, it was a tremendous -undertaking, for the line would be, when finished, at least 500 miles -long, and it would be worked by thirty or more tremendous pumps. On July -25 a meeting was held at Parker’s Landing, presenting publicly the -reports of General Haupt and General Butler. The authority and -seriousness of the scheme as set forth at this meeting alarmed the -railroads. If this seaboard line went through it was farewell to the -railroad-Standard combination. Oil could be shipped to the seaboard by -it at a cost of 16⅔ cents a barrel, General Haupt estimated. All of the -interests, little and big, which believed that they would be injured by -the success of the line, began an attack. - -Curiously enough one of the first points of hostility was General Haupt -himself. An effort was made to discredit his estimate in order to scare -people from taking stock. They recalled the Hoosac Tunnel scandal and -the fact that the General once built a bridge which had tumbled down, -ridiculed his estimate of the cost, etc., etc. The “card” in which -General Haupt answered his chief critic, one who signed himself “Vidi,” -was admirable: - - - A CARD FROM GENERAL HAUPT - - What are the charges that I am requested to “smash”? - - They are, as I understand them from others, for some I have not - seen: - - 1. That I once built a bridge that tumbled down. - - 2. That I was connected with the Hoosac Tunnel that cost seventeen - millions of dollars. - - 3. That my estimates of cost of transportation are ridiculously low - and unreliable. - - 1. I did design a bridge some twenty years ago, and constructed a - span near Greenfield, in Massachusetts, which gave way, owing to a - defective casting, while being tested. The bridge was not finished; - had not been opened to the public; had not been accepted from the - contractor, who repaired the damage in such a manner that a - recurrence of a break would have been impossible. I have built spans - of bridges and tested them until they broke, to ascertain their - ultimate strength, but I supposed that this was a matter that - concerned myself and not the public. If the bridge had been thrown - open for public use, and an accident had then occurred from - defective design or material, the engineer might have been - censurable, but not otherwise. In an experience of nearly forty - years I have never had a bridge to fail, after being opened for - travel, or a piece of masonry to give way. No accident occurred even - upon the temporary military bridges constructed during the war, - which President Lincoln used to say were built of bean poles and - corn stalks. - - 2. How about the Hoosac Tunnel? - - In 1856 I undertook to build the Hoosac Tunnel, at that time - ridiculed as visionary and utterly impracticable. I carried it on - until 1862, when its practicability was so fully demonstrated that - it was considered some discredit to Massachusetts to allow the work - to proceed under engineers from another state, and honourable - members of the Legislature declared that Massachusetts had engineers - as competent as any that could be found in Pennsylvania. The work in - my hands, as was proved by reports of investigating committees, was - costing less than $2,000,000, and the trouble then was that the - margin was considered too large, and that I was making too much - money on the $2,000,000, which the state had agreed to advance. In - 1862 the state took the work out of my hands and put it under - control of state commissioners and engineers. The result was that - instead of getting the Hoosac Tunnel completed for $2,000,000, which - was amply sufficient in the hands of H. Haupt and Company, it has - now cost, _under state management_, nearly $17,000,000. - - I hope this explanation will be considered sufficient to “smash” - Number 2. - - 3. As to Number 3, the insufficiency of my estimate. - - The items which enter into such an estimate are pure and simple. - There has been but one omission, and that is malicious mischief or - deviltry, and this item is so uncertain that, without a more - intimate acquaintance with “Vidi” and his supporters, I could not - undertake to estimate it. - - I have put coal at five dollars per ton or eighteen cents per - bushel, now worth five cents at Brady’s and eight at Pittsburg. Is - not this enough? I have allowed fifty per cent. greater consumption - at each station than has been estimated by others. I have allowed - $1,000 a year for each of two engine men at each station. Will - anyone say this is not sufficient? And I have, to be safe, estimated - the work down below the results given by any of the ordinary - hydraulic formula. It would be absurd to tell experienced pipe men - that oil cannot be pumped fifteen miles under 900 pounds pressure - through a four–inch pipe with a discharge of 5,000 barrels per day, - which is all that the estimate is based upon, and it allows - sixty-five days’ stoppage besides. - - Please, gentlemen, let me alone. I have had enough of newspaper - controversy in former years. I am sick of it. - - H. HAUPT. - - -At the same time that General Haupt was attacked the Pennsylvania -Transportation Company was criticised for bad management. A long letter -to the Derrick August 14, 1876, claimed that the company in the past had -been mismanaged; that the credit it asked could not be given safely; -that its management had been such that it had scarcely any business -left. Indeed this critic claimed that the last pipe-line organised, a -small line known as the Keystone, had during the last six months done -almost double the business of the Pennsylvania. Under the direction of -the Pennsylvania Railroad, it was believed, the Philadelphia papers -began to attack the plan. Their claim was that the charters under which -the Pennsylvania Transportation Company expected to operate would not -allow them to lay such a pipe-line. The opposition became such that the -New York papers began to take notice of it. The Derrick on September 16, -1876, copies an article from the New York Bulletin in which it is said -that the railroads and the Standard Oil Company, “now stand in -gladiatorial array, with shields poised and sword ready to deal the -cut.” An opposition began to arise, too, from farmers through whose -property an attempt was being made to obtain right of way. In Indiana -and Armstrong counties the farmers complained to the secretary of -internal affairs, saying that the company had no business to take their -property for a pipe-line. One of the common complaints of the farmers’ -newspapers was that leakage from the pipes would spoil the springs of -water, curdle milk, and burn down barns. The matter assumed such -proportions that the secretary referred it to the attorney-general for a -hearing. In the meantime the Pennsylvania Transportation Company made -the most strenuous efforts to secure the right of way. A large number of -men were sent out to talk over the farmers into signing the leases. Hand -bills were distributed with an appeal to be generous and to free the oil -business from a monopoly that was crushing it. These same circulars told -the farmers that a monopoly had hired agents all along the route -misrepresenting the facts about their intentions. Mr. Harley, under the -excitement of the enterprise and the opposition it aroused, became a -public figure, and in October the New York Graphic gave a long interview -with him. In this interview Mr. Harley claimed that the pipe-line scheme -was gotten up to escape the Standard Oil monopoly. Litigation, he -declared, was all his scheme had to fear. “John D. Rockefeller, -president of the Standard monopoly,” he said, “is working against us in -the country newspapers, prejudicing the farmers and raising issues in -the courts, and seeking also to embroil us with other carrying lines.” - -It was not long, however, before something more serious than the farmers -and their complaints got in the way of the Pennsylvania Transportation -Company. This was a rumour that the company was financially embarrassed. -Their certificates were refused on the market, and in November a -receiver was appointed. Different members of the company were arrested -for fraud, among them two or three of the best known men in the Oil -Regions. The rumours proved only too true. The company had been grossly -mismanaged, and the verification of the charges against it put an end to -this first scheme for a seaboard pipe-line. - -While all these efforts doomed to failure or to but temporary success -were making, a larger attempt to meet Mr. Rockefeller’s consolidation -was quietly under way. Among those interested in the oil business who -had watched the growing power of the Standard with most concern was the -head of the Empire Transportation Company, Colonel Joseph D. Potts. In -connection with the Pennsylvania Railroad Colonel Potts had built up -this concern, founded in 1865, until it was the most perfectly developed -oil transporter in the country. It operated 500 miles of pipe, owned a -thousand oil-tank cars, controlled large oil yards at Communipaw, New -Jersey, was in every respect indeed a model business organisation, and -it had the satisfaction of knowing that what it was it had made itself -from raw material, that its methods were its own, and that the practices -it had developed were those followed by other pipe-line companies. While -the Empire had far outstripped all its early competitors, there had -grown up in the last year a rival concern which Colonel Potts must have -watched with anxiety. This concern, known as the United Pipe Line, was -really a Standard organisation, for Mr. Rockefeller, in carrying out his -plan of controlling all the oil refineries of the country, had been -forced gradually into the pipe-line business. - -His first venture seems to have been in 1873. In that year the -oil-shipping firm of J. A. Bostwick and Company laid a short pipe in the -Lower Field, as the oil country along the Allegheny River was called. -Now J. A. Bostwick was one of the charter members of the South -Improvement Company, and when Mr. Rockefeller enlarged his business in -1872 because of the power that enterprise gave him, he took Mr. Bostwick -into the Standard. This alliance, like all the operations of that -venture, was secret. The bitterness of the Oil Regions against the -members of the South Improvement Company was so great for many months -after the Oil War that Mr. Bostwick and Mr. Rockefeller seem to have -concluded in 1873 that it would be a wise precautionary measure for them -to lay a pipe-line upon which they could rely for a supply of oil in -case the oil men attempted again to cut them off from crude, as they had -succeeded in doing in 1872. Accordingly, a line was built and put in the -charge of a man who has since become known as one of the “strong men” of -the Standard Oil Company. This man, Daniel O’Day, was a young Irishman -who had first appeared in the oil country in 1867, and had at once made -so good a record for himself as transporting agent, that in 1869, when -the oil-shipping firm of J. A. Bostwick needed a man to look after its -shipments, he was employed. The record he made in the next two years was -such that it reached the ear of Jay Gould himself, the president of the -Erie, over which Mr. Bostwick was doing most of his shipping. Now the -Erie at this time was making a hard fight to meet the growth of the -Empire Transportation Company. So important did Jay Gould think this -struggle that in 1871 he himself came to the Oil Regions to look after -it. One of the first men summoned to his private car as it lay in -Titusville was the young Irishman, O’Day. He came as he was, begrimed -with the oil of the yards, but Mr. Gould was looking for men who could -do things, and was big enough to see through the grime. When the -interview was concluded, Daniel O’Day had convinced Jay Gould that he -was the man to divert the oil traffic from the Pennsylvania to the Erie -road, and he walked out with an order in his pocket which lifted him -over the head of everybody on the road so far as that particular freight -was concerned, for it gave him the right to seize cars wherever he found -them. For weeks after this he practically lived on the road, turning -from the Pennsylvania in this time a large volume of freight, and making -it certain that it would have to look to its laurels as it never had -before. - -The next year after this episode came the Oil War. The anger of the oil -men was poured out on everyone connected in any way with the -stockholders of the South Improvement Company, and among others on Mr. -O’Day. He knew no more of the South Improvement Company at the start -than the rest of the region, but he did know that it was his business to -take care of certain property intrusted to him. Resolutions calling on -him to resign were passed by oil exchanges and producers’ unions. Mobs -threatened his cars, his stations, his person, but with the grit of his -race he hung to his post. There was, perhaps, but one other man in the -employ of members of the South Improvement Company who showed the same -courage, and that was Joseph Seep of Titusville. Almost every other -employee fled, the principals in the miserable business took care to -stay out of the country, but Mr. O’Day and Mr. Seep polished their -shillalahs and stood over their property night and day until the war was -over. Their courage did not go unrewarded. They were made the chief -executive representatives, in the region, of the consolidated Standard -interests which followed the war, though neither of them knew at the -time that they were in the Standard employ. They supposed that the -shipper Bostwick was an independent concern. It was a man of grit and -force and energy then who took hold of the Standard’s pipe-line in 1873. -Rapid growth went on. The little line with which they started became the -American Transfer Company, gradually extending its pipes to seventy or -eighty miles in Clarion County, and in 1875 building lines in the -Bradford Field. - -The American Transfer Company was soon working in harmony with the -United Pipe Lines, of which Captain J. J. Vandergrift was the president. -This system had its nucleus, like all the others of the country, in a -short private line, built in 1869 by Captain Vandergrift. It had grown -until in 1874 it handled thirty per cent. of the oil of the region. Now -in 1872, after the Oil War, Captain Vandergrift had become a convert to -Mr. Rockefeller’s theory of the “good of the oil business,” and as we -have seen, had gone into the National Refiners’ Association as -vice-president. Later he became a director in the Standard Oil Company. -In 1874 he sold a one-third interest of his great pipe-line system to -Standard men, and the line was reorganised in the interests of that -company. That is, the Standard Oil Combination in 1876 was a large -transporter of oil, for the directors and leading stockholders owned and -operated fully forty per cent. of the pipe-lines of the Oil Regions, -owned all but a very few of the tank cars on both the Central and Erie -roads, and controlled under leases two great oil terminals, those of the -Erie and Central roads. It was little wonder that Colonel Potts watched -this rapid concentration of transportation and refining interests with -dread. It was more dangerous than the single shipper, and he had always -fought that idea on the ground of policy. “In the first place, it -concentrates great power in the hands of one party over the trade of the -road,” he told an investigating committee of Congress in 1888. “They can -remove it at pleasure. In the second place I think a large number of -parties engaged in the same trade are very apt to divide themselves into -two different classes as to the way of viewing markets; one class will -be hopeful, and the other the reverse. The result will be there will be -always one or the other class engaged in shipping some of the -traffic.... The whole question seems to me to resolve itself into -determining what policy will bring the largest volume in the most -regular way to the carrier; and it is my opinion, based upon such -experience as I have had, that a hundred shippers of a carload a day -would be sure to give to a carrier a more regular volume of business, -and I think, probably, a larger total volume of business in a year’s -time than one shipper of a hundred cars a day.”[53] - -Holding this theory, Colonel Potts had opposed the rebate to the -Standard granted by the Pennsylvania in 1875. Three years later he -described in a communication, published anonymously, the effect of the -rebates granted at that time: - - - “The final agreement with the railways was scarcely blotter-dried - ere stealthy movements toward the whole line of outside refiners - were evident, although rather felt than seen. As long as - practicable, they were denied as mere rumours, but as they gradually - became accomplished victories, as one refiner after another, through - terror, through lack of skill in ventures, through financial - weakness, fell shivering with dislike into the embrace of this - commercial octopus, a sense of dread grew rapidly among those - independent interests which yet lived, and notably among a portion - of the railroad transporters.” - - -The chief “railroad transporter” who shared with the independents the -sense of dread which Mr. Rockefeller’s absorption of refineries awakened -was Mr. Potts himself. As he saw the independents of Pittsburg, -Philadelphia, New York and the creek, shutting down, selling out, going -into bankruptcy, while the Standard and its allies grew bigger day by -day, as he saw the Standard interest developing a system of -transportation greater than his own, he concluded to prevent, if -possible, the one shipper in the oil business. “We reached the -conclusion,” said Colonel Potts in 1888, “that there were three great -divisions in the petroleum business—the production, the carriage of it, -and the preparation of it for market. If any one party controlled -absolutely any one of those three divisions, it practically would have a -very fair show of controlling the others. We were particularly -solicitous about the transportation, and we were a little afraid that -the refiners might combine in a single institution, and some of them -expressed a strong desire to associate themselves permanently with us. -We therefore suggested to the Pennsylvania road that we should do what -we did not wish to do—associate ourselves. That is, our business was -transportation and nothing else; but, in order that we might reserve a -nucleus of refining capacity to our lines, we suggested we should become -interested in one or more refineries, and we became interested in two, -one in Philadelphia and one in New York. It was incidental merely to our -transportation. The extreme limit was 4,000 barrels a day only.” - -It was in the spring of 1876 that the Empire began to interest itself in -refineries. No sooner did Mr. Rockefeller discover this than he sought -Mr. Scott and Mr. Cassatt, then the third vice-president of the -Pennsylvania, in charge of transportation. It was not _fair_! Mr. -Rockefeller urged. The Empire was a transportation company. If it went -into the refining business it was not to be expected that it would deal -as generously with rivals as with its own factories; besides, it would -disturb the one shipper who, they all had agreed, was such a benefit to -the railroads. Mr. Scott and Mr. Cassatt might have reminded Mr. -Rockefeller that he was as truly a transporter as the Empire, but if -they did they were met with a prompt denial of this now well-known fact. -He was an oil refiner—only that and nothing more. “They tell us that -they do not control the United Pipe Lines,” Mr. Cassatt said in his -testimony in 1879. Besides, urged Mr. Rockefeller, if they have -refineries of course they will give them better terms than they do us. -Mr. Flagler told the Congressional Committee of 1888 that the Standard -was unable to obtain rates through the Empire Transportation Company -over the Pennsylvania Railroad for the Pittsburg or Philadelphia -refineries as low as were given by competing roads, and, added he, “from -the fact that the business during those years _was so very close as to -leave scarcely any margin of profit_ under the most advantageous -circumstances. And we, finding ourselves undersold in the markets by -competitors whom we knew had not the same facilities in the way of -mechanical appliances for doing the business, knew that there was but -one conclusion to be reached, and that was that the Empire -Transportation Company favoured certain other shippers, I would say -favoured its own refineries to our injury.” - -As the Standard Oil Company paid a dividend of about fourteen per cent. -in both 1875 and 1876, besides spending large sums in increasing its -plants and facilities, the margin of profit cannot have been so low as -it seemed to Mr. Flagler in 1888 to have been; naturally enough, for he -saw dividends of from fifty to nearly 100 per cent. later. - -[Illustration: - - A. J. CASSATT IN 1877 - - Third vice-president of the Pennsylvania Railroad in charge of - transportation when first contract was made by that road with the - Standard Oil Company. -] - -[Illustration: - - GENERAL GEORGE B. MCCLELLAN - - President of the Atlantic and Great Western Railroad at the time of - the South Improvement Company. General McClellan did not sign the - contract. -] - -[Illustration: - - GENERAL JAMES H. DEVEREUX - - Who in 1868 as vice-president of the Lake Shore and Michigan Southern - Railroad first granted rebates to Mr. Rockefeller’s firm. -] - -[Illustration: - - JOSEPH D. POTTS - - President of the Empire Transportation Company. Leader in the struggle - between the Pennsylvania Railroad and the Standard Oil Company in - 1877. -] - -Mr. Vanderbilt and Mr. Jewett soon joined their protests to Mr. -Rockefeller’s. “The steps it (the Empire) was then taking,” said Mr. -Jewett, “unless checked would result in a diversion largely of the -transportation of oil from our roads; the New York Central road and our -own determined that we ought not to stand by and permit those -improvements and arrangements to be made which, when completed, would be -beyond our control.”[54] These protests increased in vehemence, until -finally the Pennsylvania officials remonstrated with Mr. Potts. “We -endeavoured,” says Mr. Cassatt, “to try to get those difficulties -harmonised, talked of getting the Empire Transportation Company to lease -its refineries to the Standard Oil Company, or put them into other -hands, but we did not succeed in doing that.” “Rather than do that,” -Colonel Potts told Mr. Cassatt, when he proposed that the Empire sell -its refineries, “we had rather you would buy us out and close our -contract with you.” - -When the Standard Oil Company and its allies, the Erie and Central, -found that the Pennsylvania would not or could not drive the Empire from -its position, they determined on war. Mr. Jewett, the Erie president, in -his testimony of 1879 before the Hepburn Commission, takes the burden of -starting the fight. “Whether the Standard Oil Company was afraid of the -Empire Line as a refiner,” he said, “I have no means of knowing. I never -propounded the question. We were opposed to permitting the Empire Line, -a creature of the Pennsylvania Railroad, to be building refineries, to -become the owners of pipe-lines leading into the oil field and leading -to the coast, without a contest, and we made it without regard to the -Standard Oil Company or anybody else; but when we did determine to make -it, I have no doubt we demanded of the Standard Oil Company during the -contest to withdraw its shipments from the Pennsylvania.” Mr. Flagler -gave the following version of the affair to the Congressional Committee -of 1888:— - - - We made an agreement with the Empire Transportation Company for - shipments over the Pennsylvania Railroad on behalf of the - Pennsylvania interests, which were then owned by the Standard Oil - Company, simply because there was no alternative. It was the only - vehicle by which these Pittsburg refineries and the Philadelphia - refineries carried their crude oil over the Pennsylvania Railroad. - There was no other medium by which business could be done over the - Pennsylvania Railroad, except through the Empire Transportation - Company, a subsidiary company of the Pennsylvania Railroad Company. - The Empire Transportation Company was not only the owner of - pipe-lines in the Oil Regions, and tank-cars on the Pennsylvania - Railroad, but also of refineries at Philadelphia and New York, and - to that extent were our competitors. We, _having no interest - whatever in transportation_,[55] naturally felt jealous of the - Empire Transportation Company, and drew the attention of the - northern lines. By that I mean the New York Central and the Erie - railroads. With the peculiar position of the oil business on the - Pennsylvania Railroad, their attention was called to this very soon - after the Empire Transportation Company began the business of - refining. The position taken by the two Northern trunk lines in - their intercourse with the Pennsylvania Railroad, as was admitted by - Mr. Cassatt in his testimony, and stated to me by the - representatives of the two Northern roads, Mr. Vanderbilt and Mr. - Jewett, was that it was unfair to them that the Pennsylvania - Railroad did not divest itself of the manufacturing business. - - -Backed by the Erie and Central, Mr. Rockefeller, in the spring of 1877, -finally told Mr. Cassatt that he would no longer send any of his freight -over the Pennsylvania unless the Empire gave up its refineries. The -Pennsylvania refused to compel the Empire to this course. According to -Mr. Potts’s own story, the road was partially goaded to its decision by -a demand for more rebates, which came from Mr. Rockefeller at about the -time he pronounced his ultimatum on the Empire. “They swooped upon the -railways,” says Colonel Potts, “with a demand for a vast increase in -their rebate. They threatened, they pleaded, it has been said they -purchased—however that may be, they conquered. Minor officials intrusted -with the vast power of according secret rates conceded all they were -asked to do, even to concealing from their superiors for months the real -nature of their illegal agreements.” Probably it was at this time that -there took place the little scene between Mr. Vanderbilt and Mr. -Rockefeller and his colleagues, of which the former told the Hepburn -Commission in 1879. The Standard people were after more rebates. They -affirmed other roads were giving larger rebates than Mr. Vanderbilt, and -that their contract with him obliged him to give as much as anybody else -did. - -“Gentlemen,” he told them, “you cannot walk into this office and say we -are bound by any contract to do business with you at any price that any -other road does that is in competition with us; it is only on a fair -competitive basis, a fair competition for business at a price that I -consider will pay the company to do it.” - -Soon after this interview, so rumour says, Mr. Vanderbilt sold the -Standard stock he had acquired as a result of the deals made through the -South Improvement Company. “I think they are smarter fellows than I am, -a good deal,” he told the commission, somewhat ruefully. “And if you -come in contact with them I guess you will come to the same conclusion.” - -Spurred on then by resentment at the demands for new rebates, as well as -by the injustice of Mr. Rockefeller’s demand that the Empire give up its -refineries, the Pennsylvania accepted the Standard’s challenge, resolved -to stand by the Empire, and henceforth to treat all its shippers alike. -No sooner was its resolution announced in March, 1877, than all the -freight of the Standard, amounting to fully sixty-five per cent. of the -road’s oil traffic, was taken away. An exciting situation, one of -out-and-out war, developed, for the Empire at once entered on an -energetic campaign to make good its loss by developing its own -refineries, and by forming a loyal support among the independent oil -men. Day and night the officers worked on their problem, and with -growing success. When Mr. Rockefeller saw this he summoned his backers -to action. The Erie and Central began to cut rates to entice away the -independents. It is a sad reflection on both the honour and the -foresight of the body of oil men who had been crying so loudly for help, -that as soon as the rates were cut on the Standard lines many of them -began to attempt to force the Pennsylvania to follow. “They found the -opportunity for immediate profits by playing one belligerent against the -other too tempting to resist,” says Colonel Potts. “We paid them large -rebates,” said Mr. Cassatt; “in fact, we took anything we could get for -transporting their oil. In some cases we paid out in rebates more than -the whole freight. I recollect one instance where we carried oil to New -York for Mr. Ohlen, or someone he represented, I think at eight cents -less than nothing. I do not say any large quantities, but oil was -carried at that rate.” - -While the railroads were waging this costly war the Standard was -carrying the fight into the refined market. The Empire had gone -systematically to work to develop markets for the output of its own and -of the independent refineries. Mr. Rockefeller’s business was to prevent -any such development. He was well equipped for the task by his system of -“predatory competition,” for in spite of the fact that Mr. Rockefeller -claimed that underselling to drive a rival from a market was one of the -evils he was called to cure, he did not hesitate to employ it himself. -Indeed, he had long used his freedom to sell at any price he wished for -the sake of driving a competitor out of the market with calculation and -infinite patience. Other refiners burst into the market and undersold -for a day; but when Mr. Rockefeller began to undersell, he kept it up -day in and day out, week in and week out, month in and month out, until -there was literally nothing left of his competitor. A former official of -the Empire Transportation Company, who in 1877 took an active part in -the war his company was waging against the Standard, once told the -writer that in every town, North or South, East or West, in which they -already had a market for their refined oil, or attempted to make one, -they found a Standard agent on hand ready to undersell. The Empire was -not slow in underselling. It is very probable that in many cases it -began it, for, as Mr. Cassatt says, “They endeavoured to injure us and -our shippers all they could in that fight, and we did the same thing.” - -In spite of the growing bitterness and cost of the contest, the Empire -had no thought of yielding. Mr. Potts’s hope was in a firm alliance with -the independent oil men, many of the strongest of whom were rallying to -his side. At the beginning of the fight he had very shrewdly enlisted in -his plan one of the largest independent producers of the day, B. B. -Campbell, of Butler. “Being a pleasure and a duty to me,” says Mr. -Campbell, “I entered into the service with all the zeal and power that I -have. I made a contract with the Empire Line wherein I bound myself to -give all my business to this line.” At the same time Mr. Potts sought -the help of the man who was generally accepted as the coolest, most -intelligent, and trustworthy adviser in matters of transportation the -Oil Regions had, E. G. Patterson, of Titusville. Mr. Patterson was a -practical railroad man, and an able and logical opponent of the rebate -and “one shipper” systems. He had been prominent in the fight against -the South Improvement Company, and since that time he had persistently -urged the independents to wage war only on the practice of rebates—to -refuse them themselves and to hold the railroads strictly to their duty -in the matter. Several conferences were held, and finally, in the early -summer, Mr. Potts read the two gentlemen a paper he had drawn up as a -contract between the producers and the Empire. It speaks well for the -fair-mindedness of Mr. Potts that when he read this document to Mr. -Campbell and Mr. Patterson, both of whom were skilled in the ways of the -transporter, they “accepted it in a moment.” - -“It was made the duty of Mr. Patterson and myself to get signatures of -producers to this agreement,” says Mr. Campbell, “in a sufficient amount -to warrant the Pennsylvania road entering into a permanent agreement. -The contract, I think, was for three years.” The attempt to enlist a -solid body of oil men in the scheme was at once set on foot, but hardly -was it under way before troubles of most serious import came upon the -Pennsylvania road. A great and general strike on all its branches tied -up its traffic for weeks. In Pittsburg hundreds of thousands of dollars’ -worth of property were destroyed by a mob of railroad employees. It is -not too much to say that in these troubles the Pennsylvania lost -millions of dollars; it is certain that as a result of them the company -that fall and the coming spring had to pass its dividends for the first -time since it commenced paying them, and that its stock fell to -twenty-seven dollars a share (par being fifty dollars). Overwhelmed by -the disasters, Mr. Scott and Mr. Cassatt felt that they could not afford -any longer to sustain the Empire in its fight for the right to refine as -well as transport oil. - -While the coffers of the Pennsylvania were empty, those of the Standard -were literally bursting with profits; for the Standard, the winter -before this fight came on, had carried to completion for the first time -the work which it had been organised to accomplish, that is, it had put -up the price of refined oil, in defiance of all laws of supply and -demand, and held it up for nearly six months. The story of this dramatic -commercial hold-up is told in the next chapter; it is enough for present -purposes to say that in the winter of 1876–1877 millions of gallons of -oil were sold by Mr. Rockefeller and his partners at a profit of from -fifteen to twenty-five cents a gallon. The curious can compute the -profits; they certainly ran into the multi-millions. A dividend of fifty -per cent. was paid for the year following the scoop, and “there was -plenty of money made to throw that dividend out twice over and make a -profit,” Samuel Andrews, one of the Standard’s leading men, told an Ohio -investigating committee in 1879. The Standard then had a war budget big -enough for any opposition, and it is not to be wondered at that the -Pennsylvania, knowing this and finding its own treasury depleted, was -ready to quit. - -It was August when Mr. Scott and Mr. Cassatt decided to give up the -fight. Peace negotiations were at once instituted, Mr. Cassatt going to -Cleveland to see Messrs. Rockefeller and Flagler, and Mr. Warden, who -was visiting them there. Later, the same gentlemen met Mr. Scott and Mr. -Cassatt at the St. George Hotel, in Philadelphia. “The subject of -discussion at these meetings,” said Mr. Cassatt in 1879, when under -examination, “was whether we could not make some contract or agreement -with the Standard Oil Company by which this contest would cease. They -insisted that the first condition of their coming back on our line to -ship over our road must be that the Empire Transportation Company, which -company represented us in the oil business, must cease the refining of -oil in competition with them. The Empire Transportation Company objected -to going out of the refining business.” The result of this objection -Colonel Potts stated in 1888: “Our contract with the Pennsylvania road -gave to them the option, at any time they saw proper, upon reasonable -notice, of buying our entire plant; they exercised that option.” “Was -that at your request or desire?” the chairman asked the Colonel. “No, -sir. It was at the request of the Pennsylvania road through their -officials.” The question then came up as to who should buy the plant of -the Empire Transportation Company. “The Standard wanted us to do so,” -says Mr. Cassatt. “They wanted us to buy the pipe-lines and cars; we -objected to buying the pipe-lines, and it resulted in their buying them -and the refining plants. The negotiations were carried on in -Philadelphia, Mr. Rockefeller and Mr. Flagler mainly representing the -Standard. A substantial agreement was reached about the last of October. -The agreement would have been probably perfected about that time except -that the counsel for the Empire Line thought it was necessary that they -should advertise the fact that they were going to sell their property, -and have a meeting of their stockholders, and get their assent to the -sale before the papers were finally signed.” - -This meeting of which Mr. Cassatt speaks was held on October 17. Colonel -Potts made a statement to the stockholders, which he began by a brief -review of the growth of the company from the point when twelve years -before it had started as a new route charged with the duty of meeting -formidable competitors. He pointed out that at the close of the twelfth -year the company was the owner of a large fleet of lake vessels, of -elevators and docks at the City of Erie, of improved piers in New York -City, of nearly 5,000 cars, of over 500 miles of pipe-lines, of valuable -interests in refineries, of all the appliances of a great business. In -these twelve years, Colonel Potts told his stockholders, the -organisation had collected more than one hundred million dollars, and in -the last year their cars had moved over 30,000 miles of railway. He -explained to the stockholders the condition of the oil business which -had made it necessary, in his judgment, for the Empire Transportation -Company to go into the refining business. It was done with the greatest -reluctance, Colonel Potts declared, but it was done because he and his -colleagues believed that there was no other way for them to save to the -Pennsylvania road permanently the proportion of the oil traffic which -they had acquired in the twelve years in which they had been in -business. He reviewed, dispassionately, the circumstances which had led -the Pennsylvania road to ask the company to give up its refineries. He -stated his reasons for deciding that it was wiser for the Empire to -resign its contracts with the Pennsylvania and go into liquidation than -to submit to the demands of the Standard interests. Colonel Potts -followed his statement by an abstract of the agreements which had been -made between the Standard people and the Empire. By these agreements the -Standard Oil Company bought of the Empire Transportation Company their -pipe-line interest for the sum of $1,094,805.56, their refining -interests in New York and Philadelphia for the sum of $501,652.78, -$900,000 worth of Oil Tank Car Trust, and they also settled with outside -refiners and paid for personal property to the extent of $900,000 more, -making a total cash payment of $3,400,000. Two millions and a half of -this money, Colonel Potts told the stockholders, would be paid that -evening by certified checks if the agreements were ratified. “Not -knowing what your action might be at this meeting,” he concluded, “we -are still in active business. We could not venture to do anything that -would check our trade, that would repel customers, that would drive any -of them away from us. We must be prepared if you said no to go right -along with our full machinery under our contract, or under such -modification of that as we could fight through. We could not stop moving -a barrel of oil. We must be ready to take any offered to us; we must -supply parties taking oil. There was nothing we could do but what was -done; nothing was stopped, nothing is stopped, everything is going on -just as vigorously at this moment through as wide an extent of country -as ever it did, and it will continue to do so until after you take -action, until after we get these securities or the money. That, we -suppose, will be about six o’clock to-day, if you act favourably, and at -that time we shall, if everything goes through, telegraph to every man -in our service, and to the heads of departments what has been done, and -at twelve o’clock to-night we shall cease to operate anything in the -Empire Transportation Company.” - -The stockholders accepted the proposition, and that night at Colonel -Potts’s office on Girard Street, Philadelphia, Mr. Scott and Mr. -Cassatt, of the Pennsylvania Railroad, Colonel Potts and two of his -colleagues in the Empire, and two of the refiners with whom he was -affiliated, met William Rockefeller, Mr. Flagler, Mr. Warden, Mr. -Lockhart, Charles Pratt, Jabez A. Bostwick, Daniel O’Day, and J. J. -Vandergrift, and their counsel, and the papers and checks were signed -and passed, wiping out of existence a great business to which a body of -the best transportation men the state of Pennsylvania has produced had -given twelve years of their lives. After the meeting was over, there -were sent out from Philadelphia to scores of employees of the Empire -Transportation Company scattered throughout the state, telegrams stating -that at twelve o’clock that night the company would cease to exist. For -twelve years the organisation had been doing a growing business. On the -date of this telegram its operations were more extensive, its -opportunities more promising, under fair play, than they had ever been -before in its history. The band of men who had built it up to such -healthy success were not giving it up because they had lost faith in it, -or because they believed there were larger opportunities for them in -some other business; they were giving it up because they were compelled -to, and probably men never went out of business in this country with a -deeper feeling of injustice than that of the officials of the Empire -Transportation Company on October 17, 1877, when they sent out the -telegrams which put their great creation into liquidation. - -The pipe-lines thus acquired were at once consolidated with the other -Standard lines. Only a few independent lines, and only one of these of -importance—the Columbia Conduit—now remained in the Oil Regions. This -company had been doing business, since 1875, under the difficulties -already described. Dr. Hostetter, the chief stockholder, had become -heartily sick of the oil business and wanted to sell. He had approached -the Empire Line, and there had been some negotiations. Then came the -fall of the Empire and Dr. Hostetter sought the United Pipe Line. Intent -on stopping every outlet of oil not under their control the Standard -people bought the Columbia Conduit. By the end of the year the entire -pipe-line system of the Oil Regions was in Mr. Rockefeller’s hands. He -was the only oil gatherer. Practically not a barrel of oil could get to -a railroad without his consent. He had set out to be simply the only oil -refiner in the country, but to achieve that purpose he had been obliged -to make himself an oil transporter. In such unforeseen paths do great -ambitions lead men! - -The first effect of the downfall of the Empire was a new railroad pool. -Indeed when it became evident that the Pennsylvania would yield, the -Erie, Central and the Standard had begun preparing a new adjustment, and -the papers for this were ready to be signed on October 17, with those -transferring the pipe-line property. Never had there been an arrangement -which gathered up so completely the oil outlets, for now the Baltimore -and Ohio road came into a pool for the first time. Mr. Garrett had -always refused the advances of the other roads, but when he saw that the -Columbia Conduit Line, his chief feeder, was sure to fall into Standard -hands; when he began to suspect the Baltimore refiners were going into -the combination, he realised that if he expected to keep an oil traffic -he must join the other roads. The new pool, therefore, was between four -roads. Sixty-three per cent. of the oil traffic was conceded to New -York, and of the sixty-three per cent. going there the Pennsylvania road -was to have twenty-one per cent. Thirty-seven per cent. of the traffic -was to go to Philadelphia and Baltimore, and of this thirty-seven per -cent. the Pennsylvania had twenty-six per cent. The Standard guaranteed -the road not less than 2,000,000 barrels a year, and if it failed to -send that much over the road it was to pay it a sum equal to the profits -it would have realised upon the quantity in deficit. In return for this -guarantee of quantity the Standard was to pay such rates as might be -fixed from time to time by the four trunk lines (which rates it was -understood should be so fixed by the trunk lines as to place them on a -parity as to cost of transportation by competing lines), and it was to -receive weekly a commission of ten per cent. on its shipments it -controlled.[56] No commission was to be allowed any other shipper unless -he should guarantee and furnish such a quantity of oil that after -deducting any commission allowed, the road realised from it the same -amount of profits as it did from the Standard trade. The points in the -agreement were embodied in a letter from William Rockefeller to Mr. -Scott. This letter and the answer declaring the arrangement to be -satisfactory to the company are both dated October 17.[57] - -Four months later Mr. Rockefeller was able to take another step of great -advantage. He was able to put into operation the system of drawbacks on -other people’s shipments which the South Improvement Company contracts -had provided for, and which up to this point he seems not to have been -securely enough placed to demand. There were no bones about the request -now. Mr. O’Day, the general manager of the American Transfer Company, a -pipe-line principally in Clarion County, Pennsylvania, which, including -its branches, was from eighty to 100 miles in length, a company now one -of the constituents of the United Pipe Line, wrote to Mr. Cassatt: - - - “I here repeat what I once stated to you, and which I wish you to - receive and treat as strictly confidential, that we have been for - many months receiving from the New York Central and Erie Railroads - certain sums of money, in no instance less than twenty cents per - barrel on _every barrel of crude oil carried by each of these - roads_.” Continuing, Mr. O’Day says: “Co-operating as we are doing - with the Standard Oil Company and the trunk lines in every effort to - secure for the railroads paying rates of freight on the oil they - carry, I am constrained to say to you that in justice to the - interests I represent we should receive from your company at least - twenty cents on each barrel of crude oil you transport.... In - submitting this proposition I find that I should ask you to let this - date from November 1, 1877, but I am willing to accept as a - compromise (which is to be regarded as strictly a private one - between your company and ours) the payment by you of twenty cents - per barrel on all crude oil shipments commencing with February 1, - 1878.”[58] - - -Mr. Cassatt complied with Mr. O’Day’s request. In a letter to the -comptroller of the road he said that he had agreed to allow this -commission after having seen the receipted bills, showing that the New -York Central allowed them a commission of thirty-five cents a barrel, -and the Erie Railroad a commission of twenty cents a barrel on Bradford -oil and thirty cents on all other oils. Thus the Standard Oil Company, -through the American Transfer Company, received, in addition to rebates -on its own shipments, from twenty to thirty-five cents drawback a barrel -on all crude oil which was sent over the trunk lines by other people as -well as by itself.[59] - -The effect of this new concentration of power was immediate in all the -refining centres of the country. Most of the Baltimore refiners, some -eight in number, which up to this time had remained independent, seeing -themselves in danger of losing their oil supply, were united at the end -of 1877 into the Baltimore United Oil Company, with J. N. Camden at -their head. Mr. Camden was president of the Camden Consolidated Company -of Parkersburg, West Virginia, a concern already in the Standard -alliance, and he and his partners held the majority stock in the -Baltimore concern. The method of reaching the Baltimore independents who -looked with dislike or fear on the Standard was a familiar one: An -officer of one of the concerns owned by the Standard Oil Company would -approach the outsider who was feeling the pressure and propose a sale or -a lease to himself personally. It was an escape, and it usually ended in -the complete absorption of the plant by the Standard. A few of the -Baltimore interests refused to go into the Baltimore United Oil Company. -Among them was a woman, a widow, Mrs. Sylvia C. Hunt, who had conducted -a successful refinery there for several years, and whose business -ability and energy had been the admiration of all those with whom she -had come in contact. Her interests had been particularly cherished by -the Empire Line, “Mrs. Hunt’s cars” being given precedence many a time -by agents at Titusville or other shipping points who knew her story. In -the summer of 1877 her works burned out. With a courage which was -generally commented on at the time Mrs. Hunt at once rebuilt and in less -than six months had her plant in running order. Then came the fall of -the Empire Transportation Company, the sale of the Columbia Conduit -Company, and the entrance of the Baltimore and Ohio into the Oil Pool. -Every refiner in Baltimore knew what that meant, and the wise sold when -Mr. Camden proposed it. Mrs. Hunt, however, did not want to sell. She -distrusted the new company. Finally with many misgivings she leased for -five years at $5,000 a year. It was less than half she had been making, -so she claimed, and among her old friends there was much indignation. -Colonel Potts, indeed, in telling her story in his “Brief History of the -Standard Oil Company,” said: “It could fairly have been expected that -something of chivalrous feeling would be inspired by the sight of this -indomitable spirit who had wrought so noble a work against such great -odds. But though fine sentiments and generous words find frequent exodus -from the lips of the Standard managers, they are never seconded by -generous deeds. They crushed her business and her spirit as -remorselessly as they would have killed a dog.” These are bitter words -written when Colonel Potts was still smarting from his defeat. They were -written, too, without reflection that Mrs. Hunt, if allowed to have all -the oil she wanted, allowed equal rates, allowed to use her ability and -experience, allowed freedom to sell in the markets she had built up, -would undoubtedly have increased her business. She would have profited -by the high prices of refined oil which Mr. Rockefeller was taking all -this trouble to secure. She might have grown a formidable competitor -even, and disturbed the steadiness of the working of the great machine. -Colonel Potts forgot that if the Great Purpose was realised nobody must -do business except under Mr. Rockefeller’s control. - -In New York City the new tariff and pooling arrangements caused the -greatest uneasiness, for here was the largest group of prosperous -independent refiners. They had all allied themselves with the Empire -Transportation Company in the spring of 1877 when its fight with the -Standard had begun, but they had been dropped immediately when peace -negotiations were begun, and a letter of remonstrance they sent Mr. -Scott at the time was never answered.[60] The experiences of several of -these independents have been recorded in court testimony. One or two -will suffice here. For instance, among the Eastern refiners was the firm -of Denslow and Bush; their works were located in South Brooklyn. They -had begun in a very small way in 1870, and by 1879 were doing a business -of nearly 1,000 barrels of crude a day. They had transported nearly all -their oil by the Empire Line. After that line went out of business in -October, 1877, the contract with Denslow and Bush was transferred to the -Pennsylvania Railroad Company. This contract terminated on the first day -of May, 1878. Some time in March they received formal notice of its -expiration, and solicited an interview with the officers of the -Pennsylvania Railroad in order to make some arrangements for the further -transportation of their oil. Mr. Cassatt named New York. The meeting was -held at Mr. Denslow’s office, 123 Pearl Street. Besides Mr. Bush, there -were present to meet Mr. Cassatt, Messrs. Lombard, Gregory, King, H. C. -Ohlen, and C. C. Burke, all independents. When Mr. Bush was under -examination in the suit against the Pennsylvania Railroad in 1879 he -gave an account of what happened at this interview: - - - “We asked Mr. Cassatt what rate of freight we should have after the - expiration of these contracts, whether we should have as low a rate - of freight as the Standard Oil Company or any other shipper? He - said, ‘No,’ We asked why. ‘Well, in the first place, you can’t ship - as much oil as the Standard Oil Company,’ ‘Well, if we could ship as - much oil’—I think Mr. Lombard put this question—‘would we then have - the same rate?’ He said, ‘No,’ ‘Why?’ ‘Why, you could not keep the - road satisfied; it would make trouble.’ And he remarked in - connection with that, that the Standard Oil Company was the only - party that could keep the roads harmonised or satisfied. He - intimated, I believe, that each road had a certain percentage of the - oil business, and they could divide that up and give each road its - proportion, and in that way keep harmony, which we could not do. - Right after that he made the remark that he thought that we ought to - fix it up with the Standard; we ought to do something so as to all - go on and make some money, and I think we gave him very distinctly - to understand that we didn’t propose to enter into any ‘fix up’ - where we would lose our identity, or sell out, or be under anybody - else’s thumb. I believe that he went so far as to say that he would - see the Standard, and do everything he could to bring that thing - about. We told him very clearly that we didn’t want any interference - in that direction, and if there was anything to be done, we thought - we were quite capable of doing it. The interview perhaps lasted an - hour. There was a great deal of talk of one kind and another, but - this is, I think, the substance. This interview was in March, 1878, - I think. - - “Another interview at which I was present was either in June or - July. Mr. Scott was present. This interview was brought about - because we had been deprived, as we believed, of getting a - sufficient number of cars we were entitled to. We had telegraphed or - written to Mr. Cassatt—at least, Mr. Ohlen, our agent, had, on - several occasions, and tried to get an interview, and finally this - one was appointed, at which Mr. Scott would be present. When we - arrived there we found Mr. Brundred, from Oil City; and Mr. Scott - went on to state that he thought that we were receiving our fair - proportion of cars. They tried to make us believe and feel, I - suppose, that we were getting our due proportion, when for some - considerable time previous to this we had not been able to do any - business in advance; we could only do business from hand to mouth. - We could not sell any refined oil unless we absolutely had the crude - oil in our possession in New York, and Mr. Lombard, one of our - number, had sold a cargo of crude oil, I think, of 9,000 barrels, - and Denslow and Bush absolutely stopped their refinery for three - weeks consequently, in order to let their oil go to Ayres and - Lombard to finish their vessel, because they would only get three or - four cars a day; and we stopped our place for three weeks to give - them our crude oil, all we could give—our proportion—in order to - lift them out and get their vessel cleared. After trying to impress - upon us that we were getting our proportion of cars, we asked Mr. - Scott substantially the same question we asked Mr. Cassatt in New - York, whether we could have, if there was any means by which we - could have, the same rate of freight as other shippers got, and he - said flatly, ‘No’; and we asked him then if we shipped the same - amount of oil as the Standard, and he said, ‘No,’ and gave the same - reasons Mr. Cassatt had in New York, that the Standard Oil Company - were the only parties that could keep peace among the roads. We - stated to Mr. Scott that we would like to know to what extent we - would be discriminated against, because we wanted to know what - disadvantage we would have to work under. And we went away very much - dissatisfied. All the information we got on that point was from Mr. - Cassatt in New York, when he stated that the discrimination would be - larger on a high rate of freight than on a low rate of freight, - which led us to infer that it was a percentage discrimination. That - is all the point that I recollect we ever got as to the amount of - the commission. We told Mr. Scott that if they hadn’t sufficient - cars on their road we would like to put some on, and he told us - flatly that they had just bought out one line and they would not - allow another one to be put on; that if they hadn’t cars enough they - would build them. He seemed to show considerable feeling that - afternoon, and he said: ‘Well, you have cost us in fighting for you - now a million dollars’ (or a million and a half, something like - that—a very large sum), ‘and we don’t propose to go into another - fight.’”[61] - - -Strange as it may seem there were not only men in the refining business -who were willing to fight under these conditions, there were men among -the very ones who had succumbed at the opening of the Standard’s -onslaught who were ready to try the business again. Among these was -William Harkness, whose experience up to 1876 was related in the -preceding chapter. Mr. Harkness’s next experience in the oil business -was related to the same committee as that already mentioned: - - - “When I was compelled to succumb,” he said, “I thought it was only - temporarily; that the time would come when I could go into the - business I was devoted to. We systematised all our accounts and knew - where the weak points were. I was in love with the business. I - selected a site near three railroads and the river. I took a run - across the water—I was tired and discouraged and used up in 1876, - and was gone three or four months. I came back refreshed and ready - for work, and had the plans and specifications and estimates made - for a refinery that would handle 10,000 barrels of oil a day, right - on this hundred acres of land. I believed the time had arrived when - the Pennsylvania Railroad would see their true interest as common - carriers, and the interest of their stockholders and the business - interest of the city of Philadelphia, and I took those plans, - specifications, and estimates, and I called on Mr. Roberts, - president of the Pennsylvania Railroad Company. I had consulted one - or two other gentlemen, whose advice was worth having, whether it - would be worth my while to go to see President Roberts. I went there - and laid the plans before him, and told him I wanted to build a - refinery of 10,000 barrels capacity a day. I was almost on my knees - begging him to allow me to do that. He said; ‘What is it you want?’ - I said; ‘I simply ask to be put upon an equality with everybody - else, and especially the Standard Oil Company.’ I said; ‘I want you - to agree with me that you will give me transportation of crude oil - as low as you give it to the Standard Oil Company or anybody else - for ten years, and then I will give you a written assurance that I - will do this refining of 10,000 barrels of oil a day for ten years.’ - I asked him if that was not an honest position for us to be in; I, - as a manufacturer, and he, the president of a railroad. Mr. Roberts - said there was a great deal of force in what I said, but he could - not go into any written assurance. He said he would not go into any - such agreement, and I saw Mr. Cassatt. He said in his frank way; - ‘That is not practicable, and you know the reason why.’” - - -As this work of absorption went on steadily, persistently, the -superstitious fear of resistance to proposals to lease or sell which -came from parties known or suspected to be working in harmony with the -Standard Oil Company, which had been strong in 1875, grew almost -insuperable. In Cleveland this was particularly true. A proposal from -Mr. Rockefeller was certainly regarded popularly as little better than a -command to “stand and deliver.” “The coal-oil business belongs to us,” -Mr. Rockefeller had told Mr. Morehouse. “We have facilities; we must -have it. Any concern that starts in business we have sufficient money -laid aside to wipe out”[62]—and people believed him! The feeling is -admirably shown in a remarkable case still quoted in Cleveland—and which -belongs to the same period as the foregoing cases, 1878—a case which -took the deeper hold on the public sympathy because the contestant was a -woman, the widow of one of the first refiners of the town, a Mr. B——, -who had begun refining in Cleveland in 1860. Mr. B——’s principal -business was the manufacture of lubricating oil. Now at the start the -Standard Oil Company handled only illuminating oil, and accordingly a -contract was made between the two parties that Mr. B—— should sell to -Mr. Rockefeller his refined oil, and that the Standard Oil Company -should let the lubricating business in Cleveland alone. This was the -status when in 1874 Mr. B—— died. What happened afterwards has been told -in full in affidavits made in 1880,[63] and they shall tell the story; -the only change made in the documents being to transfer them for the -sake of clarity from the legal third person to the first, and to -condense them on account of space. - -Mrs. B——’s story as told in her affidavit is as follows: - - - “My husband having contracted a debt not long prior to his death for - the first time in his life, I, for the interest of my fatherless - children, as well as myself, thought it my duty to endeavour to - continue the business, and accordingly took $92,000 of the stock of - the B—— Oil Company and afterwards reduced it to $72,000 or $75,000, - the whole stock of the company being $100,000, and continued - business from that time until November, 1878, making handsome - profits out of the business during perhaps the hardest years of the - time since Mr. B—— had commenced. Some time in November, 1878, the - Standard Oil Company sent a man to me by the name of Peter S. - Jennings, who had been engaged in the refining business and had sold - out to the Standard Oil Company. I told Mr. Jennings that I would - carry on no negotiations with him whatever, but that if the Standard - Oil Company desired to buy my stock I must transact the business - with its principal officer, Mr. Rockefeller. Mr. Jennings, as - representing the Standard Oil Company, told me that the president of - the company, Mr. Rockefeller, said that said company would control - the refining business, and that he hoped it could be done in one or - two years; but if not, it would be done, anyway, if it took ten - years to do it. - - “After two or three days’ delay Mr. Rockefeller called upon me at my - residence to talk over the negotiation with regard to the purchase - of my stock. I told Mr. Rockefeller that I realised the fact that - the B—— Oil Company was entirely in the power of the Standard Oil - Company, and that all I could do would be to appeal to his honour as - a gentleman and to his sympathy to do with me the best that he - could; and I begged of him to consider his wife in my position—that - I had been left with this business and with my fatherless children, - and with a large indebtedness that Mr. B—— had just contracted for - the first time in his life; that I felt that I could not do without - the income arising from this business, and that I had taken it up - and gone on and been successful, and I was left with it in the - hardest years since my husband commenced the business. He said he - was aware of what I had done, and that his wife could never have - accomplished so much. I called his attention to the contract that my - husband had made with him in relation to carbon oil, whereby the - Standard Oil Company agreed not to touch the lubricating branch of - the trade carried on by my husband, and reminded him that I had held - to that contract rigidly, at a great loss to the B—— Oil Company, - but did so because I regarded it a matter of honour to live up to - it. I told him that I had become alarmed because the Standard Oil - Company was getting control of all the refineries in the country, - and that I feared that the said Standard Oil Company would go into - the lubricating trade, and reminded him that he had sent me word - that the Standard Oil Company would not interfere with that branch - of the trade. He promised, with tears in his eyes, that he would - stand by me in this transaction, and that I should not be wronged; - and he told me that, in case the sale was made, I might retain - whatever amount of the stock of the B—— Oil Company I desired, his - object appearing to be only to get the controlling stock of the - company. He said that while the negotiations were pending he would - come and see me, and I thought that his feelings were such on the - subject that I could trust him and that he would deal honourably by - me. - - “Seeing that I was compelled to sell out, I wanted the Standard Oil - Company to make me a proposition, and endeavoured to get them to do - so, but they would not make a proposition. I then made a proposition - that the whole stock of the B—— Oil Company with accrued dividends - should be sold to said Standard Oil Company for $200,000, which was, - in fact, much below what the stock ought to have been sold for; but - they ridiculed the amount, and at last offered me only $79,000, not - including accounts, and required that each stockholder in the B—— - Oil Company should enter into a bond that within the period of ten - years he or she would not directly or indirectly engage in or in any - way be concerned in the refining, manufacturing, producing, piping, - or dealing in petroleum or in any of its products within the county - of Cuyahoga and state of Ohio, nor at any other place whatever. - - “Seeing that the property had to go, I asked that I might, according - to the understanding with the president of the company, retain - $15,000 of my stock, but the reply to this request was; ‘No - outsiders can have any interest in this concern; the Standard Oil - Company has “dallied” as long as it will over this matter; it must - be settled up to-day or go,’ and they insisted upon my signing the - bond above referred to. - - “The promises made by Mr. Rockefeller, president of the Standard Oil - Company, were none of them fulfilled; he neither allowed me to - retain any portion of my stock, nor did he in any way assist me in - my negotiations for the sale of my stock; but, on the contrary, was - largely instrumental in my being obliged to sell the property much - below its true value, and requiring me to enter into the oppressive - bond above referred to. - - “After the arrangements for the sale of the refinery and of my stock - were fully completed and the property had been sold by myself and - the other stockholders, and after I had made arrangements for the - disposition of my money, I received a note from Mr. Rockefeller, in - reply to one that I had written to him threatening to make the - transaction public, saying that he would give me back the business - as it stood, or that I might retain stock if I wished to, but this - was after the entire transaction was closed, and such arrangements - had been made for my money that I could not then conveniently enter - into it; and I was so indignant over the offer being made at that - late day, after my request for the stock having been made at the - proper time, that I threw the letter into the fire and paid no - further attention to it.”[64] - - -The letter which Mrs. B—— destroyed was included in the affidavit in -which Mr. Rockefeller answered Mrs. B——’s statement. It reads: - - - “November 13, 1878. DEAR MADAM: I have held your note of 11th inst., - received yesterday, until to-day, as I wished to thoroughly review - every point connected with the negotiations for the purchase of the - stock of the B—— Oil Company, to satisfy myself as to whether I had - unwittingly done anything whereby you could have any right to feel - injured. It is true that in the interview I had with you I suggested - that if you desired to do so, you could retain an interest in the - business of the B—— Oil Company, by keeping some number of its - shares, and then I understood you to say that if you sold out you - wished to go entirely out of the business. That being my - understanding, our arrangements were made in case you concluded to - make the sale that precluded any other interests being represented, - and therefore, when you did make the inquiry as to your taking some - of the stock, our answer was given in accordance with the facts - noted above, but not at all in the spirit in which you refer to the - refusal in your note. In regard to the reference that you make as to - my permitting the business of the B—— Oil Company to _be taken_ from - you, I say that in this, as all else that you have written in your - letter of 11th inst., you do me most grievous wrong. It was of but - little moment to the interests represented by me whether the - business of the B—— Oil Company was purchased or not. I believe that - it was for your interest to make the sale, and am entirely candid in - this statement, and beg to call your attention to the time, some two - years ago, when you consulted Mr. Flagler and myself as to selling - out your interests to Mr. Rose, at which time you were desirous of - selling at _considerably less price_, and upon time, than you have - now received in cash, and which sale you would have been glad to - have closed if you could have obtained satisfactory security for the - deferred payments. As to the price paid for the property, it is - certainly three times greater than the cost at which we could - construct equal or better facilities; but wishing to take a liberal - view of it, I urged the proposal of paying the $60,000, which was - thought much too high by some of our parties. I believe that if you - would reconsider what you have written in your letter, to which this - is a reply, you must admit having done me great injustice, and I am - satisfied to await upon innate sense of right for such admission. - However, in view of what seems your present feelings, I now offer to - restore to you the purchase made by us, you simply returning the - amount of money which we have invested and leaving us as though no - purchase had been made. Should you not desire to accept this - proposal, I offer to you one hundred, two hundred, or three hundred - shares of the stock at the same price that we paid for the same, - with this addition, that we keep the property we are under - engagement to pay into the treasury of the B—— Oil Company, an - amount which, added to the amount already paid, would make a total - of $100,000, and thereby make the shares $100 each. - - “That you may not be compelled to hastily come to conclusion, I will - leave open for three days these propositions for your acceptance or - declination, and in the meantime believe me, - - Yours very truly, - “JOHN D. ROCKEFELLER.” - - -Mr. Rockefeller says further in the affidavit from which this letter is -drawn: “It is not true that I made any promises that I did not keep in -the letter and spirit, and it is not true that I was instrumental to any -degree in her being obliged to sell the property much below its true -value, and I aver that she was not obliged to sell out, and that such -was a voluntary one upon her part and for a sum far in excess of its -value; and that the construction which was purchased of her could be -replaced for a sum not exceeding $20,000.”[65] - -It is probably true, as Mr. Rockefeller states, that he could have -reproduced Mrs. B——’s plant for $20,000; but the plant was but a small -part of her assets. She owned one of the oldest lubricating oil -refineries in the country, one with an enviable reputation for good work -and fair dealing, and with a trade that had been paying an annual net -income of from $30,000 to $40,000. It was this income for which Mr. -Rockefeller paid $79,000; this income with the old and honourable name -of the B—— Oil Company, with not a few stills and tanks and agitators. - -It is undoubtedly true, as Mr. Rockefeller avers, that Mrs. B—— was not -obliged to sell out, but the fate of those who in this period of -absorption refused to sell was before her eyes. She had seen the twenty -Cleveland refineries fall into Mr. Rockefeller’s hands in 1872. She had -watched the steady collapse of the independents in all the refining -centres. She had seen every effort to preserve an individual business -thwarted. Rightly or wrongly she had come to believe that a refusal to -sell meant a fight with Mr. Rockefeller, that a fight meant ultimately -defeat, and she gave up her business to avoid ruin. - - - - - CHAPTER SEVEN - THE CRISIS OF 1878 - - A RISE IN OIL—A BLOCKADE IN EXPORTS—PRODUCERS DO NOT GET THEIR SHARE - OF THE PROFITS—THEY SECRETLY ORGANISE THE PETROLEUM PRODUCERS’ UNION - AND PROMISE TO SUPPORT PROPOSED INDEPENDENT PIPE-LINES—ANOTHER - INTERSTATE COMMERCE BILL DEFEATED AT WASHINGTON—“IMMEDIATE - SHIPMENT”—INDEPENDENTS HAVE TROUBLE GETTING CARS—RIOTS - THREATENED—APPEAL TO GOVERNOR HARTRANFT—SUITS BROUGHT AGAINST UNITED - PIPE-LINES, PENNSYLVANIA RAILROAD AND OTHERS—INVESTIGATIONS - PRECIPITATED IN OTHER STATES—THE HEPBURN COMMISSION AND THE OHIO - INVESTIGATION—EVIDENCE THAT THE STANDARD IS A CONTINUATION OF THE - SOUTH IMPROVEMENT COMPANY—PRODUCERS FINALLY DECIDE TO PROCEED - AGAINST STANDARD OFFICIALS—ROCKEFELLER AND EIGHT OF HIS ASSOCIATES - INDICTED FOR CONSPIRACY. - - -It was clear enough by the opening of 1878 that Mr. Rockefeller need no -longer fear any serious trouble from the refining element. To be sure -there were scattered concerns still holding out and some of them doing -very well; but his latest move had put him in a position to cut off or -at least seriously to interfere with the very raw material in which they -worked. It was hardly to be expected after the defeat of the -Pennsylvania that any railroad would be rash enough to combine with even -a strong group of refiners. As for independent pipe-lines, there were so -many ways of “discouraging” their building that it did not seem probable -that any one would ever go far. It was only a matter of time, then, when -all remaining outside refiners must come into his fold or die. Mr. -Rockefeller’s path would now have been smooth had it not been for the -oil producers. But the oil producers, naturally his enemy, he being the -buyer and they the seller, had become in the six years before Mr. -Rockefeller had made himself the only gatherer of their oil, -irreconcilable opponents of whatever he might do. The South Improvement -Company they regarded rightly enough as devised to control the price of -their product, and that scheme they wrongfully laid entirely at Mr. -Rockefeller’s door. Mr. Rockefeller had been only one of the originators -of the South Improvement Company, but the fact that he had become later -practically its only supporter, that he was the only one who had -profited by it, and that he had turned his Cleveland plant into a -machine for carrying out its provisions, had caused the oil country to -fix on him the entire responsibility. Then the oil men’s experience with -Mr. Rockefeller in 1873 had been unfortunate. They charged the failure -of their alliance to his duplicity. There is no doubt that Mr. -Rockefeller played a shrewd and false game with the oil men in 1873, but -the failure of their alliance was their own fault. They did not hold -together—they failed to limit their production as they agreed, they -suspected one another, and at a moment, when, if they had been as -patient and wise as their great opponent they would have had the game in -their own hands, and him at their feet, as he had been in 1872, for the -sake of immediate returns, they abandoned some of the best features of -their organisation, and allied themselves with a man they distrusted. -When that alliance failed they threw on Mr. Rockefeller’s shoulders a -blame which they should have taken on their own. - -Another very real cause for their anxiety and dislike was that as the -refiners’ alliance progressed the refiners made a much larger share of -the profits than the producers thought fair. The abandoning of their -alliance in 1873 had of course put an end to their measures for limiting -production and for holding over-production until it could be sold at the -prices they thought profitable. The drill had gone on merrily through -1873, 1874, and 1875, regardless of consumption or prices. By the end of -1874 there were over three and a half million barrels of oil in stock, -more than twice what there had ever been before. Production was well to -a million barrels a month and prices that year averaged but $1.15 a -barrel. For men who considered three dollars a starvation price this was -indeed hard luck. Things looked better by the end of 1875, for -production was falling off. By March, 1876, stocks had been so reduced -that there was strong confidence that the price of crude oil must -advance. By June the Oil City Derrick began to prophesy “three-dollar -oil” and to advise oil men to hold crude for that price. In August three -dollars was reached in the Oil City exchange. It had been nearly four -years since that price had been paid for oil, and the day the point was -reached (August 25) the brokers fairly went mad. They jumped on their -chairs, threw up their hats, beat one another on the back, while the -spectators in the crowded galleries, most of them speculators, yelled in -sympathy. Before six o’clock that day oil reached $3.11¼. Nobody thought -of stopping because it was supper time. The exchange was open until -nearly midnight, prices booming on to $3.17½. It seemed like old times -in the Oil Region—the good old flush times when people made a fortune -one day and threw it away the next! - -Of course refined oil went up steadily with crude. Refined reached 21⅜ -cents in New York the day of this boom at Oil City. The day following -the rise was one of the most exciting the oil exchange had ever seen. -“Never before,” declared the Derrick in its report, “was so much -business done.” From early in the morning until ten o’clock at night the -exchange was crowded by frantic speculators. Their awful excitement was -clear from their blanched faces and wild voices. Fully 800,000 barrels -of oil exchanged hands that day, the advance between the time the -exchange opened and its close was over fifty-five cents. Refined in New -York advanced in accordance with the market on the creek, closing at -twenty-four cents. This went on for several days, when a new element in -the situation began to force itself on the oil men’s attention. One of -the chief reasons on which they based their confidence in high prices -for crude oil was the fact that the foreigners were short of refined -oil. It was the custom then, as now, for exporters to buy their oil for -the winter European trade in the late summer and early fall. When the -boom began the harbour at New York was beginning to fill up with ships -for cargoes. But to the consternation of the oil men intent on keeping -up the boom, the exporters were refusing to buy. They were declaring the -price to which refined had risen to be out of proportion to the price of -crude. More, they declared the latter a speculative price—only once, -they argued, had it touched four dollars, and the refiners were not -buying at that price for manufacture. They were holding refined too -high. It was early in September when the realisation came upon the Oil -Regions that a new element was in the problem—a veritable blockade in -exports. As the days went on they saw that this was no temporary affair. -They saw that Mr. Rockefeller’s combination was at last carrying out -just what it had been organised to do—forcing the price it wanted for -refined. Day after day refined was held at twenty-six cents. Day after -day the exporters refused to buy. It was not until the end of September, -in fact, that they began to yield—as it was inevitable they should do, -for the game was certainly in the hands of the refiners, and Europe had -to have its light. The exporters began to see too that if they held off -longer they might have to pay higher prices, for it was rumoured that -the Standard Combination was shutting down its factories, literally -making refined scarce, while crude oil was piling up in Pennsylvania! - -With the yielding of the exporter exactly what they feared occurred, the -price was raised! The exporters balked again. The matter began to -attract public attention. The New York Herald was particularly active in -airing the situation and did not hesitate to denounce it as a “Petroleum -Plot.” The leaders were interviewed, among them Mr. Rockefeller. Mr. -Rockefeller still held to his theory that to make oil dear was worthy of -public approval. They had aimed to control the price of oil in a -perfectly legitimate way, he told the Herald reporter, and the exporters -would have to yield to their prices. By the end of October New York -harbour was full of vessels—a mute protest against the corner—and it was -not until November that the exporters fully gave in and began to take -all the oil they could get at prices asked, which ranged from twenty-six -to thirty-five cents. And these prices were held all through the winter -of 1876–77, up to February 22. They were held regardless of the price of -crude, for, do their utmost, the producers could not keep their oil up -to the corresponding price of refined. According to the scale of -relative prices then accepted, twenty-six cents a gallon for refined -meant five dollars a barrel for crude, yet there was not a month in the -entire period of this hold-up that crude averaged that price. In -December, when the average price of refined was 29⅜ cents, crude was but -$3.78⅛ a barrel. The producers held meetings and passed resolutions, -cursed the refiners and talked of building independent refineries, -filled the columns of the Derrick with open letters advocating a -shut-down, an alliance of their own, restrictive legislation, an oil -men’s railway, and what was more to the point some of them supported, -with more or less fidelity, the efforts to build up counter movements -noted in the last chapter: the Columbia Conduit Line, the seaboard -pipe-line, and especially the alliance with the Empire Transportation -Company, attempted in the spring of 1877. There seemed more hope in this -last combination than in any other movement, for they had faith in -Colonel Potts, and besides they were accustomed to seeing the -Pennsylvania Railroad get what it wanted. The defeat of the Pennsylvania -was therefore the heavier blow. Indeed, the news of the sale of the -Empire pipe-lines to the Standard was like the sounding of the tocsin in -the angry and baffled Oil Regions. It revived the spirit of 1872. But it -was the spirit of 1872 with new dignity and a discretion such as had -never been before seen in the blatant region. In every town from McKean -County southwest to Butler the oil towns hastened to organise themselves -into a secret society. Little by little it came out that a Producers’ -Union had been organised. From all that could be learned it looked very -much as if the Petroleum Producers’ Union had come into existence to do -business. On November 21, 1877, the first meeting of the new -organisation was held, “the Petroleum Parliament” or “Congress” it was -called. This Congress, which met in Titusville, was composed of 172 -delegates. It was claimed that it represented at least 2,000 oil -producers, and not less than seventy-five millions in money. It is -certain it included the representative men of the Oil Regions, those to -whose daring, hard work, and energy the discovery and development of the -oil fields, as they were known at that time, were entirely due. - -[Illustration: - - WOODEN CAR TANKS -] - -[Illustration: - - BOILER TANK CARS -] - -[Illustration: - - WOODEN TANKS FOR STORING OIL -] - -[Illustration: - - RAILROAD TERMINAL OF AN EARLY PIPE LINE -] - -For four days the Congress was in session, and it is a remarkable -comment on the seriousness with which it had undertaken its work that, -although reporters from all parts of the country interested in oil were -present, nothing leaked out. In December a second session of four days -was held in Titusville, but no announcement of what was doing was made -to the press. Indeed, it was only as lines of action developed that the -public became familiar with what the producers had resolved on in the -days of secret session which they had held. - -Their resolutions had been eminently wise and they undertook their -support vigorously and intelligently. First and foremost they resolved -to stand by all efforts to secure an outlet to the seaboard independent -of the Standard and the allied railroads. Two enterprises were put -before them at once. The first was what was known as the Equitable -Petroleum Company, an organisation started by one of the most -resourceful and active independent men in the oil country, one of whom -we are to hear more, Lewis Emery, Jr. This company, in which some 200 -oil producers in the Bradford field had taken stock, proposed to lay a -pipe-line to Buffalo and to ship their oil thence by the Erie Canal. -They had acquired a right of way to Buffalo and had capital pledged to -carry out the project. The second enterprise to come before the newly -formed union was much more ambitious. It was nothing less than a revival -of Mr. Harley’s enterprise which had attracted so much attention in -1876. It was revived now by the three men who had been operating the -Columbia Conduit Line under a lease—Messrs. Benson, McKelvy and Hopkins, -who had been set free by the sale of that property to the Standard. -Their experience with the pipe-line business had convinced them it was -one of the most lucrative departments of the oil industry. They believed -too that oil could be pumped over the mountains, and no sooner were they -free than they took up Mr. Harley’s old idea and engaged the same -engineer he had brought into the enterprise, General Herman Haupt, to -survey a route from Brady’s Bend on the Allegheny River to Baltimore, -Maryland—a distance of 235 miles. To both of these projects the General -Council of the Union gave promise of support. - -The demand for interstate commerce legislation was renewed at once by -the Union, and in December E. G. Patterson, the head of the committee -having the matter in hand, prepared the first draft of an act which was -put in formal shape by George B. Hibbard, of Buffalo, counsel employed -by the Union for this purpose. Mr. Hibbard also prepared a memorandum of -the law on the subject. The bill prepared by Mr. Patterson and Mr. -Hibbard was introduced into the House of Representatives in May, 1878, -by Lewis F. Watson, whose home was in Warren County, Pennsylvania. It -was called into committee and came out as the Regan bill and as such was -passed at the end of the year by the House, but only to be smothered -later in the Senate. At the same time that the effort was going in -Washington for relief the Legislature of Pennsylvania was being besieged -again for a free pipe-line bill and an anti-discrimination bill. Both of -these projects failed, and the committee having them in charge said -bitterly in its report to the Union: “How well we have succeeded at -Harrisburg you all know. It would be in vain for your committee to -describe the efforts of the Council in this direction. It has been -simply a history of failure and disgrace. If it has taught us anything, -it is that our present law-makers, as a body, are ignorant, corrupt and -unprincipled; that the majority of them are, directly or indirectly, -under the control of the very monopolies against whose acts we have been -seeking relief.... There has been invented by the Standard Oil Company -no argument or assertion, however false or ridiculous, which has not -found a man in the Pennsylvania Legislature mean enough to become its -champion.” - -On every side indeed the producers hastened to protect themselves -against the Lord of the Oil Regions, as Mr. Rockefeller, not inaptly, -was called, on the completion of his pipe-line monopoly. That they were -not merely alarmists in thinking that they must do something to protect -their interests was demonstrated sooner than was anticipated. The -demonstration was hurried by an unforeseen and difficult situation—a -great outpouring of oil in a new field—the Bradford or Northern Field in -McKean County, Pennsylvania. About the time that Mr. Rockefeller’s -lordship was realised it became certain that a deposit of oil had been -discovered which was going to lead soon to a production vastly in excess -of the consumption, as well as in excess of the then existing facilities -for gathering and storing oil. If Mr. Rockefeller wished to keep his -monopoly he must, it was evident, enter upon a campaign of expansion -calling for an immense expenditure of energy and money. He must lay -pipes in a hundred directions to get the output of new wells; he must -build tanks holding thousands of barrels to receive the oil. And all of -this must be done quickly if rivals were to be kept out of the way. -There was no hesitation on the part of the United Pipe Lines. One of the -greatest construction feats the country has ever seen was put through in -the years 1878, 1879 and 1880 in the Bradford oil field by the Standard -interests. It was a wonderful illustration of the surpassing -intelligence, energy and courage with which the Standard Oil Company -attacks its problems. But while it was putting through this feat it -instituted a policy toward the producers which was regarded by them as -tyrannical and unjustifiable. The first manœuvre in this new policy hit -the producer in a very tender spot, for it concerned the price he was to -receive for oil. - -The method which prevailed at the time in handling and buying and -selling oil was this: At the request of the well owner connected with a -pipe-line his oil was run and credited to him in the pipe-line office. -Here he could hold it as long as he wished by paying a storage charge. -If he wished to sell his “credit balance,” as oil to his account was -called, he simply gave the buyer an order on the line for the oil, and -it was transferred to the account of the new buyer. The pipe-lines -frequently had hundreds of thousands of barrels of oil in hand, and they -traded with this oil as banks do with their deposits—that is, they -issued certificates for each 1,000 barrels of oil on hand, and these -certificates were negotiable like any other paper. Now the United Pipe -Lines acknowledged itself a common carrier, and so was obliged to -discharge the duty of collecting oil on demand, or at least within a -reasonable time after the demand of its patrons. - -But in December, 1877, after the monopoly was completed, they refused to -discharge their obligations in the customary way. On the plea that they -had not sufficient tankage to carry oil in the Bradford field, they -issued an order that no oil would be run in that district for any one -unless it was sold for “immediate shipment”—that is, no oil would be -taken to hold for storage; it would be taken for shipping only. At the -same time the Standard buyer, J. A. Bostwick, decreed that henceforth no -Bradford oil would be bought for immediate shipment unless it was -offered at _less_ than the market price. No fixed discount was set. The -seller was asked what he would take; his offer was, of course, according -to his necessities. Even then an answer was not always immediately -given. The seller was told to come back in five or ten days and he would -be told if his oil would be taken. A feature of the new order, -particularly galling to the oil men, was the manner in which it was -enforced. Formerly the buyer and seller had met freely in the oil -exchanges and their business offices, and transactions had been carried -on as among equals. Now the producers were obliged to form in line -before the United Pipe Lines’ offices and to enter one at a time to -consult the buyer. A line of a hundred men or more often stood during -the hours set before the office, waiting their turn to dispose of their -oil. It should be said in justice to Mr. Bostwick that he was not the -first buyer to take oil at a discount. The producers themselves -frequently offered oil at less than the market price when in need of -money, but Mr. Bostwick was the first buyer in a situation to force them -to make the discount regularly. When these orders came, few of the -producers had sufficient private tankage to take care of any amount of -oil. Here was the situation then: to keep oil from running on the ground -the producer must sell it; but if he sold it he must take a price from -two to twenty-five cents or more below the market. - -The immediate shipment order was not an invention of the United Pipe -Lines. It had been enforced more than once for brief periods by various -lines when they found their capacity overcrowded by some unexpected -situation. In 1872 epizootic among the horses so upset things in the Oil -Regions that for a short time an immediate shipment order was enforced. -In 1874, when the pipe-lines were overtaxed by a great outpouring of oil -in the Lower Field, immediate shipment had been attempted, but at that -time there were still so many independent pipes struggling for business -that the movement met no success. Now, however, the United Pipe Lines -had things its own way. That they were not ready to meet the growing -Bradford production is plain from a study of the figures. There were in -the Oil Regions at the close of 1877, according to the Oil City Derrick, -4,000,000 barrels of tankage. There was on hand at this time 3,127,837 -barrels of oil, but the empty tankage was in the wrong place. In the -Bradford field, where the daily production had suddenly increased from -2,000 barrels in January to 8,451 barrels in December, there was only a -little over 200,000 barrels of tankage.[66] In order to take care of the -oil the pipe-lines began to make nearly all their shipments from that -field, and oil piled up in the Lower Region to the great dissatisfaction -of the producers there. - -As soon as the situation of the Bradford field was realised both the -United Pipes and the producers began a furious campaign of tank -building. By the beginning of April, 1878, the tankage there had been -increased to 1,152,028 barrels.[67] Between April 1 and November 1 -seventy tanks of from 10,000 to 25,000 barrels capacity were built in -McKean County. The greater number of these belonged to the producers. -According to the United Pipe Lines’ statement, there was under their -control in the entire Oil Regions in October 5,200,000 barrels of -tankage, two-thirds of which belonged to producers, but was held by them -under a lease.[68] But oil poured from the ground faster than tanks -could be built. In six months—that is, by July, 1878,—the daily output -of Bradford had become over 18,000 barrels, an increase of 10,000 -barrels a day over that of the previous December. That it was a most -difficult situation for everybody is evident. There was but one way to -prevent loss—shut down the wells and stop the drill; but this the -producers refused to consider. Of course the price of oil went down -rapidly, so far did the production exceed consumption. But why, cried -the producer, when oil is already so low, take advantage of our -necessity and force us into competition with each other; why enforce -this immediate shipment? They answered their question themselves, and -began then to make a charge against the Standard, which they continue to -make to-day; that is, that it habitually meets the extraordinary -expenses to which it is put by depressing the price of crude oil—“taking -it out of the producer.” The Bradford region demanded great investments, -therefore immediate shipment. “The producer pays.” The writer has no -documentary proof that this is Mr. Rockefeller’s policy, but there is no -question that the Oil Region believes it is, and this belief must be -taken into account if one attempts to explain the long warfare of the -oil country on him and his company. It is a common enough thing to-day, -indeed, to hear oil producers in Northwestern Pennsylvania remark -facetiously when a new endowment to Chicago University is reported: -“Yes, I contributed so much on such a day. Don’t you remember how the -market slumped without a cause? The university needed the money, and so -Mr. Rockefeller called on us to stand and deliver.” - -A few months after “immediate shipment” was begun a new cause for -dissatisfaction arose. More or less private tankage leased to the lines -had always been in existence. It enabled a producer to carry his oil -without paying storage, and, of course, it was the business of the -company to empty this storage within a reasonable time after the owner -demanded it. But in the spring the lines, under the same plea of under -capacity, refused to carry out this duty to the tank owner; that is, -they refused to give him his tankage, although he had sold his oil. Thus -A owns 5,000 barrels of tankage. It is full. He sells a portion of it to -Mr. Bostwick and asks the United Pipe Lines to run the oil accumulated -at his wells. But the United Pipe Lines refuses on the ground that the -line is full. The loss to producers incident upon these orders was -terrible. All over the Bradford field men saw their oil running on the -ground, though they offered to sell it at ruinous prices, and though -they might have thousands of barrels of tankage leased to the United -Lines. Yet they did not riot; conscious that their own reckless drilling -had brought on the trouble, they cursed the Standard, and put down more -wells! - -But in the spring of 1878 Mr. Rockefeller and his colleagues instituted -a series of manœuvres which shattered the last remnant of confidence the -oil men had in the sincerity of their claim that they were doing their -utmost to relieve the distressed Oil Regions, and that their measures -were necessary to hold the producers in check. The pipe-lines began to -refuse to load cars for the shippers who supplied the few independent -refiners with oil. The experiences of many of these independent oil men -have been told before the courts. For instance, W. H. Nicholson, the -representative of Mr. Ohlen, of New York, a shipper of petroleum, -testified[69] that in May, 1878, he began to have difficulty in getting -cars. At Olean, one day, Mr. Ohlen telegraphed to the officials of the -Erie road to know if he could get 100 cars to run East. The reply came -back, Yes. About noon, Mr. Nicholson says, he saw Mr. O’Day, the manager -of the United Pipe Lines, in which his oil was stored, and told him that -he was waiting to have his cars loaded. Mr. O’Day at once said he could -not load the cars. “But I have an order from the Erie officials, giving -me the cars,” Mr. Nicholson objected. “That makes no difference,” O’Day -replied; “I cannot load cars except upon an order from Pratt.” Nor would -he do it. The cars were not loaded for Mr. Nicholson, although at that -time he had ten thousand barrels of oil in the United Pipe Lines, and an -order for 100 cars from the officials of the Erie road in his hand. - -B. B. Campbell, at that time president of the Producers’ Union, gave his -experience at this time in the suit of the Commonwealth against the -Pennsylvania Railroad: - - - I never heard of a scarcity of cars until the early part of June, - 1878; I came to Parker about five o’clock in the evening, and found - the citizens in a state of terrible excitement; the Pipe-Lines would - not run oil unless it was sold; the only shippers we had in Parker - of any amount, viz., the agents of the Standard Oil Company, would - not buy oil, stating that they could not get cars; hundreds of wells - were stopped to their great injury; thousands more, whose owners - were afraid to stop them for fear of damage by salt-water, were - pumping the oil on the ground. I used all the influence I had to - prevent an outbreak and destruction of railroad and pipe-lines; I at - once went over to the Allegheny Valley Railroad office and - telegraphed to John Scott, president of the Allegheny Valley - Railroad Company: - - “‘The refusal of the United to run oil unless sold upon immediate - shipment, and of the railroad to furnish cars, has created such a - degree of excitement here that the more conservative part of the - citizens will not be able to control the peace, and I fear that the - scenes of last July will be repeated on an aggravated scale.’ That - message I left in the office about seven o’clock in the evening. I - got up the next morning before seven and received an answer: - - “‘What do you advise should be done? John Scott.’ I answered: ‘Will - meet you to-morrow morning,’ which would be Saturday. - - “On Saturday morning I came in on an early train and met at the - depot Mr. Shinn, then, I believe, vice-president of the Allegheny - Valley Railroad Company, David A. Stewart, one of the directors of - the road, and Thomas M. King, assistant superintendent. I spoke very - plainly to Mr. Shinn, telling him that the idea of a scarcity of - cars on daily shipments of less than 30,000 barrels a day was such - an absurd, barefaced pretence that he could not expect men of - ordinary intelligence to accept it, as the preceding fall, when - business required, the railroads could carry day after day from - 50,000 to 60,000 barrels of oil. Mr. Shinn stated clearly that I - knew that the Allegheny Valley Railroad Company did not control the - oil business over its line, but was governed entirely and - exclusively by orders received from the Pennsylvania Railroad - Company. I then requested him to be the vehicle of communicating to - the Pennsylvania Railroad officials my views on the subject, telling - him that I was convinced that unless immediate relief was furnished - and cars afforded there would be an outbreak in the Oil Regions. - After further conversation we parted. My interview with them was not - as officials of the Allegheny Valley Railroad Company, but as - representatives of the oil traffic carried and controlled by the - Pennsylvania road. On the next Monday I returned to Parker. After - passing Redbank, where the low-grade road, the connecting link - between the Valley Road and the Philadelphia and Erie Road, meets - the Valley Road—between that point and Parker—the express train was - delayed for over half an hour in passing through _hundreds of empty - oil cars_.”[70] - - -In June another exasperating episode occurred, growing out of the -attempts of the oil men to secure independent routes to the seaboard. As -we have seen, two enterprises had been launched late in 1877 under the -patronage of the Petroleum Producers’ Union. As soon as the Equitable -had acquired its right of way to Buffalo, Mr. Emery, the head of the -company, his papers in hand, sought an interview with representatives of -the Buffalo and McKean road, and told them if they did not consent that -the Equitable lay a pipe-line to their road, and did not contract to -carry the oil from that connection to Buffalo, the pipe-line to Buffalo -would be laid. After considerable negotiation a contract was made with -the railroad, and by June the new company was ready with pipe-line, cars -and barges to carry oil to New York. But no sooner did they attempt to -begin operations than the railroad, under pressure from the Pennsylvania -Railroad it was claimed, refused to carry out its contracts. The cars -the Equitable ordered sent to the loading track were refused, a side -track it had laid was torn up, the frog torn out; everything, indeed, -was done to prevent the Equitable doing business, though finally a -vigorous appeal to the law brought the road to terms, and in July oil -began to flow Eastward by this indirect route. No sooner did the -Standard find that the Equitable people were really doing business than -they appealed to the railroads. A meeting of the representatives of the -trunk lines was held at Saratoga in July, and the rates on crude -Eastward were dropped to eighty cents to meet the new competition. - -While this fight was going on against the Equitable all sorts of -interference were being put in the way of the seaboard line between -Brady’s Bend and Baltimore. It was ridiculed as chimerical to attempt to -pump oil over the mountains, and General Haupt was declared to be a -visionary engineer with a record of failures. All the old stories -retailed in 1876 were dragged out again. The farmers were told that the -leakage from the pipe-line would ruin their fields and endanger their -buildings, and an active campaign to excite prejudice was carried on -again in the farmers’ papers. Philadelphia and Pittsburg both fought the -plan, the press and chambers of commerce opposing the free pipe bill at -that time before the Legislature, and the project generally. In -Pittsburg the opposition created almost a riot, for the oil producers of -the Lower Field, who had long bought their supplies there, now -threatened to boycott the city if the pipe-line was fought. So strong -was the opposition that capital took fright and the company found it -most difficult to secure funds. This opposition to the pipe-line was, of -course, charged against the Standard and the Pennsylvania Railroad. - -Now, while the railroads were refusing cars to independent shippers,—or -if they gave an order for them, the United Pipe Lines were refusing to -load them,—while the Standard and the railroads were doing their utmost -to prevent the Equitable Line doing business, and were discouraging in -every way the seaboard pipe-line—new routes which would take care of a -proportion, at least, of the oil which they claimed they could not -handle—thousands of barrels of oil were running on the ground in -Bradford, and two of the independent refineries of New York shut down -entirely in order that a third of their number might get oil enough to -fill an order. - -This interference with the outside interests, thus preventing the small -degree of relief which they would have afforded, and a growing -conviction that the Standard meant to keep up the “immediate shipment” -order, at least until it had built the pipes and tanks needed in the -Bradford field, finally aroused the region to a point where riot was -imminent. The long line of producers who filed into the United Pipe -Lines’ office day after day to sell their oil at whatever prices they -could get for it, and who, having put in an offer which varied according -to their necessities, were usually told to come back in ten days, and -the buyer would see whether he wanted it or not—this long line of men -began to talk of revolution. Crowds gathered about the offices of the -Standard threatening and jeering. Mysterious things, cross-bones and -death-heads, were found plentifully sprinkled on the buildings owned by -the Standard interests. More than once the slumber of the oil towns was -disturbed by marching bodies of men. It was certain that a species of -Kuklux had hold of the Bradford region, and that a very little spark was -needed to touch off the United Pipe Lines. In the meantime things were -scarcely less exciting in the Lower Fields. The “immediate shipment” -order was looked upon there as particularly outrageous, because there -was no lack of lines or tanks in that field, and when, in the summer of -1878, there was added to this cause an unjustifiable scarcity of cars, -excitement rose to fever heat. - -The only thing which prevented a riot at this time and great destruction -of property, if not of life, was the strong hand the Petroleum -Producers’ Union had on the country. Fearing that if violence did occur -the different movements they had under way would be prejudiced, they -sent a committee of twenty-five men to Harrisburg to see Governor -Hartranft. They laid before him and the attorney-general of the state -the grievance of the oil producers in an “appeal” reviewing the history -of the industry.[71] They demanded that the United Pipe Lines be made to -perform its duty as a public carrier, and the railroads be made to cease -their discrimination against shippers both in the matter of rebates and -in furnishing cars. They called the Governor’s attention to the fact -that there were already existing laws touching these matters which, in -their judgment, met the case, and if the existing laws did not give them -relief, that it was the plain duty of the executive to call a meeting of -the Legislature and pass such acts as would do so. Governor Hartranft -was much stirred by the story of the producers. He went himself to the -Oil Regions to see the situation, and in August directed the producers -to put their demands into the form of an appeal. This was done, and it -was decided to bring proceedings by writ of _quo warranto_ against the -United Pipe Lines, and by separate bills in equity against the -Pennsylvania Railroad and the other lines doing business in the state. -It was September before the state authorities began their investigation -of the United Pipe Lines, the hearings being held in Titusville. Many -witnesses summoned failed to appear, but enough testimony was brought -out in this investigation to show that the railroads had refused to -furnish cars for independents when they had them empty, and that the -United Pipe Lines had clearly violated its duty as a common carrier. In -his report on this investigation the secretary of internal affairs, -William McCandless, rendered a verdict that the charges of the oil -producers had not been substantiated in any way that demanded action. - -The indignation which followed this report was intense. It found a vent -in the hanging in effigy of McCandless, who was universally known in the -state as “Buck.” In the oil exchange at Parker, on the morning of -October 19, the figure of a man was found hanged by the neck to a -gallows, and the producers left it hanging there all day, so that they -might jeer and curse it. Across the forehead of the effigy in large -blood-red letters were the words: - - ........................... - . . - . PENNSYLVANIA RAILROAD . - . . - ........................... - -Pinned to the gallows there was a card bearing a quotation from -Secretary McCandless’s report: - - ..................................................... - . . - . The charges of the oil producers have not been . - . substantiated in any way that demands action. . - . . - ..................................................... - -In Bradford a huge effigy hung in the streets all day, and in the -village of Tarport, near by, another swayed on the gallows. They pulled -down the effigy at Bradford, and drew from a pocket what purported to be -a check signed by John D. Rockefeller, president of the Standard Oil -Company, in favour of “Buck” McCandless, for $20,000, and endorsed by -the Pennsylvania Railroad Company. That represented the price, they -said, that McCandless got for signing the report. Throughout the oil -country there was hardly an oil producer to be found not associated with -the Standard Oil Company who did not believe that McCandless had sold -himself and his office to the Standard Oil Combination for $20,000, and -used the money to help in his Congressional canvass. - -The excitement in the Oil Regions spread all over the country. Something -of the importance the press attached to it may be judged from the way -the New York Sun handled the question. For six weeks it kept one of the -ablest members of its staff in the Oil Regions. Six columns of the first -page of the issue for November 13 was taken up with the story of the -excitement, coupled with the full account of the South Improvement -Company, and the development of the Standard Oil Company out of that -concern. On November 23 the first page contained four columns more under -blazing headings. - -Early in 1879 the hearing in the suits in equity brought by the -commonwealth against the various transportation companies of which the -producers had been complaining were begun. The witnesses subpœnaed -failed at first to appear, and when on the stand they frequently refused -to reply; but it soon became apparent to them that the state authorities -were in earnest, and that they must “answer or go to Europe.” By March, -1879, an important array of testimony had been brought out. Among the -Standard men who had appeared had been John D. Archbold, William Frew, -Charles Lockhart and J. J. Vandergrift. A score or more of producers -also appeared. The most important witness from the railroad circles, -and, indeed, the most important witness who appeared, was A. J. Cassatt. -Mr. Cassatt’s testimony was startling in its candour and its -completeness, and substantiated in every particular what the oil men had -been claiming: that the Pennsylvania Railroad had become the creature of -the Standard Oil Company; that it was not only giving that company rates -much lower than to any other organisation, but that it was using its -facilities with a direct view of preventing any outside refiner or -dealer in oil from carrying on an independent business.[72] - -The same or similar conditions, not only in oil, but in other products, -which led to these suits, led to investigations in other states. Toward -the end of 1878 the Chamber of Commerce of New York City demanded from -the Legislature of the state an investigation of the New York railroads. -This investigation was carried on from the beginning of 1879. The -revelations were amazing. Before the Hepburn Commission, as it was -called from the name of the chairman, was through with its work there -had appeared before it to give testimony in regard to the conduct of the -Standard Oil Company and of the relation of the Erie and the Central -roads to it, H. H. Rogers, J. D. Archbold, Jabez A. Bostwick and W. T. -Sheide. A large number of independent oil men had also appeared. William -H. Vanderbilt had been examined, and G. H. Blanchard, the freight agent -of the Erie road, had given a full account of the relation of the Erie -to the Standard, perhaps the most useful piece of testimony, after that -of Mr. Cassatt, belonging to this period of the Standard’s history.[73] - -At the same time that the Pennsylvania suits were going on, and the -Hepburn Commission was doing its work, the Legislature of Ohio -instituted an investigation. It was commonly charged that this -investigation was smothered, but it was not smothered until H. M. -Flagler had appeared before it and given some most interesting facts -concerning rebates. A number of gentlemen who were finding it hard to do -oil business also appeared before the Ohio committee and told their -stories.[74] By April, 1879, there had been brought out in these various -investigations a mass of testimony sufficient in the judgment of certain -of the producers to establish the truth of a charge which they had long -been making, and that was that the Standard was simply a revival of the -South Improvement Company. Now the verdict of the Congressional -Committee had been that the South Improvement Company was a conspiracy. -Therefore, said the producers, the Standard Oil Company is a conspiracy. -Their hope had been, from the first, to obtain proof to establish this -charge. Having this they believed they could obtain judgment from the -courts against the officials of the company, and either break it up or -put its members in the penitentiary. The more hotheaded of the producers -believed that they now had this evidence. - -If one will examine the testimony which had been given thus far in the -course of the various examinations one will see that there was reason -for their belief. In the first place, it had been established that all -the stockholders of the South Improvement Company, excepting four, were -now members of the Standard Oil Combination. Indeed, the only persons -holding high positions in the new combination at this date who were not -South Improvement Company men were, Charles Pratt, J. J. Vandergrift, H. -H. Rogers and John D. Archbold. - -The South Improvement Company had been a secret organisation. So was the -new Standard alliance; that is, the most strenuous efforts had been made -to keep it secret; for instance, the sale of the works of Lockhart, -Warden and Pratt to the Standard was kept from the public. Indeed, it -was a year after these sales before even the Erie Railroad knew that Mr. -Rockefeller had any affiliations besides those with Pratt and Company, -and it made its contracts with him on this assumption. When purchases of -refineries were made it was the custom to continue the business under -the name of the original concern; thus, when Mrs. B., of Cleveland, sold -in 1878, as recounted in the last chapter, the persons selling were -obliged to keep the sale secret even from the employees of the concern. -“The understanding was with regard to the sale of the property to the -Standard Oil Company,” said the shipping clerk in his affidavit, “that -it should not be known outside of their own parties, that it was to be -kept a profound secret, and that the business was to be carried on as if -the B—— Oil Company was still a competitor.” The secret rites with which -the contract was made in 1876 between Mr. Rockefeller and Scofield, -Shurmer and Teagle have already been described. - -To keep the relations of the various Standard concerns secret Mr. -Rockefeller went so far, in 1880, as to make an affidavit like the -following: “It is not true, as stated by Mr. Teagle in his affidavit, -that the Standard Oil Company, directly or indirectly through its -officers or agents, owns or controls the works of Warden, Frew and -Company, Lockhart, Frew and Company, J. A. Bostwick and Company, C. -Pratt and Company, Acme Refining Company, Imperial Refining Company, -Camden Consolidated Company, and the Devoe Manufacturing Company; nor is -it true that the Standard Oil Company, directly or indirectly through -its officers or agents, owns or controls the refinery at Hunter’s Point, -New York. It is not true that the Standard Oil Company, directly or -indirectly through its officers or agents, purchased or acquired the -Empire Transportation Company, or furnished the money therefor; nor is -it true that the Standard Oil Company inaugurated or began or induced -any other person or corporation to inaugurate or begin a war upon the -Pennsylvania Railroad Company or the Empire Transportation Company, as -stated in the affidavit of Mr. Teagle.”[75] - -There may be a technical explanation of this affidavit, although the -writer knows of none. There is certainly abundant testimony in existence -that the works of Messrs. Pratt, Lockhart and Warden, at least, had been -bought long before this affidavit was made, and paid for in Standard Oil -Company stock, and that they were working in alliance with that company. -It was shown in the last chapter that on October 17, 1877, the Standard -Oil Company paid $2,500,000 in certified checks on the purchasing price -of the plant of the Empire Transportation Company. - -While none of the other members of the Standard Oil Company examined in -1879 was quite so sweeping in his denials, all of them evaded direct -answers. The reason they gave for this evasion was that the -investigations were an interference with their rights as private -citizens, and that the government had no business to inquire into their -methods. Consequently when asked questions they refused to answer “by -advice of counsel.” Ultimately the gentlemen did answer a great many -questions. But taking the testimony all in all through these years it -certainly is a mild characterisation to say that it totally lacks in -frankness. The testimony of the Standard officials before the Hepburn -Commission was so evasive that the committee in making its report spoke -bitterly of the company as “a mysterious organisation whose business and -transactions are of such a character that its members decline giving a -history or description of it lest this testimony be used to convict them -of a crime.” The producers certainly were right in claiming that secrecy -was a characteristic of the Standard as it had been of the South -Improvement Company. - -The new Standard Combination, like the South Improvement Company, aimed -at controlling the entire refining interest. “The coal-oil business -belongs to us,” Mr. Rockefeller once told a recalcitrant refiner. His -associates were saying the same on all sides; “the object of the -Standard Oil Company is to secure the entire refining business of the -world,” a member of the concern told B. F. Nye, an Ohio producer.[76] - -The method the Standard depended upon to secure this control was the -same as the method of the South Improvement Company—special privileges -in transportation. We have seen how intelligently and persistently Mr. -Rockefeller worked to secure these special privileges until, in 1877, he -had made with all the trunk lines contracts which in every particular -paralleled the contracts which in January, 1872, Messrs. Scott, Gould, -Vanderbilt and McClellan made with the South Improvement Company. He now -had a rebate on every barrel of oil he shipped, and this was given with -the understanding that the railroad should allow no rebate to any other -shipper unless that shipper could guarantee and furnish a quantity of -oil for shipment which would, after deduction of his commission, realise -to the road the same amount of profit realised from the Standard trade. -He also had a drawback on every barrel his rivals shipped. No clause in -the South Improvement Company’s contract with railroads had given more -offence to the oil world than that which called for a drawback to the -company on the oil shipped by outsiders. It will be remembered that the -beneficiaries of this contract were to receive drawbacks of $1.06 a -barrel on all crude oil that outside parties shipped from the Oil -Regions to New York, and a proportionate drawback on that shipped from -other points. The rebate system was considered illegal and unjust, but -men were more or less accustomed to it. The drawback on other people’s -shipment was a new device, and it threw the Oil Region into a frenzy of -rage. It did not seem possible that the Standard would attempt to revive -this practice again, and yet when it had got its hand strongly on the -four trunk lines it made a demand for the drawback. It has already been -recounted how, on February 15, 1878, four months after the Pennsylvania -succumbed to the Standard’s demand, Mr. O’Day wrote to Mr. Cassatt: “I -here repeat what I once stated to you, and which I wish you to receive -and treat as strictly confidential, that we have been for many months -receiving from the New York Central and Erie Railroads certain sums of -money, in no instance less than twenty cents per barrel on _every barrel -of crude oil carried by each of these roads_.... Co-operating as we are -doing with the Standard Oil Company and the trunk lines in every effort -to secure for the railroads paying rates of freight on the oil they -carry, I am constrained to say to you that in justice to the interests I -represent we should receive from your company at least twenty cents on -each barrel of crude oil you transport.” And Mr. Cassatt after seeing -the freight bills showing that both the Central and Erie allowed a -drawback gave orders that the Pennsylvania pay one of 22½ cents. When -Mr. Cassatt was under examination in 1874 the examiner remarked: - -“I understand, Mr. Cassatt, that this 22½ cents paid to the American -Transfer Company is not restricted to all oil that passed through their -lines.” - -“No, sir; it is paid on all oil received and transferred by us.” - -Among the interesting documents presented at this inquiry was a -statement of the crude oil shipments over the Pennsylvania road for -February and March, 1878.[77] They footed up to a total of 343,767½ -barrels. On this amount a discount of twenty cents a barrel was allowed -to the Standard Oil Company through its agent, the American Transfer -Company. Among other independents who shipped this oil was H. C. Ohlen. -In all, Mr. Ohlen shipped 29,876 barrels, and on this the Standard Oil -Company received twenty cents a barrel! That is, after Mr. Ohlen had -paid for his oil, paid for having it carried by the pipe-line to the -railroad, and paid the railroad the full rate of freight without the -commission the Standard received, the Pennsylvania was obliged to turn -over to the Standard Oil Company twenty cents of the amount he had paid -on each barrel! - -The examiner tried very hard to find out if there was a legitimate -reason why such an allowance should have been made to the American -Transfer Company on oil it did not handle. “We pay that,” Mr. Cassatt -said, “as a commission to them to aid in securing us our share of -trade.” “We pay it,” said the comptroller, “for procuring oil to go over -the lines in which the Pennsylvania Railroad Company is interested as -against the New York lines and the New York Central.” - -“Do you understand,” the examiner questioned of one of the auditors, -“that the American Transfer Company secured to the Pennsylvania road the -traffic of the outside refiners of New York (mentioned in the statement -quoted above)?” “I never raised a question of that kind in my mind,” -answered the adroit auditor. - -But the answer was evident. The American Transfer Company had nothing -whatever to do with the oil shipped by Mr. Ohlen or Ayres, Lombard and -Company or J. Rousseaux or any one of the other independents mentioned -in the statement, unless perchance that oil had come originally from the -lines of the American Transfer Company. In that case the shipper had -paid the line for the service rendered, at the time he bought the -oil—the custom then and now. The tax was paid by the Pennsylvania solely -because the Standard Oil Company had the power to demand it. The demand -was made in the name of the American Transfer Company as a blind. -Naturally the proof that the Standard had revived the most obnoxious -feature of the South Improvement Company aroused intense bitterness and -disgust among the oil men. - -Another offensive clause of the 1872 contracts was that pledging the -railroads to lower or raise the gross rates of transportation for such -times and to such extent as might be necessary to overcome competition. -Now, the new contracts of the Standard provided the same arrangement; -that is, they stipulated that the rates were to be lowered if necessary -so as to place the Standard on a parity with shippers by competing -lines. The workings of the clause were illustrated when the producers -got the Equitable Line through in 1878, the railroads dropping their -charge to eighty cents a barrel, and in some cases even less. The -producers certainly had evidence enough for their claim that the -contracts of the South Improvement Company and the Standard Oil Company -with the railroads were similar in every particular as far as principles -were concerned—that they differed alone in the amounts of the rebates -and drawbacks. - -There was plenty of evidence brought out, also, to show that the object -of the Standard operations was like that of the South Improvement -Company—keeping up the price of refined oil. Both combinations were -formed to keep the refined article scarce on the market by controlling -all the refineries and by refusing to sell under competition. The -officials of the South Improvement Company stated under oath that they -hoped to raise the price fifty per cent. The Central Organisation hoped -to put up the price of refined from fifteen to twenty-five cents. As a -matter of fact that organisation when it finally got control of the -market put up the price considerably more. The spectacular demonstration -in the winter of 1876 and 1877 of what could be done in keeping up the -price of refined was still rankling in the minds of the oil men. They -saw that it was by that coup that the Standard had gotten the ready -money to pay for the plant of the Empire Transportation Company—the -money to buy in whatever it wanted—the money to pay the fifty per cent. -dividend to which one of its members testified in the Ohio -Investigation. They remembered that while the refiners had been selling -refined around thirty cents a gallon they had sold crude at less than -four dollars a barrel. Little wonder then that they felt they had -evidence that the Standard had actually done what they had always -claimed it would do if it got hold of the refining interests as it -planned. Even in the case where certain large producers had entered into -a partnership with the Standard on condition that they pay them prices -for crude commensurate with the price of refined, these producers -claimed the agreement had not been kept. One of these cases came to -light in a suit instituted in 1878. It seems that some time in December, -1874, the large oil company of H. L. Taylor and Company sold one-half -interest in its property to the Standard Oil Company. The reason for the -sale the plaintiffs stated in their complaint to be as follows: - - - The extent of their (the Standard’s) business and control over - pipe-lines and refineries had enabled them to procure, and they had - procured from the railways, more favourable terms for transportation - than others could obtain. These advantages and facilities placed it - within their power to obtain, and they did obtain, far better and - more uniform prices for petroleum than could be obtained by the - plaintiffs. The said organisation and firms, by virtue of their - monopoly of the business of refining and transportation of oil, had - been at times almost the only buyers in the market, and at such - times had been enabled to dictate and establish a price for crude - oil far below its actual value, as determined by prices of refined - oil at same dates, and they thus obtained a large share of the - profits which should have fallen to the plaintiffs and other - purchasers. The sale was made, and in consideration of the foregoing - premises, and upon the promise and agreement on the part of the - defendants that the partnership thus formed should have the benefit - of the advantage and facilities of the said defendants, and the - organisations and firms managed and controlled by defendants, in - marketing its oil; that the firm should have to the extent of its - production the advantage of the sales of refined by the defendants - or said Standard Oil Company, either for present or future delivery, - so that there should be at no time any margin or difference between - the ruling price of refined oil, and the price which defendants - would pay the partnership for the crude by it produced, beyond the - necessary cost of refining. This thing formed the inducement and the - larger part of the consideration for the sale of said property to - defendants. The amount actually received for said interest was far - beneath its actual value, and without the agreement on the part of - the defendants to pay to the partnership for its product prices at - all times commensurate with the prices of refined oil, they would - not have sold the said interest nor entered into said partnership. - - * * * * * - - The defendants, although requested to do so, have not only failed, - neglected, and refused to comply with this agreement, but have, by - false and erroneous statements, misled the plaintiffs, and induced - them to consent to the sale to them and to the Standard Oil Company - of large quantities of crude petroleum, produced by the partnership - at prices far below its actual value, to the great loss and damage - of the orators. That on or about December 16, 1876, refined was - selling at a price equivalent to seven dollars for crude oil, at - which time plaintiffs called upon defendants for a compliance with - their agreement, and asked that they take or purchase 210,000 - barrels of the production of the partnership at a price commensurate - with the price of refined at the time. This, defendants neglected - and refused to do, and the partnership was forced to sell the same - at prices varying from three to four dollars, making a loss to the - partnership upon this one transaction of from $600,000 to - $1,000,000, for which said defendants neglect and refuse to account. - - * * * * * - - That the said defendants for themselves, and for the said Standard - Oil Company, and other organisations and firms aforesaid, have since - the formation of the partnership received from the railways a rebate - or drawback in the shape of wheelage, or otherwise, at times as high - as one dollar per barrel upon all oil shipped by them to the - seaboard. That instead of using these advantages which they possess - for the benefit and profit of the partnership, as they covenanted to - do, they have used them against its interest by restraining trade, - preventing competition, and forcing plaintiffs to accept any price - which defendants, the said Standard Oil Company, or the other - organisations aforesaid, might offer for their production. That the - amount of oil produced and sold by the partnership for the three - years beginning with the date of its formation, and ending December - 1, 1877, was 2,657,830 barrels. That the profits of defendants upon - oil refined by them during said period, taking into consideration - the rebates and drawbacks received from the railways, have averaged - at least one dollar per barrel over and above the cost of refining, - and at times as high as four and five dollars. That these profits, - under the partnership agreement that no margin should exist between - crude and refined prices, should to the extent of the production of - the partnership have been paid by defendants to the partnership. - That the amount lost by the partnership and realised by the - defendants, by reason of the failure and refusal of said defendants - to comply with their agreement, is not less than $2,500,000, for - one-half of which defendants should account to your orators, but - which they neglect and refuse to do. - - -Naturally enough the producers now pointed out that the case of the H. -L. Taylor Company was a demonstration of what they had claimed in 1872, -when the South Improvement Company, alarmed at the uprising, offered -them a contract, and what they had always claimed since when the -Standard offered contracts for oil on a sliding scale, viz., that such -contracts were never meant to be kept; that they were a blind to enable -the Standard to make scoops such as they had made in the winter of 1876 -and 1877. - -Taking all these points into consideration— - -First—That the Standard Oil Company, like the South Improvement Company, -was a secret organisation; - -Second—That both companies were composed in the main of the same -parties; - -Third—That it aimed, like its predecessors, at getting entire control of -the refining interest; - -Fourth—That it used the power the combination gave it to get rebates on -its own oil shipments and drawbacks on the shipments of other people; - -Fifth—That it arranged contracts which compelled the railroads to run -out all competition by lowering their rates. - -Sixth—That it aimed to put up the price of refined without allowing the -producer a share of the profits— - -Taking all these points into consideration, many of the producers, -including the president of the Petroleum Producers’ Union, B. B. -Campbell, and certain members of his Council, came to the conclusion -that as they had sufficient evidence against the members of the Standard -Combination to insure conviction for criminal conspiracy, they should -proceed against them. Strenuous opposition to the proceedings, as hasty -and ill-advised, developed in the Council and the Legal Committee, but -the majority decided that the prosecution should be instituted. Mr. -Scott and Mr. Cassatt were omitted from the proposed indictment on the -ground that they were already weary of the Standard, and would cease -their illegal practices gladly if they could. - -On the 29th day of April, 1879, the Grand Jury of the County of Clarion -found an indictment against John D. Rockefeller, William Rockefeller, -Jabez A. Bostwick, Daniel O’Day, William G. Warden, Charles Lockhart, -Henry M. Flagler, Jacob J. Vandergrift and George W. Girty. (Girty was -the cashier of the Standard Oil Company.) There were eight counts in the -indictment, and charged, in brief, a conspiracy for the purpose of -securing a monopoly of the business of buying and selling crude -petroleum, and to prevent others than themselves from buying and selling -and making a legitimate profit thereby; a combination to oppress and -injure those engaged in producing petroleum; a conspiracy to prevent -others than themselves from engaging in the business of refining -petroleum, and to secure a monopoly of that business for themselves; a -combination to injure the carrying trade of the Allegheny Valley and -Pennsylvania Railroad Companies by preventing them from receiving the -natural petroleum traffic; to divert the traffic naturally belonging to -the Pennsylvania carriers to those of other states by unlawful means; -and to extort from railroad companies unreasonable rebates and -commissions, and by fraudulent means and devices to control the market -prices of crude and refined petroleum and acquire unlawful gains -thereby.[78] - -Four of the persons mentioned in the indictment—Messrs. O’Day, Warden, -Lockhart and Vandergrift—all citizens of Pennsylvania, gave bail, and -early in June application was made to Governor Hoyt of Pennsylvania to -issue a requisition before the Governor of New York for the extradition -of the other five gentlemen. - -With damaging testimony piling up day by day in three states, and with -an indictment for conspiracy hanging over the heads of himself and eight -of his associates, matters looked gloomy for John D. Rockefeller in the -spring of 1879. “The good of the oil business” certainly seemed in -danger. - - - - - CHAPTER EIGHT - THE COMPROMISE OF 1880 - - THE PRODUCERS’ SUIT AGAINST ROCKEFELLER AND HIS ASSOCIATES USED BY THE - STANDARD TO PROTECT ITSELF—SUITS AGAINST THE TRANSPORTATION - COMPANIES ARE DELAYED—TRIAL OF ROCKEFELLER AND HIS ASSOCIATES FOR - CONSPIRACY POSTPONED—ALL OF THE SUITS WITHDRAWN IN RETURN FOR - AGREEMENTS OF THE STANDARD AND THE PENNSYLVANIA TO CEASE THEIR - PRACTICES AGAINST THE PRODUCERS—WITH THIS COMPROMISE THE SECOND - PETROLEUM PRODUCERS’ UNION COMES TO AN END—PRODUCERS THEMSELVES TO - BLAME FOR NOT STANDING BEHIND THEIR LEADERS—STANDARD AGAIN ENFORCES - ORDERS OBJECTIONABLE TO PRODUCERS—MORE OUTBREAKS IN THE OIL - REGIONS—ROCKEFELLER HAVING SILENCED ORGANISED OPPOSITION PROCEEDS TO - SILENCE INDIVIDUAL COMPLAINT. - - -No doubt the indictment of Mr. Rockefeller in the spring of 1879 seemed -to him the work of malice and spite. By seven years of persistent effort -he had worked out a well-conceived plan for controlling the oil business -of the United States. Another year and he had reason to believe that the -remnant of refiners who still rebelled against his intentions would -either be convinced or dead and he could rule unimpeded. But here at the -very threshold of empire a certain group of people—“people with a -private grievance,” “mossbacks naturally left in the lurch by the -progress of this rapidly developing trade,” his colleagues described -them to the Hepburn Commission—stood in his way. “You have taken -deliberate advantage of the iniquitous practices of the railroads to -build up a monopoly,” they told him. “We combined to overthrow those -practices so far as the oil business was concerned. You not only refused -to support us in this contention, you persuaded or forced the railroads -to make you the only recipient of their illegal favours; more than that, -you developed the unjust practices, forcing them into forms unheard of -before. Not only have you secured rebates of extraordinary value on all -your own shipments, you have persuaded the railroads to give you a -commission on the oil that other people ship. You are guilty of plotting -against the prosperity of an industry.” And they indicted him with eight -of his colleagues for conspiracy. - -The evidence on which the oil men based this serious charge has already -been analysed. At the moment they brought their suit for conspiracy what -was their situation? They had several months before driven the -commonwealth of Pennsylvania to bring suits against four railroads -operating within its borders and against the Standard pipe-lines for -infringing their duties as common carriers. Partial testimony had been -taken in the case against the Pennsylvania road and in that against the -United Pipe Lines. These suits, though far from finished, had given the -Producers’ Union the bulk of the proof on which they had secured the -indictment of the Standard officials for conspiracy. Now, since the -railroads and the pipe-lines were the guilty ones—that is, as it was -they who had granted the illegal favours, and as they were the only ones -that could surely be convicted, it seems clear that the only wise course -for the producers would have been to prosecute energetically and -exclusively these first suits. But evident as the necessity for such -persistency was, and just after Mr. Cassatt had startled the public and -given the Union material with which it certainly in time could have -compelled the commonwealth to a complete investigation, the producers -interrupted their work by bringing their spectacular suit for -conspiracy—a suit which perhaps might have been properly instituted -after the others had been completed, but which, introduced now, -completely changed the situation, for it gave the witnesses from whom -they were most anxious to hear a loophole for escape. - -For instance, the officials of the Standard pipe-lines had been -instructed to appear on the 14th of May, 1879, to answer questions which -earlier in the trial they had refused to answer “on advice of counsel.” -Now the president of the United Pipe Lines, J. J. Vandergrift, and the -general manager, Daniel O’Day, were both included in the indictment for -conspiracy. The evening before the interrogatory the producers’ counsel -received a telegram from the attorney-general of the state, announcing -that the pipe-line people were complaining that the testimony which they -would be called on to give on the morrow would be used against them in -the conspiracy trial—as it undoubtedly would have been—and that he -thought it only fair that their hearing be postponed until after that -suit. And so the defendants gained time—the chief desideratum of -defendants who do not wish to fight. - -Soon after, the conspiracy case was again used to excellent advantage by -the Standard people in the investigation which was being conducted in -New York before the Hepburn Commission. Mr. Bostwick, the Standard Oil -buyer, whose order to buy immediate shipment oil only at a discount had -been one of the oil men’s chief grievances for a year and a half, was -summoned as a witness; but Mr. Bostwick too was under indictment for -conspiracy, and when the examiners began to put questions to him which -the producers were eager to have answered, he asked: “How can I, a man -soon to be tried for conspiracy, be expected to answer these questions? -I shall incriminate myself.” He was sustained in his plea, and about all -the Hepburn Commission got out of him was, “I refuse to answer, lest I -incriminate myself.” This, then, was the first fruit of the producers’ -hasty and vindictive suit. It had shut the mouths of the important -Standard witnesses. - -Discouraging as this discovery was, however, there was no reason why the -suits against the railroads should not have been pushed through, and the -testimony the officials unquestionably could be made to give, now that -Mr. Cassatt had set the pace, have been obtained. But the Producers’ -Union had lost sight for the moment of the fact that the fundamental -difficulty in the trouble was the illegal discrimination of the common -carriers. The Union was so much more eager to punish Mr. Rockefeller -than it was to punish the railroads, that in bringing the suit for -conspiracy it was even guilty of leniency toward the officials of the -Pennsylvania. Certainly, if there was to be an indictment for -conspiracy, all the supposed conspirators should have been included. It -was by discriminations clearly contrary to the constitution of the state -that the Pennsylvania Railroad had made it possible for Mr. Rockefeller -to achieve his monopoly in Pennsylvania. The Union had proof of these -rebates, but they let off Mr. Scott and Mr. Cassatt because “they -professed the greatest desire to get rid of Standard domination, and -were loudly asserting that they had been victimised and compelled at -times to carry oil freights at less than cost.”[79] Evidently the fate -of the settlement the oil men had made seven years before with Mr. Scott -and the presidents of the other oil-bearing roads had been forgotten. -Naturally enough the railroads took advantage of these signs of leniency -on the part of the producers, and brought all their enormous influence -to bear on the state authorities to delay hearings and bring about a -settlement. The Pennsylvania secured delays up to December, 1879, and -then the Governor ordered the attorney-general to stop proceedings -against the road until the testimony had been taken in the other four -cases; that is, in the cases against (1) the United Pipe Lines; (2) the -Lake Shore and Michigan Southern; (3) the Dunkirk, Allegheny and -Pittsburg, and (4) the Atlantic and Great Western. It was a heavy blow -to the Union, for at the moment its hands were tied by the conspiracy -case, as far as the United Pipe Lines were concerned, and the three -railroads were foreign corporations, only having branches in -Pennsylvania, and accordingly very difficult to reach. The testimony -could have been obtained, however, if the Union had been undivided in -its interests. It would have been done, of course, if the state -authorities had been willing to do what was their obvious duty. But the -state authorities really asked nothing better than to escape further -prosecution of the railroads. The administration was Republican, the -Governor being Henry M. Hoyt. Mr. Hoyt had been elected in the fall of -1878 and so had inherited the suits from Governor Hartranft. He was -pledged, however, to see them through, for before the election the -Producers’ Union had sent him the following letter: - - - “TITUSVILLE, October 23, 1878. - - “HENRY M. HOYT: - - _Sir_—During the past few months, the Association of Producers of - Petroleum, long oppressed in their immediate business and kindred - industries by the persistent disregard of law by certain great - corporations exercising their powers within the state of - Pennsylvania, and daily subjected to incalculable loss by a powerful - and corrupt combination of these corporations and individuals, have - appealed to the executive, legislative and judiciary branches of the - government for relief and protection. - - The questions which they raise for the consideration of the - authorities and the people affect not only themselves but the whole - public, not only the particular calling in which they are engaged, - but nearly all kinds of business in the commonwealth and the nation. - - The Legislature has not responded to the demands made that the - provisions of the constitution shall be speedily enforced by - appropriate legislation. - - The present executive has caused proceedings to be instituted in the - courts looking to relief, if it can be had by process of law, and - these are still pending, while others may be begun. - - In view of the grave duties which will devolve upon you, should you - be chosen to the high office to which you aspire, on behalf of the - Petroleum Producers’ Association I ask from you a definite - expression of your views upon the following subjects: - - First—Will you, if elected, recommend to the Legislature the passage - of laws to carry into effect the third and twelfth sections of the - sixteenth, and the third, seventh and twelfth sections of the - seventeenth articles of the constitution of Pennsylvania? - - Second—If such laws should be passed as referred to in the preceding - question, will you, as Governor, approve them, if constitutional? - - Third—Will you, as Governor, recommend and approve such other - remedial legislation as may be required to cure the evils set forth - in a memorial to Governor Hartranft of August 15, 1878? - - Fourth—In the selection of the law officer of the state, will you, - if elected, secure the services of one who will prosecute with - vigour all proceedings already commenced or that may be instituted, - having in view the subjection of corporations to the laws of the - land? - - Very respectfully, - A. N. PERRIN, - _Chairman Committee_.” - - -Governor Hoyt’s answers were eminently satisfactory: - - - “There were provisions in the constitution,” he wrote, “intended to - compel the railroads and canal companies of the state to the - performance of their duties as common carriers with fairness and - equality, without discrimination, to all persons doing business over - their lines. This policy is just and right. - - “If called to a position requiring official action, I would - recommend and approve any legislation necessary and appropriate to - carry into effect the sections of the constitution referred to. - - “It would be my duty, if elected, to see that no citizen, or class - of citizens even, were subjected to hardship or injustice in their - business, by illegal acts of corporations or others, where relief - lay within executive control. Any proper measures or legislation - which would effectually remedy the grievances set forth in the - memorial addressed to Governor Hartranft would receive my - recommendation and approval. - - “It would be my duty, if elected, to select only such officers as - would enforce obedience to the constitution and laws, both by - corporations and individuals, without fear or favour, and all such - officers would be held by me to strict accountability for the full - and prompt discharge of all their official duties.” - - -Governor Hoyt had indeed begun the suits, all of the testimony in regard -to the Pennsylvania having been taken in his administration. This -testimony must have proved to him that the transgressions of the road -had been far more flagrant than anyone dreamed of—that they had amounted -simply to driving certain men out of business in order to build up the -business of certain other men. His evident duty, as his letter to the -producers shows clearly enough that he realised, was to push the suits -against the railroads even if the oil men entirely withdrew, but instead -of that it became evident in the spring that he was using every -opportunity to delay. Indeed, one reason the producers gave for bringing -the conspiracy suit was that it would give the state authorities a -scapegoat; that they would gladly act vigorously against the Standard if -they were let off from prosecuting the Pennsylvania. Governor Hoyt now -availed himself fully of the vacillation of the Union toward the -railroads, using it as an excuse for not prosecuting the railroad cases. - -But if the producers were half-hearted toward the railroads they were -whole-hearted enough toward the Standard. In spite of the fact that they -had gotten in their own way, so to speak, by bringing their conspiracy -suit, they felt convinced that they had material enough to win it on, -and they sought the extradition of the non-residents who had been -indicted. - -Early in June Governor Hoyt was called upon to issue a requisition for -the extradition of John D. Rockefeller, William Rockefeller, H. M. -Flagler, J. A. Bostwick, Daniel O’Day, Charles Pratt and G. W. Girty. A -full agreement was made before the state officials, but a decision was -deferred repeatedly. Finally, worn out with waiting, Mr. Campbell, in a -telegram to the Governor on July 29, threatened, if there was longer -delay, to make his request for extradition through the public press. The -answer from Harrisburg was that the attorney-general was sick and could -not attend to the matter. Mr. Campbell wired back that he was tired of -“addition, division, and silence,” and he sent out the following letter: - - - “FAIRFIELD, July 31, 1879. - - “TO HIS EXCELLENCY HENRY M. HOYT, - Governor of the Commonwealth of Pennsylvania. - - _Sir_—On behalf of the producers of oil, whom I represent as - president of their General Council, I most respectfully ask a - decision at your hands, of the requisition on the Governor of the - state of New York, for the surrender of the officers of the Standard - Oil Company, indicted by the Grand Jury of Clarion County, and now - believed to be within the limits of the state of New York. - - The case was exhaustively argued before you, more than four weeks - ago, and the great oil interest which I have the honour to represent - has a right to a prompt decision on this vital question. If these - parties—who for their own profit and its ruin control Pennsylvania’s - most valuable product, and compel its greatest carrier to undertake - their warfare and to do their bidding at the sacrifice of its - innocent stockholders—can, under the plea of being ‘aliens,’ defy - the law of Pennsylvania and laugh at our impotent attempts to reach - them, the sooner it is known the better. It is possible that if we - are denied protection within the limits of our commonwealth, we may - obtain justice by appealing to the courts of a sister state, where - at least the defendants will be obliged to admit that they are - residents. - - Your obedient servant, - B. B. CAMPBELL, - _President of Producers’ Council_.” - - -The Governor remained obdurate, nor was the request ever granted. In a -message sent out in January, 1881, Governor Hoyt gave a review of the -case—as he was compelled to do, so great was the popular criticism of -his course in not pushing the suits and in refusing the request for -extradition—in which he attributed his refusal to the negotiations begun -between the railroads and the Producers’ Union. - - - “The details of these negotiations, of course, need not, and did - not, reach the office of the executive department,” he said. “As a - part of them, however, requests were presented in the interest of - the petitioners (the Producers’ Union) to the Governor, not to issue - the requisition, followed again by requests that they be allowed to - go out. Finding that the highest process of the commonwealth was - being used simply as leverage for and against the parties to these - negotiations between contending litigants, and that, however entire - and perfect might have been the good faith in which the criminal - proceedings in Clarion County had been commenced, they were being - regarded and treated as a mere make-weight in the stages of private - diplomacy, I deemed it my duty, in the exercise of a sound - discretion, to suspend action on the requisitions.” - - -[Illustration: - - E. G. PATTERSON - - From 1872 to 1880 the chief advocate in the Oil Region of an - interstate commerce law. Assisted in drafting the bills of 1876 and - 1880. Abandoned the independent interests at the time of the - compromise of 1880. -] - -[Illustration: - - ROGER SHERMAN - - Chief counsel of the Petroleum Producers’ Union from 1878 to 1880. - From 1880 to 1885 counsel for the Standard Oil Company. From 1885 to - his death in 1893 counsel of the allied independents. -] - -[Illustration: - - BENJ. B. CAMPBELL - - President of the Petroleum Producers’ Union from 1878 to 1880. - Independent refiner and operator until his death. -] - -[Illustration: - - JOSIAH LOMBARD - - Prominent independent refiner of N. Y. City, whose firm was the only - one to keep its contract with the Tidewater Pipe Line Company in - 1880. -] - -The writer has examined all the private correspondence which passed at -this time between the litigants, but finds no proof of Governor Hoyt’s -statement that the Union at one time ceased its demands for Mr. -Rockefeller’s extradition. - -The conspiracy suit had been set for the August session of the Clarion -County court. When August came the Standard sought a continuance, and it -was granted. The delay did not in any way discourage the producers, and -when Mr. Rockefeller became convinced of this he tried conciliation. -“Come, let us reason together,” has always been a favourite proposition -of Mr. Rockefeller. He would rather persuade than coerce, rather silence -than fight. He had been making peace overtures ever since the suits -began. The first had been in the fall of 1878, soon after they were -instituted, when he sent the following letter to Captain Vandergrift: - - - “CAPTAIN J. J. VANDERGRIFT: - - _My dear Sir_—We are now prepared to enter into a contract to refine - all the petroleum that can be sold in the markets of the world at a - low price for refining. Prices of refined oil to be made by a joint - committee of producers and refiners, and the profits to be - determined by these; profits to be divided equitably between both - parties. This joint interest to have the lowest net rates obtainable - from railroads. If your judgment approves, you may consult some of - the producers upon this question. This would probably require the - United Pipe Lines to make contracts and act as a clearing house for - both parties. - - Very respectfully yours, - J. D. ROCKEFELLER.” - - -Captain Vandergrift handed the letter to the executive committee of the -Producers’ Union. It was returned to him without a reply. The producers -had tried an arrangement of this kind with Mr. Rockefeller’s National -Refiners’ Association in the winter of 1872 and 1873, and it had failed. -The refiners had thrown up their contract when they found they could get -all the oil they wanted at a lower price than they had contracted to pay -the Producers’ Union, from men who had not gone into that organisation. -The oil country was familiar, too, with the case of the H. L. Taylor -Company, whose complaint against the Standard was referred to in the -last chapter. Contracts of that sort were never meant to be kept, they -declared. They were meant as “sops, opiates.” In November, 1878, after -the testimony which had been brought out by the suit against the United -Pipe Lines had been pretty well aired in the New York Sun and other -papers, and one or two private suits against the railroads were creating -a good deal of public discussion, an effort to secure a conference -between the representatives of the Union and the Standard officials was -made. The Union refused to go into it officially. A meeting was held, -however, in New York on November 29, at which several well-known oil men -were present. It was announced to the press in advance that it was to be -an important but secret meeting between the oil producers, refiners and -Standard men; that its object was to settle all grievances, and to -secure a withdrawal of the impending suits. As soon as the news of this -proposed meeting reached the Oil Regions, the officials of the Union -promptly denied their connection with it. - -Although these early efforts to get a wedge into the Producers’ Union -and thus secure a staying of the suits had no results, the Standard was -not discouraged—it never is: there is no evidence in its history that it -knows what the word means. Not being able to handle the Union as a -whole, the Standard began working on individuals. By March, 1879, the -idea of a compromise had become particularly strong in Oil City. Indeed, -one of the several reasons advanced for bringing the conspiracy suits -was that such a proceeding would defeat the efforts the Oil City branch -were making to bring about a settlement with Mr. Rockefeller. -Accordingly, when it became apparent to Mr. Rockefeller in the fall of -1879 that the producers meant to fight through the conspiracy suit, -though they might dally over the others, he notified Roger Sherman, -counsel for the Union, that he wished to lay before him a proposition -looking to a settlement. The president, Mr. Campbell, was in favour of -receiving the proposition. “I have no idea they will present anything we -can accept,” he wrote Mr. Sherman. “Still it will furnish a first-rate -gauge to test how badly they are scared.” And the Standard was told that -the Union would consider what they had to offer. “But it is a serious -question—this of settlement,” replied Mr. Rockefeller. “Our trial is set -for October 28. We cannot get ready for that and prepare a proposition -too. Why not postpone the trial?” This was done—December 15 being set. -But no proposition was made to the producers for over six weeks—then -they were asked to meet the Standard men on November 29 in New York -City. Piqued at the delay, the producers informed the Standard that they -could no longer consider their proposition and that the trial would be -pushed. - -But again the Standard secured delay—this time by petitioning that the -case be argued before the Supreme Court of the state. They declared that -such was the state of public feeling in Clarion County that they could -not obtain justice there. They charged the judges with bias and -prejudice, declared secret societies were working against them, and -called attention to the civil suits which were still hanging fire. Over -this petition serious trouble arose in court—there was a wrangle between -the judge and the Standard’s counsel. The newspapers took it up—the -whole state divided itself into camps, and the case was again postponed, -this time until the first of the year. Postponement obtained, compromise -was again proposed upon the basis of abandonment of all those methods of -doing business which the producers claimed injured them, and as a mark -of their sincerity the United Pipe Lines on December 24, 1879, issued an -order announcing the abandonment of immediate shipment throughout the -region. A meeting between the legal advisers of the two parties to -discuss the proposed terms was arranged for January 7, 1880, at the -Fifth Avenue Hotel in New York City—the very time to which the trial of -the case for conspiracy had been postponed. It was hardly to be expected -that when such negotiations were going on in New York the trial in -Clarion County would be pushed very briskly. It was not. There was a -hitch again, and for the fourth time proceedings were stayed. The -conferences, however, went on. - -These negotiations with the Standard continued for a month, and then, -early in February, Mr. Campbell, the president of the Union, called a -meeting of the Grand Council for February 19, 1880, in Titusville, -Pennsylvania. For several weeks the Oil Regions had known that President -Campbell and Roger Sherman, the leading lawyer of the Union, were in -conference with the Standard officials. It was rumoured that they were -arranging a compromise, and it was suspected that the meeting now called -was to consider the terms. Naturally the proposition to be made was -looked for with suspicion and curiosity. The meeting was the largest the -Grand Council had held for many months. It was supposed to be secret, -like all gatherings of the Union, but before the first session was over, -the word spread over the Oil Regions that Mr. Campbell had brought to -the meeting contracts with both Mr. Rockefeller and Mr. Scott, and that -they were receiving harsh criticism from the Grand Council. The very -meagre accounts which exist of this gathering, historic in oil annals, -show that it was one of the most exciting which was ever held in the -country, and one can well believe this when one considers the bitter -pill the council was asked to swallow that day. Mr. Campbell began the -session by reporting that all the suits at which they had been labouring -for nearly two years had been withdrawn, and that in return for their -withdrawal the Standard and the Pennsylvania Railroad officials had -signed contracts to cease certain of the practices of which the -producers complained. - -The Standard contract, which Mr. Campbell then presented, pledged Mr. -Rockefeller, and some sixteen associates, whose names were attached to -the document, to the following policy: - -1. They would hereafter make no opposition to an entire abrogation of -the system of rebates, drawbacks and secret rates of freight in the -transportation of petroleum on the railroads. - -2. They withdrew their opposition to secrecy in rate making—that is, -they promised that they would not hereafter receive any rebate or -drawback that the railroad company was not at liberty to make known and -to give to other shippers of petroleum. - -3. They abandoned entirely the policy which they had been pursuing in -the management of the United Pipe Lines—that is, they promised that -there should be no discrimination whatever hereafter between their -patrons; that the rates should be reasonable and not advanced except on -thirty days’ notice; that they would make no difference between the -price of crude in different districts excepting such as might be -properly based upon the difference in the quality of the oil; that they -would receive, transport, store and deliver all oil tendered to them, up -to a production of 65,000 barrels a day. And if the production should -exceed that amount they agreed that they would not purchase any -so-called “immediate shipment” oil at a discount on the price of -certificate oil. - -4. They promised hereafter that when certificates had been given for oil -taken into the custody of the pipe-lines, the transfer of these -certificates should be considered as a delivery of the oil, and the -tankage of the seller would be treated as free.[80] - -Mr. Rockefeller also agreed in making this contract to pay the -Producers’ Union $40,000 to cover the expense of their litigation. In -return for this money and for the abandonment of secret rebates and of -the pipe-line policy to which he had held so strenuously, what was he to -receive? He was not to be tried for conspiracy. And that day, after the -contract had been presented to the Grand Council, Mr. Campbell sent the -following telegram: - - - “TITUSVILLE, February 19, 1880. - - “TO HIS EXCELLENCY HENRY M. HOYT, - Governor of the Commonwealth of Pennsylvania. - - _Sir_—As prosecutor in the case of the Commonwealth _vs._ J. D. - Rockefeller, Number 25, April Sessions of Clarion County, I consent - to the withdrawal of the requisition asked of you for extradition of - J. D. Rockefeller _et al._, the same having been in your hands - undecided since July last and a _nolle prosequi_ having been entered - by leave of Court of Clarion County in the case, and I will request - William L. Hindman, the prosecuting attorney, to forward a formal - withdrawal. - - Your obedient servant, - B. B. CAMPBELL.” - - -The contract with the Pennsylvania which was signed by Mr. Scott agreed, -in consideration of the withdrawal of the suit against the road, to the -following policy: - -1. That it would make known to all shippers all rates of freight charged -upon petroleum. [This was an abolition of secret rates.] - -2. If any rates of freight were allowed one shipper as against another, -on demand that rate was to be made known. - -3. There should be no longer any discrimination in the allotment and -distribution of cars to shippers of petroleum. - -4. Any rebate allowed to a large shipper was to be reasonable.[81] - -There were both humiliation and bitterness in the Council when the -report was read—humiliation and bitterness that after two years of such -strenuous fighting all that was achieved was a contract which sacrificed -what everybody knew to be the fundamental principle, the principle which -up to this point the producers had always insisted must be recognised in -any negotiation—that the rebate system was wrong and must not be -compromised with. Hard speeches were made, and Mr. Campbell’s head was -bowed more than once while big tears ran down his cheeks. He had worked -long and hard. Probably most of the members of the Grand Council who -were present had a consciousness that no one of them had done anywhere -near what Mr. Campbell had done toward prosecuting their cause, and -though they might object to the compromise, they could not blame him, -knowing all the difficulties which had been put in the way. So they -accepted the report, thanking him for his fidelity and energy, but not -failing to express their disapproval of the reservation in regard to the -rebate system. They ended their meeting by a resolution bitterly -condemning the courts, the state administration at Harrisburg, and -corporations in general: - - - “We declare that by the inefficiency and weakness of the secretary - of internal affairs in the year 1878; by the interposition on more - than one occasion of the attorney-general in 1879, by which the - taking of testimony was prevented; by the failure of the present - government for many months, either to grant or deny the requisition - for criminals indicted for crime, within the commonwealth of - Pennsylvania, fugitives to other states; and by the interference of - some of the judges of the Supreme Court, by an extraordinary and, - according to the best legal judgment of the land, unlawful - proceeding, by which the trial of an indictment for misdemeanour - pending in a local court was delayed and prevented, the alarming and - most dangerous influence of powerful corporations has been - demonstrated. While we accept the inevitable result forced upon us - by these influences, we aver that the contest is not over and our - objects not attained, but we all continue to advocate and maintain - the subordination of all corporations to the laws, the constitution, - and the will of the people, however and whenever expressed; that the - system of freight discrimination by common carriers is absolutely - wrong in principle, and tends to the fostering of dangerous - monopolies; and that it is the duty of the government, by - legislation and executive action, to protect the people from their - growing and dangerous power.” - - -And with this resolution the second Petroleum Producers’ Union formed to -fight Mr. Rockefeller came to an end. - -By the morning of February 20 the Oil Regions knew of the compromise. -The news was received in sullen anger. It was due to the cowardice of -the state officials, the corrupting influence of corporations, the oil -men said. They blamed everybody but themselves, and yet if they had done -their duty the suits would never have been compromised. The simple fact -is that the mass of oil men had not stood by their leaders in the hard -fight they had been making. These leaders, Mr. Campbell the president, -Mr. Sherman the chief counsel, and Mr. Patterson the head of the -legislative committee, had given almost their entire time for two years -to the work of the Union. The offices of Mr. Campbell and Mr. Patterson -were both honorary, and they had both often used their private funds in -prosecuting their work. Mr. Sherman gave his services for months at a -time without pay. No one outside of the Council of the Union knew the -stress that came upon these three men. Up to the decision to institute -the conspiracy suit they had worked in harmony. But when that was -decided upon Mr. Patterson withdrew. He saw how fatal such a move must -be, how completely it interfered with the real work of the Union, -forcing common carriers to do their duty. He saw that the substantial -steps gained were given up and that the work would all have to be done -over again if their suit went on. Mr. Campbell believed in it, however, -and Mr. Sherman, whether he believed in it or not, saw no way but to -follow his chief. The nine months of disappointment and disillusion -which followed were terrible for both men. They soon saw that the forces -against them were too strong, that they would never in all probability -be able to get the conspiracy suit tried, and that so long as it was on -the docket the proper witnesses could not be secured for the suits -against the railroads. Finally it came to be a question with them what -out of the wreck of their plans and hopes could they save? And they -saved what the compromise granted. If the oil producers they -represented, a body of some 2,000 men, had stood behind them throughout -1879 as they did in 1878 the results would have been different. Their -power, their means, were derived from this body, and this body for many -months had been giving them feeble support. Scattered as they were over -a great stretch of country, interested in nothing but their own oil -farms, the producers could only be brought into an alliance by hope of -overturning disastrous business conditions. They all felt that the -monopoly the Standard had achieved was a menace to their interests, and -they went willingly into the Union at the start, and supported it -generously, but they were an impatient people, demanding quick results, -and when they saw that the relief the Union promised could only come -through lawsuits and legislation which it would take perhaps years to -finish, they lost interest and refused money. At the first meeting of -the Grand Council of the Union in November, 1878, there were nearly 200 -delegates present—at the last one in February, 1880, scarcely forty. -Many of the local lodges were entirely dead. Not even the revival in the -summer of 1879 of the hated immediate shipment order, which had caused -so much excitement the year before, but which had not been enforced long -because of the uprising, brought them back to the Union. In July the -order had been put in operation again in a fashion most offensive to the -oil men, it being announced by the United Pipe Lines that thereafter oil -would be bought by a system of sealed bids. Blanks were to be furnished -the producers, the formula of which ran: - - - BRADFORD, PENNSYLVANIA,........ 187.. - - I hereby offer to sell J. A. Bostwick .... barrels crude oil, of - forty-two gallons per barrel, at .... cents, at the wells, for - shipment from the United Pipe Lines, within the next five (5) days, - provided that any portion of the oil not delivered to you within the - specified time shall be considered cancelled. - - -There was a frightful uproar in consequence. The morning after this -announcement several hundred men gathered in front of the United Pipe -Line’s office in Bradford, and held an open-air meeting. They had a band -on the ground which played “Hold the Fort”; and the following -resolutions were adopted: - - - “Resolved, That the oil producers of the Northern District in - meeting assembled do maintain and declare that the present shipment - order is infamous in principle and disreputable in practice, and we - hereby declare that we will not sell one barrel of oil in conformity - with the requirements of the said order. And we pledge our lives, - our fortunes and our sacred honour to resort to every legal means, - to use every influence in our power to prevent any sales under the - said order. And we also declare that the United Pipe Lines shall - hereafter perform their duty as common carriers under the law.” - - -That night a battalion of some 300 masked men in robes of white marched -through the streets of Bradford, groaning those that they suspected of -being in sympathy with the Standard methods, and cheering their friends. -Again there appeared there, that night, all over the upper oil country, -cabalistic signs, which had been seen there often the year before. The -feeling was so intense, and the danger of riot so great, that -twenty-four hours after the order for sealed bids was given, it was -withdrawn. The outbreak aroused Mr. Campbell’s hope that it might be -possible at this moment to arouse the lodges, and he wrote a prominent -oil man of Bradford asking his opinion. In reply he received the -following letter. It shows very well what the leaders had to contend -against. It shows, too, the point of view of a very frank and -intelligent oil producer: - - - “BRADFORD, PENNSYLVANIA, July 30, 1879. - - “B. B. CAMPBELL, - Parnassus, Pennsylvania. - - _Dear Sir_—Your despatch of yesterday from O. C. has only just - reached me. As I cannot say what I want to over the wires I reply by - mail. - - You ask if the high-sounding wording of the declaration of rights of - the producers made at their mass-meeting, held here on Monday, in - which they pledged their lives, fortunes and sacred honours, means - liberal subscriptions to the Council funds. I reply with sorrow and - humiliation—_I fear not_. All this high-flown talk is buncombe of - the worst kind. The producers are willing to meet in a mass-meeting - held out of doors where it costs nothing even for rent of a hall, - and pass any kind of a resolution that is offered. It costs nothing - to do this, but when asked to contribute a dollar to the legal - prosecution of these plunderers, robbers, and fugitives from - justice, whom they are denouncing in their resolution, they either - positively refuse, say that the Council is doing nothing, that the - suits are interminable and will never end, that there is no justice - to be obtained in the courts of Pennsylvania, etc., etc., or else - plead poverty and say they have contributed all that they are able - to. - - True, the producers are poor and the suits and legal proceedings are - slow, and there is much to discourage them, but I tell you, my - honoured chief, that the true inwardness of this state of affairs - is, that the people of the Oil Regions have by slow degrees and easy - stages been brought into a condition of bondage and serfdom by the - monopoly, until now, when they have been aroused to a realisation of - their condition, they have not the courage and manhood left to - enable them to strike a blow for liberty. And these are the people - for whom you and your few faithful followers in the Council are - labouring, spending (I fear wasting) your substance—neglecting your - own interest to advance theirs, and all for what good—“_cui bono_”? - - I fear you will say that I am discouraged. No, not discouraged, but - disgusted with the poor, spiritless, and faint-hearted people whom - you are labouring so hard to liberate from bondage. As to the - prospects of raising funds for the prosecution of the suits by - subscription or assessments on the Unions, I am sorry to say that I - fear it is impossible—at least it is impossible for me to make any - collections—and right here let me make a suggestion. I often feel - that the fault may not be with the people, but with the writer. I - would therefore suggest that you select from among the members of - the Council any good man whom you think has the power of convincing - these people that their only hope of relief lies in sustaining you - in the prosecution of the suits, and therefore they must contribute - to the fund. If you will do this, I will promise you that he will be - hospitably received and favourably introduced by the writer. But as - for depending on the unaided efforts of myself to raise funds, I - fear it would be useless. - - I do not write this, my friend, with a view of throwing any - discouragement in your path, which, God knows, is rugged and thorny - enough, but I must give vent to my righteous indignation in some - way, and ask you are the producers as a class (nothing but a d—d - cowardly, disorganised mob as they are) worth the efforts you are - putting forth to save them? - - As for myself, a single individual (and I can speak for no others), - I am determined to stand with you until the end, with my best - strength and my last dollar.” - - -Now, what was this loose and easily discouraged organisation opposing? A -compact body of a few able, cold-blooded men—men to whom anything was -right that they could get, men knowing exactly what they wanted, men who -loved the game they played because of the reward at the goal, and, above -all, men who knew how to hold their tongues and wait. “To Mr. -Rockefeller,” they say in the Oil Regions, “a day is as a year and a -year as a day. He can wait, but he never gives up.” Mr. Rockefeller knew -the producers, knew how feeble their staying qualities in anything but -the putting down of oil wells, and he may have said confidently, at the -beginning of their suits against him, as it was reported he did say, -that they would never be finished. They had not been finished from any -lack of material. If the suits had been pushed but one result was -possible, and that was the conviction of both the Standard and the -railroads; they had been left unfinished because of the impatience and -instability of the prosecuting body and the compactness, resolution and -watchfulness of the defendants. - -The withdrawal of the suits was a great victory for Mr. Rockefeller. -There was no longer any doubt of his power in defensive operations. -Having won a victory, he quickly went to work to make it secure. The -Union had surrendered, but the men who had made the Union remained; the -evidence against him was piled up in indestructible records. In time the -same elements which had united to form the serious opposition just -overthrown might come together, and if they should it was possible that -they would not a second time make the mistake of vacillation. The press -of the Oil Regions was largely independent. It had lost, to be sure, the -audacity, the wit, the irrepressible spirit of eight years before when -it fought the South Improvement Company. Its discretion had outstripped -its courage, but there were still signs of intelligent independence in -the newspapers. Mr. Rockefeller now entered on a campaign of -reconciliation which aimed to placate, or silence, every opposing force. - -Many of the great human tragedies of the Oil Regions lie in the -individual compromises which followed the public settlement of 1880; for -then it was that man after man, from hopelessness, from disgust, from -ambition, from love of money, gave up the fight for principle which he -had waged for seven years. “The Union has surrendered,” they said; “why -fight on?” This man took a position with the Standard and became -henceforth active in its business; that man took a salary and dropped -out of sight; this one went his independent way, but with closed lips; -that one shook the dust of the Oil Regions from his feet and went out to -seek “God’s country,” asking only that he should never again hear the -word “oil.” The newspapers bowed to the victor. A sudden hush came over -the region, the hush of defeat, of cowardice, of hopelessness. Only the -“poor producer” grumbled. “You can’t satisfy the producer,” Mr. -Rockefeller often has had occasion to remark benignantly and pitifully. -The producer alone was not “convinced.” He still rehearsed the series of -dramatic attacks and sieges which had wiped out independent effort. He -taught his children that the cause had been sold, and he stigmatised the -men who had gone over to the Standard as traitors. Scores of boys and -girls grew up in the Oil Regions in those days with the same feeling of -terrified curiosity toward those who had “sold to the Standard” that -they had toward those who had “been in jail.” The Oil Regions as a whole -was at heart as irreconcilable in 1880 as it had been after the South -Improvement Company fight, and now it had added to its sense of outrage -the humiliation of defeat. Its only immediate hope now was in the -success of one of the transportation enterprises which had come into -existence with the uprising of 1878 and to which it had been for two -years giving what support it could. This enterprise was the seaboard -pipe-line which, as we have seen, Messrs. Benson, McKelvy and Hopkins -had undertaken. - - - - - APPENDIX - - - NUMBER 1 (See page 1007) - PROFESSOR SILLIMAN’S REPORT ON PETROLEUM - - - [From “The Early and Later History of Petroleum,” by J. T. Henry, - pages 38–54.] - - - MESSRS. EVELETH, BISSELL AND REED. - - _Gentlemen_:—I herewith offer you the results of my somewhat - extended researches upon the rock-oil, or petroleum, from Venango - County, Pennsylvania, which you have requested me to examine with - reference to its value for economical purposes. - - Numerous localities, well known in different parts of the world, - furnish an oily fluid exuding from the surface of the earth, - sometimes alone in “tar springs,” as they are called in the Western - United States; frequently it is found floating upon the surface of - water in a thin film, with rainbow colours, or in dark globules, - that may, by mechanical means, be separated from the fluid on which - it swims. - - In some places wells are sunk for the purpose of accumulating the - product in a situation convenient for collection by pumping the - water out. The oil exudes on the shores of lakes and lagoons, or - rises from springs beneath the beds of rivers. Such are the springs - of Baku, in Persia, and the wells of Amiano, in the duchy of Parma, - in Italy. The usual geological position of the rocks furnishing this - natural product is in the coal measures—but it is by no means - confined to this group of rocks, since it has been found in deposits - much more recent, and also in those that are older—but in whatever - deposits it may occur, it is uniformly regarded as a product of - vegetable decomposition. Whether this decomposition has been - effected by fermentation only, or by the aid of an elevated - temperature, and distilled by heated vapour, is perhaps hardly - settled. - - It is interesting, however, in this connection to remember that the - distillation, at an elevated temperature, of certain black, - bituminous shales in England and France has furnished large - quantities of an oil having many points of resemblance with naphtha, - the name given to this colourless oil, which is the usual product of - distilling petroleum. The very high boiling point of most of the - products of the distillation of the rockoil from Venango County, - Pennsylvania, would seem to indicate that it was a pyrogenic - (fire-produced) product. - - Bitumen, asphaltum, mineral pitch, chapapote, etc., etc., are names - variously given to the more or less hard, black, resinous substance - which is produced usually from the exposure of petroleum to the air, - and is found either with or without the fluid naphtha or petroleum. - The most remarkable examples of the occurrence of these substances, - so intimately connected with the history of rock-oil, are the Lake - Asphaltites of the Dead Sea, so memorable in history, the well-known - Bitumen Lake of Trinidad, and the deposits of mineral pitch or - chapapote in Cuba. In one of the provinces of India, vast quantities - of petroleum are annually produced, the chief consumption being - local, for fuel and lights, but a portion is also exported to Europe - for the production of naphtha. In the United States, many points on - the Ohio and its tributaries are noted as producing this oil; nearly - all of them within the coal measures. A detailed history of these - various localities can be found recorded in books of science, and - their repetition here would be out of place. - - - GENERAL CHARACTER OF THE CRUDE PRODUCT - - The crude oil, as it is gathered on your lands, has a dark brown - colour, which, by reflected light, is greenish or bluish. It is - thick even in warm weather—about as thick as thin molasses. In very - cold weather it is somewhat more stiff, but can always be poured - from a bottle even at 15° below zero. Its odour is strong and - peculiar, and recalls to those who are familiar with it the smell of - bitumen and naphtha. Exposed for a long time to the air, it does not - thicken or form a skin on its surface, and in no sense can it be - called a drying oil. The density of the crude oil is .882, water - being 1.000. It boils only at a very high temperature, and yet it - begins to give off a vapour at a temperature not greatly above that - of boiling water. It takes fire with some difficulty and burns with - an abundant smoky flame. It stains paper with the appearance of - ordinary fat oils, and feels smooth and greasy between the fingers. - It is frequently used in its crude state to lubricate coarse - machinery. In chemical characters, it is entirely unlike the fat - oils. Most of these characters are common to petroleum from various - places. In one important respect, however, the product of your lands - differs from that obtained in other situations, that is, it does - not, by continued exposure to the air, become hard and resinous like - mineral pitch or bitumen. I have been informed by those who have - visited the locality, that on the surface of the earth above the - springs which furnish your oil there is no crust or deposit of this - sort such as I have seen in other situations where petroleum or - mineral tar is flowing. This difference will be seen to be of - considerable importance, as it is understood and represented that - this product exists in great abundance upon your property, that it - can be gathered wherever a well is sunk in the soil, over a great - number of acres, and that it is unfailing in its yield from year to - year. The question naturally arises, Of what value is it in the - arts, and for what uses can it be employed? These researches answer - these inquiries. - - - EXAMINATION OF THE OIL - - To determine what products might be obtained in the oil, a portion - of it was submitted to fractional distillation.[82] The temperature - of the fluid was constantly regulated by a thermometer, the heat - being applied first by a water bath, and then by a bath of linseed - oil. This experiment was founded upon the belief that the crude - product contained several distinct oils, having different boiling - points. The quantity of material used in this experiment was 304 - grammes. The thermometer indicated the degrees of the Centigrade - scale, but, for convenience, the corresponding degrees of - Fahrenheit’s scale are added. The water bath failed to distil any - portion of the oil at 100° C. (= 212° F.), only a small quantity of - acid water came over. An oil bath, linseed oil, was then - substituted, and the temperature was regularly raised by slow - degrees until distillation commenced. From that point the heat was - successively raised by stages of ten degrees, allowing full time at - each stage for complete distillation of all that would rise at that - temperature before advancing to the next stage. The results of this - tedious process are given in the annexed table—304 grammes of crude - oil, submitted to fractional distillation, gave - - TEMPERATURE QUANTITY - 1st Prod. at 100° C. = 213° F.(acid water) 5 gms. - 2nd Prod. at 140° C. to 150° C.= 284° to 302° F. 26 gms. - 3rd Prod. at 150° C. to 160° C.= 302° to 320° F. 29 gms. - 4th Prod. at 160° C. to 170° C.= 320° to 388° F. 38 gms. - 5th Prod. at 170° C. to 180° C.= 338° to 367° F. 17 gms. - 6th Prod. at 180° C. to 200° C.= 356° to 392° F. 16 gms. - 7th Prod. at 200° C. to 220° C.= 392° to 428° F. 17 gms. - 8th Prod. at 220° C. to 270° C.= 428° to 518° F. 12 gms. - Whole quantity distilled by this method 160 gms. - ——— - Leaving residue in the retort 144 gms. - ——— - Original quantity 304 gms. - - _Product No. 1_, as above remarked, was almost entirely water, with - a few drops of colourless oil, having an odour similar to the - original fluid, but less intense. - - _Product No. 2_ was an oil perfectly colourless, very thin and - limpid, and having an exceedingly persistent odour, similar to the - crude oil, but less intense. - - _Product No. 3_ was tinged slightly yellow, perfectly transparent, - and apparently as limpid as the second product, with the same odour. - - - _Product No. 4_ was more decidedly yellowish than the last, but was - in no other respect distinguishable from it. - - _Product No. 5_ was more highly coloured, thicker in consistence, - and had a decided empyreumatic odour. - - _Product No. 6._ This and the two subsequent products were each more - highly coloured and denser than the preceding. The last product had - the colour and consistency of honey, and the odour was less - penetrating than that of the preceding oils. The mass of crude - product remaining in the retort (equal 47.4 per cent.) was a dark, - thick, resinous-looking varnish, which was so stiff when cold that - it could be inverted without spilling. This showed no disposition to - harden or skin over by exposure to the air. The distillation was - arrested at this point in glass, by our having reached the limit of - temperature for a bath of linseed oil. The _density_ of the several - products of this distillation shows a progressive increase, thus: - - DENSITY - No. 2 733 - No. 3 752 - No. 4 766 - No. 5 776 - No. 6 800 - No. 7 848 - No. 8 854 - - To form an idea of the comparative density of these several - products, it may be well to state that sulphuric ether, which is one - of the lightest fluids known, has a density of .736, and alcohol, - when absolutely pure, .800. - - The _boiling points_ of these several fluids present some anomalies, - but are usually progressive, thus, No. 2 gave signs of boiling at - 115° C. (= 239° F.), and boiled vigorously and remained constant at - 225° C. to 228° C. (= 437° to 442° F.). No. 3 began to boil 120° (= - 248° F.), rose to 270° (= 518° F.), where it remained constant. No. - 4 began to vapourise at 140° (= 284° F.), rose to 290° (= 554° F.), - where it remained constant. On a second heating the temperature - continued to rise, and passed 305° (= 581° F.). No. 5 gave - appearance of boiling at 160° (= 320° F.), boiling more vigorously - as the heat was raised, and was still rising at 308° (= 581° F.). - No. 6 commenced boiling at 135° (= 275° F.), boiled violently at - 160° (= 320° F.), and continued rising above the range of the - mercurial thermometer. No. 7 commenced ebullition at the same - temperature as No. 6, and rose to 305° (= 581° F.), where the - ebullition was not very active. Much time was consumed in obtaining - these results. We infer from them that the rock-oil is a mixture of - numerous compounds, all having essentially the same chemical - constitution, but differing in density and boiling points, and - capable of separation from each other, by a well-regulated heat. - - The uncertainty of the boiling points indicates that the products - obtained at the temperatures named above were still mixtures of - others, and the question forces itself upon us, whether these - several oils are to be regarded as _educts_ (i. e., bodies - previously existing, and simply separated in the process of - distillation), or whether they are not rather produced by the heat - and chemical change in the process of distillation. The continued - application of an elevated temperature alone is sufficient to effect - changes in the constitution of many organic products, evolving new - bodies not before existing in the original substance. - - - PROPERTIES OF THE DISTILLED OILS - - Exposed to the severest cold of the past winter, all the oils - obtained in this distillation remained fluid. Only the last two or - three appeared at all stiffened by a cold of 15° below zero, while - the first three or four products of distillation retained a perfect - degree of fluidity. Exposed to air, as I have said, they suffer no - change. The chemical examination of these oils showed that they were - all composed of carbon and hydrogen, and probably have these - elements in the same numerical relation. When first distilled they - all had an acid reaction, due to the presence of a small quantity of - free sulphuric acid, derived from the crude oil. This was entirely - removed by a weak alkaline water, and even by boiling on pure water. - Clean copper remained untarnished in the oil which had thus been - prepared, showing its fitness for lubrication, so far as absence of - corrosive quality is concerned. The oils contain no oxygen, as is - clearly shown by the fact that clean potassium remains bright in - them. Strong _sulphuric acid_ decomposes and destroys the oil - entirely. _Nitric acid_ changes it to a yellow, oily fluid, similar - to the changes produced by nitric acid on other oils. - _Hydrochloric_, _chromic_, and _acetic acids_ do not affect it. - _Litharge_ and other metallic oxyds do not change it, or convert it - in any degree to a drying oil. _Potassium_ remains in it unaffected, - even at a high temperature. _Hydrates of potash_, _soda_, and _lime_ - are also without action upon it. _Chloride of calcium_ and many - other salts manifest an equal indifference to it. Distilled with - _bleaching powders_ (chloride of lime) and water in the manner of - producing chloroform, the oil is changed into a product having an - odour and taste resembling chloroform. Exposed for many days in an - open vessel, at a regulated heat below 212°, the oil gradually rises - in vapour, as may be seen by its staining the paper used to cover - the vessel from dust, and also by its sensible diminution. Six or - eight fluid ounces, exposed in this manner in a metallic vessel for - six weeks or more, the heat never exceeding 200°, gradually and - slowly diminished, grew yellow, and finally left a small residue of - dark brown, lustrous-looking resin, or pitchy substance, which in - the cold was hard and brittle. The samples of oil employed were very - nearly colourless. This is remarkable when we remember that the - temperature of the distillation was above 500° F. The oil is nearly - insoluble in pure alcohol, not more than 4 or 5 per cent. being - dissolved by this agent. In ether the oil dissolves completely, and - on gentle heating is left unchanged by the evaporisation of the - ether. India-rubber is dissolved by the distilled oil to a pasty - mass, forming a thick, black fluid which, after a short time, - deposits the India-rubber. It dissolved a little amber, but only - sufficient to colour the oil red. It also dissolves a small portion - of copal in its natural state, but after roasting, the copal - dissolves in it as it does in other oils. - - - USE FOR GAS-MAKING - - The crude oil was tried as a means of illumination. For this - purpose, a weighed quantity was decomposed, by passing it through a - wrought-iron retort filled with carbon, and ignited to full redness. - The products of this decomposition were received in a suitable - apparatus. It produced nearly pure carburetted hydrogen gas, the - most highly illuminating of all the carbon gases. In fact, the oil - may be regarded as chemically identical with illuminating gas in a - liquid form. The gas produced equalled ten cubic feet to the pound - of oil. It burned with an intense flame, smoking in the ordinary gas - jet, but furnishing the most perfect flame with the Argand burner. - - These experiments were not prosecuted further, because it was - assumed that other products, now known and in use, for gas-making, - might be employed at less expense for this purpose, than your oil. - Nevertheless, this branch of inquiry may be worthy of further - attention. - - - DISTILLATION AT A HIGHER TEMPERATURE - - The results of the distillation at a regulated temperature in glass - led us to believe that in a metallic vessel, capable of enduring a - high degree of heat, we might obtain a much larger proportion of - valuable products. A copper still, holding five or six gallons, was - therefore provided, and furnished with an opening, through which a - thermometer could be introduced into the interior of the vessel. - Fourteen imperial quarts (or, by weight, 560 ounces) of the crude - product were placed in this vessel, and the heat raised rapidly to - about 280° C. (= 536° F.), somewhat higher than the last temperature - reached in the first distillation. At this high temperature the - distillation was somewhat rapid, and the product was easily - condensed without a worm. The product of the first stage was 130 - ounces (or over 28 per cent.), of a very light-coloured thin oil, - having a density of .792. This product was also acid, and as before, - the acid was easily removed by boiling with fresh water. The - temperature was now raised to somewhat above 300° C. (= 572° F.), - and 123 ounces more distilled, of a more viscid and yellowish oil, - having a density of .865. This accounts for over 43 per cent. of the - whole quantity taken. The temperature being raised now above the - boiling point of mercury, was continued at that until 170 ounces, or - over 31 per cent., of a dark brown oil had been distilled, having a - strong empyreumatic odor. Upon standing still for some time, a dark - blackish sediment was seen to settle from this portion, and on - boiling it with water the unpleasant odour was in a great degree - removed, and the fluid became more light-coloured and perfectly - bright. (It was on a sample of this that the photometric experiments - were made.) The next portion, distilled at about 700° F., gave but - about 17 ounces, and this product was both lighter in colour and - more fluid than the last. It now became necessary to employ dry - hickory wood as a fuel, to obtain flame and sufficient heat to drive - over any further portions of the residue remaining in the alembic. - - It will be seen that we have already accounted for over 75 per cent. - of the whole quantity taken. There was a loss on the whole process - of about 10 per cent. made up, in part, of a coaly residue that - remained in the alembic, and partly of the unavoidable loss - resulting from the necessity of removing the oil twice from the - alembic, during the process of distillation, in order to change the - arrangements of the thermometer, and provide means of measuring a - heat higher than that originally contemplated. - - About 15 per cent. of a very thick, dark oil completed this - experiment. This last product, which came off slowly at about 750° - F., is thicker and darker than the original oil, and when cold, is - filled with a dense mass of pearly crystals. These are paraffine, a - peculiar product of the destructive distillation of many bodies in - the organic kingdom. This substance may be separated, and obtained - as a white body, resembling fine spermaceti, and from it beautiful - candles have been made. The oil in which the crystals float is of a - very dark colour, and by reflected light is blackish green, like the - original crude product. Although it distills at so high a - temperature, it boils at a point not very different from the denser - products of the first distillation. The paraffine, with which this - portion of the oil abounds, does not exist ready-formed in the - original crude product; but it is a result of the high temperature - employed in the process of distillation, by which the elements are - newly arranged. - - I am not prepared to say, without further investigation, that it - would be desirable for the company to manufacture this product in a - pure state, fit for producing candles (a somewhat elaborate chemical - process); but I may add that, should it be desirable to do so, the - quantity of this substance produced may probably be very largely - increased by means which it is now unnecessary to mention. - - Paraffine derives its name from the unalterable nature of the - substance, under the most powerful chemical agents. It is white, in - brilliant scales of a greasy lustre; it melts at about 116°, and - boils at over 700° F.; it dissolves in boiling alcohol and ether, - and burns in the air with a brilliant flame. Associated with - paraffine are portions of a very volatile oil, _eupione_, which - boils at a lower temperature, and by its presence renders the - boiling point of the mixture difficult to determine. I consider this - point worthy of further examination than I have been able at present - to give it, i.e., whether the last third, and possibly the last - half, of the petroleum, may not be advantageously so treated as to - produce from it the largest amount of paraffine which it is able to - produce. - - The result of this graduated distillation, at a high temperature, is - that we have obtained over 90 per cent. of the whole crude product - in a series of oils, having valuable properties, although not all - equally fitted for illumination and lubrication. - - A second distillation of a portion of the product which came over in - the later stages of the process (a portion distilled at about 650° - F., and having a high colour), gave us a thin oil of density about - .750, of light yellow colour and faint odour. - - It is safe to add that, by the original distillation, about 50 per - cent. of the crude oil is obtained in a state fit for use as an - illuminator without further preparation than simple clarification by - boiling a short time with water. - - - DISTILLATION BY HIGH STEAM - - Bearing in mind that by aid of high steam, at an elevated - temperature, many distillations in the arts are affected which - cannot be so well accomplished by dry heat, I thought to apply this - method in case of the present research. Instances of this mode of - distillation are in the new process for Stearine candles, and in the - preparation of rosin oil. I accordingly arranged my retort in such a - manner that I could admit a jet of high steam into the boiler, and - almost at the bottom of the contained petroleum. I was, however, - unable to command a jet of steam above 275° to 290° F., and although - this produced abundant distillation, it did not effect a separation - of the several products, and the fluid distilled had much the same - appearance as the petroleum itself, thick and turbid. As this trial - was made late in the investigation, I have been unable to give it a - satisfactory issue, chiefly for want of steam of a proper - temperature. But I suggest, for the consideration of the company, - the propriety of availing themselves of the experience already - existing on this subject, and particularly among those who are - concerned in the distillation of rosin oil—a product having many - analogies with petroleum in respect to its manufacture. - - - USE OF THE NAPHTHA FOR ILLUMINATION - - Many fruitless experiments have been made in the course of this - investigation which it is needless to recount. I will, therefore, - only state those results which are of value. - - 1. I have found that the only lamp in which this oil can be - successfully burned is the camphene lamp, or one having a button to - form the flame, and an external cone to direct the current of air, - as is now usual in all lamps designed to burn either camphene, rosin - oil, sylvic oil, or any other similar product. - - 2. As the distilled products of petroleum are nearly or quite - insoluble in alcohol, burning fluid (i. e., a solution of the oil in - alcohol) cannot be manufactured from it. - - 3. As a consequence, the oil cannot be burned in a hand lamp, since, - with an unprotected wick, it smokes badly. Neither can it be burned - in a Carcel’s mechanical lamp, because a portion of the oil being - more volatile than the rest, rises in vapour on the elevated wick - required in that lamp, and so causes it to smoke. - - I have found all the products of distillation from the copper still - capable of burning well in the camphene lamp, except the last third - or fourth part (i.e., that portion which came off at 700° F. and - rising, and which was thick with the crystals of paraffine). Freed - from acidity by boiling on water, the oils of this distillation - burned for twelve hours without injuriously coating the wick, and - without smoke. The wick may be elevated considerably above the level - required for camphene, without any danger of smoking, and the oil - shows no signs of crusting the wick tubes with a coating of rosin, - such as happens in the case of camphene, and occasions so much - inconvenience. The light from the rectified naphtha is pure and - white, without odour. The rate of consumption is less than half that - of camphene, or rosin oil. The Imperial pint, of 20 fluid ounces, - was the one employed—a gallon contains 160 such ounces. A camphene - lamp, with a wick one inch thick, consumed of rectified naphtha in - one hour, 1¾ ounces of fluid. A Carcel’s mechanical lamp of ⅞–inch - wick, consumed of best sperm oil, per hour, 2 ounces. A “Diamond - Light” lamp, with “sylvic oil,” and a wick 1½–inch diameter, - consumed, per hour, 4 ounces. - - I have submitted the lamp burning petroleum to the inspection of the - most experienced lampists who were accessible to me, and their - testimony was, that the lamp burning this fluid gave as much light - as any which they had seen, that the oil spent more economically, - and the uniformity of the light was greater than in camphene, - burning for twelve hours without a sensible diminution, and without - smoke. I was, however, anxious to test the amount of light given, - more accurately than could be done by a comparison of opinions. With - your approbation I proceeded therefore to have constructed a - _photometer_, or apparatus for the measurement of light, upon an - improved plan. Messrs. Grunow, scientific artists of this city, - undertook to construct this apparatus, and have done so to my entire - satisfaction. This apparatus I shall describe elsewhere—its results - only are interesting here. By its means I have brought the petroleum - light into rigid comparison with the most important means of - artificial illumination. Let us briefly recapitulate the results of - these - - - PHOTOMETRIC EXPERIMENTS - - The _unit_ adopted for comparison of intensities of illumination is - Judd’s Patent Sixes Sperm Candle. - - The sperm oil used was from Edward Mott Robinson, of New Bedford—the - best winter sperm remaining fluid at 32° F. The colza oil and - Carcel’s lamps were furnished by Dardonville, lampist, Broadway, New - York. The gas used was that of the New Haven Gas Light Co., made - from best Newcastle coal, and of fair average quality. - - The distance between the standard candle, and the illuminator sought - to be determined, was constantly 150 inches—the photometer traversed - the graduated bar in such a manner as to read, at any point where - equality of illumination was produced, the ratio between the two - lights. I quote only single examples of the average results, and - with as little detail as possible, but I should state that the - operation of the photometer was so satisfactory that we obtained - constantly the same figures when operating in the same way, evening - after evening, and the sensitiveness of the instrument was such that - a difference of one-half inch in its position was immediately - detected in the comparative illumination of the two equal discs of - light in the dark chamber. This is, I believe, a degree of accuracy - not before obtained by a photometer. - - TABLE OF ILLUMINATING POWER OF VARIOUS ARTIFICIAL LIGHTS COMPARED WITH - JUDD’S PATENT CANDLES AS A UNIT - - SOURCE OF LIGHT RATIO TO - CANDLE—1 - Gas burning in Scotch fish-tail tips, 4 feet to the hour 1 : 5.4 - Gas burning in Scotch fish-tail tips, 6 feet to the hour 1 : 7.55 - Gas burning in Cornelius fish-tail tips, 6 feet to the hour 1 : 6.3 - Gas burning in English Argand burner, 10 feet to the hour 1 : 16 - Rock-oil, burning in 1–inch wick camphene lamp, consuming 1¾ - ounces of fluid to the hour 1 : 8.1 - Carcel’s mechanical lamp, burning best sperm oil, 2 ounces of - fluid to the hour, wick ⅞ of an inch 1 : 7.5 - Carcel’s mechanical lamp, burning best sperm oil, 2 ounces of - colza oil to the hour, wick of ⅞ an inch 1 : 7.5 - Camphene lamp (same size as rock-oil above) burning best - camphene, 4 fluid ounces per hour 1 : 11 - “Diamond Light” by “sylvic oil,” in 1½–inch wick, 4 ounces - per hour 1 : 8.1 - - From this table it will be seen that the rock-oil lamp was somewhat - superior in illuminating power to Carcel’s lamp of the same size, - burning the most costly of all oils. It was also equal to the - “Diamond Light” from a lamp of one-half greater power, and - consequently is superior to it in the same ratio in lamps of equal - power. The camphene lamp appears to be about one-fifth superior to - it, but, on the other hand, the rock-oil surpasses the camphene by - more than one-half in economy of consumption (i.e., it does not - consume one-half so much fluid by measure), and it burns more - constantly. Compared with the sylvic oil and the sperm, the rock-oil - gave on the ground glass diaphragm the whitest disc of illumination, - while in turn the camphene was whiter than the rock-oil light. By - the use of screens of different coloured glass, all inequalities of - _colour_ were compensated in the use of the photometer, so that the - intensity of light could be more accurately compared. Compared with - gas, the rock-oil gave more light than any burner used except the - costly Argand consuming ten feet of gas per hour. To compare the - _cost_ of these several fluids with each other, we know the price of - the several articles, and this varies very much in different places. - Thus, gas in New Haven costs $4 per 1,000 feet, and in New York - $3.50 per 1,000, in Philadelphia $2.00 per 1,000, and in Boston - about the same amount. - - Such sperm oil as was used costs $2.50 per gallon, the colza about - $2, the sylvic oil 50 cents, and the camphene 68 cents; no price has - been fixed upon for the rectified rock-oil. - - I cannot refrain from expressing my satisfaction at the results of - these photometric experiments, since they have given the oil of your - company a much higher value as an illuminator than I had dared to - hope. - - - USE OF THE ROCK-OIL AS A LUBRICATOR FOR MACHINERY - - A portion of the rectified oil was sent to Boston to be tested upon - a trial apparatus there, but I regret to say that the results have - not been communicated to me yet. As this oil does not gum or become - acid or rancid by exposure, it possesses in that, as well as in its - wonderful resistance to extreme cold, important qualities for a - lubricator. - - - CONCLUSION - - In conclusion, gentlemen, it appears to me that there is much ground - for encouragement in the belief that your company have in their - possession a raw material from which, by simple and not expensive - process, they may manufacture very valuable products. - - It is worthy of note that my experiments prove that nearly the - _whole_ of the raw product may be manufactured without waste, and - this solely by a well-directed process which is in practice one of - the most simple of all chemical processes. - - There are suggestions of a practical nature, as to the economy of - your manufacture, when you are ready to begin operations, which I - shall be happy to make, should the company require it; meanwhile, I - remain, gentlemen, - - Your obedient servant, - - B. SILLIMAN, JR., - _Professor of Chemistry in Yale College_. - - NEW HAVEN, April 16, 1855. - - - NUMBER 2 (See page 1044) - FIRST ACT OF INCORPORATION OF THE STANDARD OIL COMPANY - - - _KNOW ALL MEN BY THESE PRESENTS_: That we, _John D. Rockefeller_, - _Henry M. Flagler_, _Samuel Andrews_, and _Stephen V. Harkness_, of - _Cleveland, Cuyahoga County, Ohio_, and _William Rockefeller_, of - the _City_, _County_, and _State_ of _New York_, have associated - ourselves together under the provisions of the Act of the - Legislature of the State of Ohio, entitled An Act to provide for the - creation and regulation of incorporated companies in the State of - Ohio, passed May 1, 1852, and the Acts supplementary thereto passed - April 8, 1856, and the Act to amend the last-named Act, passed - February 14, 1861, and other laws of the State of Ohio applicable - thereto, for the purpose of forming a body corporate for - manufacturing petroleum and dealing in petroleum, and its products - under the corporate name of _THE STANDARD OIL COMPANY_. - - And we do certify that the purpose for which said body corporate is - formed is the manufacture of petroleum and to deal in petroleum and - its products. - - That the capital stock necessary for said company, and the amount - agreed on as composing the capital stock, is the sum of _One Million - Dollars_. - - That the amount of each share of capital stock is _One Hundred - Dollars_. - - That the name of the place where said manufacturing establishment - shall be located for doing business is _Cleveland City, Cuyahoga - County, State of Ohio_. - - That the name and style by which said manufacturing establishment - shall be known is _THE STANDARD OIL COMPANY_. - - JOHN D. ROCKEFELLER, - HENRY M. FLAGLER, - SAMUEL ANDREWS, - STEPHEN V. HARKNESS, - WILLIAM ROCKEFELLER. - - CLEVELAND, OHIO, January 10, 1870. - - - NUMBER 3 (See page 1047) - AFFIDAVIT OF JAMES H. DEVEREUX - - - [In the case of the Standard Oil Company _vs._ William C. Scofield - _et al._ in the Court of Common Pleas, Cuyahoga County, Ohio.] - - - J. H. Devereux, being first duly sworn, says that he is forty-eight - years of age, and is president of the New York, Pennsylvania and - Ohio Railroad; that in 1868 he became vice-president of the Lake - Shore Railroad, and remained in that position as well as president - and general manager till 1873. That he has heard read the statements - of Robert Hanna and George O. Baslington, in their affidavits filed - herein in respect to transportation of oil, and in regard thereto he - has to say that his experience with the oil traffic began in 1868 - when he went upon the Lake Shore Railroad as vice-president, - succeeding Mr. Stone who retired from ill health; that the only - written memoranda connected with the business of the company with - which he was furnished was a book in which it was stated—probably in - Mr. Stone’s handwriting—that the representatives of the various oil - interests of Cleveland would agree to pay a rate of 1 cent. per - gallon on crude oil moved from the regions to Cleveland; that in - addition to the inevitable friction arising from the competition of - these refiners of Cleveland—probably aggregating twenty-five in - number, was the further difficulty of the patent right which the - Pennsylvania Railroad claimed to the transportation of oil, and the - peculiar differences made by them in the rates given to refiners at - Titusville, Pittsburg, and other places all thoroughly in - competition with the then very limited refining capacity of - Cleveland; that he took up the subject as to whether the Lake Shore - Railroad could hope to compete for the transportation of oil, and - the end of the matter was that the Jamestown and Franklin Railroad - was extended from Franklin to Oil City, the then centre of the - producing district, and a sharper contest than ever was produced, - growing out of the opposition of the Pennsylvania Railroad in - competition; that such rates and arrangements were made by the - Pennsylvania Railroad, that it was publicly proclaimed in the public - print in Oil City, Titusville, and other places that Cleveland was - to be wiped out as a refining centre as with a sponge, and without - exception the oil refiners of Cleveland came to affiant as a - representative of transportation, and with a single exception - expressed their fears that they would have either to abandon their - business here or move to Titusville or other points in the Oil - Regions; that the only exception to this decision was that offered - by Rockefeller, Andrews and Flagler, who on its assurance that the - Lake Shore Railroad could and would handle oil as cheaply as the - Pennsylvania Company, proposed to stand their ground at Cleveland - and fight it out on that line. That later, about 1870, the first - move was made to transport refined oil by rail regularly and - throughout the entire year from Cleveland to New York. That prior to - that time the export business from Cleveland was comparatively - limited and was confined to the summer months, most of that portion - of the traffic refined at Cleveland in competition with Pittsburg, - Titusville, and other places being shipped by lake and canal, and as - affiant remembers at a rate of about one dollar per barrel, and with - a certainty of its being reduced to ninety cents. That the rail rate - was nominally two dollars on refined oil from Cleveland to New York. - That Mr. Flagler, at this time representing Rockefeller, Andrews and - Flagler, proposed to make regular monthly shipments by rail - throughout the year provided a proper rate could be made for the - business then offered, this rate to cover transportation of crude - from the region to Cleveland, and when refined from Cleveland to New - York. Rockefeller, Andrews and Flagler being the only refiners here - who proposed to compete for the export business or offered oil for - the entire haul from the regions to Cleveland and thence to New - York; that Mr. Flagler’s proposition was to assure to the Lake Shore - Railroad sixty carloads of refined oil per day[83] from Cleveland to - New York at a rate of $1.75 per barrel from the regions to New York, - being thirty-five cents per barrel for crude from the regions to - Cleveland and $1.30 per barrel for refined from Cleveland to New - York; and Rockefeller, Andrews and Flagler were to assume all risk - and losses from fire or other accidents. That affiant took this - proposition into consideration and made careful computation of the - cost of this transportation to the railroad, which cost is the - proper basis in fixing the rate to be charged; that affiant found - that the then average time for a round trip from Cleveland to New - York for a freight car was thirty days; to carry sixty cars per day - would require 1,800 cars at an average cost of $500 each, making an - investment of $900,000 necessary to do this business, as the - ordinary freight business had to be done; but affiant found that if - sixty carloads could be assured with absolute regularity each and - every day, the time for a round trip from Cleveland to New York and - return could be reduced to ten days, by moving these cars in solid - trains instead of mixing oil cars in other trains, as would be - necessary when transported in small quantities and by moving the oil - trains steadily without regard to other cars; that by thus reducing - the time to ten days for a round trip, only six hundred cars would - be necessary to do this business with an investment therefore of - only $300,000. That the regularity of the traffic would insure - promptness in the unloading and return of the cars; that upon these - considerations affiant concluded that Mr. Flagler’s proposition - offered to the railroad company a larger measure of profit than - would or could ensue from any business to be carried under the old - arrangements, and such proved to be pre-eminently the case; that the - proposition of Mr. Flagler was therefore accepted, and in affiant’s - judgment this was the turning-point which secured to Cleveland a - considerable portion of the export traffic. That this arrangement - was at all times open to any and all parties who would secure or - guarantee a like amount of traffic or an amount sufficient to be - treated and handled in the same speedy and economical way, the - charges for transportation being always necessarily based upon the - actual cost of the service to the railroad, and whenever any shipper - or shippers will unite to reduce the cost of transportation to the - railroad, to refuse to give them the benefit of such reduction would - be to the detriment of the public, the consumers, who in the end pay - the transportation charges. Affiant says that this legitimate and - necessary advantage of the large shipper over the smaller he - explained to Mr. Hanna and Mr. Baslington, and they recognised its - propriety, and affiant offered them the same terms if by themselves - or with others they would assure him like quantities with like - regularity, thus securing like speed and economy in transportation. - And further affiant saith not. - - J. H. DEVEREUX. - - Subscribed in my presence and sworn to before me this thirteenth day - of November, 1880. - - J. C. CANNON, - _Notary Public in and for Said County_. - - - NUMBER 4 (See page 1055) - TESTIMONY OF HENRY M. FLAGLER ON THE SOUTH IMPROVEMENT COMPANY - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3112, pages 289–290.] - - - _A._ ... Neither of the Messrs. Rockefeller, Colonel Payne, nor - myself, nor any one connected with the Standard Oil Company, ever - had any confidence in or regard for the scheme known as the South - Improvement Company. We did not believe in it, but the view - presented by other gentlemen was pressed upon us to such an extent - that we acquiesced in it to the extent of subscribing our names to a - certain amount of the stock, which was never paid for. The company - never did a dollar’s worth of business, and never had any existence - other than its corporative existence, which it obtained through its - charter. Through its president it negotiated certain railroad - contracts, which, as I remember now, were signed by the company and - by the officers of the railroad. Those contracts were held in escrow - a few weeks and were destroyed or cancelled by mutual consent. - - _Q._ Who presented these views to you gentlemen? Who was the person - that had charge of this South Improvement Company’s scheme? - - _A._ I think Mr. Warden and the Messrs. Logan were the great leaders - in the South Improvement Company policy. - - - NUMBER 5 (See page 1062) - CONTRACT BETWEEN THE SOUTH IMPROVEMENT COMPANY AND THE PENNSYLVANIA - RAILROAD COMPANY, DATED JANUARY 18, 1872 - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3112, pages 357–361.] - - - Agreement made and entered into this eighteenth day of January, in - the year eighteen hundred and seventy-two, by and between the South - Improvement Company, a corporation organised and existing under the - laws of the State of Pennsylvania, party hereto of the first part, - and the Pennsylvania Railroad Company, on its own behalf and on - behalf of all other railroad companies, whose roads are controlled, - owned, or leased by it, or with which it has sufficient running - arrangements, which other roads are herein described as the - connections of the said Pennsylvania Railroad Company, party hereto - of the second part. - - WITNESSETH: - - _Whereas_, the party hereto of the first part has been organized for - the purpose, among other things, of increasing, facilitating, and - developing the trade in and the conveyance and transportation of - petroleum and its products, and for that purpose proposes, among - other things, to expend large sums of money in the purchase, - erection, and construction of, and maintaining and conducting works - for storage, distillation, and refining, warehousing and - transportation, and in various other ways, upon the inducement, - among other things, of this contract. - - _And Whereas_, the magnitude and extent of the business and - operations proposed to be carried on by the party hereto of the - first part will greatly promote the interest of the party hereto of - the second part, and make it desirable for it, by fixing certain - rates of freight, drawbacks, and rebates, and by the other - provisions of this _agreement_, to encourage the outlay proposed by - the party hereto of the first part, and to facilitate and increase - the transportation to be received from it. - - _And Whereas_, it has been agreed by and between the party hereto of - the second part, for itself and its connections, the Erie Railroad - Company, for itself and its connections, and the New York Central - Railroad Company, for itself and its connections, that the business - of transporting, by railroad, crude petroleum and its products, - toward the Atlantic coast, from the points of production and - refining, on their lines of road, shall be allotted by the party - hereto of the first part, to the said three companies, in the - proposition of forty-five (45) per cent. of the whole to the - Pennsylvania Railroad Company, for itself and its connections, - including the Philadelphia and Erie Railway, the Northern Central - Railway, the Alleghany Valley Railroad, Camden and Amboy Railway, - the Pennsylvania Company, and all other railroads which are, or may - be, controlled, owned, and leased by it, or with which it has, or - may have, sufficient running arrangements; twenty-seven and a half - (27½) per cent. of the whole to the Erie Railway Company, for itself - and its connections, and twenty-seven and a half (27½) per cent. of - the whole to the New York Central Railroad Company for itself and - its connections, and that the transportation beyond Cleveland and - Pittsburg over the railroads of the said companies and their - connections, in other directions than toward the Atlantic coast, - west from said points of production and refining, shall be allotted - by the party hereto of the first part, in the proportion of - one-third thereof, to the party hereto of the second part, for - itself and its western connections, and the remainder to other - railroads. - - Now, therefore, this agreement witnesseth: That the parties hereto - for themselves and their successors, in consideration of the - promises, of the mutual execution hereof, and of the mutual - advantages hereby conferred, have covenanted and agreed, and hereby - do covenant and agree each with the other, as follows: - - - ARTICLE FIRST - - The party hereto of the first part covenants and agrees: - - 1. To furnish to the party hereto of the second part for - transportation, such a proportion of the crude petroleum and its - products, owned or controlled by the party hereto of the first part, - as shall give to the party hereto of the second part forty-five (45) - per cent. of all the crude petroleum and its products, sent from the - points of production and refining toward the Atlantic coast, by the - said Pennsylvania, the Erie, and the New York Central railroads and - their connections, and thirty-three and one-third (33⅓) per cent. - that which is sent west of Pittsburg and Cleveland by those - railroads and their connections. - - 2. To provide suitable tankage at the points where petroleum is - produced, on the railroads of the party hereto of the second part - and its connections in which to receive crude petroleum preparatory - to shipment, with the necessary pipes, pumps, racks, and other - appliances for its convenient transfer in bulk into railroad cars. - - 3. To deliver to the railroads of the party hereto of the second - part, and its connections, at the places of shipment, and to receive - from them, at the places of destination, all crude petroleum and its - products transported over their roads for the party of the first - part. - - 4. To provide at the places of destination on the seaboard, - necessary and suitable yards, wharves, warehouses, sheds, tanks, - pipes, pumps, and motive power, for the reception of petroleum and - its products, and loading vessels therewith. - - 5. To provide, maintain, and operate the works necessary to refine - crude petroleum upon the largest scale practicable, and with such - skill, and on such a system of organisation and division of labour, - as will secure both efficiency and economy; and for that purpose and - for the purpose of developing and increasing the petroleum trade of - the country, to provide and maintain all suitable and necessary - means and facilities. - - 6. To keep records of the transportation over the railroads of the - party hereto of the second part, and its connections, and so far as - it can obtain the same, over the Erie and the New York Central - railroads and their connections, of all petroleum and its products, - showing the number of barrels of forty-five gallons each in bulk, - and the number of barrels of forty-seven gallons each in barrels, - carried by each road with the points of receiving and delivery, and - the amount of freight received by each road for such transportation, - which records shall at all reasonable times be open to the - inspection of the duly constituted representatives of the party - hereto of the second part. - - Monthly abstracts of all such records shall be regularly sent to the - party of the second part. - - 7. To pay the party of the second part weekly for all transportation - over its roads and its connections, of petroleum and its products, - such gross rates and half-rates of freight as are hereinafter - specified, less the rebates and drawbacks hereinafter provided to be - retained by the party hereto of the first part for its own use. - - - ARTICLE SECOND - - The party hereto of the second part covenants and agrees: - - 1. That the party hereto of the second part will pay and allow to - the party hereto of the first part, for its own use, in all - petroleum and its products, transported over the railroads of the - party hereto of the second part and its connections, for the party - hereto of the first part, rebates, and on all transported for - others, drawbacks, at the rates hereinafter provided, except in the - case specified in Article Third. - - 2. To deliver to the party hereto of the first part all petroleum - and its products in packages, transportation over the railroads, of - the party hereto of the second part, and its connections, by - whomsoever shipped, and consigned to the party of the first part, at - the warehouses of the party of the first part, at the seaboard, and - inland, at the depots of the party of the second part, at the places - of destination, and to deliver all petroleum and its products, in - bulk, owned by or consigned to the said party of the first part, at - any point required on the line of the railroads, of the party of the - second part and its connections. - - 3. To transport and deliver petroleum and its products over the - railroads of the party of the second part and its connections, at - gross rates, which shall at no time exceed the following, without - the consent of both parties hereto. - - From any point on the Oil Creek and Allegheny River Railroad to Oil - City, Union, Corry or Irvineton, which are herein designated as - _common points_, on each barrel of forty-five gallons in bulk, and - on each barrel of forty-seven gallons in barrels, thirty cents. - - - ON CRUDE PETROLEUM - - From any common point to Cleveland, for each barrel of 45 gallons $0.80 - From any common point to Pittsburg, for each barrel of 45 gallons .80 - From any common point to New York, for each barrel of 45 gallons 2.56 - From any common point to Philadelphia, for each barrel of 45 - gallons 2.41 - From any common point to Baltimore, for each barrel of 45 gallons 2.41 - From any common point to Boston, for each barrel of 45 gallons 2.71 - - All other points, except those on the Oil Creek and Allegheny River - Railway, to the places of destination last named, the same rates as - from the _common points_. - - - ON REFINED OIL, BENZINE, AND OTHER PRODUCTS OF THE MANUFACTURE OF - PETROLEUM - - From Pittsburg to New York, for each barrel $2.00 - From Pittsburg to Philadelphia, for each barrel 1.85 - From Pittsburg to Baltimore, for each barrel 1.85 - From Cleveland to Boston, for each barrel 2.15 - From Cleveland to New York, for each barrel 2.00 - From Cleveland to Philadelphia, for each barrel 1.85 - From Cleveland to Baltimore, for each barrel 1.85 - From any common point to New York, for each barrel 2.92 - From any common point to Philadelphia, for each barrel 2.77 - From any common point to Baltimore, for each barrel 2.77 - From any common point to Boston, for each barrel 3.07 - - From and to all points intermediate between the points aforesaid, - such reasonable rates as the party of the second part shall from - time to time establish, on both crude and refined. - - From Pittsburg, Cleveland, and other points, to places west of - Pittsburg and Cleveland, such reasonable rates as the party of the - second part may deem it expedient from time to time to establish. - - 4. To pay and allow to the party hereto of the first part, on all - petroleum and its products, transportation for it over the railroads - of the party of the second part and its connections, the following - rebates, and on all transported for other parties, drawbacks of like - amounts, as the rebates from the gross rates, the same to be - deducted and retained by the party hereto of the first part, for its - own use from the amounts of freights, payable to the party of the - second part. - - - ON THE TRANSPORTATION OF CRUDE PETROLEUM - - From the gross rate from any common point to Cleveland, a rebate - per barrel of $0.40 - From the gross rate from any common point to Pittsburg, a rebate - per barrel of .40 - From the gross rate from any common point to New York, a rebate - per barrel of 1.06 - From the gross rate from any common point to Philadelphia, a - rebate per barrel of 1.06 - From the gross rate from any common point to Baltimore, a rebate - per barrel of 1.06 - From the gross rate from any common point to Boston, a rebate per - barrel of 1.06 - - From the gross rate from all other points, and the six places of - destination last named rebates the same as on the rates from the - common points. - - - ON THE TRANSPORTATION OF REFINED OIL, BENZINE, AND OTHER PRODUCTS OF - THE MANUFACTURE OF PETROLEUM - - From the gross rates from Pittsburg to New York, a rebate per - barrel of $0.50 - From the gross rates from Pittsburg to Philadelphia, a rebate per - barrel of .50 - From the gross rates from Pittsburg to Baltimore, a rebate per - barrel of .50 - From the gross rates from Cleveland to Boston, a rebate per - barrel of .50 - From the gross rates from Cleveland to New York, a rebate per - barrel of .50 - From the gross rates from Cleveland to Philadelphia, a rebate per - barrel of .50 - From the gross rates from Cleveland to Baltimore, a rebate per - barrel of .50 - From the gross rates from any common point to New York, a rebate - per barrel of 1.32 - From the gross rates from any common point to Philadelphia, a - rebate per barrel of 1.32 - From the gross rates from any common point to Baltimore, a rebate - per barrel of 1.32 - From the gross rates from any common point to Boston, a rebate - per barrel of 1.32 - - From the gross rates to and from all points, intermediate between - the above points, a rebate or drawback of one-third of the gross - rate, shall be paid. - - From the gross rates from Pittsburg, Cleveland, and other points, to - places west of the meridians of Pittsburg and Cleveland, a rebate or - drawback of one-third of the gross rate shall be paid. - - 5. To charge to all other parties (excepting such as are referred to - in Article 3d) for the transportation of petroleum and its products, - rates which shall not be less than the gross rates above specified, - and should at any time any less rate be charged, directly or - indirectly, either by way of rebate, commission, allowances, or upon - any pretext whatsoever, the same reduction per barrel shall be made - to the party hereto of the first part, from the net rates provided - for them, on all transportation for them during the period for which - such reduction shall be made to others. - - 6. To permit the party hereto of the first part, if, in its - judgment, the currents of trade should so require, temporarily to - increase or diminish the proportion, as herein provided to the party - hereto of the second part, for itself and its connections, as the - whole business of transporting petroleum and its products, as - between the party hereto of the second part, the Erie Railway - Company and the New York Central Railroad Company. The party of the - second part in such case, to receive from the party hereto of the - first part, in full payment or indemnity, for the excess or - deficiency, one-half the net schedule rates on such excess or - deficiency; the other half to be paid _pro rata_ to the said other - companies, whose apportioned quantity of transportation shall thus - be varied; but such diversion of business shall not, at any time, - exceed one week, nor be repeated without an interval of at least - sixty days, unless with the consent of the party hereto of the - second part. Also, that whenever from time to time, as aforesaid, a - temporary diversion of a part of the apportioned transportation of - the party of the second part, to the other railroads aforesaid, or - to either of them, shall become necessary, cars of the party of the - second part may be loaded by the party of the first part, and sent - away over such other railroads, or either of them, but the cars so - sent away shall be returned without unnecessary delay, and in as - good order as when taken to the railroads of the party of the second - part, and mileage at the usual rates paid for their use while - absent. - - 7. To furnish with as much regularity as possible, at all times, - good and sufficient cars, and other means suitable and necessary for - the safe and prompt transportation of all crude petroleum and its - products, either in bulk or in barrels, which the party hereto of - the first part shall desire to send from one point to another (and - which shall be supplied with as much regularity as possible), on or - over the railroads of the party of the second part and its - connections. - - 8. To make manifests or way-bills of all petroleum or its products, - transported over any portion of the railroads of the party of the - second part or its connections, which manifests shall state the name - of the consignor, the place of shipment, the kind and actual - quantity of the article shipped, the name of the consignee, and the - place of destination, with the rate and gross amount of freight and - charges, and to send daily to the principal office of the party of - the first part, duplicates of all such manifests or way-bills. - - - ARTICLE THIRD - - And it is hereby further covenanted and agreed by and between the - parties hereto, that the rebates hereinbefore provided for the party - hereto of the first part, may be made to any other party who shall - furnish an equal amount of transportation, and who shall possess and - use works, means, and facilities for carrying on and promoting the - petroleum trade equal to those possessed and used by the party - hereto of the first part. - - - ARTICLE FOURTH - - And it is hereby further covenanted and agreed by and between the - parties hereto, that the party hereto of the second part shall at - all times co-operate, as far as it legally may, with the party - hereto of the first part, to maintain the business of the party - hereto of the first part, against loss or injury by competition, to - the end that the party hereto of the first part may keep up a - remunerative, and so a full and regular business, and to that end - shall lower or raise the gross rates of transportation over its - railroads and connections, as far as it legally may, for such times, - and to such extent as may be necessary to overcome such competition. - The rebates and drawbacks to the party of the first part to be - varied _pari passu_ with the gross rates. - - - ARTICLE FIFTH - - It is hereby mutually agreed by and between the parties hereto that - for the purpose of meeting such exigencies as may from time to time - require change of the rates of transportation herein provided, each - party, on ten days’ written notice from the other, shall appoint a - person on behalf of such party, and the two persons thus appointed, - shall have power to change and adjust the rates, which shall go into - effect on being approved by the said parties hereto. - - - ARTICLE SIXTH - - It is further mutually agreed by and between the parties hereto that - the gross rates of freight to the party hereto of the first part - shall at all times be kept as near to the net rates as is consistent - with the interests of the party hereto of the first part, and that - whenever in the judgment of the party hereto of the first part it is - expedient to lower the rebate below the rate above specified, it may - do so, and from time to time raise the same again, not, however, - above the rate hereinbefore specified. The party hereto of the first - part, from time to time shall notify the party of the second part in - writing of the change required, whereupon the party hereto of the - second part shall forthwith make a corresponding change of such - gross rates. - - - ARTICLE SEVENTH - - It is further mutually agreed by and between the parties hereto, - that this agreement shall continue and remain in force for the - period of not less than five years, and shall not then, nor - thereafter terminate, until one of the parties shall have given - twelve months’ written notice to terminate it. - - - ARTICLE EIGHTH - - It is further mutually agreed by and between the parties hereto, - that if any doubt, question, difference, cause, or suit shall at any - time or times, hereafter, arise or happen between the said parties - to these presents, touching the construction of these presents, or - any clause, matter, or thing herein contained, or any other matters, - cause, or thing whatsoever, in any wise relating to or concerning - this agreement, and such doubt, question, difference, or dispute, - shall not be fully settled by the parties to these presents within - one calendar month after the same shall arise, then, in every such - case, upon the request in writing of either of the said parties - hereto, specifying such doubt, question, difference, or dispute, it - shall be committed and referred to the hearing and arbitration of - three disinterested persons; one of them to be chosen by the party - of the first part, another of them to be chosen by the party of the - second part, and each party on ten days’ notice in writing from the - other, shall make such choice, and appoint a disinterested person in - behalf of such party, but, if either party on such notice shall - within such ten days fail to make an appointment, the person - appointed by the other party shall choose the second disinterested - person, and the third disinterested person shall be chosen within - one calendar month next after such request; and the award, order, or - determination of the said three persons, to be chosen as aforesaid, - or any two of them, shall be binding and conclusive on the parties - hereto, and shall be performed and kept by them, without any further - suit or trouble whatsoever; provided such award, order, or - determination, be made in writing, under the hands of the said three - persons, or of any two of them, within the space of sixty days after - all the persons shall be so selected, as aforesaid. And for the - further and better enforcing the performance of the award, so to be - made, as aforesaid, the reference or submission for or in respect of - the same, may, at the option of any of the parties to these - presents, from time to time be made as a matter of course, a rule of - court in any court of record. - - In witness whereof, the said South Improvement Company and - Pennsylvania Railroad Company have caused their respective corporate - seals to be hereto affixed, and these presents to be subscribed by - their respective presidents, the day and year first above written. - - [SEAL] - - SOUTH IMPROVEMENT COMPANY. - By P. H. WATSON, - _President_. - - [SEAL] - - PENNSYLVANIA RAILROAD COMPANY. - By J. EDGAR THOMPSON, - _President_. - - Attest: JOSEPH LESLEY, _Secretary_. - - - NUMBER 6 (See page 1063) - STANDARD OIL COMPANY’S APPLICATION FOR INCREASE OF CAPITAL STOCK TO - $2,500,000 IN 1872 - - - _To the Secretary of the State of Ohio_: - - The undersigned, being a majority of the Board of Directors of _THE - STANDARD OIL COMPANY OF CLEVELAND, OHIO_, do hereby certify that on - the first day of January, A.D. 1872, at the annual meeting of the - stockholders of said company held at its office in Cleveland, - Cuyahoga County, Ohio, by a vote then and there taken, all the - stockholders of said company being present and voting therefor, it - was resolved and agreed by each and all of them, that the capital - stock of said company be increased the sum of _One Million Five - Hundred Thousand Dollars_, thereby making the capital stock of said - company _Two Millions Five Hundred Thousand Dollars_, which action - of the stockholders was as follows, to wit: - - _Resolved_, and it is hereby agreed by each and all of us, that the - capital stock of this company, namely, _The Standard Oil Company of - Cleveland, Ohio_, be increased to the sum of _Two Millions Five - Hundred Thousand Dollars_, and it is also agreed, and the proper - officers of the company are hereby instructed to take the requisite - steps to so increase said capital stock. - - - JOHN D. ROCKEFELLER, O. B. JENNINGS, B. BREWSTER, WILLIAM - ROCKEFELLER, S. V. HARKNESS, H. M. FLAGLER, T. P. HANDY, S. - ANDREWS, A. STONE, JR., S. WITT, _Stockholders_. - - - _Cleveland, O., January 1st_, A.D. _1872._ - - _And afterward said meeting was adjourned._ HENRY M. FLAGLER, - _Secretary_. - - And we further certify that the whole amount of such increase of - capital stock has been paid to said company, in money, that no note, - bill, bond, or other security has been taken for the same, or any - part thereof, and that the credit of the company has not been used - directly or indirectly to raise funds to pay the same or any part - thereof. - - _IN WITNESS WHEREOF_, We hereunto set our names at _Cleveland, - Ohio_, this ninth day of February, A.D. 1872. - - JOHN D. ROCKEFELLER, HENRY M. FLAGLER, SAMUEL ANDREWS, STEPHEN V. - HARKNESS, _Directors_. - - - NUMBER 7 (See page 1067) - AFFIDAVITS OF GEORGE O. BASLINGTON - - - [In the case of the Standard Oil Company _vs._ William C. Scofield, - _et al._, in the Court of Common Pleas, Cuyahoga County, Ohio.] - - - In the spring of 1869, they (Hanna, Baslington & Company) began the - construction of refining works just above the Atlantic depot on the - west side of the Cleveland and Columbus Railroad track, and invested - in the construction of the works about $67,000, which works were - completed so as to commence the refining business about the first of - June, 1869, and from that time up to about the first of July, 1870, - the works had netted a profit of $40,000 over all expenses of - running said works, being about 60 per cent. on the capital invested - per annum, and from that time on up to the first of April, 1872, - said firm cleared $21,000, being about 30 per cent. per annum on the - investment from the time that said firm commenced business. - - Some time in February, 1872, the firm received a message from the - Standard Oil Company requesting said firm to have an interview as to - the disposal of the refining works of said firm; that they were - indisposed to enter into any arrangement for the disposition of said - works because the investment of capital in said works had proved - abundantly profitable to their satisfaction and they had no - disposition whatever to part with the works; but upon investigation - they were somewhat surprised to find that the Standard Oil Company - had already obtained the substantial control of the different - refineries in the City of Cleveland; that it had obtained such rates - of transportation of crude and refined oil from the different - railroads that it was impossible for them to compete with it, and - upon an interview which was had by Mr. Hanna and affiant with Mr. - Rockefeller who was at the time president of the Standard Oil - Company. Mr. Flagler, the secretary of the company, being present, - Mr. Rockefeller in substance declared or said that the Standard Oil - Company had such control of the refining business already in the - City of Cleveland that he thought said firm of Hanna, Baslington & - Company could not make any money; that there was no use for them to - attempt to do business in competition with the Standard Oil Company. - - Affiant further says that after having had an interview both with - Mr. Watson, who was the president of a company called “The South - Improvement Company,” and Mr. Devereux, who was the general manager - of the Lake Shore Road, he became satisfied that no arrangement - whatever could be effected through which transportation could at - least be obtained on the Lake Shore Road that would enable their - firm to compete with the Standard Oil Company, the works of said - Hanna, Baslington & Company, being so situated that they could only - obtain their crude oil through the line of the Lake Shore Road. And - finding that the Standard Oil Company had such special rates of - transportation that unless the firm of Hanna, Baslington & Company - were enabled to bring as much oil as the Standard Oil Company, that - it was impossible for said firm of Hanna, Baslington & Company to - obtain a fair competing rate with the Standard Oil Company. They at - least came to the conclusion that it was better for them to take - what they could get from the Standard Oil Company and let their - works go. - - And affiant further says that under these circumstances they sold - their works to the Standard Oil Company, which were on the day of - the sale worth at least $100,000, for $45,000 because that was all - they could obtain from them, and works too which in cash cost them - not less than $76,000, and which with a fair competition would have - paid them an income of not less than 30 per cent. per annum on the - investment. - - Affiant further says that at the interviews which he had with Mr. - Rockefeller, Mr. Rockefeller told him that the Standard Oil Company - already had control of all the large refineries in the City of - Cleveland and there was no use for them to undertake to compete - against the Standard Oil Company, for it would only ultimate in - their being wiped out, or language to that effect.—(November 1, - 1880.) - - * * * * * - - George O. Baslington being duly sworn (November 12, 1880) says: That - the firm of Hanna, Baslington & Company, the first year they were in - business, made profit amounting to a little less than $40,000 and - from the end of the first year up to the time of the sale to the - Standard Oil Company they made no profit at all. At the time of the - sale the firm reserved the privilege of running the works to close - up and run them up to about April 1, 1872, and during that time they - made profit to the amount of about $21,000. At the time my former - affidavit was drawn by Mr. Tyler, I stated these facts to him. - - In the sale of the works to the Standard Oil Company we were given - the option to take cash or to take stock in the Standard Oil Company - at par. We decided to and did take cash, and one reason that - influenced us to take cash was that we were fearful that refining - oil at Cleveland might not be successful, and if so, the cash was - better than the stock, and affiant wanted the cash to enable him to - embark in other pursuits. - - - NUMBER 8 (See page 1072) - ORGANISATION OF THE PETROLEUM PRODUCERS’ UNION OF 1872 - - - [From “A History of the Rise and Fall of the South Improvement - Company,” pages 8–10.] - - - 1. The territory forming the Pennsylvania petroleum field shall be - divided into sixteen districts.... - - 2. The producers in each district shall meet at some convenient - place and choose one or more (not to exceed five) men, from their - own number, through whose hands they shall pledge themselves to sell - all their crude oil. - - 3. It shall be the duty of these committeemen to sell the crude oil - coming into their hands: First, to the local refiners; second, to - the agents of the refiners located in distant cities, as may be - designated by the executive committee; and third, to such shippers, - dealers, and exporters as may be named by the executive committee, - and it shall be the further duty of said local committeemen to keep - the executive committee fully posted as to what is being done in - their respective districts with reference to the sale and removal of - all crude oil. - - 4. There shall be an executive committee composed of members of the - Petroleum Producers’ Union, to consist of one from each of the - sixteen districts, to be chosen by the local committee, whose duty - it shall be to meet from time to time, and take all necessary - measures to fully carry out this plan in all its details. - - 5. That for the purpose of paying the expenses of this committee, - one cent a barrel on all the crude oil shall be levied, collected, - and paid over by the local committeemen to the executive committee, - of which the executive committee shall keep an account to be - rendered to the producers at a future meeting. - - 6. It shall be the especial duty of the executive committee to take - such measures as they may find necessary to secure uniform mileage - rates of freights on all oil and merchandise of every kind, to and - from the Oil Region, and employ all lawful measures for the - abolition of the railway system of rebates or drawbacks. - - - PLEDGE - - “I do hereby agree to sell all my production of oil through, or with - the consent of, the committee of the Petroleum Producers’ Union.” - - _First._—That an organisation shall be immediately formed for the - exclusive purpose of advancing money to producers upon their - depositing proper Tank or Pipe Company receipts therefor with the - organisation or its agency. - - _Second._—That the name of the organisation shall be the “PRODUCERS’ - PROTECTIVE ASSOCIATION.” - - _Third._—That its capital shall be one million dollars, with power - in the directors to increase it to such an amount as in their - judgment shall be necessary to accomplish the objects of the - organisation. - - _Fourth._—That its headquarters shall be in Oil City, and its - co-operative agencies shall be located at all principal producing - points. - - _Fifth._—That its stock shall be divided into shares of $100 each, - which stock shall be transferable only upon the books of the company - at its headquarters, with the consent of the board of directors. - - _Sixth._—That the chairman of the general committee be requested to - appoint one person in each of the sixteen producing districts, who - shall open books to receive, and every producer, manufacturer, or - other party, directly or indirectly interested in our home - industries be invited to subscribe to the capital stock of this - organisation not exceeding fifty shares, or such part thereof as he - shall elect, and no person shall, at any time hold more than said - number of shares. - - _Seventh._—That when the sum of one million dollars shall have been - subscribed and ten per cent. thereof paid to five trustees to be - appointed by the chairman of the general committee, the said - chairman shall give notice of an election of officers, who shall be - elected by the votes of the subscribers, each share being entitled - to a vote. - - _Eighth._—That said officers shall consist of a president, - vice-president, and such a number of directors as shall give each - district a fair presentation. - - _Ninth._—That the board of directors shall appoint some bank or - banker in each district its co-operative agency; or in the absence - of a bank or bankers such agencies be established as shall be most - convenient for the producer, which bank or agency shall, as - necessity requires, by draft or otherwise, obtain its funds from the - headquarters of the company, and be held strictly accountable - therefor. - - _Tenth._—That every producer shall be entitled to go to his most - convenient agency, and deposit his certificate or receipt for oil, - which shall be passed to his credit, and he shall receive such an - advance thereof as the board of directors in their discretion shall - deem prudent to make. - - _Eleventh._—That the association shall from time to time sell the - oil belonging to it, or held as security for advances overdue in - such quantities and at such prices as legitimate demand will justify - said prices to be daily telegraphed from headquarters to the several - agencies. - - _Twelfth._—That every producer depositing oil in the hands of the - association on which no advance is made, may, if he so elect, have - his oil held until such time as he shall direct its sale, and that - the appropriation of oils sold from day to day shall be as follows: - First, all oils ordered sold by its owner, and the balance _pro - rata_ on oils on which advances have been made and shall then be - overdue. - - _Thirteenth._—The association shall charge a reasonable rate of - interest on all advances made, such interest to be used in defraying - the expenses of the association and the surplus, if any, shall be - declared as dividends upon the full paid stock. That any surplus - stock remaining in the hands of the association shall be the - property of the association until taken and paid for by some party - entitled thereto under the foregoing provisions, but always at par. - - _Fourteenth._—When the producers of each district shall have - appointed their committees, as provided in the second section of the - Producers’ Union, and have elected their chairman, he is requested - to send to the chairman of the general committee the names thereof. - - _Fifteenth._—And it shall be the duty of the person appointed by the - general committee, as provided in section five, to use due diligence - in the circulation thereof, for subscriptions, and within one week - from the receipt thereof, he shall collect the ten per cent. of each - subscription, as provided by section seventh, and report the same to - the chairman of the general committee, together with a list of the - subscribers and the amount subscribed. - - - NUMBER 9 (See page 1078) - CHARTER OF THE SOUTH IMPROVEMENT COMPANY - - - [From The Laws of Pennsylvania for 1872.] - - - An Act to incorporate the South Improvement Company: - - SECTION 1. _Be it enacted by the Senate and House of Representatives - of the Commonwealth of Pennsylvania in General Assembly met, and it - is hereby enacted by the authority of the same_, That S. S. Moon, R. - D. Barcley, John A. Fowler, or a majority of them, their associates, - successors, and assigns, be and they are hereby authorised and - empowered to form and be a body corporate, to be known as the South - Improvement Company, which shall be and is hereby vested with all - the powers, privileges, duties, and obligations conferred upon the - act to incorporate the Pennsylvania Company by the Act of the - Legislature of Pennsylvania, approved the seventh day of April, A.D. - one thousand eight hundred and seventy, and the supplements thereto. - - SEC. 2. That the stockholders of said company, by and with the - consent of the holders of not less than two-thirds of the shares of - stock, be and they are hereby authorised to change the name and - title of the said company and designate the location of its general - office, which changes shall be valid after the filing of a - certificate in the office of the secretary of the Commonwealth, - signed by the president, and attested by the seal of the said - company. - - Approved the sixth day of May, 1871. - - The Act incorporating the Pennsylvania Company, referred to above, - is the one that details the powers conferred on the incorporators. - - An Act to incorporate the Pennsylvania Company: - - SECTION 1. _Be it enacted by the Senate and House of Representatives - of the Commonwealth of Pennsylvania in General Assembly met, and it - is hereby enacted by the authority of the same_, That Andrew Howard, - J. S. Swartz, G. B. Edwards, J. D. Welsto, and J. P. Malin, their - associates, successors, and assigns, or a majority of them, be and - they are hereby authorised to form and be a body corporate, to be - known as the Pennsylvania Company, and by that name, style, and - title shall have perpetual succession, and all the privileges, - franchises and immunities incident to a corporation; may sue and be - sued, implead and be impleaded, complain and defend in all courts of - law and equity, of record and otherwise; may purchase, receive, - hold, and enjoy, to them, their successors, and assigns, all such - lands, tenements, leasehold estates and hereditaments, goods and - chattels, securities and estates, real, personal and mixed, of what - kind and quality soever, as may be necessary to erect depots, engine - houses, tracks, shops, and other purposes of the said corporation, - as hereafter defined by the second section of this act, and the same - from time to time may sell, convey, mortgage, encumber, charge, - pledge, grant, lease, sub-lease, alien, and dispose of, and also - make and have a common seal, and the same to alter and renew at - pleasure, and ordain, establish, and put in execution such by-laws - or ordinances, rules, and regulations as may be necessary or - convenient for the government of the said corporation, not being - contrary to the constitution and laws of this commonwealth, and - generally may do all and singular the matters and things which to - them shall appertain to do for the well-being of the said - corporation, and the management and ordering of the affairs and - business of the same: - - _Provided_, That nothing herein contained shall be so construed as - to give to the said corporation any banking privileges or - franchises, or the privilege of issuing their obligations as money. - - SEC. 2. That the corporation hereby created shall have power to - contract with any person or persons, firms, corporations or any - other party, howsoever formed, existing or that may hereafter exist, - in any way that said parties or any of them may have authority to - do, to build, construct, maintain or manage any work or works, - public or private, which may tend or be designed to improve, - increase, facilitate, or develop trade, travel, or the - transportation and conveyance of freight, live stock, passengers, - and any other traffic, by land or water, from or to any part of the - United States or the territories thereof; and the said company shall - also have power and authority to supply or furnish all needful - material, labour, implements, instruments, and fixtures of any and - every kind whatsoever, on such terms and conditions as may be agreed - upon between the parties respectively; and also to purchase, erect, - construct, maintain, or conduct, in its own name and for its own - benefit, or otherwise, any such work, public or private, as they may - by law be authorised to do (including also herein lines for - telegraphic communication), and to aid, co-operate, and unite with - any other company, person or firm in so doing. - - SEC. 3. The company hereby created shall also have the power to make - purchases and sales of or investments in the bonds and securities of - other companies, and to make advances of money and of credit to - other companies, and to aid in like manner contractors and - manufacturers; and to receive and hold, on deposit or as collateral, - or otherwise, any estate or property, real or personal, including - the notes, obligations, and accounts of individuals and companies, - and the same to purchase, collect, adjust, and settle, and also to - pledge, sell, and dispose thereof, on such terms as may be agreed on - between them and the parties contracting with them; and also to - indorse and guarantee the payment of the bonds and the performance - of the obligations of the other corporations, firms, and - individuals, and to assume, become responsible for, execute, and - carry out any contracts, leases, or sub-leases made by any company - to or with any other company or companies, individuals or firms - whatsoever. - - SEC. 4. The company hereby created shall also have power to enter - upon and occupy the lands of individuals or of companies, on making - payment therefor or giving security according to law, for the - purpose of erecting, constructing, maintaining, or managing any - public work, such as is provided for or mentioned in the second - section of this act, and to construct and erect such works thereon, - and also such buildings, improvements, structures, roads, or - fixtures as may be necessary or convenient for the purposes of the - said company, under the powers herein granted; and to purchase, - make, use, and maintain any works or improvements connecting or - intended to be connected with the works of the said company; and to - merge or consolidate, or unite with the said company the - improvements, property, and franchises of any other company or - companies, on such terms and conditions as the said company may - agree upon; and to fix and regulate the tolls or charges to be - charged or demanded for any freight, property, or passengers - travelling or passing over any improvement erected, managed, or - owned by the said company, or on any merchandise or property - transported over any road whatever by the said company, and to make, - from time to time dividends from the profits made by said company; - the several railroads managed by said company shall continue - taxable, as heretofore, in proportion to their length within this - state respectively; and the said Pennsylvania Company shall be - taxable only on the proportion of dividends on its capital stock and - upon net earnings or income, only in proportion to the amount - actually carried by it within the state of Pennsylvania, and all its - earnings or income derived from its business beyond the limits of - this Commonwealth shall not be liable for taxation. - - SEC. 5. The capital stock of said company shall consist of 2,000 - shares, of the value of fifty dollars each, being $100,000, and with - the privilege of increasing the same by a vote of the holders of the - majority of the stock present at any annual or special meeting, to - such an amount as they may from time to time deem needful; and the - corporators, or a majority of them, named in the first section of - this act, shall have power to open books for subscriptions at such - times and places as they may deem expedient; and when not less than - 1,000 shares shall have been subscribed, and twenty per cent. - thereon shall have been paid in, the shareholders may elect not less - than three nor more than nine directors to serve until the next - annual election, or until their successors shall be duly elected and - qualified; and the directors so elected may, and they are hereby - authorised and empowered to have and to exercise, in the name and in - behalf of the company, all the rights and privileges which are - intended to be hereby given, subject only to such liabilities as - other shareholders are subject to, which liabilities are no more - than for the payment to the company of the sums due or to become due - on the shares held by them; and should the capital stock at any time - be increased, the stockholders, at the time of such increase, shall - be entitled to a _pro rata_ share of such increase, upon the payment - of the instalments thereon duly called for; and whenever an increase - of capital stock is made, a certificate thereof, duly executed under - the corporate seal of the company, and signed by the president and - secretary, shall be filed with the auditor-general before the same - shall be deemed to be valid. - - SEC. 6. The principal office of the said company shall be in the - City of Pittsburg, but the directors, under such rules and - regulations as they may prescribe, may establish branches or - agencies in other parts of the state, or elsewhere; all of the - directors of said company shall be citizens of the United States, - and reside therein. - - SEC. 7. The directors shall be elected annually by the stockholders, - on the first Tuesday of June of each year; and they shall elect from - their number, at the first meeting of the board after their - election, a president, and shall also have power to elect from their - number, or otherwise, a vice-president, a treasurer, and secretary, - and such other officers, clerks, and agents as the business of the - company may require; all elections for directors shall be by ballot, - and every stockholder shall be entitled to one vote for each share - of stock held by him; but no person shall be eligible as director - who is not a stockholder to the amount of ten shares; at the annual - or special meetings a quorum shall consist of stockholders owning at - least one-half of the capital stock. - - SEC. 8. Ten days’ notice shall be given, by publication, in two - newspapers published in the City of Pittsburg, of the time and place - of the annual election; which election shall be conducted by three - stockholders, one of whom shall act as judge, and the other two as - inspectors. - - SEC. 9. The board of directors shall make all by-laws necessary for - conducting the business of the company; which by-laws shall at all - times be accessible to persons transacting business with them; the - said directors shall have power, by a vote of a majority of their - number at any meeting of the board, to change the name of the said - corporation; and by any new name, thus adopted, upon filing with the - secretary of the Commonwealth and the auditor-general a truly - certified certificate, the said company shall have, hold, and enjoy - all the rights, powers, privileges, and immunities hereby granted; - the directors shall have power to require payment of the amount - remaining unpaid on the stock of said company, at such times and in - such proportions as they shall think proper; the said assessment to - be made as the by-laws of said company shall direct. - - ELISHA W. DAVIS, - _Speaker of the House of Representatives_. - - CHARLES H. STINSON, - _Speaker of the Senate_. - - Approved—The seventh day of April, Anno Domini, one thousand eight - hundred and seventy. - - JOHN W. GEARY. - - - NUMBER 10 (See page 1080) -DRAFT OF CONTRACT BETWEEN THE SOUTH IMPROVEMENT COMPANY AND PRODUCERS OF - PETROLEUM IN THE VALLEY OF THE ALLEGHENY AND ITS TRIBUTARIES. DATED - JANUARY, 1872[84] - - - [From “A History of the Rise and Fall of the South Improvement - Company,” pages 121–122.] - - - Agreement made and entered into this day of January, A.D. 1872, by - and between the South Improvement Company, a corporation under the - laws of Pennsylvania, and embracing among its stockholders more than - two-thirds (reckoned by their refining capacity) of the refineries - of petroleum in the United States, parties hereto of the first part; - and the Associated Producers of Petroleum, a corporation also - organised under the laws of Pennsylvania, and embracing among its - stockholders more than two-thirds (reckoned by the actual production - of the crude petroleum at their wells) of the producers of petroleum - in the Valley of the Allegheny and its tributaries, party hereto of - the second part. WITNESSETH. - - _That whereas_, The party of the first part has entered into certain - contracts, viz.: The _first_ with the Pennsylvania Railroad Company; - the _second_ with the Erie Railway Company; the _third_ with the - Atlantic and Great Western Railway Company; and the _fourth_ with - the New York Central and Hudson River Railroad, and the Lake Shore - and Michigan Southern Railway Company, which contracts secure - certain advantages in relation to the transportation of petroleum - and its products, which it is the purpose of the contracting parties - to use for the promotion of the common interests of the producers, - refiners, and transporters of petroleum. - - To the end that the said object may be more fully attained the said - parties hereto have covenanted and agreed, each with the other, as - follows, viz.: - - I. The party of the first part, that it will appoint five of its - members to form, with a like number of the party of the second part, - a joint executive committee, who shall choose some competent and - discreet person not of their number who shall serve as the chairman - and the eleventh member of the joint committee. - - - II. The party of the first part, that it will submit all questions, - arising under said railroad contracts, which affect the interests of - both producers and refiners, to the decision of the joint committee - provided for in Article I of the agreement. - - III. The party of the second part, that it will appoint five of its - members to constitute, with the five members of the party of the - first part, the joint executive committee provided for in Article I - of this agreement; and will submit to said committee all the - questions mentioned in Article II. - - IV. The said parties mutually, that the decisions of said joint - committee on all questions, affecting the joint interests of - producers and refiners, which shall be submitted to them, shall be - final and conclusive upon both the parties hereto. That upon the - questions which shall at all times be held to affect the joint - interests of both producers and refiners are the following, viz.: - - - 1st. The rates of transportation of both crude and refined oil. - - 2nd. The price of crude oil at the wells and in the market. - - 3rd. The price of refined oil in the market. - - 4th. The amount of rebate and drawback which from time to time - it may be necessary for the interests of the trade to ask from - the railroads. - - - V. The said parties mutually, that the joint committee shall meet - once a month, and at any intermediate time, or times, at which a - meeting shall be called by the chairman, or by any four of its - members, to consider such questions as shall affect the joint - interests of the parties hereto. - - VI. The party of the second part that it will agree to increase and - lessen the aggregate production of crude petroleum, as the said - joint committee shall direct, to adapt as nearly as practicable the - supply of the same to the capacity of the markets of the world to - absorb at a price remunerative to the producer, the refiner and the - transporter. - - VII. The parties hereto mutually, that the said joint committee - shall, at the beginning of each year, fix the minimum average price - at which crude petroleum can be produced and delivered on board - railway cars, which price shall be called the minimum cost of - production—that at the same periods the said committee shall also - fix the minimum average price at which crude oil can be refined, put - up in packages and sold, which price shall be called the minimum - cost of manufacture. - - VIII. The parties hereto mutually, that after paying the minimum - cost of production of crude petroleum, the minimum cost of its - manufacture, and the cost of transportation and storage, and - shipping also, in the case of exported oil, the profits shall be - apportioned between the producers and refiners, in the ratio of ... - per cent. to the former, and ... per cent. to the latter. - - IX. The said parties, that in case of a temporary over-production of - crude petroleum, the excess shall as far as practicable be taken and - withheld from market, and an advance of three-fourths of the minimum - cost of production advanced thereon by the party of the first part - at eight per cent., intrust the party of the second part keeping the - tanked petroleum insured in good and responsible companies to the - full amount of the advance, one year’s interest added. - - X. The said parties mutually, that the party of the first part shall - only be bound to pay the prices and make the advances aforesaid, in - case the producers shall in good faith obey the instructions of the - joint committee, to limit production by stopping the drilling of new - wells. - - XI. The party of the second part that it will keep a register of the - date of the commencement of all new wells, the date at which the - same shall be finished, the character of the well and the monthly - production, and the date at which it may be abandoned, and that it - will make it a condition, precedent to the holding of stock in its - company, that the date aforesaid shall be finished by its - stockholders. - - XII. Both parties, that it is the especial object of this agreement - to bring the producers and refiners of petroleum into harmony and - co-operation, by reciprocal, fair, and just dealing, for the - promotion of their mutual interests, and everything in this - agreement is to be construed liberally for the carrying into effect - of this object. - - - NUMBER 11 (See page 1082) - EXTRACTS FROM THE TESTIMONY OF W. G. WARDEN - - - [From “A History of the Rise and Fall of the South Improvement - Company,” pages 30–41.] - - - WASHINGTON, D. C., March 30, 1872. - - William G. Warden affirmed and examined. - - By Mr. C. Heydrick (Counsel). - - _Q._ Are you an officer of the South Improvement Company? - - _A._ Yes, sir; or rather, I was. - - _Q._ What office did you hold? - - _A._ I held the office of secretary during all the previous - meetings, and was a director of the company. - - _Q._ When was the company organised? - - _A._ Our minutes will show that, if you will allow me to refer to - them, and I desire to put them in as evidence. On referring to the - minutes I find that the corporators’ meeting was held January 2, - 1872. As I understand that these minutes are to go in as a part of - the evidence, they will furnish you all the information you desire - in regard to the organisation and proceedings of the company. - - [The chairman stated that the witness could refer to the minutes as - memoranda, and that the committee would determine hereafter as to - whether they should be received as evidence.] - - By Mr. Heydrick. - - _Q._ For what object or business was the company organised? - - _A._ For refining oil. - - _Q._ That meeting was under the charter which has been presented? - - _A._ That was the first meeting held after we got the charter. - - _Q._ The gentlemen who attended that meeting on the second of - January were those named in the act of the incorporation? - - _A._ Yes, sir; they met and transferred the company under the - charter over to the stockholders. - - _Q._ Did the incorporators named in the act transfer their interest - to the stockholders, as you have stated on that occasion? - - _A._ Yes, sir. - - _Q._ What refining capacity does this company possess? State the - amount of capital and stock subscribed and put in? - - _A._ At that time 1,100 shares, at $100 per share, was subscribed, - and twenty per cent. thereon paid into the treasury. - - * * * * * - - _Q._ Where did that company intend to refine oil? - - _A._ Their calculation was to get all the refineries in the country - into the company. - - _Q._ Was it the design of the stockholders to include all the oil - refineries in this country? - - _A._ Yes, sir; every one of them. - - * * * * * - - _Q._ Can you give us a list of the stockholders? - - _A._ I can give you them from the minutes. They are as follows: - - William Frew 10 shares - W. P. Logan 10 〃 - John P. Logan 10 〃 - Charles Lockhart 10 〃 - Richard S. Waring 10 〃 - W. G. Warden 475 〃 - O. F. Waring 475 〃 - P. H. Watson 100 〃 - H. M. Flagler 180 〃 - O. H. Payne 180 〃 - William Rockefeller 180 〃 - J. A. Bostwick 180 〃 - John D. Rockefeller 180 〃 - ————— - 2,000 - - By Mr. Sheldon. - - _Q._ What was the idea of getting all the refineries of the country - into one organisation? - - _A._ The idea when the company started was this: There is a large - number of refineries in the country—a great deal larger than is - required for the manufacture of the oil produced in the country, or - for the want of the consumers in Europe and America; the capacity of - the oil refineries in the country is, I think, 45,000 or 50,000 - barrels a day; we completed our organisation, and when we met - together it was discovered that the parties present represented, in - one way or another, a large portion of the refining interest in the - country; of course all of us had our friends in the matter, who must - be taken care of if any arrangement at all was made; and after - discussing the matter at considerable length, it was decided to - include within our company every refinery we could possibly get into - it. We also had considerable discussion with the railroads in regard - to the matter of rebate on their charges for freight; they did not - want to give us a rebate unless it was with the understanding that - all the refineries should be brought into the arrangement and placed - upon the same level; there was no difference made as far as we were - concerned, in favour of or against any refinery; they were all to - come in alike; that was the understanding from the first to the - last. - - _Q._ Where are the refineries situated? - - _A._ Situated in New York, Philadelphia, Baltimore, Boston, on the - seaboard, and in the Oil Region, Pittsburg, and Cleveland. - - _Q._ You say you made propositions to railroad companies, which they - agreed to accept upon the condition that you could include all the - refineries? - - _A._ No, sir; I did not say that; I said that was the understanding - when we discussed this matter with them; it was no proposition on - our part; they discussed it not in the form of a proposition that - the refineries should be all taken in, but it was the intention and - resolution of the company from the first that that should be the - result; we never had any other purpose in the matter. - - _Q._ In case you could take the refineries all in, the railroads - proposed to give you a rebate upon their freight charges? - - _A._ No, sir; it was not put in that form; we were to put the - refineries all in, upon the same terms; it was the understanding - with the railroad companies that we were to have a rebate; there was - no rebate given in consideration of our putting the companies all - in, but we told them we would do it; the contract with the railroad - companies was with us. - - _Q._ But if you did form a company composed of the proprietors of - all these refineries, you were to have a rebate upon your freight - charges? - - _A._ No; we were to have the rebate anyhow; but were to give all the - refineries the privilege of coming in. - - _Q._ You were to have the rebate whether they came in or not? - - _A._ Yes, sir. - - _Q._ Were you to have a rebate upon the same freight charges that - had been in existence before? - - _A._ No; the whole object of the railroad authorities was to get - better freight prices. - - * * * * * - - _Q._ What effect was this arrangement to have upon the producer or - upon the refineries that did not go into your combination? - - _A._ According to our opinion of it that is the way we have got into - this trouble; we have been misconstrued and misrepresented as to our - purposes all over the country; the whole object was, and our whole - talk was, as far as any of my friends came into the matter, or as - far as I myself was concerned, that the producers should receive a - better price for their oil; we calculated to get five or six dollars - a barrel for crude oil; that was from the beginning of our talk - until the end of it; we had not our company organised, or at least - the organisation was not completed, nor the contract signed, until - all these disturbances commenced to be gotten up; we thought the - matter would quiet down and we would get a chance to explain our - position and put ourselves right; we asked for the opportunity to do - so; we have evidence of that in the telegrams we sent, and I can - say, under oath, that they were sent in good faith; there was never - an idea in my mind that they were not.... I will state further that - this matter was discussed with Mr. Scott by myself, personally, and - in very great length, and also with Mr. Potts, who never has had any - interest and never any part in this contract, and who spoke of this - very matter from the start, expressing the opinion that it could not - succeed unless the producers were taken care of. That was understood - by us all from the start in every discussion we had, and by the - railroad people as far as I heard from them. I can only answer for - the railroad people from the conversation I had personally with Mr. - Scott and Mr. Potts, in which it was perfectly understood that we - could not succeed in carrying out these measures for our own benefit - and the benefit of the railroads without the co-operation of the - producers, and the only point we discussed was whether it should be - a combination or co-operation. I took the ground personally against - forming a combination inasmuch as the interests of the producers - were in one sense antagonistic to ours, one as the seller and the - other as the buyer. We held in argument that the producers were - abundantly able to take care of their own branch of the business if - they took care of the quantity produced. They were only liable to - depression from our production, therefore they had in their own - hands directly the power of holding the market at six or eight - dollars a barrel. - - _Q._ You did not take into consideration the good of the consumers - of the country, which is by far the larger part of the population of - the country? - - _A._ Yes, we did. - - _Q._ You wanted to put up the price of oil? - - _A._ In answer to that I will state that the producers and refiners - were both suffering under the depression that existed. The refiners - were not getting enough to pay their expenses. All we asked was a - fair refiner’s profit. - - _Q._ What effect were these arrangements to have upon those who did - not come into the combination or co-operation, as you have termed - it, as to the price to be charged for transporting their oil, both - refiners and producers? - - _A._ I do not think we ever took that question up. - - _Q._ Were the railroad companies to charge the same increase of - freights to those who did not come into the combination that they - did to you without giving them a rebate? - - _A._ Yes, sir. - - _Q._ Now in case you could control the oil produced by these people - in any combination that you made, were you not to have a rebate upon - the oil? - - _A._ We were not to have a rebate, we were to have a drawback. - - _Q._ What is the difference between a rebate and a drawback? - - _A._ There is not much difference in one sense. A rebate is made at - the time we pay our freight; a drawback is made afterward. - - _Q._ That is a technical, rather than a real, difference, is it not? - - _A._ I want to state it as you will find it in the contract. - - _Q._ The effect was that those who did not go into the combination - could not get their oil as cheaply as you could? - - _A._ No, sir; they could not; I want to explain in what relation - that occurred and why this arrangement was made. I may say that it - never entered into my head that the refineries would not all be - brought in; a fair manufacturer’s profit was all we wanted. They - were all to be brought in on equal terms, and the object of the - drawback was not to cover all the oil to be refined in this country, - but only the oil that was to be exported. - - _Q._ If all had gone into the combination, then the result would not - have been to injure the producers and refiners, but to injure the - consumers of the country? - - _A._ No, sir; the purpose was not to injure them. - - _Q._ Would it not have been to increase the price of oil, if you had - increased the cost of freight? - - _A._ Yes, sir. - - * * * * * - - _Q._ You say the railroad companies were going to increase the rate - of freight anyhow; they had the right to do that if they were - carrying too low, but would that justify them in increasing the - rates of freight to such an extent that they could afford to give - you a sum of money for it? - - _A._ I will tell you how that was done. The men in our trade are a - very hard kind of men to hold. Those of us who deal in oil know that - when we have purchased a lot, they would deliver it in New York for - less than anybody could afford to deliver it. That has been the fact - almost continuously ever since 1869. Oil has been delivered in the - East for less money than was apparent from any rates known to the - market; less than even we who refined it could deliver it for. The - railroads were kept constantly besieged by one or another, and they - were continually cutting under other routes for New York or for - Cleveland, so that nobody knew what the rates were. They have been - paying rebates, more or less, for the last two years. - - _Q._ And you contemplated an increase of rates for the simple - purpose of having the railroads divide with you? - - _A._ There was no divide. - - _Q._ A rebate is a divide to a certain extent, is it not? The - proposition was that there should be taken out of the producers and - consumers of this country a certain percentage of the freight for - you? - - _A._ It was done to prevent this cutting of roads one under another, - and to prevent speculation. - - _Q._ Was it not done for the purpose of oppressing the producers and - consumers of this country? - - _A._ I can only deny that such was the object, or that such would - have been the effect. - - * * * * * - - _Q._ Has it been the practice of both the producer and refiner to - make combinations from time to time by storing oils, and by large - shipments abroad to affect the general price in the market? - - _A._ The producers have made such combinations on the creek, and a - few of the refiners and merchants made two combinations in 1868, - which was known as the Deboe combination, and in 1869 and 1870 the - Bull Ring, as they called it; but there was no combination that I - knew of on the part of the producers, except among themselves; they - have several times combined among themselves. - - _Q._ Have there not been combinations of producers, refiners, and - merchants to affect the price of oil? - - _A._ There have been all kinds of combinations. - - _Q._ Is there not at this time, if not invalidated by a change of - directors of the Erie Railroad Company, a combination between - officers of that road and certain parties in New York by which they - control the price of coal? - - _A._ If I were allowed to say what I think, I should reply in the - affirmative and to say that one great reason why we went into this - arrangement was to stop that Erie combination, which was a great - source of difficulty; we could not get hold of the matter; we would - ship a cargo of oil at a fair price to-day, and would be compelled - to sell it to-morrow at a much less price; this arrangement did - break up that combination entirely, so that there is no combination - of that sort to-day. - - By the Chairman. - - _Q._ I understand that your larger combinations swallowed up the - Erie combination. - - _A._ It destroyed it at the time. - - _Q._ Yours was somewhat in the direction of the Erie combination, - but larger? - - _A._ No, sir; it was not; the Erie was with some merchants, ours - embraces the whole refining interest in the country; that was - different; I will state that since I came into this Capitol I have - been told that the very men engaged in prosecuting this - investigation have a combination by which they intend to run up the - price of their oil; I hope they will; I do not care what means are - used, so that we can carry on our business, and pay just what others - have to pay. - - * * * * * - - _Q._ I understand you to say that under your arrangement the cost of - crude oil might be increased $1.25 a barrel, and that there is - produced about 18,000 barrels daily in the Oil Regions of - Pennsylvania, but not that on an average; can you state from memory - about the amount of annual production? - - _A._ I have a circular here which gives the statement as 5,775,000 - barrels. - - _Q._ So that the production in round numbers for last year was - 6,000,000 barrels; now, of this $1.25, how much were you to get as - your drawback if you had carried out your arrangement? - - _A._ The maximum we would have been entitled to receive is one - dollar a barrel. - - _Q._ Then on this production you would have received $6,000,000 a - year, and the railroad companies an additional sum of $1,500,000; in - other words, under your arrangement the public would have been put - to an additional expense of $7,500,000 a year. - - _A._ What public do you refer to? They would have had to pay it in - Europe. - - By Mr. Negley. - - _Q._ Were there not at the same time combinations upon the part of - producers to affect the price of oil in the market? - - _A._ There were not at the time we started this matter; I do not - know of any just at that moment; there have been over and over - again. I want to state that a large portion of our oil product goes - to Europe—of this very crude oil which Mr. Sheldon talks about; I - have here a circular to which I call the attention of the committee, - which bears out our position in this matter; I desire to put it in - evidence because it gives the general opinion of merchants connected - with the exportation of crude oil. It has been the impression of - everybody in the trade that the oil exported should pay us an - additional amount in this country, to be divided between those - interested in the handling of it and the producing of it, to the - extent of eight or ten millions a year; I have had that figured out - three, or four, or five successive years. We have shown over and - over again that that amount ought to be retained in this country. I - have been engaged for several years in the oil business, and I have - yet to sell one barrel to bear the market. I have always been upon - the bull side of the market; I believe there ought to be in this - country a better price for oil to every one engaged in it. In 1868, - 1869, and 1870, there were movements in oil which brought to this - country millions of dollars; and if the producers had refrained from - sending forward their oil beyond the requirements of the market, the - price would have been sustained. That has been the trouble always in - making movements for a higher price. There is no man in this country - who would not quietly and calmly say that we ought to have a better - price for these goods. - - By the Chairman. - - _Q._ Do you mean a better price here, or a better price for that - exported? - - _A._ You could not get a better price for that exported without - having a better price here. - - _Q._ That is what the committee wants to know, whether it is - necessary, in order to keep up the price abroad, to keep up the - price at home? - - - NUMBER 12 (See page 1082) - EXTRACTS FROM THE TESTIMONY OF PETER H. WATSON - - - [From “A History of the Rise and Fall of the South Improvement - Company,” pages 76–96.] - - - WASHINGTON, D. C., April 5, 1872. - - By Mr. Townsend. - - _Q._ From such testimony as you have given this morning, am I - correct in understanding that this whole arrangement was suspended - before its completion and before anything was done under it? - - _A._ Yes, sir. - - _Q._ That no completion of contracts was consummated? - - _A._ No, sir; the conditions of the original understanding about the - contracts, on which alone they were to go into effect, had not been - complied with. - - _Q._ And a further arrangement was necessary to make it a complete - contract? - - _A._ Yes, sir, the South Improvement Company had to enter into a - contract, such substantially as I have furnished a draft of here, to - give the producers the full benefit of everything connected with the - contract before the contract itself could go into effect. - - _Q._ There are three principal interests connected with the oil - trade? - - _A._ There are, the producers, refiners and transporters; no - injustice could be done to either interest without affecting, - injuriously, the others. The object of the railroads in this matter - was to promote the interests of the trade in order to promote their - own interests. - - By the Chairman. - - _Q._ You say there were three interests, producers, refiners and - shippers? - - _A._ Yes, sir, connected with the trade. - - _Q._ And that the object of all these arrangements was to protect - these three interests? - - _A._ To protect these three interests and incidentally, of course, - protecting the general interest in doing that, for this is - peculiarly an American traffic. - - _Q._ It was in the direction of increasing to each of these parties, - respectively the benefits and profits of the business? - - _A._ Yes, sir, that each might receive a fair profit. The railroad - companies had not been receiving cost for transportation, and it was - to save them from loss, for they had been transporting at a loss - during the whole of the year 1871. - - _Q._ Well, that is to increase profits, is it not? - - _A._ Yes, to save from loss. - - _Q._ Did it look to increasing in any way the benefits of cheapness - to the consumer? - - _A._ Yes, sir. - - _Q._ How? - - _A._ By steadying the trade. You will notice what all those familiar - with this trade know, that there are very rapid and excessive - fluctuations in the oil market; that when these fluctuations take - place the retail dealers are always quick to note a rise in price, - but very slow to note a fall. Even if two dollars a barrel had been - added to the price of oil, under a steady trade, I think the price - of the retail purchaser would not have been increased. That - increased price would only amount to one cent a quart, and I think - the price would not have been increased to the retail dealer because - the fluctuation would have been avoided. That was one object to be - accomplished. Moreover, there is only one-sixth of the oil produced - here consumed in this country—a very small proportion of the - product. In discussing what compensating advantage would arise from - an increase of price, the railroad companies considered, in the - first place, that there was a very great compensation afforded by a - steady trade. - - _Q._ Will you state to the committee how, with your mode of arriving - at these conclusions, that cheapness to the consumer is promoted by - stability in trade—how that arrangement which gave $1.50 a barrel to - the South Improvement Company benefited either the railroad company - or the producer? - - _A._ Well, sir, in the agreement you will observe that the maximum - rebates and maximum rates are stated. These maximum rebates were - exceptions to the rule, which is a cardinal principle in the - contract. The actual rates were to be kept as near to net rates as - possible. Moreover, this was a contract which, before it was to go - into effect, would have been a contract with the producer as well as - the refiner. - - _Q._ Does this contract show that? - - _A._ The draft of a contract which I have presented to the - committee, and which was to have been entered into with the - producers before the contracts with the railroad companies went into - operation, shows that. - - _Q._ Does this contract say that anything was to be done in behalf - of the producer before it was to go into operation? - - _A._ Not on the face of the contract; it was only a condition on - which it was delivered to me. - - _Q._ A written condition so that it would become a part of the - contract? - - _A._ It was a part of the contract. - - _Q._ I asked you whether there was anything in writing? - - _A._ I said there was nothing in writing on the face of the - contract, but nevertheless it was an essential part of it. - - _Q._ It seems to be essential now that it should be a part of the - contract? - - _A._ It was all the time so considered from the beginning. - - By Mr. Hambleton. - - _Q._ Was this draft of a contract with the producers drawn prior to - the execution of the railroad contracts? - - _A._ Yes, sir, the draft was drawn prior to that. - - By the Chairman. - - _Q._ What is the date of that pencilled draft of a contract? - - _A._ I could not give you the date of it; it was written in the - office of the Lake Shore Railroad Company. - - _Q._ At what place? - - _A._ New York. - - _Q._ State as near as you can the date? - - _A._ I should say it was probably in December; either late in - December or in the beginning of January, probably in December; - indeed, I am very confident it was before I went home at Christmas. - - _Q._ Has any copy of this ever been printed? - - _A._ No, sir. - - _Q._ This is all there was of it? - - _A._ Yes, except discussion; we discussed the matter. - - _Q._ I mean all there was committed to writing? - - _A._ Yes, sir, all there was then committed to writing. - - _Q._ Is it all there was as far as making out a contract is - concerned? - - _A._ Yes, sir. - - _Q._ Was this submitted to the producers as a body or individually? - - _A._ We were very anxious to submit it to the producers, and I asked - them to appoint a committee that we might do it, but they had got up - such an excitement at the time that nothing was practicable. - - _Q._ When was that? - - _A._ Before the last of these contracts was signed. - - _Q._ Can you give the dates at all? - - _A._ I cannot give the dates, but the contract with the Lake Shore - road had not been signed at the time. - - _Q._ What producers did you ask to call a meeting? - - _A._ Among others I addressed a communication to be delivered to a - gentleman who was understood to be the chairman of a meeting about - to be held. - - _Q._ What was his name? - - _A._ Foster W. Mitchell, of Franklin. - - _Q._ You addressed a communication to him, of what purport? - - _A._ Asking him to appoint a committee to meet a committee of the - South Improvement Company, that they might know what the objects of - the South Improvement Company were. I proposed to submit these - contracts with the railroad companies to that committee and also the - form of contract which the railroad companies required the South - Improvement Company to enter into with the producers, before these - contracts went into effect. - - _Q._ Have you a copy of that communication or letter? - - _A._ It was a telegram. - - _Q._ Have you a copy of it here? - - _A._ I have not at present. - - _Q._ Have you it in your possession, anywhere, and can you lay it - before the committee? - - _A._ I may have it; am not sure. - - _Q._ Did you receive a reply to that communication? - - _A._ Yes, sir. - - _Q._ Was it stated in your communication that you proposed to lay - before the committee the form of contract to be entered into with - the producers? - - _A._ No, sir. I proposed to lay that before the committee if it - should be appointed. - - _Q._ If you are not able to furnish a copy of that communication I - will ask you to state orally its contents. - - _A._ I could not give you the words of it; it was in general terms - asking that they appoint a committee to confer with a committee of - the South Improvement Company. - - _Q._ To confer in reference to what? - - _A._ I do not know that I should be safe in undertaking to say; I - know what my object was in writing it. - - _Q._ That you have stated. If you received a reply from Mr. - Mitchell, state whether it was by letter or telegram. - - _A._ I received a reply by telegraph from Mr. Mitchell, stating that - the meeting of the producers received the communication with - scorn—as of course they would if read to them, as a mass-meeting is - always called for a specific object. - - _Q._ That was not in his reply? - - _A._ No, sir, it was not. I replied to him that I had intended the - communication to him to be for the purpose of laying it before a few - of the principal producers; that to lay the proposition before the - meeting was of course to insure its defeat, because the meeting had - convened for a predetermined purpose, which was to denounce and - treat with scorn the South Improvement Company, because the South - Improvement Company had been represented to them as hostile to their - interests. This last perhaps was not in the communication. - - By Mr. Hambleton. - - _Q._ Have you a copy of that paper which you addressed to Mr. - Mitchell? - - _A._ I am not sure whether I have or not. It was a telegram. - - _Q._ Did that substantially close the written communications between - you and the producers upon that subject? - - _A._ No, sir. I had a great many communications with individual - producers; I think with more than half the producers, estimating - them by the quality of oil produced. - - _Q._ State what occurred. - - _A._ I have corresponded with them and in that correspondence they - have expressed their belief that the proposed plan of the South - Improvement Company would work greatly for the benefit of the - producing interest; that there was something greatly needed for the - producing interest, and that it could not thrive without something - of this kind, because it could not pay fair, living rates, for - transportation to the railroad companies at the price oil was - bringing, and that there was no likelihood of oil increasing in - price under the existing condition of things; that the railroad - could not always, of course, continue carrying at a loss. - - * * * * * - - _Q._ Will you give the names of the producers who proposed to join - the South Improvement Company, or who expressed themselves - favourable to the plan of that company, in addition to the name of - Mr. Mitchell? - - _A._ I could give you the names of several of them, but I do not - think their lives and property would be safe. They requested me not - to mention their names because they thought it would be an imprudent - thing to do. - - _Q._ You refuse, then, to give the names which you say you could - state? - - _A._ I refuse to give the names for the reason I have stated. - - _Q._ Are there any of them you are willing to mention? - - _A._ I will look over the letters and see whether there are any of - them not marked confidential. If there are any not so marked, I will - give you the names. - - _Q._ Why do you state to this committee that you are not willing to - give the names of the parties to whom you refer, when you state that - a great many producers were in favour of this plan, and were - consulted in regard to it? - - _A._ I stated it because it was a fact. - - By Mr. Sheldon. - - _Q._ Did the danger to the lives of these parties arise from the - excitement in the Oil Regions in consequence of these proceedings? - - _A._ Yes, sir, one of the presidents of one of the committees - representing the producers was in New York, a Mr. Patterson. He - stated, as I understood, to one of the railroad officers, that he - did not think my life would be safe if I were to go into the Oil - Region, although he himself would not take it. I had received a - number of threatening letters, but I did not attach any importance - to them until Mr. Patterson made that statement. - - By the Chairman. - - _Q._ What was the reason given why your life would not be safe? - - _A._ I do not know that the reason given, I think by Mr. Patterson, - that there was such an unreasonable excitement among the people as - to the nature and object of the South Improvement Company, which was - represented to them to be a measure altogether hostile to them. - - _Q._ Do you know what these misrepresentations were? - - _A._ I only know by what I have seen stated in the papers and what - persons have mentioned to me. - - _Q._ Did you make an effort to correct the false impressions? - - _A._ I did; the papers called for the other day by the committee, - and which I have here to-day to produce, will show that. - - _Q._ Were your efforts to correct these misrepresentations - successful? - - _A._ No, sir, they were not. I will read the despatches which I sent - for the purpose of endeavouring to do that, and you will see from - them the nature of the efforts I made. - - _Q._ Sent to whom? - - _A._ I sent a despatch to F. W. Mitchell through S. P. McCalmont of - Franklin, which I have here. - - _The Chairman._—We will not stop to read them. - - _Witness._—It will answer your question in a great deal shorter - period than I could answer it verbally. - - _The Chairman._—We will put the answers themselves in as testimony. - - _Witness._—Then I will read this as my answer, if you please, - because it expresses as fully as I could express the facts you - desire to know. - - _The Chairman._—Very well, you may hand the despatches to the - reporter, and they will go in as a part of your testimony, and save - the committee the time of reading them. - - _Witness._—You can hardly comprehend the answer without hearing the - despatches. There were three despatches, showing the efforts I made - to have the producers understand that the whole arrangement was one - which looked as much to their interest as to any other. - - _The Chairman._—Very well, you may furnish them to the committee; we - will not stop to read them now. - - _Witness._—I then offer you first my despatch to S. P. McCalmont, - dated New York, March 4, 1872. I next offer another despatch from - myself to F. W. Mitchell, dated New York, March 5, 1872, and also a - despatch from myself to the same party, dated New York, March 6, - 1872. - - The despatches referred to are as follows: - - - NEW YORK, March 4, 1872. - - S. P. MCCALMONT, - Franklin, Pennsylvania. - - Your telegram received. Please deliver the following - communication to F. W. Mitchell, or, in his absence, to somebody - else who will make its contents known to the principal producers - attending the meeting to be held to-morrow at Franklin: - - - To F. W. MITCHELL: - - Yesterday I received by mail from you or some other friend in - Franklin several newspaper slips, one of which threatened the - destruction of my oil at Franklin. At the same time I received an - anonymous letter threatening injury to the Jamestown and Franklin - Railroad. Disapproval of my connection with the South Improvement - Company is alleged as the reason of both threats. This morning the - telegraph informs me that the threat to destroy my oil has been - executed by tapping the tank and letting it run to waste. While - there may be some excuse for working up the present excitement to - induce people to subscribe their money to new railroad schemes, - there can be nothing but reprobation for the lawless destruction of - property. You have sufficient character and influence, and - sufficient information of the purposes of the company, to quell this - excitement by a word, and I think it your duty to say that word. It - seems to me that a great responsibility rests with somebody among - you for stimulating the present causeless excitement, and the - lawless destruction of property. On meeting you here on your return - from the South, I explained to you, very briefly, that the whole - plan of the South Improvement Company was founded upon the - expectation of co-operation with the oil producers to maintain a - good price for crude oil, as the only means of securing a fair - remuneration to either the transporter, the refiner, or the - merchant. - - Unless the producers will co-operate with us, first, by limiting the - production or the capacity of the markets of the world to absorb - petroleum at a good price; and, secondly, by tanking a large part of - the production for the next two or three months, that it may be - withheld from the market until the present glut is exhausted and - production reduced, it will be impossible, I am convinced from - recent advices of the state of supply and demand in the principal - markets of the world, to keep the price of crude oil up to $3.50, - and of refined oil up to twenty-two cents, during the coming summer. - - I stated to you in the strongest terms the desire of the South - Improvement Company to enter into an arrangement for a series of - years with the producers, whereby good prices for crude oil at the - wells and fair and reasonable rates of transportation would at all - times be assured. The desire still exists. You expressed to me your - concurrence in these views, as others among the leading producers - whom I have more recently seen have also done. - - I then explained to you certain important business which I had - postponed to await the organisation of the South Improvement - Company. That business I have been engaged upon for the last ten - days. As soon as I get through with it, which I hope will be in a - few days, I should like to meet a committee of the principal - producers to arrange the details of the plan of co-operation of - which we spoke. I therefore request you to have such a committee - appointed by the meeting noticed for to-morrow on the newspaper slip - sent to me, and if possible have a plan prepared by which, among - other things, we could extend to you large facilities of tankage and - capital to take care of the surplus oil until the present production - can be checked. - - P. H. WATSON. - - - * * * * * - - - NEW YORK, March 5, 1872. - - To F. W. MITCHELL, - Franklin, Pennsylvania. - - Just received another batch of newspaper slips giving proceedings of - Oil City meeting. - - The meeting acted in ignorance and under a radical misconception of - the actual facts, and with far more earnestness and zeal than - judgment. - - If you will take the trouble to appoint a committee of producers to - investigate, we will show that the contracts with the railroads are - as favourable to the producing as to any other interests; that the - much-denounced rebate will enhance the price of oil at the wells, - and that our entire plan in operation and effect will promote every - legitimate American interest in the oil trade. - - You patiently test a well before deciding upon its merits, like - rational men. You examine other subjects before acting upon them. Is - not this a subject of sufficient importance to be worthy of rational - investigation? - - P. H. WATSON. - - - * * * * * - - - NEW YORK, March 6, 1872. - - To F. W. MITCHELL, - Franklin, Pennsylvania. - - Your telegrams received. - - My telegrams were not addressed to the mass-meeting, but to you as a - friend, as is also this, to be read at your discretion to some of - the principal producers attending the meeting, simply to induce them - to investigate the subject about which they are excited before - acting upon it. - - A mass-meeting is not a deliberative body; it always acts under the - feeling of impulse or passions, and meets for predetermined - purposes, one of which in this case, as appears in the articles of - the newspapers calling the meeting, was to denounce and show its - scorn for anything and everything connected with the South - Improvement Company. Hence it required no prophet to tell beforehand - in what spirit my telegrams to you would be listened to. You ask me - to go to Franklin to consult my true friends. I will most gladly - meet you and your friends at any place favourable to calm - investigation and deliberation, and therefore outside of the - atmosphere of excitement by which you are surrounded, say at Albany - or New York. - - I can well understand that, however, the excited people of your - region may misjudge, they have no other purpose than to promote the - public interest, and knowing that you deservedly enjoy their - confidence, I am strongly convinced that a free and frank - interchange of views at the conference suggested would result in - satisfying you and the people that there exists no cause for - regarding us as enemies. I therefore hope you will name an early day - for the meeting. - - P. H. WATSON. - - - * * * * * - - - Mr. Gilfillan. - - I would like to suggest a question that would throw a little light - upon this subject, and which I know Mr. Watson will be entirely - satisfied to answer. I wish the chairman would ask if the objects of - the South Improvement Company, in connection with railroads, were - presented to the public through any statement in writing or by - telegraph to the public, explaining the objects. - - _The Chairman._—I am coming to that, but first I want to know of the - witness, whether he received any replies to these despatches? - - _A._ Yes, sir, to one of them. - - _Q._ Have you a copy of that? - - _A._ I have not, but I have stated the purport of the answer. To the - first I did not receive any answer; there was not time to receive - any, and I did not expect it. I sent the second shortly after, and - the answer was to the first and second together. To the third I - received no telegraphic answer. - - _Q._ You say you have no copy of these answers you received? - - _A._ I have not. I gave the purport of the answer I received at the - last meeting. - - _Q._ Were there any other letters or statements published by your - authority to the public or to parties in interest among the - producers? - - _A._ These were not published by my authority. - - _Q._ Was there any other matter published by your authority, giving - explanation to the people? - - _A._ I made similar statements to a great many of the producers. - - _Q._ I mean documentary evidence; was there anything published over - your signature? - - _A._ Oh, I did not publish any document at all; I did not publish - this. - - _Q._ Did you authorise it? - - _A._ I neither published it nor authorised it, because I considered - it useless; the people were so excited that they could not be - reasoned with at all. Every one who informed me about it said so. - - _Q._ Did you offer to any of the producers, or any parties in - interest to show them these contracts? - - _A._ Yes, I wanted that committee appointed for that purpose; I told - them so substantially in my despatch. - - _Q._ Did you make the offer otherwise? - - _A._ I told them that I would, if that can be considered as an - offer. I said I would, and I should have done it if they had come to - meet us; but they were afraid. - - _Q._ Would you have published it, do you mean? - - _A._ I should have been perfectly willing to publish the contract; I - should have been glad to have published everything in connection - with the matter. - - _Q._ If you would have been glad to have published it, why did you - not? You had the power. - - _A._ I would have been very glad to have done it, with the assent of - these men. - - _Q._ With the assent of what men? - - _A._ The producers. I said to some of the producers that if they - would go and examine the whole plan, and after they had examined - into it they were not satisfied that it was for their interest, I - would be perfectly willing to abandon the whole thing. That was the - feeling we had in regard to the matter. - - _Q._ What producers did you say that to? - - _A._ Several of them. - - _Q._ Mention their names. - - _A._ Men with whom I had been in correspondence with on this - subject, and whose lives and property I believe would not be safe if - I were to mention their names, because they have told me so. I have - promised not to expose them, and I feel in honour bound not to give - their names. - - _Q._ You have so promised in regard to all of them? - - _A._ Most of those with whom I have had correspondence. - - _Q._ Was there any opportunity offered to explain this matter, to - show the contracts and let them know what were the objects of your - company? Are there no names you can mention in that connection? - - _A._ I shall have to look over the letters in order to see if there - are any not marked confidential. I should like to give you the names - if I am at liberty to do so. - - Mr. Gilfillan. - - I should like to make a suggestion which would throw a little light - on this subject. If the chairman will allow me, I will ask the - witness if he saw the proceedings of the meeting at Franklin, to - which he refers, and if so, whether a resolution was not passed at - that meeting asking for the production of these contracts that the - public might know what the objects of this company were? - - _A._ I have seen no such resolution; I do not think I have seen the - published proceedings of that meeting; I only saw such parts as were - sent to me in slips. There was certainly no such resolution as that - which came to me. Mr. Mitchell telegraphed to me that my telegrams - were received with scorn; that they did not want to know anything - about the matter. - - * * * * * - - _Q._ Do you remember whether, about the first of March, the railroad - companies, with which you made these contracts, or some of them, - raised their rates of transportation? - - _A._ I think about that time they did. - - * * * * * - - _Q._ Was it for a short time raised to that amount, and a printed - schedule published? - - _A._ I never saw the published schedule; I understood that through a - mistake between William Vanderbilt, vice-president of the New York - Central Railroad Company and freight agent of the Lake Shore road, - it was supposed by the freight agent of the Lake Shore road that the - rate had been raised by an agreement among the railroads to the - maximum rates mentioned in their contracts with the South - Improvement Company. A day or two after that mistake, being in Mr. - Vanderbilt’s office, a telegram came in respect to it, and Mr. - Vanderbilt at once directed the correction to be made. Mr. Devereux, - the general manager of the Lake Shore Railroad, happened to come in - at the time, and he also gave directions to the officers of his road - to have the correction promptly made. - - _Q._ Were you present? - - _A._ Yes, sir, I was present. When I said “being in Mr. Vanderbilt’s - office,” I meant that I myself was present. - - _Q._ Was the correction made at your instance, or request, or - suggestion? - - _A._ It was not. - - By Mr. Hambleton. - - _Q._ Why was it made? - - _A._ Because it was a mistake, a misapprehension, a - misunderstanding, as I understood. I had not heard anything of it - before that moment, and it was accidental, as I said, that I heard - it. - - By the Chairman. - - _Q._ Then the rates were raised by the freight agents of the roads - to correspond with the rates mentioned in these contracts? - - _A._ I do not know the facts any further than having heard it as I - have stated. - - _Q._ And you think they were raised to correspond with these - contracts by mistake? - - _A._ I stated I so understood at the time. - - _Q._ You stated the circumstances so minutely as to its being a - mistake between Mr. Vanderbilt and the Lake Shore agent, that I - inferred you knew the facts? - - _A._ I only know it was so represented at the time. - - _Q._ Did you take any part in that conversation by which the error - you speak of was corrected? - - _A._ Only in this sense: Mr. Vanderbilt mentioned the fact to me - that a mistake of that kind had been made, that he had just received - a despatch in relation to it, and he was about to correct it, and he - asked me, I think, if I knew whether Mr. Devereux had given any - orders respecting the matter. I told him I did not know anything - about it. - - _Q._ If I understand you, the time had not come for raising the - freights under these contracts then? - - _A._ I do not know anything about the time; I did not intend to make - any such statement. - - By Mr. Hambleton. - - _Q._ At that time, as president of the South Improvement Company, - was it not the understanding, and was it not your expectation, that - the rates would go up at that time as they did go up to the maximum - rates named in these contracts? - - _A._ I do not know that as president I had any knowledge of the - matter; and as an individual I took no part in the transaction. - - _Q._ The president is an officer supposed to know more about such - details than any of the directors or members of the company; and as - president of that company I ask you if it was not the general - understanding that the rates would go up about that time? - - _A._ I answer distinctly that it was not, and that as president of - that company I had nothing to do with the rates then, because the - South Improvement Company’s contracts had not gone into operation, - and neither the South Improvement Company nor any of its officers - had any control of the question in any way. - - _Q._ Had not the contracts at that time been signed? - - _A._ The contracts had been signed, but they were held by me - personally in escrow and they had not gone into effect. - - _Q._ They had been signed? - - _A._ Yes, but had not gone into effect. - - _Q._ Were not these contracts so signed and held by you as president - of the South Improvement Company, and did you not expect that the - rates would advance to the maximum named therein at that time? - - _A._ Certainly I did not; and in regard to the premises stated in - the first part of your question I do not want to admit the - statements you made. I do not suppose the object was to entrap me - into an admission of a statement that is not true. - - _Mr. Hambleton._—I do not wish to entrap you into anything. - - _Witness._—I say that when you remark that I hold these contracts as - president of the South Improvement Company, you mistake; they were - not in my hands as president. - - _Q._ I supposed that as president they passed into your hands? - - _A._ They were passed into my hands as a person, and as such, in - execution of the trust, I should hold them as much against the South - Improvement Company as against anybody else. - - _Q._ You answer my question then that you did not expect them to - raise these rates? - - _A._ Certainly I did not; I had no such idea at all. - - _Q._ State how that mistake, or misunderstanding, or error, happened - to occur, and what was the cause of it? - - _A._ I really do not know; it was suggested at the time by Mr. - Devereux that Mr. Hills, the freight agent of the Lake Shore - Railroad, had a son on his death-bed, that he had to leave the - office in charge of subordinates, and that he had not his wits about - him as usual, because his mind was so pre-occupied with the sickness - of his son, who was a favourite son. - - _Q._ If he had not his wits about him, had he the contracts? - - _A._ I do not wish to use that expression in any offensive sense; I - mean he had not the full use of his mind. I do not know whether he - had the contracts or not. I think it is probable from the - conversation there that all the freight agents had the rates - mentioned in these contracts; I have no doubt that the officers of - the roads had consulted him; indeed some of them stated that they - had been consulted, and that the freight agents knew what rates were - provided for in these contracts. - - * * * * * - - _Q._ I want an answer to my question. By your contracts with the - railroad companies you were to purchase all the refineries in the - main cities of this country. You had it in your power to furnish - more transportation than anybody else? - - _A._ The refineries were not purchased; they have not been - purchased. - - _Q._ Was not that contemplated? - - _A._ The company contemplated purchasing if it had gone into - operation. - - _Q._ I am getting at the point now; if your scheme had been - successful do you suppose anybody in the world could have furnished - an equal amount of transportation with your company? - - _A._ If our plan had been carried out it included everybody; there - would have been nobody left, and no hostile interest. - - _Q._ You would have had the matter perfectly under your control? - - _A._ Yes, because there would have been nobody left. - - _Q._ Then I am correct in saying that nobody else could have shipped - oil under any circumstances, because you were to have an additional - rebate in case any rebate was allowed to any other person? - - _A._ But if all interest was drawn into the plan, there would have - been no hostile party and no injustice done to anybody. - - _Q._ That is a different matter; now we agree that your advantages - of rebate from the leading roads gave you the power of paying larger - prices to the oil producers than anybody else? - - _A._ It was expected that these rebates would enable the refiners - and producers to maintain a fair price for crude oil at the wells. - - _Q._ Will you answer my question? Could you not have purchased oil - and shipped it with these rebates, on terms that nobody else could - compete with? - - _A._ If everything had been successful, if the South Improvement - Company had gone into successful operation, combining all these - various interests, of course we could have paid a higher price than - anybody else. - - _Q._ Do you not see then that you had the producers of the Oil - Regions absolutely in your control? - - _A._ No, sir. - - _Mr. Sheldon._—I do. - - _Witness._—I do not, and will tell you why; you asked me a question - that is a good deal like attempting to make the Bible prove that it - says itself “that there is no God.” - - _The Chairman._—All our time is being expended in this way. Will you - answer the direct question put to you? - - _Witness._—I want to answer it truly. It is an essential part of - this contract that the producers should be joined in it; therefore - it was not hostile to the producers in any of its intents or - purposes; it never would have gone into effect unless the producers - had joined. - - By Mr. Sheldon. - - _Q._ That may be the fact, but if the producers had refused to join, - could you not have forced them into the arrangement on your own - terms? - - _A._ No, sir; because the South Improvement Company had no contract. - - _Q._ You have a contract? - - _A._ No, sir; it has no contract. - - _Q._ Did it never have? - - _A._ No, sir; they are placed in escrow with me. It has never had - any, that is, there is not to-day and has not at any time been a - contract in existence, in activity, or in force between the - railroads and the South Improvement Company. - - By Mr. Hambleton. - - _Q._ Is not that entirely due to the excitement produced in - consequence of the contracts having been entered into? - - _A._ If the purchasers had entered into the contract which was - contemplated by the South Improvement Company, it would have been - entirely satisfactory to all parties, and both contracts would have - gone into operation. - - _Q._ And if a party of the producers had joined, you could have - forced the balance to have gone into the arrangement? - - _A._ Two-thirds were required. - - _Q._ You could have forced the balance to have gone in? - - _A._ The majority rules in most kinds of business; unless two-thirds - had joined, no arrangement would have been made. - - _Q._ Let us see whether you have not power to force the producers; - by your contract with the railroads you had the advantage of forty - cents a barrel to Cleveland and Pittsburg, and $1.06 to New York, - Philadelphia, Baltimore or Boston on crude petroleum; while on - refined petroleum you had the advantage to these cities of fifty - cents a barrel, and from any other point to New York, Philadelphia, - Baltimore and Boston of thirty-two cents a barrel; it seems to me at - that advantage you could have compelled the producers to do exactly - what you wanted them to do? - - _A._ The South Improvement Company never could have had that - advantage, because the condition on which the main contract with the - railroads was to be enforced was that the producers should join with - them and participate in the benefits. - - _Q._ Is that embodied in the different contracts? - - _A._ The condition is not embodied upon the face of the contract; it - is a condition upon which I held the contracts. - - _Q._ Now Mr. Watson, as a lawyer, if you are such, are verbal - conditions made with a third party to change the terms of a written - contract executed in all respects? - - _A._ Let me give you an illustration within my experience that is - exactly parallel to this: I had a note executed, sealed, and - complete in every way, put into my possession to be delivered upon - the production of a deed. - - _The Chairman._—Wait a moment, there must be some kind of order in - this proceeding. I wish you to answer the question which has been - asked you, whether as a lawyer the conditions stated would change - the terms of a written contract. If you are able to give an answer - to that legal question you may do so. - - _Witness._—Let me hear the question and I will endeavour to answer - it fully, if you will allow me to answer it in my own way. - - By Mr. Sheldon. - - _Q._ The question is, whether a verbal understanding to be performed - by other parties not embraced in the written contract can be made - effective to modify the terms of that contract as between the - parties to it. - - _A._ An agreement between the parties to a contract, whether verbal - or written, fixing the terms upon which the contract shall go into - effect, is perfectly competent and would be binding. - - _Q._ That is your opinion as a lawyer? - - _A._ That is my opinion. - - _Q._ Now, sir, these contracts contemplated a considerable increase - in the freight charges, both upon crude and refined petroleum? - - _A._ They contemplate an increase almost up to the price for coal - and lumber, as they are ordinarily carried, amounting to about 1½ - cents a pound. - - _Q._ Did it contemplate an increase upon both crude petroleum and - refined oil? - - _A._ Certainly; the railroads had been carrying these articles at a - loss of nearly a million dollars; they carried for less than cost, - and one object of these contracts was to increase the price of - freight to the railroads. - - _The Chairman._—Let me suggest the propriety of first answering the - question and then giving your explanation. That is the regular - course, and I am sorry to say that during your whole examination - there has not been a direct answer given to a question. - - _Witness._—Well, sir, where a question is such that it would give a - false impression unless answered fully and fairly, I do not want to - convey that false impression by my testimony. - - Mr. Sheldon. - - _Q._ Very well, I am satisfied with your explanation; now could not - these railroad companies have raised the price of freight without - the intervention of the South Improvement Company? - - _A._ There were a good many difficulties in the way. - - _Q._ Could they not have done it, and had they not the power to do - it? - - _A._ The laws of the State of New York forbid the Erie and New York - Central Railroads from combining to raise the rates of freight; - whether they could have done it I do not know. They tried very hard - to agree to raise the freights but did not succeed. - - _Q._ If that is the law of New York, is there an exception to that - law so that they could combine with the South Improvement Company? - - _A._ I think it was the opinion of lawyers that this arrangement was - perfectly legal and proper; they could not combine, but they could - make an independent agreement. - - _Q._ They could raise the rates in your behalf, but they could not - in the behalf of anybody else? - - _A._ Not in behalf of anybody, but they could make this transaction. - For two or three years they had been cutting under for the purpose - of drawing the business away from each other. - - _Q._ What effect would this increase of freight have upon the - consumers of oil? - - _A._ I think it would not be to the prejudice of the consumers in - this country at all. - - _Q._ Would it not have increased the price? - - _A._ I think it would not have increased the price to the retail - consumers in this country. If there had been no countervailing - advantage to the retail consumers, of course it would have increased - the price. - - _Q._ You mean to say that there was such a margin upon the traffic - of oil that to increase the freight charges fifty or 100 per cent. - would not affect the retail price? - - _A._ No, sir; I do not mean to say that is the reason. - - _Q._ Is that not the effect of your answer? - - _A._ No, sir, I think not. My explanation of it is this: that the - oil trade, unless it is steadied by some artificial process, is - subject to violent and rapid fluctuation. The retailers are very - quick to note a rise in price, as I explained the other day, but - very slow to notice a fall, so that the average price of a retail - purchaser is very much above the average wholesale price. Now it was - expected that the price under this arrangement would be a steady - price, and that with a steady, regular price it would not cause the - retailer to raise the price at which he sold at all. - - _Q._ Do you know what profit is made on a barrel of oil sold by - retailers to consumers in Northern Ohio? - - _A._ It varies. - - _Q._ Does it ever reach over $1.75 a barrel? - - _A._ I can answer your question with a little calculation. (After - computation.) I have known it to be sold at as low a profit as forty - cents a barrel. About six or eight cents a gallon is a fair profit. - - _Q._ We gentlemen are supposed to be acting for the public good; - will you tell us what public interest you are advancing, or thought - you were advancing in making the arrangements that are foreshadowed - in these contracts? - - _A._ We were advancing the interests of the railroads, the - transporting interest, the interest of the producers, those who mine - oil, the interest of the refiners, those who manufacture it, and the - interests of the American trade and business generally, for - five-sixths of the oil produced is exported, and an increase in the - price of crude oil at the mines is essential to the payment of a - fair business profit to the refiners; it is essential to the payment - of a fair rate of transportation, because without a higher price of - transportation more profit to the refiners could not be paid long - and allow the producer pay for his labour at the average price of - oil last year. - - _Q._ Do you not think the interests of trade in this country are - better promoted by leaving everybody to attend to their own matters - and protect their own rights rather than by forming a combination as - you did? - - _A._ It is essential in many cases beyond individual means to form - combinations. Railroads cannot be built without the co-operation of - a great many individuals. There are a great many other operations - that cannot be managed successfully without co-operation, and this - is one of them. - - _Q._ Did the producers ask you to go into this operation? - - _A._ The most intelligent producers did, and to-day, my judgment is, - that they are all satisfied that something of that kind is necessary - for the protection of American industry. - - _Q._ Did the consumers ask you to go into it? - - _A._ Not any considerable number of consumers; we ourselves are all - consumers. The body of them did not. - - _Q._ How much money would the railroad companies have made under - these contracts if they had shipped oil at these advanced rates? - - _A._ They would have made about the same profits on that business - that they do on coal and lumber, even if the maximum rates had been - paid without any rebate; not so much if the net rates only had been - charged. - - By the Chairman. - - _Q._ State whether in your judgment it was necessary, in order to - make provision for these people for the South Improvement Company to - receive this million dollars a year for the benefit of American - interest, as you have suggested. - - _A._ There was no such provision made, as I understand it. - - _Q._ The testimony is that about six million barrels a year are - shipped; the provisions of this contract are that a rebate to that - company, supposing the maximum to have been charged, should be over - a dollar a barrel. - - _A._ No such thing as charging maximum rates was ever contemplated. - The contract on its face says it is a cardinal principle that the - gross rates shall be kept as near the net rates as possible. - - _Q._ Suppose it had been kept at the gross rates, your company would - then have received over six million? - - _A._ That would be altogether different from the principles on which - the contract was based. - - _Q._ If the gross rates which the contract allows had been paid, - however, the South Improvement Company would have received a rebate - of over six million dollars? - - _A._ Certainly, supposing such an absurdity. - - _Q._ Why did you put such an absurdity in the contract? - - _A._ It is not in the contract, as I stated. - - By Mr. Hambleton. - - _Q._ It is in the contract as a maximum? - - _A._ But it is also expressly stated that the rates shall be kept as - near to net rates as possible. - - - NUMBER 13 (See page 1093) - CONTRACT OF MARCH 25, 1872 - - - [From “A History of the Rise and Fall of the South Improvement - Company,” pages 27–28.] - - - I. That all arrangements for the transportation of oil after this - date shall be upon a basis of perfect equality to all shippers, - producers and refiners, and that no rebates, drawbacks, or other - arrangements of any character, shall be made or allowed that will - give any party the slightest difference in rates or discrimination - of any character whatever. - - II. That the present rates from Oil City, Union, Corry, Irvineton, - Pittsburg, Cleveland and other competing points, shall be and remain - in full force at following rates: - - - ON REFINED OIL, BENZINE, ETC. - - Per barrel - From Oil City, Union, Corry and Irvineton to Boston $1.65 - From Oil City, Union, Corry and Irvineton to New York 1.50 - From Oil City, Union, Corry and Irvineton to Philadelphia 1.35 - From Oil City, Union, Corry and Irvineton to Baltimore 1.35 - From Cleveland to Boston 1.65 - From Cleveland to New York 1.50 - From Cleveland to Philadelphia 1.35 - From Cleveland to Baltimore 1.35 - From Pittsburg to New York 1.50 - From Pittsburg to Philadelphia 1.35 - From Pittsburg to Baltimore 1.35 - - - ON CRUDE OIL - - From Oil City, Union, Corry and Irvineton to Boston $1.50 - From Oil City, Union, Corry and Irvineton to New York 1.35 - From Oil City, Union, Corry and Irvineton to Philadelphia 1.20 - From Oil City, Union, Corry and Irvineton to Baltimore 1.20 - From Oil City, Union, Corry and Irvineton to Cleveland .50 - From Oil City, Union, Corry and Irvineton to Pittsburg .50 - - And said rates shall not be liable to any change either for increase - or decrease without first giving to William Hasson, president of the - Producers’ Union at Oil City, at least ninety days’ notice in - writing of such contemplated change. - - III. In the distribution of cars for shipments, it shall be done - without discrimination. - - IV. On the basis as hereinbefore stated, the parties respectively - agree to carry out the arrangements in good faith and work for the - mutual interests of each other. - - In witness whereof the parties have hereunto affixed their - signatures, this twenty-fifth day of March, A.D. 1872: - - For the Lake Shore and Michigan Southern Railroad Company: H. F. - CLARK, _President_. - - For the Erie Railway Company: O. H. P. ARCHER, _Vice-President_. - - For the New York Central and Hudson River Railroad Company: WILLIAM - H. VANDERBILT, _Vice-President_. - - For the Atlantic and Great Western Railroad Company: GEORGE B. - MCCLELLAN, _President_. - - For the Pennsylvania Railroad Company: THOMAS A. SCOTT, - _Vice-President_. - - On behalf of the Producers and Refiners: G. SHAMBURG, E. G. - PATTERSON, WILLIAM HASSON, HENRY BYROM, WILLIAM PARKER, JOHN J. - FISHER, _Oil Creek Producers and Refiners_. - - J. J. VANDERGRIFT, A. P. BENNETT, WILLIAM M. IRISH, WILLIAM T. - SCHEIDE, _Oil City Producers and Refiners_. - - HENRY H. ROGERS, F. C. FLEMING, JOSIAH LOMBARD, JR., _New York - Refiners_. - - B. VAUGHAN, _Boston Refiners_. - - - NUMBER 14 (See page 1100) - TESTIMONY OF HENRY M. FLAGLER - - - [Before a committee appointed by the Legislature of Ohio, March, - 1879.] - - - Henry M. Flagler; residence, Cleveland, Ohio; occupation, secretary - Standard Oil Company; sworn and examined. - - By Mr. Norton. - - _Q._ Mr. Flagler, I suppose you understand that this investigation - is brought under what is known as House Resolution Number 162? - - _A._ I understand that it is. - - _Q._ How long have you been secretary of the Standard Oil Company? - - _A._ Since its organisation, some time in January, 1870. - - _Q._ Are the articles manufactured or the oil refined by your - company shipped over the line of any railroad in the State of Ohio, - and if so, state whether or not any rate of freight is contracted - for by you or whether your company pays the freight? - - _A._ To the first question, yes, sir; more or less of the product of - our refineries is shipped over the railroads of the state. As a rule - all of the freight contracts have been made by me. - - _Q._ Please state as near as you can what proportion of your product - is shipped out of the state? - - _A._ Well, I should say from sixty-five to seventy per cent. - - _Q._ Now, has your corporation any contracts, written or verbal, - with any of the railroads of the State of Ohio for carrying your - freight? - - _A._ Yes, sir. - - _Q._ You may state whether these contracts are written or verbal. - - _A._ They are written. - - _Q._ Have you heretofore, prior to this time, any contracts written - or verbal? - - _A._ We have. - - _Q._ You may state, Mr. Flagler, whether by virtue of these - contracts it has been agreed or allowed by the railroad companies to - pay you any drawbacks or rebates on freights. - - _A._ No, sir, it has not. - - _Q._ You may state whether or not you are allowed special rates, or - what is known as special privileges. - - _A._ I can’t answer that question from the fact that I do not know - what other people get, so I do not know whether they are special - rates or general. - - _Q._ I believe, Mr. Flagler, that in your subpœna it was requested - of you that if any such contracts were in existence relative to - freight matters, you would bring them before the committee. Did you - do so? - - _A._ I have never seen the subpœna, so I do not know what the demand - was. I have, however, contracts made with our company as far back as - the first one ever made. - - _Q._ Can you produce these contracts before this committee? - - _A._ Yes, sir, I can; I am willing to do so, provided they may be - used by the committee—if it is proper to ask, to be used in the - nature of a confidential communication. None of these contracts - provides for any discrimination whatever, but they may contain some - business secret of the Standard Oil Company, whose interests I am - bound to protect. I do not see how the submission of those contracts - as evidence in this case will do other than bear out the statement I - have made under oath. I do not see how they will do anything more - than sustain the statements I have made. I would be very glad to - have our company set right before the public in these matters, but I - do not care enough about it, however, to have our business contracts - made public. I should be very glad to submit them to you under such - circumstances. - - _Q._ Mr. Flagler, do you know anything about the rates of freight - from the Southern portions of the state, well, say from Marietta and - from Wheeling to the City of Columbus? - - _A._ I do not. - - _Q._ Did you have anything to do, or has the Standard Oil Company - anything to do with the making of the rates of freight for the - company known as the Camden Consolidated? - - _A._ None whatever. - - _Q._ Have you anything to do with the making of the rate, or the - arranging of the freights for the company known as the Marietta Oil - Refining Company? - - _A._ None whatever. - - _Q._ Testimony introduced here shows, I think, Mr. Flagler, that - about one year ago the rates of freight were raised nearly one-half - from the points I have mentioned and from Parkersburg and other - places to points in this direction. Had the Standard Oil Company any - understanding by and between the railroad companies in regard to - this rise in the rates of freight? - - _A._ I should say, to my own knowledge, positively no; I never heard - of it before. I do not know what the rates were and I did not know - that the raise had been made. - - _Q._ Do you in your capacity, or does the Standard Oil Company - through its agents, control the rates of freight or make the rates - of any of the oil companies in Cleveland, outside of your own - corporation? - - _A._ No, sir. - - _Q._ Mr. Flagler, what is your rate of freight from the seaboard, or - to the seaboard from Cleveland? - - _A._ At the present time? - - _Q._ Yes, sir, at the present time. - - _A._ Do you mean per carload or by the barrel? - - _Q._ Well, we’ll put it by the barrel, as there is some testimony - before the committee relating to that. - - _A._ I do not know that I could answer the question and I do not - know but that I would be betraying the business interests of other - people. The custom for several years, in fact, for more than five - years, has been that the rates of freight on shipments to the - seaboard and export oil have been made by what is called trunk - lines, the New York Central, the Erie, now New York, Lake Erie and - Western, the Pennsylvania, and Baltimore and Ohio. The general - freight agents are the officers who make those rates, and their - Western connections share in them. I do not know how the freight - which is paid for services rendered is divided between their Western - connections, having no means of knowing that at all. We do not make - any contracts with the Lake Shore for the rates of freight, and the - same is equally true of the Atlantic and Great Western. These are - the only two roads we ever ship by—I may be wrong; we ship some by - way of Pittsburg, over the Cleveland and Pittsburg or over the - Baltimore and Ohio. - - _Q._ Do you know what the open rate, the published rate is to the - seaboard by the barrel? - - _A._ To Boston and New York, $1.54½; to Philadelphia and Baltimore, - $1.29½. - - _Q._ Now, Mr. Flagler, you have used your pencil to arrive at that - conclusion, why was it necessary to figure out that matter if there - is a published rate? - - _A._ Simply because I do not keep that thing in my mind and had to - call upon my memory for the way the thing is got at. I got at that - by deducting what is called the crude rebate. Nobody pays the crude - rebate which is 45½ cents. Whether that form is kept up by the - railroad companies I do not know, but my impression is it is not. - - _Q._ It is a fact, isn’t it, that you do get a lower rate and pay - less freight than the published rate? I believe it is in evidence - that the open rate of freight to the seaboard will average about - $1.65. - - _A._ I have never seen the freight tariff, if you mean that which is - known as the schedule rate published for the public. I have not seen - anything of the kind and do not know anything about it. - - _Q._ What inducement does your company offer to the railroads or - what propositions are made by the railroads to your company? Now, I - refer to the testimony given by Mr. Hills in regard to the carrying - of oils, etc., what inducements do the railroad companies give - whereby they lower your rate of freight? - - _A._ They do not give us lower rates of freight for any - consideration of that kind. They pay us for the use of our property, - if we furnish them with terminal facilities, cars in which to haul - the goods, they pay us a compensation for the use of the property. - Perhaps I can give it so you can understand it; we keep a separate - account with each refinery and if we spend $50,000, or $100,000 to - create what we term terminal facilities, warehouses, loading places, - etc., we make an arrangement whereby they pay us a fair compensation - for the property that is created by our money. That consideration is - credited to that investment and has nothing whatever to do with the - freight. The refinery making the oil is charged with the rate of - freight just as anybody else pays, and the compensation for the use - of tank cars and terminal facilities at the shipping and receiving - ends of the line is given for the use of these ends. I will say that - in the contracts we have made, the railroad companies have expressly - reserved the right to give to other parties the same privileges if - they furnish the same conveniences. - - _Q._ Does the Standard Oil Company own and control the Camden - Consolidated Company at Parkersburg? - - _A._ Well, I would like to ask a question in reply, and that is, - whether that question and answer comes within the scope of this - resolution? - - _Q._ I will give you my reason for asking the question. It has been - charged here by witnesses that there is a collusion by and between - the railroads in the Southern part of the state and the Camden - Consolidated Oil Company or the Standard Oil Company, as they term - it, for discriminations in the rates of freight. Now, to find out - whether or not there is anything for which to blame the Standard Oil - Company, I ask this question. - - _A._ Well, it is a business secret of our company, but considering - the circumstance, I will answer the question. The Standard Oil - Company doesn’t own or control the Camden Oil Company, and I would - say to every man explicitly and fully that the Standard Oil Company - doesn’t own a share of stock in the Camden Consolidated Company. I - say this so I may be understood and I hope I have done so. I do not - own a share in it myself. - - _Q._ Coming back to this question of the contracts, have you any of - the written contracts that have been or are now in force, that you - can give this committee; contracts between the railroad companies - traversing this state and your company? - - _A._ Yes, sir. (Contracts produced.) The price for the shipment of - oil per barrel as given in the first contract for the year 1870 was - as follows: From the first of February to the first of June, 1870, - $1.40; from the first of June to the first of November, 1870, $1.20; - this was during the season of navigation. From the first of November - until the expiration of the contract, April 1, $1.60. - - _Q._ Is there a line or clause in that contract whereby there is an - agreement for rebates or drawbacks? - - _A._ None whatever. - - Second contract read: In this contract the rates were as follows: - From the first of April until the middle of November, 1872, about - seven months, $1.25. For the remainder of November, December, - January, February and March of 1873, $1.40. These were rates per - barrel. - - _Q._ Were there no rebates, drawbacks, or special privileges given - outside of what is written in the contract? - - _A._ None whatever. (Third contract introduced.) - - _Mr. Flagler_: I want to say something of this matter and I want to - tell the whole truth. Our business was at the time about 4,000 - barrels a day and we had contracted this oil for delivery at once, - and we had to pay from $50 to $150 gold per day if we kept it an - hour longer than the time specified in the contract, so it was very - important for us that the railroads put these on board as rapidly as - possible. - - _Q._ Mr. Flagler, from the reading of that contract I see that you - might, instead of being benefited, sustain damages by the failure on - the part of the railroad company to get your oil in there. Did you - ever have to pay any demurrage to them? - - _A._ Yes, sir, we had to pay some years as high as $30,000. - - _Q._ Have you ever received any benefits by reason of these - contracts that any other shipper might not have received? - - _A._ No, sir. Not in the slightest. All the way through these - contracts you will observe that we have undertaken those risks which - the law imposes on the common carrier and which no railroad can - divest itself of except by written agreement. The handling of these - quantities of oil was a very serious matter; there was a constant - tendency on the part of the railroad companies to put cars used in - this trade to some other purpose, whenever it would pay them better. - They used a rack car, such as they could carry cattle in and we have - had a great deal of trouble with these roads in the use of those - cars, because if they could get cattle to haul from Chicago to St. - Louis for something more than they were getting from us they would - do it. I want to say what the facts are under the contract just - read. You will remember that during seven months of the year we were - to give them 4,000 barrels of oil per day or 100,000 barrels a - month, and the smallest of the shipments in those months was - 108,000. We gave them during the rest of the time more oil and paid - them the contract on it when we could have shipped by canal for - forty cents less. On the first day of December, a competing line of - railway lowered the rate to $1.05 per barrel. I went to Mr. - Vanderbilt and told him that the rate should be maintained at the - agreed price or else we would not have made the contract with him. I - said to Mr. Vanderbilt that if he insisted in the fulfillment of the - contract basis and exacted the payment of the contract price, it - would result in our being compelled to close our refineries, for we - could not afford to pay $1.25, when other people were only paying - $1.05. I called his attention to the fact that during the season of - canal navigation we had given the maximum shipments of oil, 180,000 - barrels a month, and some in excess of it, and paid $1.25. I said, - if you will reduce these rates to the rate made by the Pennsylvania - Company, in my judgment thirty days will not elapse before they will - be willing to restore their rates, and all we ask is to be put on a - parity with other shippers. After a moment’s hesitation he asked if - I thought he ought to stand all of this twenty cents. I told him if - he should stand any part of it he should stand it all. I said, it is - a transportation fight and not a fight of the manufacturers. When it - comes to competition of the manufacturers we would take care of - ourselves. I said that we would not have made this contract except - on their assurance that the contract price of $1.25 was to be - maintained. He said: “I will make your rate $1.05,” and this was - after we had done more than we had agreed to do under the contract. - The next day we sold between 50,000 and 60,000 on the basis of $1.05 - per barrel. Mr. Vanderbilt allowed that rate of payment for one - month and then said he would exact the contract price, $1.25. I said - all right, and we shall ship just the amount of oil we are compelled - to ship to fulfill our contract and then we shall stop. We paid him - $1.25 for all over the month and then we did not run a barrel of oil - from the City of Cleveland more than that until the expiration of - this contract for three months. That is the good that the contract - worked on us. You might consider it a baby act to plead the equities - of the case, but we could not place our oil on the market and - compete with other refineries. - - (Fourth contract introduced.) - - _Q._ This is the only contract you have now in existence whereby you - carry your freight? - - _A._ Yes, sir. - - * * * * * - - _Q._ Do you know anything of the suits brought by Teagle and Company - against the Lake Shore road for discriminations in freight? - - _A._ Nothing whatever. - - _Q._ Have you had since the organisation of your company any - understanding outside of these contracts whereby discriminations are - made in favour of your company as against any of the smaller - refineries of the state? - - _A._ No, sir. - - _Q._ Has your company or corporation in conjunction with the - railroads ever operated so to “squeeze out” as they term it, or - injure any other refining company of the state, outside of the - Standard Oil Company? - - _A._ No, sir, never. I would like to enlarge upon that question. I - suppose it would be fair to the mind of every member of this - committee present. A very large business with other mechanical - contrivances and an experience which grows up with and comes along - with business and always doing a very large business, in the nature - and order of things should make its presence felt by the parties - doing a comparatively small business. In 1873 and 1874, when we - stipulated for those 4,000 per day, if anybody has followed the - progress of the Standard Oil Company they would know and I feel - justified in saying that we have done a very large business, and - aimed to do it with economy and give the purchaser the very best oil - manufactured, consistent with a good and safe kind of oil—to - manufacture at one point under the eye of one man. With an - aggregation of capital and a business experience, and hold upon the - channels of trade such as we have, it is idle to say that the small - manufacturer can compete with us, and, although it is an offensive - term, “squeezing out,” yet it has never been done by the conjunction - of any railroads with us or by the carrying out of freights. - - - NUMBER 15 (See page 1106) - THE PITTSBURG PLAN - - - [From the Oil City Derrick, May 17, 1872.] - - - 1. Refiners to lease to the company for five years their - superstructure with sufficient real estate to carry on the business - of the works. - - 2. That the rental be eight per cent. per annum on the appraised - value of the superstructure, and the company to assume all risks and - pay all ordinary taxes. - - 3. Lessors to pay into the treasury of the company for a working - capital one-half of the appraised value of the superstructure in - cash or the equivalent in refiner’s stock. - - 4. Said lessors to receive for money paid in as above the bonds of - the company, in amount equal to cash paid in, and stocks of the - company for an equal amount; said bonds payable in five years or at - the option of the company after one year, said bonds to be - denominational coupon bonds to bear interest at the rate of eight - per cent. per annum, payable semi-annually. - - 5. The company shall not pay annually more than ten per cent. on the - stock as dividends until the said bonds are redeemed. - - 6. After the bonds are paid, then the company shall have the right - and shall be obliged to purchase all said superstructure at the full - appraised value first made, and shall give in exchange for the same - stock of the company for the full amount. - - 7. Each district shall appoint a local committee of three persons to - make appraisals, and when any appraisements are being made, the - chairman of each local committee shall be required to be present to - take part in the appraisement. - - There shall be a board of appeal which shall be composed of the - chairman of each local committee. All presidents of the company - shall be presidents ex officio of the board. - - The committee shall place a cash valuation on the superstructure and - shall be instructed as to the manner in which the valuation shall be - obtained. - - - NUMBER 16 (See page 1117) - “THE AGENCY” - - - [From the Oil City Derrick.] - - - I. There shall be established, under the auspices of the Council of - the Petroleum Producers’ Association of Pennsylvania, an - organisation under sanction of the laws of Pennsylvania, which shall - be known as “THE PETROLEUM PRODUCERS’ AGENCY.” - - II. The capital stock shall be not less than one million dollars, - and shall be divided into shares of one hundred dollars each, which - shall be subscribed only by members of the Petroleum Producers’ - Association, or by such other persons as may be approved by the - Council. - - III. No transfers of the shares of the capital stock shall be made - on the books of the Agency, except upon such conditions as the - directors may prescribe, subject to the approval of the Council. - - IV. The business of the Agency shall be managed by a board of - thirteen directors, who shall be elected annually by the - stockholders. - - V. There shall be an advisory board to consist of one member elected - by each local association and approved by the Council. The members - of the advisory board shall be admitted to the meetings of the board - of directors and shall be entitled to all the privileges of - directors, except that of voting. Any member of the advisory board - may be removed for any abuse of his trust, or for official - misconduct, by a vote of three-fourths of the Council at a regular - meeting. - - VI. The local associations may appoint committees to solicit and - receive subscriptions to the capital stock; they may also appoint - responsible trustees to receive payments on account of such - subscriptions, to whom the subscribers shall pay at least ten per - cent. upon their subscriptions at the time of subscribing. The - committees of the local associations shall advise the president of - the Council, from day to day, of the amount of subscriptions - received by them, and whenever the sum of at least one million - dollars shall have been subscribed in good faith, and approved by - the Council, and the organisation of the Agency legally completed, - subscribers shall be notified to hold an election of directors. The - directors shall, as soon as practicable after their election, - proceed to elect a president, secretary and treasurer. The trustees, - appointed by the local associations to receive subscriptions, shall - thereupon be required to pay over to the Agency the amounts received - by them on account of subscriptions to the capital stock. The Agency - shall not be responsible for any subscriptions paid to the trustees - appointed by the local associations until the same shall have been - paid over to the Agency or its authorised representatives. - - Subscriptions to the capital stock may be received, payable in oil - at five dollars per barrel, delivered on the cars or in the tanks of - the Agency at any sub-agency on the line of the railways; provided, - however, that no certificate of stock shall be issued in any case in - which payment is made in pipe-line receipts until the oil shall have - actually been received upon the order by the Agency or its agents. - But a special guaranty of the order shall be required from the - subscriber with an agreement that the stock shall be retained as - security for the delivery of the oil on demand, and the demand shall - be made within thirty days after the order for the oil is received - by the Agency. - - VII. Members of the Petroleum Producers’ Association shall sell - their oil only to the Agency. The Agency shall purchase all the oil - offered by members of the Association and shall pay therefor at - least five dollars per barrel for oil of standard grade, and for the - heavy oil of the fifth district. Payment for oil purchased shall be - made as follows: If the market will take the entire supply as fast - as offered, the full market price shall be paid in cash on delivery; - but if the board of directors, or the Council, shall determine that - the oil daily offered to the Agency is in excess of the demand, the - Agency shall pay three dollars in cash and give the seller a - certificate entitling him to the net proceeds of the oil when sold, - less the amount advanced thereon. - - VIII. The Agency shall sell no oil for a less price than five - dollars in cash, on delivery per barrel without the consent of the - Council of the Petroleum Producers’ Association. - - IX. To the redemption of the certificates, on and after the tenth of - the month succeeding that in which they were issued, shall be - applied the proceeds of all the oil sold and delivered during that - month, less the amount advanced and the amount required to tank the - surplus oil. For the unpaid balance of the certificate the holder - shall, upon the surrender of the same, be entitled to a tank receipt - representing his interest in the amount of surplus oil in store and - tankage. - - X. The Agency shall be entitled to receive for buying and selling - the oil such commissions per barrel as the Council may allow, - applicable first to the payment of expenses, second to the payment - of dividends on the capital stock, which shall be six per cent. - semi-annually, free of taxes. - - XI. All the net proceeds of surplus oil sold shall be applied - specifically to the redemption of the tank receipts at their value, - the surrender of which shall be at the option of the holder. - - XII. The Agency shall establish sub-agencies at such points within - the oil-producing district for the receipt, storage, and shipment of - oil as may be necessary to facilitate the convenient and economical - transaction of the business of the region, subject to the approval - of the Council. - - XIII. The Agency shall provide all storage necessary to hold the oil - on sale and the surplus oil in store. - - XIV. The price on the cars of oil of the standard grade shall be - uniform at all the sub-agencies on the line of the railways within - the oil-producing district, provided it be practicable to so arrange - with the railroads. - - XV. A barrel shall be uniformly forty-two gallons. - - XVI. Whenever the production of petroleum shall be permanently in - excess of the demand the Council of the Petroleum Producers’ - Association shall determine at what time the production shall be - restrained and shall take such measures as may be practicable, - necessary, and lawful to prevent the drilling of oil wells, but it - shall confine its orders, so far as practicable to preventing the - starting of new wells, allowing those already in process of drilling - to be completed. - - XVII. Whenever in the opinion of the board of directors it may be - advisable they may, subject to the approval of the Council, provide - such refining capacity as may be required to maintain the highest - price for crude petroleum consistent with the consumptive demand. - - XVIII. The Agency shall not at any time sell to, or contract with, - or make any arrangement whatever, with any individual, organisation, - combination, or association, by which they may have a monopoly, - inside rate, advantage or preference over, or to the prejudice of, - any present or future competitor for the purchase of the crude oil - coming into, or passing through its hands; provided, that nothing in - this section shall be so construed as to prevent the Agency, with - the sanction of the Council, from making such temporary - discrimination as may be necessary for the purpose of protecting or - promoting the interests of producers by securing higher prices for - crude oil, increased consumption of refined oil, or decreased - margins between the price of crude and refined oil. - - XIX. The Agency, with the approval of the Council, may take such - measures as may be expedient to increase the consumption of - petroleum by securing its application to new uses. - - XX. The Agency shall publish daily a correct statement showing the - amount of oil purchased, the oil sold, and oil placed in store - during the day; also showing the points at which the same was done - and the amounts at the time in store at the various sub-agencies; - also the destination of the oil sold. - - XXI. The Agency shall publish tri-monthly, full and complete reports - of all its transactions and showing its condition at the date of the - report; the correctness of the report shall be verified in such - manner as may be prescribed by the Council. - - XXII. A committee may be appointed by the board of directors, or by - the Council of the Petroleum Producers’ Association, at any meeting, - for the purpose of investigating the condition and management of the - affairs of the Agency; and it shall be the right and duty of such - committee, duly appointed, to thoroughly investigate everything - affecting the interest of the Agency, to examine its books, accounts - and vouchers; its safes, vaults and tanks; and to make a true and - faithful report of the condition and management of the affairs of - the Agency as they may be found, which report shall be published at - the expense of the organisation which appointed the committee. It - shall be the duty of the Council to see that such committee is - appointed and such examination and report made and published at - least once in every year. - - XXIII. The Agency shall establish a bureau of statistics and - information, which shall carefully collect and publish facts, - relating to the business of producing, refining, marketing and the - consumption of oil. The rooms of the bureau shall at all times be - open to the members of the Petroleum Producers’ Association, and the - Agency shall hold itself open for daily communications by telegraph - with local associations. - - - NUMBER 17 (See page 1123) - CONTRACT BETWEEN PETROLEUM PRODUCERS’ ASSOCIATION AND PETROLEUM - REFINERS’ ASSOCIATION - - - [From the Oil City Derrick.] - - - The contract between the producers and refiners read as follows: - - _Whereas_, The necessities of trade call for co-operation between - the producers and refiners of oil, for purposes of mutual - protection: - - _Therefore_, We, the undersigned, representing the Petroleum - Producers’ Association and the Petroleum Refiners’ Association, - hereby enter into the following articles of agreement, which - stipulate as follows: - - _First._—Each of the two associations hereby agrees to appoint a - representative committee, which committee shall meet together - weekly, or as often as may be necessary, and at such places as they - may determine. - - It shall be the duty of these committees (so far as in their power - lies) to see that the provisions of this agreement are executed in - good faith, and to discharge such duties as are devolved upon them - by this agreement, and in general (within the limitation of their - authority) to act for the mutual advantage of the trade, whose - interests it is the purpose of this agreement to secure. - - _Second._—The Producers’ Association shall appoint a comptroller, - who shall have the right to examine the books of the Refiners’ - Association, and its daily reports so far as they relate to the - purchase, sale, and shipments of crude and refined oil, and who, - together with the auditor of the Refiners’ Association, shall make - joint reports daily to both associations. - - The Refiners’ Association shall appoint a comptroller, who shall - have the right to examine the books of the Producers’ Association - and its agencies, and their daily reports, so far as they relate to - the purchase, sale, and shipments of crude and refined oil, and who, - together with the secretary of the Producers’ Association, shall - make joint reports daily to both associations of all sales and - shipments. - - _Third._—Each association agrees that it will keep accurate books of - account, which shall show all purchases, sales, and shipments of - crude and refined oil, which shall also be open at all reasonable - hours to the inspection and examination of the authorised agents of - each association, as hereinbefore provided. - - _Fourth._—The Refiners’ Association agrees to admit all existing - refiners to membership, and to a participation in the future - benefits of the association on equal terms with present members, and - the Producers’ Association agrees to allow all producers to join its - association on the same terms with the present members. - - _Fifth._—The Producers’ Association agrees to sell (through its - regular appointed agencies) crude oil exclusively to the Refiners’ - Association and its members, and the Refiners’ Association and its - members agree to purchase crude oil exclusively of the Producers’ - Association or its appointed agents. - - _Sixth._—The Producers’ Association agrees that all producers - enjoying the benefits of this contract shall be required to bind - themselves to sell their oil exclusively through the Producers’ - Association. - - _Seventh._—The Refiners’ Association and its members agree that they - will not until after sixty (60) days from the date of this contract - sell any portion of the crude or refined oil now held by them, - except so far as they shall have previously purchased the equivalent - of crude oil to take the place of the oil so sold. - - They further agree to buy from the Producers’ Association daily such - quantities of crude oil as the markets of the world may take of - them, the same to be determined from time to time by the - representative committees herein provided for. - - _Eighth._—The price of crude oil so purchased and sold to be - conditionally five dollars per barrel of forty-two gallons each, at - “common points,” payment to be made as follows: - - When refined oil is sold in New York at twenty-six cents per gallon, - no additional amount is to be paid; but for every one cent per - gallon of advance in the average price of sales of refined oil in - New York, twenty-five cents per barrel shall be added to the price - of so much crude oil as shall be the equivalent of refined oil sold - at such advance until the price reaches five dollars per barrel. A - proportionate addition to the average price of crude oil shall be - paid for each fraction of one cent per gallon increase in the - average price of sales of refined oil at New York, by members of the - Refiners’ Association. - - The price of refined oil in New York and of crude oil at common - points to be adjusted by the representative committee herein - provided to be appointed. - - _Ninth._—The representative committees may at any time, when it may - be necessary to do so, reduce the prices of crude and refined oils - below the minimum or advance them above the maximum prices above - named, the increase and reduction in price and the cash payments on - crude oil to be determined by said committees. - - _Tenth._—Settlements to be made to the end of each calendar month - and balances to be paid not later than the fifth of the succeeding - month. - - _Eleventh._—The profits on all crude oil sold for export by members - of the Refiners’ Association shall be credited to the Producers’ - Association in the next succeeding regular monthly settlement after - delivery of said oil. - - _Twelfth._—Either association may discontinue this agreement at any - time by giving to the president of the other association ten (10) - days’ notice in writing of its purpose to do so. - - _Thirteenth._—This agreement to remain in full force and effect for - and during the term of five years from this date, unless sooner - terminated in the manner provided in section twelve (12) of this - agreement. - - _Fourteenth._—Amendments and alterations may be made at any time by - the representative committees, subject to the approval of the - respective associations. - - In testimony whereof, the Petroleum Producers’ Association, by its - executive committee, and the Petroleum Refiners’ Association, by its - president and secretary, have hereunto set their hands this - nineteenth day of December, A.D. 1872, in the City of New York. - - Petroleum Producers’ Association, by C. V. CULVER, A. H. BRONSON, - SAMUEL Q. BROWN, WILLIAM PARKER, B. B. CAMPBELL, _Executive - Committee_. - - Petroleum Refiners’ Association, by JOHN D. ROCKEFELLER, - _President_. - - - NUMBER 18 (See page 1132) -TESTIMONY OF GEORGE R. BLANCHARD ON REBATES GRANTED BY THE ERIE RAILROAD - - - [Report of the Special Committee on Railroads, New York Assembly, - 1879. Volume III, pages 3393–3395.] - - - October 1, 1872, when I first became general freight agent of the - Erie Railroad, no oil was produced in the Bradford District, and all - petroleum then transported by the Erie Railway eastward came from - the Atlantic and Great Western Railroad. At that time, Adnah - Neyhart, of Tidioute, Pennsylvania, represented by W. T. Scheide, - afterwards by H. C. Ohlen at New York, shipped small quantities of - refined oil, for which he received a rebate of over $7,000 on his - shipments for the prior month, to wit, September, 1872.... I looked - for the reasons, and found the agreement next prior to that time as - to shipments and rates was the one already in evidence between - producers, shippers, refiners and railroad companies, dated March - 25, 1872; I asked why that contract was not observed, and was then - convinced in reply that the agreement of March 25 lasted less than - two weeks, and that at that early date the Empire Line was receiving - a large drawback or commission from the Pennsylvania Railroad, which - was either being shared with its shippers or an additional amount - was being allowed to them, besides that which the Empire Line itself - received from the Pennsylvania system; and as the Empire Line also - owned the Union Pipe Line, its shippers had advantages which our - company and its shippers did not even jointly possess. At the close - of that calendar year (1872), the entire petroleum traffic for the - five months of the administration of President Watson, the former - president of the South Improvement Company, to January 1, 1873, was - but 265,853 barrels, or but about 53,000 barrels per month; while - the Pennsylvania Railroad was carrying about six times as much, or - 300,000 barrels per month, and the New York Central was carrying the - entire refined oil sent from Cleveland to New York. The - representations then made to me also convinced the Atlantic and - Great Western Company as to what our rivals were doing, and that - railway company and our own decided to continue to pay the - twenty-four cents per barrel drawback then being paid on the rate of - $1.35 provided by this producers’ agreement of March 25, 1872. - - It is therefore clear that one of the largest of the shippers, who - signed that March agreement, did not feel that it bound him to pay - the rates he had agreed to pay, and he gave convincing reasons to - believe that others, signers and parties to that agreement, did not - pay them, and possessed equal or greater advantages by way of rival - routes. Early in 1873 Mr. Scheide came to our line with Mr. - Neyhart’s crude business, under the circumstances Mr. Scheide has - stated, but being yet without any shippers of refined oil, and - believing that the Empire Line would pay a rebate on refined, as I - now know from Mr. Scheide’s testimony, they had paid Mr. Scheide on - crude, I opened negotiations to increase our traffic, which resulted - in an agreement, with the concurrence of the Atlantic and Great - Western, as follows: - - - ERIE RAILWAY COMPANY, - OFFICE OF SECOND VICE-PRESIDENT. - - NEW YORK, March 29, 1873. - - MEMORANDUM - - Between John D. Archbold, Mr. Bennett, and Mr. Porter, and Mr. - Osborn, and self. Rate for March, 1873, to be 132½ from Union. - Rate thereafter to be 125 from same point as the maximum for - 1873. If the common point rate is made from Titusville at any - time in 1873, on _bona fide_ shipments, Erie and Atlantic and - Great Western will make same rate from same date. With this rate - the refiners agree to give us their entire product to New York - for the year, and the preference always at same rate as actual - shipment by other lines. - - (Signed) JOHN D. ARCHBOLD. - G. R. BLANCHARD. - - - This Mr. Bennett was also one of the signers to the agreement of - March 25, as a refiner, and from these gentlemen I also learned at - that time that this producers’ agreement was exploded by the action - of the Producers’ Union before that time. - - Notwithstanding this agreement of March 29, 1873, with its reduced - rates, its signers left us in November, 1873, and gave the Empire - Line their entire shipments; and we were then left with but one - small shipper of refined oil, Mr. G. Heye, whose consignments were - small, and to retain even this small business, against similar - solicitations by our rivals we were compelled to make his rate $1.10 - in November, 1873, instead of $1.50, as provided by this producers’ - agreement. - - These facts effectually refute the testimony of Mr. Patterson that - the agreement of March 25 continued for two years, or any other - period beyond three weeks, at the rates it stipulated, and show that - at least two of its signers did not feel bound to pay the rates it - named, and that they and others by other lines endeavoured - immediately after it was signed to obtain, and did secure reduced - rates, as usual before its execution and peddled their oil among - different railroads wherever they could secure an advantage, however - small, over each other or the railroads. - - - NUMBER 19 (See page 1133) - TESTIMONY OF W. T. SCHEIDE - - - [Report of the Special Committee on Railroads, New York Assembly, - 1879. Volume III, pages 2774–2777.] - - - _Q._ Why were you shipping over the Pennsylvania road and not over - the Erie? - - _A._ For the reason that the Pennsylvania was most eligibly situated - for our purposes. - - _Q._ How did you come, then, to ship over the Erie at all? - - _A._ We came to ship over the Erie because of what we considered - very bad treatment on the part of the Pennsylvania Railroad. - - _Q._ What was that bad treatment that you received at the hands of - the Pennsylvania road? - - _A._ It consisted, principally, in a discrimination against us in - furnishing us with cars. - - _Q._ They refused you transportation? - - _A._ Yes, sir. - - _Q._ Were they refusing you transportation in the interest of the - combination? - - _A._ In the interest of a peculiar idea that they had, that all - shippers should be placed upon the same basis. - - _Q._ And in consequence of that peculiar idea, they gave to other - shippers transportation and did not give it to you? - - _A._ Yes, sir. - - _Q._ And that was the practical way in which that corporation - carried out that idea? - - _A._ Yes, sir; you will allow me to explain, please? - - _Q._ Yes; go on. - - _A._ The oil business differs from other business in this, that it - is a daily crop; there is a certain amount of oil produced that has - to be shipped every day; the consumption, however, is not equal to - the daily production of our trade; the consumption varies and the - demand varies; the consequence is that there are seasons of the year - when a man engaged in shipping oil ships oil really at a loss - because there is no demand for it, and there are other seasons when - there is a large profit; now the Pennsylvania Railroad always - insisted upon having a large number of shippers; this large number - of shippers would ship only when there was profit, and when there - was no profit somebody else had to ship; we had been their shipper - for a number of years. - - _Q._ When you speak of their shipper—their leading shipper, do you - mean? - - _A._ Yes, sir; we did their business between Philadelphia and - Baltimore and New York. - - _Q._ Were you their evener, so to speak? - - _A._ We did not have any eveners in those days. - - _Q._ Did you practically stand in the position of an evener? - - _A._ No, sir; we were simply their shipper of crude oil. - - _Q._ When you speak of their “shipper,” in the singular, do you mean - that you were their sole shipper, as you subsequently became on the - Erie? - - _A._ I mean we had better rates of freight than anybody else could - have obtained over the Pennsylvania Railroad at that time. - - _Q._ And therefore monopolised the business; go on? - - _A._ And the consequence is that in consequence of this change in - the demand that when there comes a season that there is a little - money in it, the Pennsylvania Railroad would encourage these - numerous small shippers who would come in and they would pro-rate - cars with them; they would only allow us to put in a requisition for - a certain number of cars and they would allow anybody else, an - entire stranger, a man who never shipped any before, to put in an - equal requisition, and they would pro-rate with him, and the - consequence was in the paying business we were out and in the - unpaying business we were in. - - _Q._ And you left it? - - _A._ Yes, sir. - - _Q._ Because you could not get rates better than other people? - - _A._ No, sir; because we could not stand it; because we were losing - money. - - _Q._ On the same basis that other people were? - - _A._ No, sir; other people were not shipping except when there was a - profit. - - _Q._ Why did you ship when there was not a profit? - - _A._ Because that was our business; we were shippers of petroleum. - - By the Chairman. - - _Q._ I don’t understand why you were obliged to ship at a loss? - - _A._ That is the reason why we left the Pennsylvania Railroad. - - _Q._ I don’t understand why you were obliged to ship at a loss? - - _A._ We were in the petroleum business and shippers of petroleum, - and we had contracts; in order to keep the cars running it was - necessary for us to make a contract for one, two, three, five, or - six months ahead. - - By Mr. Sterne. - - _Q._ Isn’t it true that upon the basis of your having better rates - than anybody else, you proceeded to make contracts to extend your - business? - - _A._ Yes, sir. - - _Q._ With the Pennsylvania road? - - _A._ Yes, sir. - - _Q._ And that the moment that you were placed in the position of - having—— - - _A._ No transportation. - - _Q._ No transportation equal to your expectations, with your special - rates? - - _A._ I had to buy oil in New York. - - _Q._ That was the real fact? - - _A._ Yes, sir. - - _Q._ The business was based upon the rate of transportation? - - By the Chairman. - - _Q._ Why did you have to buy oil in New York? - - _A._ To fill my contract. - - _Mr. Sterne._—He had made his contract upon the basis of his special - rate. - - _The Witness._—And there was a certain supply of transportation - which was given to me. - - By Mr. Sterne. - - _Q._ Practically an exclusive supply of transportation you had at - one time over the Pennsylvania road, hadn’t you? - - _A._ Yes, sir. - - _Q._ And when they changed their policy in that respect and gave - other people transportation, you could not fill the orders upon the - basis of which you had made your contracts? - - _A._ You will excuse me; this would seem as though this was a sudden - arrangement; it was not; it lasted three or four years. - - _Q._ You had reason to suppose that it would last, had you not? - - _A._ This policy of theirs. - - _Q._ This policy. - - _A._ Yes, sir. - - _Q._ That drove you on the Erie? - - _A._ Yes, sir. - - - NUMBER 20 (See page 1133) -STATEMENT OF AMOUNTS PAID FOR OVERCHARGES AND REBATES ON OIL DURING THE - YEAR 1873 BY THE NEW YORK, LAKE ERIE AND WESTERN RAILROAD - - - [Report of the Special Committee on Railroads, New York Assembly, - 1879. Volume V, page 275 of Exhibits.] - - - NAME. ERIE PRO. - A. Neyhart $188,127.78 - Gust. Heye 7,235.31 - J. J. Vandergrift 929.11 - Durant and Company 145.95 - Dutilk and Company 815.95 - S. D. Karns 7,089.69 - Standard Oil Company 469.11 - H. B. Everest 6.66 - Lyman and Williams 13.44 - J. H. Willever 32.98 - L. Van Duzer 3.50 - H. Roach and Son .29 - L. Y. Wiggins and Brother 24.11 - P. A. Stebbins, Jr. 4.53 - C. P. Prince and Company 2.69 - E. L. Houghton and Company 45.24 - McKirgan and Company 2.70 - Marks and Bean 45.82 - McManagle and Rogers 18.27 - Theodore Merritt 4.56 - W. F. Smith 3.86 - Vacuum Oil Company 8.80 - Vandusen Brothers 38.88 - Woodbury, Morse and Company 5.40 - Ward, Leonard and Company 88.06 - Young and Borden 7.97 - ——————————— - Total $205,170.66 - - - NUMBER 21 (See page 1135) -AGREEMENT OF 1874 BETWEEN THE ERIE RAILROAD SYSTEM AND THE STANDARD OIL - COMPANY - - - [Report of the Special Committee on Railroads, New York Assembly, - 1879. Volume III, pages 3398–3402.] - - - Agreement concluded this seventeenth day of April, A.D. 1874, by and - between the Erie Railway Company and the Atlantic and Great Western - Railroad Company, parties of the first part, and the Standard Oil - Company, of Cleveland, Ohio, party of the second part, _witnesseth_: - - _First._—The parties of the first part (Erie Railway Company and the - Atlantic and Great Western Railroad Company) agree to furnish a - sufficient number of good and suitable cars for the purpose of - transporting petroleum and its products from the refineries now - owned by the party of the second part (Standard Oil Company), at - Cleveland, Ohio, and Oil City, Pennsylvania, and any others they may - hereafter control or own, to Weehawken Oil Yards, in New Jersey. - - _Second._—The parties of the first part agree to transport said - products of said refineries, and deliver the same in cars (if - destined for the New York market) at and upon the side tracks - connected with said Weehawken Oil Yards, in good order and - condition, except as provided for in Article Four (4), and do all - switching of cars at said oil yards necessary to the prompt and - rapid discharge and handling of cars employed in said business. They - also agree to haul said cars (whenever practicable) in full trains - over their respective roads, with promptness and uniformity of - movement, and accept compensation therefor as hereinafter provided. - - _Third._—Rates of freight on all said products to be made from time - to time between J. H. Devereux, president of the Atlantic and Great - Western Railroad Company, and the Standard Oil Company; the same to - be to the satisfaction of the said J. H. Devereux, president; to be, - however, no higher than is paid by the competitors of the said - Standard Oil Company, from competing Western refineries to New York - by all rail lines—each of said railway companies accepting its _pro - rata_ proportion of the through rate thus made. - - _Fourth._—The party of the second part agrees not to ship more than - fifty (50) per cent. of the product of its said refineries by any - other line or lines Eastward, to be shown by monthly statements - verified by its president and secretary. It also agrees to assume - all risks and losses of its property by fire when in the charge or - custody of the parties of the first part, whether said property is - being moved in trains or stored, or lying at any station between - place of shipment and destination (both included). It further agrees - to assume all losses from natural leakage or breakage, except the - same is caused by collisions or the wrecking of cars by unavoidable - accidents. It also agrees, at its own cost, to safely load at places - of shipment all of said products, and unload the same when delivered - at the said Weehawken Oil Yards, and furnish said products for - shipment with as great regularity as possible. - - _Fifth._—In the event of unavoidable detention, occasioned by the - elements, or by strikes of employees of the parties of the first - part, or either of them, whereby said first parties are unable (for - the time being) to fulfill their covenants under this agreement, - then it shall be the duty of said first parties to immediately - notify the second party of such casualty or strikes, and such - casualty or strike shall be considered good and sufficient cause for - delay in the execution (for the time being) of the provisions of - this agreement. And said first parties, and each of them, shall be - saved from all obligation for the fulfillment of this agreement - during the period of such detention, anything in this contract to - the contrary notwithstanding. It shall be the duty of said first - parties to proceed forthwith to put themselves in position to resume - their obligations under this agreement, giving notice at the - earliest possible moment to the second party of their ability to - resume. - - _Sixth._—The Erie Railway Company for itself hereby stipulates and - agrees to and with the second party, that on or before the first day - of May, A.D. 1874, it will give full and complete possession of the - property known as the Weehawken Oil Yards, in New Jersey, together - with all buildings, erections, docks and appurtenances thereunto, - belonging unto the second party to have and to hold, with all - revenues derived therefrom, from and after the said first day of - May, A.D. 1874, or until the expiration of this agreement, as - otherwise herein provided. The Erie Railway Company further agrees, - at its own cost, on or before the first day of May, A.D. 1874, to - put said buildings, erections and appurtenances in good repair; - after which said second party shall maintain the same in like good - order, and to do all dredging required to provide and preserve the - requisite depth of water. - - _Seventh._—In consideration of the possession of said Weehawken Oil - Yards, the second party hereby agrees to and with the Erie Railway - Company as follows: to wit: To pay weekly to said Erie Railway - Company the sum of five (5) cents on each and every barrel (of 45 - gallons) of crude oil, and the same sum on each and every barrel - (not to exceed 46 to 48 gallons) of the products of petroleum - passing through or into the aforesaid yards; the rate of five (5) - cents to be absolute on all said refined products, but subject to - rateable reductions on crude oil, in case the terminal charges on - crude oil are reduced, taking present schedule of rates thereon - (adopted November, 1872), a copy whereof is hereto annexed, as the - standard; the Erie Railway Company retaining the right to reduce - said schedule of rates on crude, to meet competition; the second - party further agrees to conduct said warehouse business in the name - of the Erie Railway Company, at its own cost and expense, to assume - such risks on the oil, while in its possession, as the Erie Railway - Company, or the Atlantic and Great Western Railroad Company would be - responsible for to forwarders, consignees, or owners after its - arrival and delivery in cars at yards; to make the charges uniform - to all parties who use the yards, or for whom services are performed - therein, and always as low as any other oil yard affording proper - facilities for the transfer, storage preparation and shipment of the - oil at the terminus of any railway, or other line competing with the - Erie Railway, at or adjacent to the port of New York, and generally - so to manage the premises as to give all patrons of the road fair - and equal facilities for their oil business at uniform cost, to - retain and pay the present superintendent and other officers and - employees of the yard, so long as their duties are satisfactorily - performed, and from time to time to appoint such other officers as - shall not be objected to by the Erie Railway Company, to maintain - the buildings, erections, and mechanical appliances of the premises - in as good order as when possession is given, natural wear and - unavoidable (by due diligence) damages from the elements excepted, - to make no rules or regulations discriminating against any other - shipper or shippers, or receivers. It is understood and agreed that - the consent of the Erie Railway Company is to be obtained before any - refined or crude oil shall be received at the Weehawken Oil Yards, - which arrives from the west via any transportation line competing - with the Erie Railway. - - _Eighth._—It is further agreed that the second party shall assume - the charge and collection of freights and charges—accounts to be - rendered and adjusted, and paid weekly—Erie way-bills to govern - quantities received, except when the same are shown to be incorrect, - or loss in transit (except from natural leakage) has occurred - through fault or neglect of said railway companies, or either of - them. Any new fixtures which the party of the second part may add to - the property shall be and remain its property, and they may remove - the same at their cost, at the expiration of this agreement, unless - mutually satisfactory terms of purchase and sale can be agreed to. - - _Ninth._—This agreement to take effect and be binding upon the - parties hereto, on the first day of May, A.D. 1874, and to continue - until the first day of May, A.D. 1877, provided, however, that - either party may terminate the same upon giving notice in writing to - the other party six (6) months in advance of its intention so to - terminate; and provided further, that within thirty days after the - election of a new board of directors, of either the Erie or Atlantic - and Great Western Railway Companies, the second party shall have the - right to terminate this agreement, by giving notice in writing to - the other party one month in advance of its intention so to - terminate, and upon the expiration of either of said periods, this - agreement shall be then at an end. - - _Tenth._—In consideration of the premises, the party of the second - part agrees to pay to the Erie Railway Company, weekly, the sums - which such weekly settlement shall show to be due to the said first - parties, as freight on its property delivered at the Weehawken Oil - Yards. - - _Eleventh._—It is hereby expressly understood and agreed that - neither of the said parties of the first part shall be liable for - the acts or defaults of the other; and that each shall only be - liable for its own acts and defaults, on and over its own line and - premises. - - * * * * * - - _In Witness Whereof_, the parties hereto have affixed their hands, - this twentieth day of April, 1874. - - (Signed) THE ERIE RAILWAY COMPANY, - - By G. R. BLANCHARD, _Second Vice-President_. - - (Signed) THE ATLANTIC AND GREAT WESTERN RAILROAD COMPANY, - - By J. H. DEVEREUX, _President_. - - (Signed) STANDARD OIL COMPANY, - - By WILLIAM ROCKEFELLER, _Vice-President_. - - - NUMBER 22 (See page 1139) - AGREEMENT OF 1874 BETWEEN THE RAILROADS AND PIPE-LINES - - - [Report of the Special Committee on Railroads, New York Assembly, - 1879. Volume III, pages 3431–3437.] - - - Memorandum of agreement entered into this fourth day of September - A.D. 1874, by and between the following parties, viz.: - - _First._—J. J. Vandergrift, G. V. Forman, and John Pitcairn, Jr., - partners themselves, and agreeing that they have authority to - represent all other partners in the association trading under the - name of the United Pipe Lines, and holding themselves individually - responsible to the other parties hereto that they have such - authority. - - _Second._—The Union Pipe Company by Charles P. Hatch, manager. - - _Third._—The Antwerp Pipe Company and the Oil City Pipe Company, - each being corporations under the laws of the State of Pennsylvania. - - _Fourth._—The American Transfer Company, a corporation under the - laws of the State of Pennsylvania. - - _Fifth._—The Grant Pipe Company, a corporation under the laws of the - State of Pennsylvania. - - _Sixth._—The Karns Pipe Line Company, a corporation under the laws - of the State of Pennsylvania. - - _Seventh._—The Relief Pipe Line Company, a corporation under the - laws of the State of Pennsylvania. - - _Eighth._—The Pennsylvania Transportation Company, a corporation - under the laws of the State of Pennsylvania. - - _Ninth._—J. J. Vandergrift, G. V. Forman, and John Pitcairn, Jr., - trading under the name of Vandergrift, Forman and Company, and - owning and representing the Milton and Sandy Pipe Lines. - - _Whereas_, The pipe lines owned and controlled by the parties hereto - have a joint capacity for transportation more than twice as great as - the total volume of petroleum produced in the district traversed by - said lines; and whereas, the separate and discordant relations now - prevailing among the parties hereto, lead to a needless - multiplication of extensions, branches, and other matters involving - heavy cost, which ultimately becomes in some shape a charge upon the - business transported, and also leads to the offering of open or - secret inducements of an illegitimate nature, such as rebates, - special rates, selling oil for less than its cost and full pipage - rates, and in other ways hereby to attract an under share of traffic - to the respective lines represented herein; and - - _Whereas_, it is believed to be desirable both for the interests of - the parties hereto and those of the public whom they serve, that all - needless expenditure and all illegitimate inducements should cease; - now, - - _Therefore_, for those purposes and for other valuable - considerations mutually moving the parties hereto, they do each - respectively agree with each other, as follows: - - _First._—The parties hereto do not by these presents create in any - respect a partnership with each other, but each party is to be - wholly and solely responsible for all of its own acts in the conduct - of its business for its certificates, receipts, and collection of - its charges, its expenses, shortages, maintenance, and management of - its property, and of its engagements and obligations of every sort. - - _Second._—The pipe-lines which are covered by this agreement are - those which are or may be owned by any of the parties hereto, and - which are situated south of Oil City, and which terminate at any of - the following points, viz. points on the Franklin branch of the - Atlantic and Great Western Railway, points on the Jamestown and - Franklin branch of the Lake Shore and Michigan Southern Railway, - points on the Alleghany Valley, between or at Oil City and - Pittsburg, points on the Schenango and Alleghany Railroad and points - on the Butler branch railroad, excepting two small pipe lines, one - owned by F. Prentice and Company, running from Mount Hope to Foster, - and one owned by Vandergrift, Forman and Company, called the - Franklin Pipe Line, running from the heavy oil district to Franklin, - Pennsylvania. - - _Third._—Each party hereto shall retain eight (8) cents per each - forty-two (42) gallons remaining after deduction of allowances for - shortage and sediment, on all of the oil it actually pumps; also, - all allowances made it on such oil to meet shrinkage and sediment, - and also all of its other receipts of every description, except as - stated in the next article. - - _Fourth._—Each party shall account monthly to the executive - committee hereinafter provided for, at the rate of twenty-two (22) - cents for each forty-two (42) gallons of petroleum (after deducting - shrinkage allowances) received by it for transportation during such - months; which twenty-two (22) cents shall be considered by said - committee as a common fund to be cleared and divided on the basis - hereinafter designated. - - _Fifth._—The executive committee shall consist of one representative - from each of the parties hereto. - - Each representative to be appointed by the party he represents to be - changeable from time to time by such party, at its pleasure; the - said committee shall faithfully execute such provisions of this - agreement as are by its terms confided to them. - - Their action must, in all cases, be unanimous before it shall be - binding upon any party hereto. - - They shall keep a record of their proceedings, to which each of the - members shall have free access, and whenever desired by any, a full - transcript, or any part thereof. - - The members of said committee shall, until changed, as hereinbefore - provided, be as follows: Charles P. Hatch, representing the Union - Pipe Company; A. M. Hughes, representing the Antwerp Pipe Company - and the Oil City Pipe Company; D. O’Day, representing the American - Transfer Company; R. B. Allen, representing the Grant Pipe Company; - S. D. Karns, representing the Karns Pipe Line Company; F. Prentice, - representing the Relief Pipe Line Company; H. Harley, representing - the Pennsylvania Transportation Company; E. Hopkins, representing - the United Pipe Lines, Milton Pipe Line, and the Sandy Pipe Lines. - - _Sixth._—Each party hereto shall furnish to the executive committee, - on or before the fifth of each month, a report of its business for - the month next preceding, duly verified by the affidavit of its - proper officer or agent; and the amounts found due by the executive - committee from any of the parties hereto shall be paid by them - through the executive committee to the parties to whom they may be - due, on or before the tenth of the month in which the report is - made. - - _Seventh._—The committee shall prescribe the form of said return, - and shall act as a clearing house thereof. They shall have power to - verify the same by inspection of books and records, and shall make - to each party hereto, on or before the tenth day of each month, a - full exhibit of the results of the returns and clearings for the - next preceding month. - - _Eighth._—The committee shall prescribe and enforce uniform rates - and conditions for the reception, storage, and transportation of - oil, including substantially uniform wordings of certificates and - gaugers’ tickets; uniform conditions for the accepting of tanks - owned by other parties; uniform conditions as to responsibility for - losses through unavoidable causes, such as lightning; and uniform - rates of allowances for shrinkages. Until changed by said committee, - the rates for transportation shall be as follows: - - For each forty-two gallons remaining after deducting allowance for - shrinkage and sediment, viz., from all points which, by any - pipe-lines represented herein, which terminate at Oil City or on the - various railways as hereinbefore described, thirty (30) cents; - excepting, _First_, on oil reached by pipes terminating on the - Alleghany Valley Railroad south of Oil City, and north of Parker - City. _Second_, on oil from the west side of the Alleghany River, - not pumped from north of Bear Creek. _Third_, on oil pumped from - Sheakley to Monterey by the United Lines, and from south of Bear - Creek, and north of Sheakley district by the Union and Karns lines, - all of which shall be twenty-five (25) cents. But the rates on oil - covered by the third exception shall be made thirty (30) cents on or - before January 1, 1875. The only remaining exceptions to these rates - on such private contracts at different figures, as each party may - now have, a list of which together with any special conditions - appertaining thereto shall be filed with the executive committee on - or before September 1, 1874; no new contracts for transportation or - storage or tankage shall be made by any party whatever, except at - the regular rates as herein fixed, or as shall be, from time to - time, fixed by the executive committee. All rates less than thirty - (30) cents may be at any time advanced to thirty (30) cents by the - party subject thereto. - - _Ninth._—The committee shall adopt all proper and practicable - measures to secure the transportation by each line of a share of the - total oil pumped each month by all the lines, equal in percentage to - the share of the common fund allotted to each herein, having - reference to the facilities of each party for doing the work; they - shall assign to each party, and as early in each case as possible, - such share of the duty of making extensions and connections with - wells as most legitimately appertains to it, or as may be required - by the well owner, or by the contracts of each party; but constant - reference shall be had to maintaining for each party its share as - heretofore described of the total oil to be transported, and to - distributing the total cost involved as nearly as practicable in the - proportion of the common fund assigned to each, and no other party - shall make such improvements except by consent of said committee. - The committee shall arrange with a chief gauger and the needful - assistants (all of whom shall be under oath to act honestly and - impartially), to gauge from time to time all tanks with which the - lines of the parties hereto are or may be connected, or car tanks - which they may load; and may collect the expense thereof from the - parties hereto in proportion to their respective shares in the - common fund; and may also assess upon the trade such reasonable - charge for car gauging, or may wholly waive such charge as they may - deem judicious. The committee shall have general power to inaugurate - and carry into effect any other features than those especially named - herein which will not be inconsistent with and which will in their - judgment more effectually accomplish the purposes and spirit of the - agreement. - - _Tenth._—The division of the common fund shall be as follows: - - The United Pipe Lines, twenty-nine and one-half (29½) per cent. - - The Union Pipe Company, twenty-five and one-half (25½) per cent. - - The Antwerp Pipe Company and Oil City Pipe Company, seven (7) per - cent. - - The American Transfer Company, seven (7) per cent. - - The Grant Pipe Company, seven (7) per cent. - - The Karns Pipe Line Company, seven (7) per cent. - - The Relief Pipe Line Company, seven (7) per cent. - - The Pennsylvania Transportation Company, seven (7) per cent. - - The Sandy Pipe Line and Milton Pipe Line, three (3) per cent. - - _Eleventh._—All parties hereto agree to faithfully carry out the - spirit and purposes of this agreement, and to do nothing between the - date of its execution and the date of its taking effect, - inconsistent therewith, and it is mutually agreed that from the date - of its taking effect until it is terminated, any violation thereof - by any party will work an injury to the whole interest of not less - than ten thousand ($10,000) dollars; and if any such violation shall - not be fully rectified by the offending party within thirty (30) - days after written notice shall have been given to the said - offending party by the executive committee, through its secretary, - upon a vote of all of said committee except the representative of - the offending party, it is agreed that ten thousand ($10,000) - dollars shall be the stipulated and liquidated damages for each and - every such violation so unrectified, which damages shall be - collected by the executive committee, and shall be divided among the - other parties hereto in the same relative proportion as the common - fund is divided. This contract shall take effect on the first day of - October, A.D. 1874, and shall continue for two (2) years, and shall - continue after the expiration of said two (2) years until after - three (3) months’ written notice shall have been given by either of - the parties hereto, to the executive committee, through its - secretary, of a wish to have it terminate, at the expiration of - which notice it shall cease and determine. - - _In Witness Whereof_, the parties hereto, by their representatives, - have affixed their signatures this fourth day of September, A.D. - 1874. - - The United Pipe Lines: J. J. VANDERGRIFT, GEORGE V. FORMAN, JOHN - PITCAIRN, JR., by GEORGE V. FORMAN, _Attorney for themselves and - others_. - - The Sandy and Milton Lines: J. J. VANDERGRIFT, GEORGE V. FORMAN, - JOHN PITCAIRN, JR., by GEORGE V. FORMAN, _Attorney_. - - For the Relief Pipe Line Company: F. PRENTICE, _President_. - - For the American Transfer Company: DANIEL O’DAY, _Superintendent_. - - For the Union Pipe Line Company: CHARLES P. HATCH, _Manager_. - - For the Grant Pipe Company: R. B. ALLEN, _President_. - - For the Karns Pipe Line Company: S. D. KARNS, _President_. - - For the Antwerp Pipe Company and the Oil City Pipe Company: E. C. - BRADLEY, _President_. - - For the Pennsylvania Transportation Company: HENRY HARLEY, - _President_. - - - NUMBER 23 (See page 1141) - THE RUTTER CIRCULAR - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3112, page 363.] - - - THE NEW YORK CENTRAL AND HUDSON RIVER RAILWAY COMPANY, GENERAL FREIGHT - AGENT’S OFFICE, GRAND CENTRAL DEPOT. - - NEW YORK, September 9, 1874. - - _Dear Sir_: Commencing October 1, 1874, the following rates on - refined and crude oil shall govern all lines: - - The rates on refined oil from all refineries at Cleveland, - Titusville and elsewhere in and adjacent to the Oil Region shall be - as follows: - - PER BARREL. - To Boston $2.10 - Philadelphia 1.85 - Baltimore 1.85 - New York 2.00 - - Net rate on Albany fifteen per cent. less, from which shall be - refunded the amount paid for the transportation of crude oil by rail - from the mouth of the pipes to the said refineries, upon the basis - of fourteen barrels of crude oil to the refineries for every ten - barrels of refined oil forwarded by rail from them (the refineries) - to the Eastern points named. - - Settlements of this drawback to be made on the refined oil forwarded - during each month. - - No rebate on these rates will be paid on oil reaching refineries - direct by pipes. - - On crude oil the rates from all initial points of rail shipments in - the Oil Region shall be as follows: - - PER BARREL. - To Boston $1.75 - Philadelphia 1.50 - Baltimore 1.50 - New York 1.50 - - Net rate on Albany fifteen per cent. less, from which shall be - refunded twenty-two cents per barrel only on oil coming from pipes - which maintain the agreed rates of pipage. - - A barrel shall in all cases be computed at forty-five gallons. - - You will observe that under this system the rate is even and fair to - all parties, preventing one locality taking advantage of its - neighbour by reason of some alleged or real facility it may possess. - - Oil refiners and shippers have asked the roads from time to time to - make all rates even, and they would be satisfied. This scheme does - it, and we trust will work satisfactorily to all. - - Respectfully yours, - J. H. RUTTER, - _General Freight Agent_. - - - NUMBER 24 (See page 1148) - STANDARD OIL COMPANY’S APPLICATION FOR INCREASE OF CAPITAL STOCK TO - $3,500,000 IN 1875 - - - _To the Secretary of the State of Ohio_: - - The undersigned, being a majority of the board of directors of _THE - STANDARD OIL COMPANY OF CLEVELAND, OHIO_, do hereby certify that on - the tenth day of March, A.D. 1875, at a special meeting of the - stockholders of said company held at its office in Cleveland, - Cuyahoga County, Ohio, by a vote then and there taken, all the - stockholders of said company being present and voting therefor, it - was resolved and agreed by each and all of them, that the capital - stock of said company be increased the sum of _One Million Dollars_, - thereby making the capital stock of said company _Three Million Five - Hundred Thousand Dollars_, which action of the stockholders was as - follows, to wit: - - _Resolved_, and it is agreed by each and all of us that the capital - stock of this company, viz.: _THE STANDARD OIL COMPANY OF CLEVELAND, - OHIO_, be increased to the sum of _Three Million Five Hundred - Thousand Dollars_, and it is also agreed and the proper officers of - this company are hereby instructed to take the requisite steps to so - increase said capital stock. - - - JOHN D. ROCKEFELLER; S. V. HARKNESS; H. M. FLAGLER, _Trustee_; S. - ANDREWS; J. D. ROCKEFELLER, _Agent_; J. D. ROCKEFELLER, _Trustee_; - O. H. PAYNE; B. BREWSTER, by J. D. ROCKEFELLER, _his Attorney_; T. - P. HANDY, by J. D. ROCKEFELLER, _his Attorney_; O. B. JENNINGS, by - J. D. ROCKEFELLER, _his Attorney_; WM. ROCKEFELLER, by J. D. - ROCKEFELLER, _his Attorney_; JAS. STANLEY, by O. H. PAYNE, _his - Attorney_; A. M. MCGREGOR, by J. D. ROCKEFELLER, _his Attorney_; W. - C. ANDREWS; A. J. POUCH, by J. D. ROCKEFELLER, _his Attorney_; F. A. - ARTER, by J. D. ROCKEFELLER, _his Attorney_; P. H. WATSON, by H. M. - FLAGLER, _his Attorney_; J. A. BOSTWICK, by J. D. ROCKEFELLER, _his - Attorney_; J. HUNTINGTON, by O. H. PAYNE, _his Attorney_; D. M. - HARKNESS, by H. M. FLAGLER, _his Attorney_; JOSIAH MACY, by J. D. - ROCKEFELLER, _his Attorney_; W. H. MACY, by J. D. ROCKEFELLER, _his - Attorney_; W. G. WARDWELL, by H. M. FLAGLER, _his Attorney_; D. P. - EELLS, by J. D. ROCKEFELLER, _his Attorney_; S. F. BARGER, by J. D. - ROCKEFELLER, _his Attorney_; W. H. VANDERBILT, by J. D. ROCKEFELLER, - _his Attorney_; H. W. PAYNE, by O. H. PAYNE, _his Attorney_; J. J. - VANDERGRIFT, by O. H. PAYNE, _his Attorney_; JOHN PITCAIRN, JR., by - O. H. PAYNE, _his Attorney_; L. G. HARKNESS, by H. M. FLAGLER, _his - Attorney_. - - And afterwards said meeting was duly adjourned. - - H. M. FLAGLER, - _Secretary_. - - CLEVELAND, March 10, 1875. - - And we further certify that the whole amount of such increase of - capital stock has been paid to said company in money, that no note, - bill, bond, or other security has been taken for the same or any - part thereof, and that the credit of the company has not been used - directly or indirectly to raise funds to pay the same or any part - thereof. - - _In Witness Whereof_, we hereunto set our names at Cleveland, this - tenth day of March, A.D. 1875. - - JOHN D. ROCKEFELLER, - HENRY M. FLAGLER, - SAMUEL ANDREWS, - OLIVER H. PAYNE, - STEPHEN V. HARKNESS. - - - NUMBER 25 (See page 1148) - HENRY M. FLAGLER’S TESTIMONY ON THE UNION OF THE STANDARD OIL COMPANY - WITH OUTSIDE REFINERS IN 1874 - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3112, page 291 and page 770.] - - - _A._ ... The original Standard Oil Company was organised in the - early part of 1870. The increased capacity and the acquisition of - the Cleveland refineries was, as I remember it, in 1872. It remained - at that until 1875 or 1876,[85] according to the best of my - recollection. Then was consummated a negotiation which had been - pending for some two years, perhaps, with certain parties in - Pittsburg, Philadelphia and New York, by which a value was agreed - upon, and their refinery property was purchased and the capital of - the company was increased a still further sum of a million, and they - were paid for these properties, and money which they contributed, in - the stock of the Standard Oil Company of Ohio. - - By Mr. Gowen. - - _Q._ When did the Standard Oil Company of Ohio first enter into an - alliance with other refineries? - - _A._ If you mean, (by) an alliance, Mr. Gowen, I should say never. - - _Q._ I am only endeavouring to aid your friends in getting at what - they want. Here, I notice, they propose to prove by you—I will give - it in this way—that on account of the disastrous condition of the - refining business, the Standard, on October 15, 1874, entered into - an alliance with a number of Pittsburg refineries? - - _A._ That is more correctly stated by saying that the Standard Oil - Company _purchased_ the refineries owned by the parties in - Pittsburg. - - _Q._ Who were they? - - _A._ Lockhart, Frew and Company, I think was the company. Wait a - moment. It was the Standard Oil Company of Pittsburg, it being a - corporation, and Warden, Frew and Company, of Philadelphia, and, I - should say, Charles Pratt and Company, of New York. - - _Q._ Any others? - - _A._ That is all. - - - _Q._ All those gentlemen, Warden, Frew and Company, and the Standard - Oil Company of Pittsburg, Charles Pratt and Company of New York, are - now associated with you as parties interested in the present Oil - Trust? - - _A._ They are stockholders. The property formerly owned by them was - at that time purchased by the Standard Oil Company. - - _Q._ When you speak of purchasing their interest, you do not exclude - them from their interest? They united with you and remained as your - associates in the business? - - _A._ If it was not from the fact that ours was a corporation, we - might call it a co-partnership. - - _Q._ They becoming interested in yours, and you in theirs? - - _A._ Yes, sir. - - _Q._ And you simply used your name to represent the joint ownership, - as it was a corporation? - - _A._ Yes, sir. - - - NUMBER 26 (See page 1153) - GEORGE H. BLANCHARD’S TESTIMONY ON THE BREAKING UP OF THE PIPE POOL OF - 1874 - - - [Report of the Special Committee on Railroads, New York Assembly, - 1879. Volume III, pages 3445–3447 and 3449–3451.] - - - The contract with the Standard Company of April 17, 1874, as I have - said, contained nothing inconsistent with our obligations to the - Pennsylvania and New York Central Railroads, and the New York - Central, under their later contract, and our company, convinced the - Pennsylvania Railroad of that fact during the discussions both as to - rates and each and every other detail agreed to, but President - Jewett thought it better to rely upon the arrangements between the - railway companies alone, and decided to avail himself of the ninth - clause of the agreement with the Standard Oil Company of April 17, - 1874, which provided that either party might terminate it by six - months’ written notice, but that notice might be given by the - Standard Company within thirty days after the election of a new - board of directors of the Erie or Atlantic and Great Western - Company. This trunk line oil pool of October 1 being in operation, - President Jewett gave notice of the termination of the Standard - agreement of April 1, 1874, on October 31, 1874, which would have - terminated in six months. It was the thirty-first of the following - May, but an election having in the meantime taken place upon the - Atlantic and Great Western Railroad, the Standard Oil Company gave - the thirty days’ notice it had the right to do on January 13, 1875, - which, therefore, terminated the agreement upon February 13, 1875, - about three months and a half before President Jewett’s notice - could, under the contract, take effect. - - The trunk line agreement of October 1, 1874, continued in force, and - pool settlements were made thereunder for but five months, namely, - until the close of February, 1875, during which time the Erie - Company paid $31,019.05 and received $6,570.55. - - Notice of the abandonment of that contract was given by the Erie - Company, April 1, 1875, although no statements or moneys were - exchanged for March, and dissatisfaction with its operations had - been expressed by us prior to that time, the reasons therefor being - as follows: - - The higher rates of the pipe pool had stimulated new pipe-lines, and - the Hunter and Cummings Line and other small pipes had been - completed, or did not maintain the agreed rates of pipage. The - Columbia Conduit Company had also been completed to Pittsburg, in - the interest of the Baltimore and Ohio Company, and either acting - upon the then policy or advice of that company, or with a desire to - be bought out, declined to charge equal rates of pipage or agree to - any fixed rates, a fact which threatened the diversion of oil - largely to Baltimore, the Baltimore and Ohio Railroad not being in - the trunk line oil pool of October 1, 1874, and publicly and - frequently announcing its endeavour to divert the oil trade to - Baltimore. - - We also believed that large drawbacks or commissions were paid by - the Pennsylvania Railroad to the Empire Line in addition to those - provided in our joint pool contract; and our belief has since been - confirmed by later knowledge of the fact that the Pennsylvania - Railroad paid to the Empire Line about 30 per cent., including the - use of cars; and the mileage, being about ten (10) per cent. at - current rates of car service, left the commission equal to about 20 - per cent., an advantage not possessed by any other shipper or - company over any of the northern lines. - - It was clear that, as the Empire Line added to its already large - resources, not only this commission upon the oil business excepting - Pittsburg, but the added profits upon its pipe-lines, that its - combined operation and profit united to control an increasing share - of the entire trade and put it in strong financial shape for a - control which it subsequently entered upon to absorb also a large - refining interest. - - As the northern trunk lines made no similar arrangements, allowances - or commissions to any forwarder or receiver, and derived no profit - from any pipe-lines, it was clearly unfair to concede them to the - Empire Line, and the agreement which gave it these growing - advantages was very properly annulled. - - We also desired the actual transportation of the oil rather than to - receive money from others, as we had done during the pool, as their - increased business might finally result in a demand for larger - percentages if the pool continued. - - I directed careful examination of our records up to date of the - abandonment of this oil pool contract; and upon the authority of - General Freight Agent Vilas, state that the net rates charged to the - Standard Company during this period to through points were uniform - with the rates charged by our lines to other shippers, taking into - account, as before stated, the transportation of the crude - equivalent to their refineries.... The preliminary discussions and - general conclusions relating to those (new) contracts were all with - President Jewett, although many of their details were subsequently - discussed and suggested by me; and the reasons influencing him to - make them have been stated by him in his testimony; I was directed - to carry them out, and have from time to time attended meetings at - which the rates thereunder were advanced or reduced. I believe those - contracts were not concluded until the latter part of April or early - in May, and were then dated back to the disruption of the trunk line - oil pool, in order to secure our guaranteed proportion of oil - shipments from that earlier date and without interruption. The - transportation contract continued to guarantee us 50 per cent. of - the business of the Standard Oil Company, which 50 per cent. should - not be less than the percentage we had received in the year 1874 of - the total arrivals at the seaboard; and at this time, for that - reason, the Standard Oil Company had no transportation arrangements - with the Pennsylvania Railroad, and this fact and guaranty induced - us to disregard the question as to whether or not the Standard - Company had similar or other contracts with the New York Central or - its connections, our only interest in the question being as to - whether rates were equal and if we received our guaranteed share of - the oil. - - There was no understanding or agreement by the Erie Company to my - knowledge that the New York Central Company or Pennsylvania - Railroad, or either of them, had or had not similar or other - contracts with the Standard Oil Company. - - They were shipping by the New York Central route, and we assumed - from their large business, terminal arrangements, etc., that some - defined understanding probably regulated such large interests, but - we were not consulted as to the terms or conditions of its contracts - with other companies if it had any, because we relied upon their - responsible guaranty to give us our proportion of the total arrivals - of oil at the seaboard and at rates equal to those of other - companies, as ample protection to our interests. - - At the time this transportation contract was made by the Erie - Company, other considerations than relief from risks and the - equalisation of the arrivals at the seaboard bore upon the contracts - for an allowance of 10 per cent. It continued to be our belief, - since fully confirmed by Mr. Cassatt’s testimony, that other - shippers _via_ the Empire Line over the Pennsylvania Railroad had at - least similar rates and arrangements, to which, on the part of the - Erie Company, no objection was offered; it also continued to be the - fact that the Empire Line continued to receive in addition to its - probable pipe profits, the same or about the same, large commission - as before, from the Pennsylvania Railroad, and it was believed by - the officers of the Erie in making this contract with the Standard - Company that the allowance to it of 10 per cent. was not much more - than one-half the allowance then being made by the Pennsylvania - Railroad to the Empire Line. - - In addition thereto, we secured the actual transportation of our - full share of the oil, at the agreed rates, without delays or - disputes in adjustments, or the preparation or exchange of the pool - statements. - - It maintained the business to New York and provided against any - increase to our rival railways or ports, no matter how the territory - of oil production might shift or vary, and while under the trunk - line pool we could not influence the various shippers to send them - oil over our railway or to this city, unless their varying and - dissimilar interests all agreed (as they did not), and no matter how - much one company might be in deficit, the Standard Company is - compelled to send it over our line. The loading and unloading, and - taking the risks, were also important items to us as has before been - detailed, and relieved us from a class of claims we had paid prior - to that time. - - It was also important to us that by this contract we were explicitly - released from large losses when the great fire consumed the - Weehawken docks in July, 1874. - - The ninth section of the contract has also been of much value to us. - In the delivery of oil to vessels or exporters, the Standard Company - assumes all the risks and expenses of delays to ships, and their - demurrage, even if it be the fault of the railway by nondelivery, - and I have known of cases where this amounted to a large sum. - - In 1877 when the general and extended railway strikes occurred, this - clause also released us beyond doubt from large claims that might - otherwise have been urged. - - The freight rates provided by the railway pool of October 1, 1874, - were not changed until October 1, 1875; and my recollection is that - it was not until the discussion upon that change that anything was - definitely known by any of the trunk lines of the arrangements of - the others with the Standard Oil Company. At that meeting the 10 per - cent. reduction to be allowed the Standard was distinctly understood - as due upon its shipments _via_ all the trunk lines in consideration - of the facts stated, and it then first came to my knowledge that - Warden, Frew and Company, of Philadelphia, represented the Standard - Oil Company, as Charles Pratt and Company represented their crude - interests at New York _via_ our line. - - - NUMBER 27 (See page 1196) -MR. FLAGLER’S EXPLANATION OF THE COMMISSION OF 10 PER CENT. ALLOWED THE - STANDARD OIL COMPANY IN 1877 - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3112, pages 774–775.] - - - I would like the privilege of explaining about that 10 per cent. - commission. The railroad companies, as perhaps Mr. Gowen will - remember, he at that time having been head of the Reading Railroad, - tried and did agree among themselves for divisions of the oil - business. I know that they agreed among themselves that a certain - percentage of it the New York Central should take; a certain other - percentage the Erie should take; a certain other percentage the - Pennsylvania Railroad should take; and a certain other percentage - the Baltimore and Ohio should take. We were only anxious that - uniform rates should be maintained by these roads. All these roads, - and each one of the roads, found it impossible to secure the - divisions of the business as they had agreed upon. Notwithstanding, - we co-operated with them, for we were heartily in favour of its - being done and were only seeking for a uniformity of rates by the - different roads. But as any gentleman connected with railroad - interests well knows there always is that desire to get more than - belongs to the line. That desire kept cropping out in the practical - shape of cutting under rates for the sake of getting a little more, - each road feeling that it was not getting enough to insure it its - percentage. The Standard Oil Company at that time owned a very large - percentage of the entire oil traffic. It was possible for it to do a - service for the roads that the roads were unable to do for - themselves. That service, however, involved a good many hardships. - - The practical working of it was this, that at the end of each month - after the arrangement had been made, each of these railroad - companies, they first having agreed how they would divide among - themselves and not seek to go beyond that certain percentage—at the - end of each month each railroad company sent to us a statement of - the number of barrels of oil they had transported during the month. - It was incumbent upon us during the succeeding month to ship over - the road or roads which had received less than its percentage an - amount during that following month sufficient to bring up the - deficit of the previous month. Undertaking to do that meant, as I - well knew at the time, a responsibility imposed upon us, and an - obligation to run refineries at certain localities which perhaps at - the time it was unprofitable for us to run. It meant a steady - continuance of a large volume of business at periods of time when it - might not be profitable to run them; and if the gentlemen of the - committee will bear with me just a moment you will see the - difficulties. It was not only the three trunk lines—the New York - Central, terminating at Buffalo, the Pennsylvania, terminating at - Pittsburg, and the Baltimore and Ohio, I don’t know where—but there - came in their Western connections. I remember well the New York - Central had two; the Lake Shore was its connection west of Buffalo - to Cleveland, and the Dunkirk and Allegheny Valley was its western - division to the Oil Region. It was not an easy matter, for we had - not only to regard the percentage delivered at the seaboard, but we - had to try to keep the Lake Shore satisfied with its proportion, the - New York Central’s proportion, and the Dunkirk and Allegheny - Valley’s proportion. As I say, it was no light task, and realising - that, I said to these gentlemen, “We will undertake to do this - business for you, to secure to each one of you the percentage which - we may have agreed upon, upon condition that we are paid for that - service a sum which shall be equal to 10 per cent. of the rate you - receive for doing the business.” There were, however, to be added to - what I have already stated as an inducement for the railroad - companies to pay that commission, other agreements, one of which was - that we assumed the risk of loss by fire in transportation. That may - seem to be to the gentlemen of the committee a cheap thing to do, - but Mr. Gowen understands, as well as I do, that a railroad company - cannot divest itself of the obligations by the common law imposed - upon it as a common carrier without a special agreement to that - effect. We took that risk, and did not collect from the railroad - companies, any of them, any losses sustained by fire in transit. We - furnished terminal facilities at the seaboard free of charge to the - railroad companies, and for all this service the Pennsylvania - Railroad agreed to pay us a commission of 10 per cent. We carried - out our part of the contract faithfully, and secured to the roads - such a division of the traffic as kept them in a state of accord and - peace, so far as quantity was concerned, and yet the Pennsylvania - Railroad paid to other shippers than ourselves a rebate or a - drawback, or whatever you choose to call it, on their shipments, - which were exactly equal to the 10 per cent. they agreed to pay us. - So that in that respect we were not favoured at all. - - - NUMBER 28 (See page 1196) - CORRESPONDENCE BETWEEN WILLIAM ROCKEFELLER AND MR. SCOTT IN OCTOBER, - 1877 - - - [Commonwealth of Pennsylvania _vs._ Pennsylvania Railroad Company, - United Pipe Lines, etc., Testimony. Appendix, pages 734–736.] - - - PHILADELPHIA, October 17, 1877. - - THOMAS A. SCOTT, - President Pennsylvania Railroad Company. - - _Dear Sir_: In consideration of the covenants by your company to be - performed as hereinafter mentioned, we will agree as follows: - - _First._—It having been agreed by the trunk lines that of all the - oil shipped by the trunk lines to the cities of New York, - Philadelphia, and Baltimore, 63 per cent. shall be considered as the - proportion which would naturally go to the City of New York, and it - having been further agreed that of this percentage one-third shall - be transported over each of the trunk lines having termini in New - York, viz.: The New York Central, Erie, and Pennsylvania, we agree, - unless the aforesaid division shall be changed by mutual consent of - said trunk lines, to ship such quantities of oil over your lines, - from time to time, as will, when added to the quantities shipped by - parties other than ourselves, give your line one-third of the - shipments to New York by the said trunk lines, or 21 per cent. of - the whole amount shipped to the three cities above named by the said - trunk lines; it being understood that in stating the number of - barrels for the purpose of making this division or for carrying out - any of the other stipulations herein contained, the barrel of - forty-five gallons of crude shall be the unit, and that each barrel - of the usual size of refined oil shall be counted as equal to one - and three-tenths barrels of crude. - - _Second._—It having been agreed, as we are informed, between your - company and the Baltimore and Ohio Railroad Company, that of the - remaining 37 per cent. of the total shipments aforesaid you should - be entitled to transport by lines owned and controlled by your - company to Philadelphia and Baltimore, 26 per cent., and the - Baltimore and Ohio Railroad Company to Baltimore by its lines 11 per - cent., we agree, until these proportions are changed by mutual - consent, to ship such quantities to Philadelphia and Baltimore by - lines owned and controlled by your company as will, when added to - shipments of parties other than ourselves, give for transportation - by your lines to Philadelphia and Baltimore, 26 per cent. of the - total shipments by the four trunk lines to the three seaboard cities - above named. - - _Third._—We further agree that the quantity of oil which we will - ourselves ship over your line shall not in any calendar year be less - than two million barrels, based upon an average production of not - less than thirty thousand barrels per day. If we should fail to give - you traffic herein named, we will pay to you a sum equal to the - profits which you would have realised upon the quantity in - deficit—provided, however, that you will at all times furnish us - with transportation, as we may reasonably require it. - - _Fourth._—We will, of the proportion of oil going to Philadelphia, - refine as much as is practicable in Philadelphia, as we understand - that you desire to see the refining capacity of Philadelphia fully - employed, and, if needful, increased. And in shipping by your lines, - whether to Philadelphia, Baltimore, or New York, we will endeavour - to deliver the oil to you at points from which you will have short - hauls; and to the extent that we can, we will make the proportion of - crude shipped as large as possible, as we understand its - transportation to be more profitable to you than that of refined - oil. - - _Fifth._—We ask, in consideration of the above named guarantee of - business, upon which it is understood we shall pay such rates as may - be fixed from time to time by the four trunk lines (which rates it - is understood shall be so fixed by the trunk lines as to place us on - a parity as to cost of transportation with shippers by competing - lines), that you shall furnish us promptly all the transportation we - may reasonably require; and that you shall allow to, and pay us, - weekly, such commission on our own shipments and the shipments which - we may control, as may be agreed to by your company and the other - trunk lines from time to time; this commission, it is understood, - has for the present been fixed at 10 per cent. upon the rate, and - shall not be fixed at a less percentage, except by mutual agreement - of your company and ours—provided, that no other shipper of oil by - your line shall pay less than the rate fixed for us before such - commission is deducted; and no commission shall be allowed any other - shipper unless he shall guarantee and furnish you such quantity of - oil for shipment as will, after deduction of commission allowed him, - realise to you the same amount of profit you realise from our trade; - that is, you will not allow any other shipper of oil any part of - such commission, unless after such allowance you realise from the - total of his business the same total amount of profit you realise - from the total of our business, except so far as your company may be - compelled to fill certain contracts for transportation made by the - Empire Line with refiners and producers, which contracts terminate - on or before May 1, 1878, a statement of which shall accompany your - reply to this letter—such contracts to be fulfilled. We agree that - all the stipulations herein contained shall be carried out by us for - the period of five years from the date hereof, unless sooner changed - or terminated by mutual consent, provided that you advise us in - writing within ten days that your company accept, and will carry - out, its part of the arrangement for the like term. In entering into - this agreement we desire to put ourselves on record as expressing - our wish and intention of making our business relations with your - company such that not only your main lines but the connecting lines - controlled by you, especially the Allegheny Valley Railroad, shall - secure the best possible results from the oil traffic consistent - with our existing obligations to other transportation interests. We - feel that the location of our refineries—all of which can be reached - by your lines—should naturally create a close alliance between your - company and ours, and that the best results from this important - traffic can only be secured to yourselves and ourselves, and, we - might add, to the entire petroleum interests of the country, by the - establishment of friendly and mutually satisfactory arrangements - between us. - - Yours truly, - STANDARD OIL COMPANY, - By WILLIAM ROCKEFELLER, - _Vice-President_. - - - OFFICE OF THE PENNSYLVANIA RAILROAD COMPANY, - PHILADELPHIA, October 17, 1877. - - WILLIAM ROCKEFELLER, - Vice-President Standard Oil Company. - - _My Dear Sir_: I am in receipt of your letter of this date, reciting - the understanding and agreement to exist between the Pennsylvania - Railroad Company and your company for a period of five years. - - I beg leave to say that the same covers the whole basis of the - arrangements, and is satisfactory to this company—the provisions of - which will be duly carried out by it. - - Very respectfully yours, - THOMAS A. SCOTT, - _President_. - - - NUMBER 29 (See page 1197) - CORRESPONDENCE BETWEEN MR. O’DAY AND MR. CASSATT - - - [Commonwealth of Pennsylvania _vs._ Pennsylvania Railroad Company, - United Pipe Lines, etc., Testimony. Appendix, pages 732–733.] - - - OFFICE OF THE AMERICAN TRANSFER COMPANY, - OIL CITY, PENNSYLVANIA, February 15, 1878. - - A. J. CASSATT, - Third Vice-President, Philadelphia. - - _Dear Sir_: Referring to the conversation I had with you in January, - I wish to submit the following facts: That our company has at large - expense (involving the payment of several hundred thousand dollars), - purchased and created certain pipe-lines to Pittsburg, through which - we are able not only to protect the Allegheny Valley road in a - paying rate of freight for the oil it carries, but also to secure to - that company (by agreement with it) its full proportion of the oil - traffic going to Pittsburg. - - You are acquainted with the efforts we have put forth in other - directions during the last months in which we have acted in thorough - accord with the trunk line interests, and I believe I may say - without egotism, we have, to the extent of our ability, effectually - protected their interests in such action. I here repeat what I once - stated to you and which I asked you to receive and treat as strictly - confidential, that we have, been for many months receiving from the - New York Central and Erie Railroads certain sums of money, in no - instance less than twenty cents per barrel on every barrel of crude - oil carried by each of those roads. - - Co-operating, as we are doing, with the Standard Oil Company and the - trunk lines in every effort to secure for the railroads paying rates - of freight on the oil they carry, I am constrained to say to you - that, in justice to the interest I represent, we should receive from - your company at least twenty cents on each barrel of crude oil you - transport. - - The fruit of co-operation referred to has been fully evidenced in - the fact that since last fall your company has received fifty to - sixty cents per barrel more freight than was obtained by it prior to - our co-operation. - - In submitting this proposition I feel I should ask you to let this - date from the first of November, 1877, but I am willing to accept as - a compromise (which is to be regarded as strictly a private one - between your company and ours) the payment by you of twenty cents - per barrel on all crude oil shipments commencing with February 1, - 1878. - - I make this proposition with the full expectation that it will be - acceptable to your company, but with the understanding on my part - that in so doing, I am not asking as much of the Pennsylvania road - and its connections as I have been and am receiving from the other - trunk lines. - - You are doubtless aware that during the last two years a large - amount of oil has been shipped to Richmond _via_ the Chesapeake and - Ohio road, and that since the purchase of the Pittsburg lines by us - not one barrel has been permitted to go in that direction. - - During the season of 1877, and so long as the Columbia Conduit - Company afforded the Baltimore and Ohio road access to the Oil - Regions, that company, I understood, refused to accept from the - other trunk lines (for its proportion of the oil traffic) less than - 20 per cent., but after the purchase by us of the Columbia Conduit - you succeeded in arranging with the Baltimore and Ohio for about - half as much as they previously claimed. - - I may add that the Baltimore and Ohio road are wholly dependent upon - us for any oil they may carry. - - Yours truly, - (Signed) DANIEL O’DAY, - _General Manager_. - - - PHILADELPHIA, May 15, 1878. - - R. W. DOWNING, Comptroller. - - _Dear Sir_: I enclose herewith copy of letter from Daniel O’Day, - general manager of the American Transfer Company, which refers to a - conversation I had with him in January last in reference to allowing - the American Transfer Company a commission of twenty cents per - barrel on all crude oil transported over this company’s lines to New - York, Philadelphia and Baltimore. - - I agreed to allow this commission from and after February 1, until - further notice, after having seen receipted bills showing that the - New York Central Railroad allowed them a commission of thirty-five - cents per barrel and that the Erie Railway allowed them a commission - of twenty cents per barrel on Bradford oil, and thirty cents per - barrel on all other oil, and that they had been doing so - continuously since the 17th of October last. - - Of this, however, you saw the evidence yourself in the bills which I - submitted to you last week. Please, therefore, prepare vouchers in - favour of the American Transfer Company per Daniel O’Day, for this - commission of twenty cents on shipments during February, March and - April, and hereafter make settlements with that company monthly. - - Yours truly, - (Signed) A. J. CASSATT, - _Third Vice-President_. - - - NUMBER 30 (See page 1197) -HENRY M. FLAGLER’S TESTIMONY ON THE REBATE PAID TO THE AMERICAN TRANSFER - COMPANY - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3112, pages 777–778.] - - - _Q._ Mr. Cassatt testified and offered in evidence the - correspondence which showed that his company agreed to the payment - of that 22½ cents to the American Transfer Company on every barrel - of crude oil passing over their line in consequence of the fact that - the writer of the first letter on behalf of the American Transfer - Company had asserted that the New York Central and the New York and - Lake Erie roads paid the same amount. You know that to be a fact, do - you not? - - _A._ May I explain that now? - - _Q._ You are entitled to make any explanation you wish. - - _A._ The American Transfer Company was built originally for, really, - the New York Central road. The New York Central had no means of - getting south of Titusville with its cars. The American Transfer - Company’s lines were built really in the interest of the New York - Central road. In those days the pipe-lines purchased the oil and - oftentimes sold it at just what they paid for it, and sometimes - less. They got more when they could. The New York Central, as I - said, paid the American Transfer Company a price, which I presume - was the figures named in Mr. Cassatt’s testimony, for collecting oil - in the lower country and delivering it to the Dunkirk and Allegheny - Valley, which is the New York Central’s connection. As that - pipe-line increased its business the Erie road did the same thing. - Later the Pennsylvania Railroad wanted the service of that pipe-line - in collecting oil. Mr. O’Day did what I suppose any manager would - do. He said to Mr. Cassatt, if you do the same thing for me that the - other roads are doing, I have no objection to making the same - arrangement with you. The payment made by the Pennsylvania, the - Erie, and the New York Central roads constituted the gross income of - the American Transfer Company, out of which it paid its expenses of - doing its business and its losses, if it made any, in the purchase - and sale of oil. It acted as a factor for those northern roads, and, - as I said, was originally built in order that oils might be reached - by the New York Central. - - _Q._ But in addition to the sum of 22½ cents, or whatever it may - have been, which these trunk lines paid to the American Transfer - Company, that company as a transporter of oil through its own pipe - got this pipage charge besides? - - _A._ I never so understood it. As I remember the facts in the case, - while there was a nominal pipage—there might have been; I do not say - there was; I do not remember. - - _Q._ You do not say there was? - - _A._ I do not remember. But while there might have been a nominal - pipage, that nominal pipage might have been absorbed in the crude - oil. In other words, it threw away its nominal pipage and relied—— - - _Q._ I am speaking now solely of the relations of the American - Transfer Company to the railroads. The former received 22½ cents on - every barrel of oil passing over the Pennsylvania road and the other - roads. But the American Transfer Company was a transporter of oil - itself, and to the extent it transported oil through its pipes it - made charge for that service also? - - _A._ That is a point where I say I want to correct you. While it may - have made a nominal charge, about which my memory fails me, I say it - threw away that nominal charge by paying to the owner or the - producer of the oil the value of the oil at the wells, plus what - that pipage might have been, and that twenty odd cents paid by the - Pennsylvania constituted its gross revenue. - - - NUMBER 31 (See page 1199) - LETTER TO PRESIDENT SCOTT OF THE PENNSYLVANIA RAILROAD FROM B. B. - CAMPBELL AND E. G. PATTERSON - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3112, pages 363–365.] - - - TO THE PRESIDENT AND DIRECTORS PENNSYLVANIA RAILROAD COMPANY. - - _Gentlemen_: About July 1 last the undersigned were of a delegation - from the Oil Region of our state, asking of your road an assurance - that its course during the preceding two months, in giving to all - producers and shippers of petroleum equal facilities and impartial - rates, might be formally made its permanent policy. - - In an interview with your president at that time, that assurance was - given, coupled with the requisition that such support should be - given it by the producers and shippers as would repay it for the - exertion it must make in defending that policy, and guaranteeing - that such support should be continuous and permanent. - - The people of the Oil Region were only too glad to enter into such - an agreement, and steps were immediately taken of a practical nature - to carry it out. - - It was understood that it could not be _immediately_ done. - - After the formal abandonment by the trunk lines of the South - Improvement Company in 1872, your road for some months faithfully - adhered, as we believe, to the pledge then given by all the trunk - lines, that no discrimination should thenceforth be permitted. We - believe also that it stood alone among the roads in adhering to it, - for gradually the persons constituting the South Improvement Company - were placed by the roads in as favourable a position as to rates and - facilities as had been stipulated in the original contract with that - company. At this time the line of your road in Western Pennsylvania, - including that under your influence and control, was dotted with - refineries capable of producing a large proportion of the refined - oil needed by the world. The policy of the Standard Oil Company, the - successor in everything but name of the South Improvement Company, - has resulted in the dismantling and abandonment of every one of - those refineries (as soon as they fell into their possession) which - could not be reached by some other and a rival road to yours, and - now there are in the Oil Region proper but few refineries and those - universally owned by the Standard Oil Company, those in Pittsburg - being owned or controlled by that combination or by the Conduit or - Empire lines. The use and export of crude oil is but a small - proportion of the consumption, and time and money were required to - re-establish this great product upon its former basis, and these - people were glad to furnish all needed means to accomplish this end, - as are also capitalists at other points not strictly within the Oil - Region, yet upon your lines. - - We are met in the midst of this preparation by assertion of agents - of the combination, and as accepted news by the press, that such a - combination is entered into, or under consideration by your road and - the Empire Transportation Company, the Erie, Central, Lake Shore, - and Baltimore roads of the one part, and the Standard Oil Company of - the other, as would preclude your road from carrying out the policy - announced by your president at the interview heretofore referred to. - - We believe there is danger that such a result may be reached, and we - in behalf of these whom we represent, in making our efforts to - prevent its accomplishment, or if accomplished to defeat it, as the - first step, address this communication to you, desiring to present - its aspect as affecting your road from our stand-point. - - So far as we, and the general public are affected, you will not - question that the present scheme is but the repetition of the South - Improvement scheme, never abandoned by its authors, and seeking the - sole and absolute control of all petroleum produced, purchased, - refined, and shipped within the states of Pennsylvania, New York, - Ohio, or West Virginia. - - The over-production of 1873, 1874, 1875, and the consequent almost - entire destruction of petroleum values, gave the Standard Oil - Company, with its organisation and capital, almost the desired - monopoly. The equalisation of consumption and production of - 1876–1877 brought that combination to the same point that they were - in 1872—utterly unable by reason of geographical position, if for no - other, to monopolise this product without the co-operation of _all_ - the transportation, and then only under a contract similar to that - of the South Improvement Company, and including all of its dangerous - and extraordinary features. None other can serve them, and so they - stand to-day, and we believe that your road can enter into no - compromise, treaty, or arrangement which will serve the ends of the - monopoly, under any less stringent stipulations and devoid of the - liabilities thereof. - - Under such an arrangement it is probable that the Central and Erie - have transported its oil, during nearly all of this year. It is now - an open secret in the producing region, that no charges follow the - shipments over at least one of these roads, and crude oil is - delivered in New York, on shipping order, at prices which barely - repay the cost of packages and contents, with little or no remainder - for transportation charges. This aid to the scheme of the - combination is possibly given in view of the high tariff and - consequent large revenue promised to be derived hereafter, when the - scheme has been made a success, and all opposition in trade and - transportation extinguished. - - Suppose your opposition to be withdrawn, and you join the alliance, - when does your profit come in? We are entitled to impartiality. As - we are advised, the law, common and statute, provides for it; it - pronounces those participating in such a scheme conspirators against - the public weal, and there is no court upon your line but what will - enforce by mandamus and injunction the impartiality that we ask. The - combination will promise you an immediate increase of revenue. If we - are well advised, will you realise upon that promise? Can you make a - contract with them that if we do not succeed in destroying, it will - be their interest to keep? You will not have a refinery left; and - they are now completing pipe-lines from Pittsburg to Oil City, and - can deliver the oil received by all their pipe-lines, independent of - your road and its branches. In case of a contract with them executed - but afterwards broken, from what source will you derive your oil - traffic and what court will enforce the broken contract in your - favour? We urge that you cannot enter into any arrangement with the - monopoly that can be permanently useful to it and to you, and doubt - if it can be made temporarily so. - - Suppose that you decline to enter into such a treaty, or any such - scheme, but announce and adhere to the opposite policy? There is no - law, not even that of necessity, to compel you to serve the ends of - the Standard Oil Company. - - If Messrs. Vanderbilt and Jewett believe that their aid alone is - insufficient to the establishment of the monopoly, for how long will - they carry its oil as at present for nothing, when they could have - full rates, by uniting the railroad interest, and leaving the - Standard Oil Company to do its business in common with all others? - - If the Pennsylvania Railroad, having the geographical position in - its favour, will announce and adhere to the policy of impartial and - competitive rates, in three or six months, it can have all the - facilities and extent of business which the Standard Oil Company can - give the competitive roads, and by men who have all to gain by so - doing. - - We ask consideration of our views and of our assurance of good - results from their favourable consideration. - - If you choose to place the matter in the light of an experiment, its - trial can cost you nothing but the failure to realise upon the - immediate fulfillment of the promises of the common enemy, and that - realisation we believe will not be permitted. - - Very respectfully, - B. B. CAMPBELL, of Pittsburg, - E. G. PATTERSON, of Titusville. - - PHILADELPHIA, September 11, 1877. - - - NUMBER 32 (See page 1225) -PRODUCERS’ APPEAL OF 1878 TO GOVERNOR JOHN F. HARTRANFT, OF PENNSYLVANIA - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3112, pages 351–356.] - - - _Sir_: The undersigned, members of a committee appointed by the - General Council of the Petroleum Producers’ Union for that purpose, - address to you, as the official head of the Commonwealth, a plain - statement of facts, to a great extent known to be true from personal - knowledge, and all material parts of which are susceptible of proof - by competent evidence. - - We address you, not only as individuals whose personal interests - have been affected, whose property has been rendered comparatively - valueless, and whose capital and labour are bound against their - consent, to increasing the gains of grasping corporations, but as - citizens of the great Commonwealth of Pennsylvania, apparently - prostrate and powerless to control one of its greatest products, and - the immense business that annually flows from it. - - The petroleum production of Pennsylvania is confined geographically - to the Northwestern portion of the state, extending from its border - upon New York State nearly to Pittsburg, and is the chief interest - in the counties of McKean, Warren, Forest, Crawford, Venango, - Clarion, Butler and Armstrong. - - The amount of money invested in well property, constantly to be - renewed and kept good, represents at least twenty millions of - dollars, and while the value of the lands upon which the wells are - located is not easily determined, it represents many times the value - of the well property. - - Petroleum should yield at the wells, with its transportation and - sale unfettered, twenty-five to thirty-five million dollars - annually, while as an article of export, it ranks third among the - products of the nation, and as first among its manufactured exports. - - For transportation outlets, it has the Pennsylvania Railroad to the - seaboard at an average distance therefrom of less than 400 miles. - The New York Central and Lake Shore Railroads reach Oil City by way - of Cleveland, Ohio, 764 miles from the seaboard, and Titusville, by - way of Dunkirk, New York, 571 miles to the seaboard, and the New - York, Lake Erie and Western, and Atlantic and Great Western Railways - reach Oil City by way of Meadville, 550 miles to the seaboard. - - - CONDITION OF THE TRADE IN 1871 - - At that time the lines of the Pennsylvania Railroad in the Oil - Region were dotted with refineries located at Tidioute, Henry’s - Bend, Oleopolis, Oil City, Corry, Titusville, Miller Farm, - Rouseville, and other points on the Oil Creek Railroad, at various - points on the Philadelphia and Erie Railroad, and on the Allegheny - Valley Railroad, these roads being tributaries of and controlled by - the Pennsylvania Railroad, while upon its main line extensive - refineries were located at Pittsburg and Philadelphia. The - refineries at Cleveland, Ohio, confined themselves in a measure to - the Western domestic trade, and those of Portland, Boston and New - York had generally specialties in the trade. - - The markets were filled with buyers of crude and refined; - information as to stocks, production and consumption was open and - obtainable, and values were regulated by the law of supply and - demand. - - In its relation to this trade, Western Pennsylvania almost - exclusively possessing this product, with ample refineries in its - midst, with its great state railroad penetrating the producing - region, and by it, having the shortest route to the seaboard, with - the Allegheny River as an additional means of transportation to - Pittsburg, the Western terminus of the Pennsylvania Railroad, and - with Philadelphia, its Eastern terminus as an exporting point, - Pennsylvania had, and was entitled to, the control of the refining - and transportation of its own product. - - - CONDITION OF THE TRADE IN 1877–1878 - - Now, this is all changed! The refineries on the lines of the - Pennsylvania Railroad have been demolished, excepting where reached - by rival railroads, and this business has been transferred to - Cleveland and New York, the refineries remaining in this state - having passed into the ownership and control of a foreign - organisation, as has also the local transportation from the wells, - by means of pipe-lines to the lines of the railways. - - The transportation of every nature is subject to its dictation; it - possesses every avenue of information; it affixes its own value to - the crude product when purchasing and the refined products when - selling; it establishes its own rates of compensation to be paid the - railways, and the laws of commerce which govern values in other - products are in this a part of the history of the past. So far as - the petroleum trade is concerned an enterprise or investment therein - is only a wager as to what step the Standard Oil combination will - next take. With the world consuming double the amount of our - petroleum that it did in 1871, the thirty millions which should be - received from the crude product has dwindled to its half; the - fifteen millions which should be the profit of Pennsylvania - refineries has been transferred to Ohio and New York, and the twenty - millions which should have swelled the earnings of the railways have - gone—no one dare say where—but the colossal fortunes acquired since - 1872 by every member (so far as its members are known) of this now - world-renowned organisation, are proofs of the success attendant - upon a scheme, no less unlawful than gigantic, and which has all the - outward and visible signs of inward and spiritual corruption. To-day - a foreign corporation is the absolute master of the production and - its value, of transportation by pipe-lines, transportation by - railroad and the compensation therefor, of storage and refining, and - the profit thereof, and dictates prices through the world of the - first, or among the first, of the products of Pennsylvania, and of - the United States, and this to the impoverishment of thousands of - citizens, and the destruction of each of these interests within the - state. That this has been accomplished through and by means of the - co-operation of the Pennsylvania Railroad, its management and - influence, is matter of record. - - - THE FIRST ATTEMPT TO MONOPOLISE THE TRADE - - was initiated by the conveyance, by R. D. Barclay, Thomas A. Scott’s - private secretary, and S. S. Moon, the legislative agent of the - Pennsylvania Railroad, to a party composed principally of Cleveland - and New York men, headed by an agent of the New York Central and - Erie Railways, of a charter granted by the Legislature of - Pennsylvania for a different purpose, under which they organised for - the seizure of the petroleum trade, retaining the charter title of - - - “THE SOUTH IMPROVEMENT COMPANY,” - - the then managers thereof being the managers of the organisation now - known as the Standard Oil Company. - - With the South Improvement Company, not a member of which lived in - the Oil Region, or was an owner of oil wells or oil lands, the - Pennsylvania Railroad hastened to execute a contract (January 18, - 1872), giving it the sole and exclusive control of all petroleum - shipments thereon, regardless of ownership, and securing this by the - payment by the railroad of a rebate or drawback to the South - Improvement Company of such a sum as would have inevitably driven - all others out of the trade, and lest there might be doubt as to the - intent to so do, it was expressly stipulated in the fourth article - thereof that that was the result aimed at, and the Pennsylvania - Railroad therein bound itself, so far as it legally might, to aid in - accomplishing it. - - The action of the Legislature and of Congress, and the uprising of - the people against this unparalleled iniquity, destroyed the - combination for the time being, the railroads having pledged - themselves to never attempt a similar outrage. - - The local transportation of crude petroleum had been gradually - changing from movement by barrels to carriage in - - - PIPE-LINES - - from the wells to tankage located on the lines of railway, the - principal of which pipe-lines, at this time known as the - Pennsylvania Transportation Company (formerly Allegheny - Transportation Company), was under special charters of the - Legislature and owned and controlled by Messrs. Scott, of the - Pennsylvania, and Fisk and Gould, of the Erie Railways. The - Legislature had been petitioned at various times since 1866 to pass - a Free Pipe Law, but the various bills introduced for that purpose - could never overcome the opposition of the Pennsylvania Railroad in - the Legislature. During the excitement attendant upon the rise and - fall of the South Improvement Company scheme, the effort was - renewed, and the Legislature enacted a law, restricted to the eight - oil-producing counties, but the Pennsylvania Railroad influence was - strong enough to exclude Allegheny County from the operation of the - Act, thus shutting out Western Pennsylvania from Pittsburg, the - terminus of the Pennsylvania Railroad, the natural outlet of the Oil - Region, and the natural refining point of the United States. - - The succeeding efforts to pass a Free Pipe Law, either general in - its nature or to permit construction of pipe-lines to lines of - railway within the state, or to include Allegheny County in the law - of 1872, have been defeated invariably by the opposition of the - Pennsylvania Railroad, and the law of 1874, known as the Wallace - Act, was so framed and enacted as to leave it doubtful whether it - had not succeeded in withdrawing from the eight counties referred to - all the rights conceded to them by the Act of 1872, a wrong which no - subsequent Legislature has been able to redress. - - Under the law of 1872, pipe-lines owned by citizens in the Oil - Region had been organised and were in operation, giving free access - to the railways, but after the passage of the Wallace Act (April 29, - 1874), the Standard Combination, which had never really abandoned - the South Improvement scheme, systematically undertook their - destruction by forcing them into insolvency and then absorbing them. - This required railway co-operation, and various means were employed - therein, notably among which is the scheme adopted by the ring and - promulgated by the railroads October 1, 1874. An explanation is - necessary to understand why the railroads should unite: _First_, to - carry oil received by them through pipe-lines that had combined to - maintain a given rate for pipage twenty-two cents per barrel cheaper - than on oil received from pipe-lines not so combining, and _Second_, - to further weaken the refineries remaining in Western Pennsylvania - by depriving them of their geographical advantage of proximity to - the crude product, to the coal used as fuel, and to the exporting - ports by _free transportation_ of crude petroleum to the ring - refineries in other states. Various pipe-lines had already been - forced out of existence, had been bought up and united under the - name of “The United Pipe Lines,” which was owned, one-third by the - Standard Oil Company, one-third by the Lake Shore and New York - Central Railroads, and one-third by individuals who were members of - and directors in the Standard Oil Company. The Pennsylvania Railroad - had as its particular feeder a similar organisation, known as the - “Empire Pipe Line.” This explains the _first_ point referred to - above. The _second_, so far as the Pennsylvania Railroad is - concerned, is inexplicable upon any ordinary hypothesis or under any - known theory in railroad politics. The scheme was a success, - pipe-lines one after another succumbed, and refiner after refiner - was bankrupted and his works absorbed. - - This effected, the monopoly, backed by the New York railroads, in - one of which it exercised unlimited power, felt strong enough to - demand of the railroads that it should be given the future sole - conduct of the trade under the old South Improvement plan. Upon this - the Pennsylvania Railroad apparently awoke to its danger, resisted - the demand, and in July, 1877, President Scott announced as the - policy of the Pennsylvania Railroad open and free trade to all - shippers of petroleum. It was then conducting its oil traffic - through its ally, the Empire Transportation Company, which possessed - a system of pipe-lines (before referred to) extending over the Oil - Region, controlling a large portion of the production, with ample - tankage, with a large rolling stock upon the Pennsylvania Railroad, - and owning or controlling a refining capacity nearly equal to - one-half the consumption of the world. In the following month - (August, 1877), immediately after the riots at Pittsburg, which were - in their extent the natural outgrowth of railroad freight - discrimination against that city, the monopolists succeeded in - convincing the officials of the Pennsylvania Railroad that it was to - their or its interests to force the Empire Company, its cars, its - pipe-lines, its tankage and its refineries into their hands. The - people of Western Pennsylvania protested in a communication to the - president and directors of the Pennsylvania Railroad in September, - before the extent of the proposed iniquity had become fully known to - the public, which communication seems never to have reached the - board of directors. The outrage was finally consummated October 17, - 1877, and the Pennsylvania Railroad was left without the control of - a foot of pipe-line together, a tank to receive, or a still to - refine a barrel of petroleum and without the ability to secure the - transportation of one except at the will of men who live and whose - interests lie in Ohio and New York. - - Into those hands had now passed the last refineries of Pennsylvania, - the last means of transportation from the wells to the railroads, - and the last means of carriage to the markets of this country and of - the world. The South Improvement scheme (less its chartered - organisation as in 1872) was at last an accomplished fact, and in - the successful designing, prosecution, consummation and operation of - which it is impossible not to believe that railroad officials were - personally interested. - - - CONGRESSIONAL LEGISLATION - - As the conspiracy was evidently gaining strength, the people of - Pennsylvania united in an effort to induce Congress to again - interfere as in 1872, and in 1876 it directed an investigation, - which was conducted in a dilatory manner by a committee, a prominent - member of the Standard Oil Company, and not a member of Congress, - presiding behind the seat of the chairman. Vice-President Cassatt, - of the Pennsylvania Railroad, was the only prominent railway - official who appeared in obedience to the subpœnas of the Speaker of - the House of Representatives, and he refused to give the committee - any information as to the matter under investigation, and the - counsel of the Pennsylvania Railroad, ex-Senator Scott, appeared - before the committee in justification of his so doing. The financial - officer of the Standard Oil Company appeared before the committee, - accompanied by a member of Congress—also a member of that Company, - and promptly refused to give the committee any information as to the - organisation, or the names of its members, or its relations with the - railroads. The influence and power of the combination was apparent; - the committee never reported, never complained of the contempt of - its witnesses, and all the evidence and record of its proceedings - effectively disappeared. In 1877–78, a bill was introduced by - Representative Watson, of Western Pennsylvania, seeking to prevent - discrimination in interstate commerce, which has been reported by a - committee, but which can hardly overcome the covert opposition which - it meets. - - - RECENT STATE LEGISLATION - - All efforts to obtain a Free Pipe Law in this state having through a - series of years proved unavailing, although New York, in its efforts - to control the trade in Pennsylvania petroleum, had enacted such a - law, a bill was prepared enforcing in this state the Third and - Seventh Sections of the Seventeenth Article of its Constitution. - This bill, known as - - - THE ANTI-DISCRIMINATION ACT, - - provided that shippers of property by car-load from any point on a - railroad within the state to any other point within the state, - should be charged equal rates and given equal facilities. Copies of - the proposed law were sent to the prominent railroad officials in - the state, but its provisions were so fair and protective to every - citizen of the state, and to every legitimate railroad interest, - that neither before the Judiciary Committee of the Senate, which - reported it favourably by an unanimous vote, nor in the Senate, - which passed it with but one dissenting voice, nor before the - Judiciary Committee of the House, which reported it unanimously, did - any railroad stockholder, official, or legislative agent appear to - offer an objection to its becoming a law. Yet it was killed in the - House by the familiar means employed by legislative agents in - disposing of measures objectionable, but not debatable. Had the bill - become a law, it would have rebuilt the refineries of the state, - with Philadelphia (whose petroleum trade under the monopoly has - gradually dwindled to a fraction of its former magnitude) as the - exporting point, with the Pennsylvania Railroad as the transporter - thereto, and the people of Western Pennsylvania might have arisen - from a community of miners, working for the benefit, and under the - rule, of a foreign corporation, to their former conditions as - citizens of a prosperous mining and manufacturing section of the - state. - - - RESULTS AND EFFECT OF THE SUCCESS OF THE CONSPIRACY - - Upon or with the New York railroads no appeal or representation of - the people of this section would have any weight or influence. Their - managers reside in Cleveland and New York, and are subject to the - daily manipulations of the monopoly managers, while in our own - state, to all efforts for emancipation or toward the restoration of - trade to its natural channels the Pennsylvania Railroad and its - power is as a Chinese wall. Its president and vice-president admit - the preferences in rates given to the monopoly, and boldly announce - their intent to continue in so doing; they claim the legal right to - so do, and challenge resistance; they obstruct all efforts of - producers, shippers and refiners by delaying or restricting - facilities; by threatening other railroads with severance of - connections and deprivation of general traffic if they transport - petroleum for parties outside the monopoly; they refer applicants - for rates and facilities over the Pennsylvania Railroad to the - Standard Oil Company, and offering their personal service as - negotiators for such rates and facilities, assure all that there is - no hope of success in the trade unless by a coalition with the - Standard. - - We have thus far given not more than an outlined sketch of this - enormous monopoly, its plan, its growth, and its results. We have - not burdened your Excellency with details of individual oppression - and outrage, but we should fail to discharge our duties to ourselves - and as citizens if we neglect to recite some of the means by which - the most deplorable results are produced to our state and section. - Wrong is constantly perpetuated and right driven from us. True it is - that in many things the monopoly has been unwittingly aided in its - schemes by unwary concessions as to the management of its business, - by producers of petroleum themselves, but they had a right, as men - pursuing an honest calling, to believe that they were dealing with - honest men, and not with a gang of public plunderers, leagued - together by no better tie than the sordid desire of gain, to be - acquired by methods of corruption and lawlessness. - - By the theory of the law, corporations derive their powers from the - people of the Commonwealth in General Assembly convened; they have - no powers not delegated to them by the people; they take nothing by - implication; they are public servants, invested for the public - benefit with extraordinary privileges, and their charters may be - taken from them when they cease to properly perform the duties of - their creation. The railroad and pipe-line companies are common - carriers of freight for all persons, are bound to receive it when - offered at convenient and usual places, and to transport it for all, - for reasonable compensation, without unreasonable discrimination in - favour of any. These are but simple statements of well established - legal principles, never doubted in any court, but affirmed by every - tribunal that has ever considered them. Yet the people who granted - these special privileges are now upon the defensive, their rights - denied by these corporations, and they are challenged to enter the - courts to establish them, while in the meantime they are inoperative - to the irreparable injury of their business. They have yielded to - the railways that they have created a part of their sovereignty, and - given them the right to take private property for public use, but - restricting such taking, strictly to such use. Yet where the narrow - strip of land used as a railway roadbed runs through valuable oil - lands, this combination is strong enough to demand from the railways - its transfer to them, that they may and do thereon sink their own - oil wells, and thereby drain the oil from the adjoining lands whose - owners gave the strip for public use by a railroad. - - The owners of lands along the line of the Allegheny Valley Railroad, - producing petroleum from those lands, with their own pipe-line - running to their own shipping racks by the side tracks of that - railroad, are unable to obtain cars in which to load their product - for transportation, at any rate of freight, while their tanks - overflow. Shippers of petroleum are refused cars, or are promised - them, only to find the promises broken, and their contracts rendered - impossible of fulfillment, while the monopoly demands and is given - all the cars belonging to the railroads, it permitting its own - private cars to meantime stand idle, so that the railroads may - assert its inability to accommodate all. - - Owners of tanks connected with the monopoly pipe-lines, with ample - storage therein for their own product, are refused transportation - from their own wells upon the ground that “their tanks are full,” a - barefaced and daily demonstrated falsehood. Other producers of - petroleum are refused transportation by the pipe-lines, on the plea - of want of capacity to carry, and at the same time are informed that - their oil will be carried if they will sell it to the ring, - “immediate shipment.” - - If the applicant’s tanks are overflowing, or if he needs money and - complies with their terms, he is offered a price from two and a half - to twenty-five cents below the market value. If he accepts and sells - a fixed amount of his oil, the pipe-line removes all but five or ten - barrels, delays for days and weeks to take the remainder, and - refuses to pay for any until all is taken. This is known as the - “immediate shipment swindle.” - - By their use of the petroleum of others stored in their tanks and - lines; by the overissue of Pipe Line Certificates; by refusal to - perform their public duties; by open defiance of the law and - impudent evasions of its provisions, the pipe-line and railroad - companies leave to the people, whose creatures they are, but two - remedies—an appeal for protection, first to the law of the land, - next to the higher law of nature! - - These corporations have made themselves the interested tools of a - monopoly that has become the buyer, the carrier, the manufacturer, - and the seller of this product of immense value. It needs no - argument or illustration to convince that in such a position this - foreign corporation is in direct antagonism to the producer, the - labourer and the consumer. - - The South Improvement conspiracy embraced in its scheme the - ownership of the oil-producing territory, wells and machinery. If - the present course of its successor cannot be stayed, it is merely a - question of time when the ownership of the entire oil production - will fall into its hands through the impoverishment of thousands of - our citizens and their inability to contend longer. - - That monopolies are dangerous to free institutions is a political - maxim so old as to have lost its force by irrelevant repetition, but - if anything were needed to awaken the public sense to its truth, the - immediate effect of this giant combination is before us. Throughout - the Oil Region, as wherever it does business, it now has its own - acid works, glue factories, hardware stores and barrel works. We - have seen that it is master of the railroads, and owns and controls - all the refineries, all the pipe-lines. All these enumerated - industries controlled by them employ large numbers of labourers - dependent for the support of themselves and their families upon the - daily labour given or withheld by this powerful conspirator. At the - flash of the telegraphic message from Cleveland, Ohio, hundreds of - men have been thrown out of employment on a few hours’ notice and - kept for weeks in a state of semi-starvation and justifiable - discontent, deceived meanwhile with delusive promises of work, until - the autocrat of a foreign corporation, maintained and upheld by the - chief among Pennsylvania corporations, gives leave from within the - borders of a foreign state for the Pennsylvania labourer to earn his - bread. - - Along the valley of Oil Creek and the Allegheny Valley, where a few - years since the smoke of busy refineries and their attendant - industries darkened the air, piles of rusted iron and heaps of - demolished brick work mark the results of the conspiracy; where a - few years since busy men crowded to and fro in the pursuit of lawful - trade in a great staple, there is now silence and emptiness. The - producer, once surrounded with competitive buyers of his product, - now goes with crowds of his fellow victims to wait his turn for - leave to sell it at a dictated price to a single agent of a single - purchaser. - - To permit to stand unattacked the foul principles of such an - organisation, to permit them to be fastened as lawful or right upon - the policy of the Commonwealth or the nation, is to lay the - foundation for the exile of capital, endless injury to the public - interests, endless oppression of the labourer, riots, tumults, and - the decay of the state. - - So far as this public wrong is within the scope of Executive - interference, we ask that immediate steps be taken to enforce by - legislative enactment the wise provisions of our State Constitution, - and by such legal processes as are necessary, compel obedience to - law and the performance by chartered companies of their public - duties. - - B. B. CAMPBELL, of Pittsburg, - E. W. CODINGTON, of Bradford, McKean County, - LEWIS EMERY, JR., of Bradford, McKean County, - GEORGE H. GRAHAM, of Petrolia, Butler County, - J. A. VERA, of St. Petersburg, Clarion County, - H. O. ROBBINS, of Turkey City, Clarion County, - L. H. SMITH, Petrolia, - R. B. BROWN, Clarion, - D. S. CRISWELL, Oil City, - A. J. SALISBURY, Karns City, - A. N. PERRIN, Titusville, Crawford County, - W. B. BENEDICT, Enterprise, Warren County, - H. W. BUMPUS, Monroe, Clarion County, - SAMUEL Q. BROWN, Pleasantville, Venango County. - - - NUMBER 33 (See page 1233) - STATEMENT OF CRUDE OIL SHIPMENTS BY GREEN LINE DURING THE MONTHS OF - FEBRUARY AND MARCH, 1878, TO NEW YORK, PHILADELPHIA, AND BALTIMORE; - SHOWING DRAWBACKS ALLOWED TO AMERICAN TRANSFER COMPANY - - - [Commonwealth of Pennsylvania vs. Pennsylvania Railroad Company, - United Pipe Lines, etc. Testimony. Appendix, page 737.] - - - SHIPPER. CONSIGNEE. DESTINATION. TOTAL. - NO. OF BARRELS. BARRELS. - Feb. March. - - H. C. Ohlen H. H. Ohlen Com’paw 18,320 11,556 29,876 - W. H. Nicholson 〃 〃 16,983 31,169½ 48,152½ - E. N. Hallock 〃 〃 1,160½ 1,160½ - S. Craig 〃 〃 2,384½ 2,384½ - H. L. Taylor & 〃 〃 - Co. 1,439½ 1,439½ - Ayres, Lombard 〃 〃 - & Co. 2,688½ 2,688½ - J. Rousseaux J. Rousseaux 〃 6,377½ 6,932½ 13,310 - W. L. Fox 〃 〃 3,150½ 3,150½ - W. H. Nicholson Ayres, Lombard 〃 - & Co. 979½ 979½ - J. A. Bostwick J. A. Bostwick 〃 - & Co. & Co. 43,074 45,915½ 88,989½ - D. Grimm Jno. Ellis & 〃 - Co. 722½ 1,185½ 1,908 - ———————— ———————— ———————— - 87,617 106,422 194,039 - - J. Bushnell Warden, Frew & Phila. - Co. 1,725½ 22,105½ 23,831 - J. A. Bostwick 〃 〃 - & Co. 12,994 12,994 - J. Bushnell care Atlantic 〃 - Ref. Co. 10,137 31,917 42,054 - J. Bushnell W. L. Elkins & 〃 - Co. 14,684 7,793 22,477 - G. M. Robinson 〃 〃 761½ 1,382 2,143½ - E. N. Hallock Greenwich 〃 - Refining Co. 3,413½ 3,414½ - Mary R. Fox 〃 〃 1,308 1,308 - S. Craig 〃 〃 1,241½ 1,241½ - Fox & Fink 〃 〃 2,541 2,541 - Fox Estate 〃 〃 501 501 - M. Lloyd M. Lloyd 〃 3,803 2,690 6,493 - S. Craig 〃 〃 2,426 2,426 - W. L. Fox 〃 〃 1,960½ 1,960½ - G. M. Robinson F. Farnsworth 〃 362½ 80 442½ - W. G. Laird, W. G. Laird, 〃 - agent agent 302 302 - Paine, Abbott & Paine, Abbott & 〃 - Co. Co. 403 403 - J. S. Davis J. S. Davis 〃 501 501 - A. & G. W. R. R A. & B. Cooley 〃 - & Co. 25 25 - ———————— ———————— ———————— - 51,135½ 73,922 125,057½ - - J. Bushnell Balto. United Balto. - Oil Co. 7,435 16,692½ 24,127½ - G. M. Robinson 〃 〃 261½ 261½ - E. J. Waring & E. J. Waring & 〃 - Co. Co., care of - S. E. - Poultney 282 282 - ———————— ———————— ———————— - 7,717 16,954 24,671 - ======== ======== ======== - Grand Total 146,469½ 197,298 343,767½ - -Total, 343,767½ barrels at 20 cents per barrel, $68,753.50. - -This amount, $68,753.50 to be paid to American Transfer Company, per -Daniel O’Day, general manager. - - Audited May 29, 1878. - G. H. D. - - Approved, - A. J. CASSATT, - _Third Vice-President_. - - - NUMBER 34 (See page 1239) - BILL OF PARTICULARS OF EVIDENCE TO BE OFFERED BY THE COMMONWEALTH - - - [In the case of Commonwealth of Pennsylvania _vs._ John D. - Rockefeller, William Rockefeller, Jabez A. Bostwick, Daniel O’Day, - William G. Warden, Charles Lockhart, Henry M. Flagler, Jacob J. - Vandergrift, Charles Pratt and George W. Girty, in the Court of - Quarter Sessions of the Peace for the County of Clarion, - Pennsylvania, 1879.] - - - FIRST COUNT. _First._—That each one of the defendants is associated - with each and all others, in business, by means of stock, issued to - each, of several corporations, to-wit: The Standard Oil Company of - Cleveland, Ohio. The Standard Oil Company of Pittsburg, - Pennsylvania. The Acme Oil Company of Titusville, Pennsylvania. The - Imperial Refining Company of Oil City, Pennsylvania. The Camden - Consolidated Oil Company of West Virginia. The Devoe Manufacturing - Company of New York. - - _Second._—That Charles Pratt is associated in business with others, - under the name of Charles Pratt and Company; that William G. Warden - and Charles Lockhart are associated in business with others under - the firm name of Lockhart and Frew, and Warden, Frew and Company; - that J. A. Bostwick is associated with others in business under the - name of J. A. Bostwick and Company. - - _Third._—That the several defendants and others now unknown are - associated together by means of the corporate and co-partnership - organisations stated in paragraphs one and two for the purpose of - carrying on the business of refining crude petroleum and selling the - refined product. That each of the said defendants is interested in - each of the several corporations and firms in refining and selling - refined petroleum, and, in refining and selling, the said - defendants, each and all, act in concert and harmony with each - other, and as against all other persons not associated with them, - and share in the profits of the business. - - _Fourth._—That the said several defendants, and all of them, and the - said several firms and corporations of which they and each of them - are members, by stock ownership or otherwise, are engaged in the - business of buying crude petroleum, in the county of Clarion, in the - state of Pennsylvania, and also in the counties of Armstrong, - Butler, Crawford, Forest, McKean, Venango, and Warren, in the state - of Pennsylvania, also in the counties of Allegheny and Philadelphia - in said state, and in the counties of Cattaraugus and New York, in - the state of New York, also in the city of Cleveland in the state of - Ohio, and in counties in the state of West Virginia. - - _Fifth._—That in the said several states and counties, and in divers - localities in said several states and counties, to-wit: at - Pittsburg, Philadelphia, Butler, Carbon Centre, Millerstown, - Petrolia, Parker’s Landing, Foxburg, Turkey City, Edenburg, - Shippensville, Pickwick, Elk City, Monterey, Emlenton, Bullion, - Scrubgrass, Forster’s Station, Oil City, Franklin, Reno, Rouseville, - Titusville, Warren, Tidioute, Hickory, Bradford, Degolia, Derrick - City, Gilmore, Forster Brook, and Tarport, in the State of - Pennsylvania; Knap Creek, Rock City, Four Mile, Two Mile, Olean, - Carrollton, Salamanca, and in the city of New York, in the state of - New York, the said defendants, and the several firms and - corporations with which they are associated and in which they were - interested, carried on the business of buying crude petroleum from - producers and owners thereof, and the business of refining said - crude petroleum, and selling the refined product, and in so doing - acted in concert. - - _Sixth._—That the said business thereinbefore referred to was so - carried on at the several counties, cities, localities, and in the - several states aforesaid, by the said defendants in concert, in - person, and through agents acting under the instructions of the said - defendants, and pursuant to their directions. - - _Seventh._—That the said defendants were engaged, and are engaged, - in the business of transporting crude petroleum through iron pipes, - in the counties of Allegheny, Armstrong, Butler, Clarion, Crawford, - Forest, McKean, Warren, and Venango, in the state of Pennsylvania; - and the county of Cattaraugus, in the state of New York. That they - are so engaged by being associated together in the ownership of - several pipe-lines, such association being accomplished by the said - defendants being owners of shares of stock in incorporated - companies, to-wit: the United Pipe Line and American Transfer - Company, and interest in capital in limited partnerships, to-wit: - the Tidioute and Titusville Pipe Companies, Limited, and others, - which said companies, the said defendants, at the time of the - conspiracy and combination charged in the indictment, controlled, - and thereby controlled the transportation of crude petroleum from - wells and points of storage in said several counties and at the said - several localities. - - _Eighth._—That the said defendants, and each of them, and the said - several corporations, firms, and limited partnerships, were and are - engaged by means of the ownership and control of said several firms, - limited partnerships, and corporations, and by means of ownership of - stock and interests therein, were and are engaged in the business of - storing crude petroleum in the said several localities, cities, - counties and states, by means of storage tanks, and said business - was carried on in said counties, each and all of them, by - themselves, personally, and also through agents acting by their - directions. - - _Ninth._—That each one of the said defendants and all of them in - concert were engaged in the several kinds of business hereinbefore - referred to, by themselves and their agents in the county of - Clarion, and in the other places mentioned hereinbefore, during the - whole period of two years prior to the day upon which the indictment - was found against them in this case, and during that time by - themselves and their agents acting under their directions in the - said county of Clarion, combined, confederated and conspired - together to cheat and defraud numerous citizens of the county of - Clarion, to-wit: J. A. Vera, William L. Fox, and M. L. Lockwood, and - divers others, and to cheat and defraud the public by securing to - themselves a monopoly of the business and occupation of buying and - selling crude petroleum in the county of Clarion, and to prevent all - other persons engaged in said business, from making, receiving and - obtaining the fair value, profit, price and return from such - business, by fraudulent devices, practices and secret contrivances, - and among others the following: - - _A._—Falsely pretending during the times aforesaid and at all times - that the storage tanks owned and controlled by them, and of which - they had the possession, measurement and accounts, were full of - crude petroleum to the extent of the capacity of said tanks, and - that the said defendants could not receive and store crude petroleum - from and for citizens of Clarion County and the other counties and - localities named, when in truth such representations and statements - were false, and thereby divers citizens lost oil and were compelled - to sell petroleum at less than the value thereof. - - _B._—By representing to divers citizens of the county of Clarion - engaged in the business of producing, buying and selling petroleum, - and to divers other persons engaged in said business in the other - counties and localities named, that the said defendants were enabled - to receive and transport for said well owners, citizens and - producers of such petroleum, by reason of lack of capacity and - transportation facilities, when in fact said representations were - false, and thereby divers producers dealers and well owners were - compelled to sell petroleum at less than the value thereof. - - _C._—That said defendants by themselves and their agents within the - county of Clarion, in the state of Pennsylvania, and at the other - counties, cities and localities, hereinbefore named, had the control - of the entire transportation of crude petroleum from the producing - wells and districts, and the control of storing of crude petroleum - produced, that they and the several firms and corporations of which - they were members, and their agents and the agents of said firms and - corporations acting under the direction of the said defendants - corruptly and oppressively used the power and control they so as - aforesaid held, to compel producers and owners of petroleum to sell - the same to them, the said defendants, their agents and the several - firms and corporations aforesaid and their agents, and to sell the - said crude petroleum at less than its value, and less than the - market price thereof. - - _D._—That the said defendants and each of them, through the several - firms and corporations of which they were members, and by their - agents acting under their directions and the agents of the said - firms and corporations, corruptly and oppressively used the power so - acquired by them to enable them to become the sole buyers and - refiners of crude petroleum. - - _E._—That among the means used to obtain control of the business of - transporting crude petroleum were the following: - - _First._—The said defendants and the several firms and corporations - of which they were members laid iron pipes in the county of Clarion, - and the other counties and states named, under charters and - pretended charters from the state of Pennsylvania, pretending that - they so did for the purpose of transporting for the public petroleum - from the oil wells and producing districts, to the railroads, for - shipment to the seaboard, when in fact the said pipe-lines were not - laid for that purpose, but for the purpose of transporting oil for - the said defendants, and the said several firms and corporations of - which they were the members, and not for the public, and to enable - the said defendants and the said firms and corporations to dictate - the rate of freight to be charged to them by the railroad companies - engaged in the business of carrying petroleum as common carriers, - and to force the said railroad companies to charge a greater and - unreasonably high rate of freight to all others, and that this was - for the purpose of preventing citizens of Clarion County and the - public from engaging in the business of buying, selling and shipping - crude petroleum. - - _Second._—The said defendants, and their agents acting under their - directions, and the several firms and corporations of which they - were members also so acting, pretended and represented to the - several railroad companies engaged in the transportation of - petroleum, and to the agents and officers of said companies, that - they, the said defendants and the several firms and corporations of - which they were members, and in which they were interested, - controlled the shipments of said crude and refined petroleum, by - deliveries thereof to the said railroad companies, and that the said - defendants were enabled to withhold, and drive said traffic and - business from them. - - Said representations were false, but by means thereof, they, the - said defendants, procured and obtained from said several railroad - companies enormous and unjust rebates, commissions and deductions - from the rates of freight charged to citizens of Clarion County and - the public. The Citizens of Clarion County and the public were - thereby prevented from engaging in the business of producing and - shipping crude petroleum. - - _Third._—That on or about the thirtieth day of August, 1877, and - again on or about the seventeenth day of October, 1877, the said - defendants met together in the city of Philadelphia and then and - there agreed together that they would represent to the officers of - the Pennsylvania Railroad Company that they, the said defendants, - and the several firms and corporations of which they were members, - could and would control and guarantee to the said railroad company a - certain proportion of the carrying traffic of crude petroleum over - said railroad. - - And on or about the same dates the said defendants further agreed - together and did represent to the officers of the New York, Lake - Erie and Western Railroad Company, and to the officers of the Erie - Railroad Company, and to Mr. Jewett, receiver of the Erie Railroad - Company, and to the officers of the New York Central and Hudson - River Railroad Company, and to the officers of the Atlantic and - Great Western Railroad Company, and to V. H. Devereux, receiver - thereof, and to the officers of the Michigan Southern and Lake Shore - Railroad Company, and to the officers of the Baltimore and Ohio - Railroad Company, that they the said defendants and the several - firms and corporations of which they were members, could and would - control and guarantee to each of them a certain proportion of the - carrying traffic of the crude petroleum over said railroads - respectively. But by reason thereof the said Pennsylvania Railroad - Company and the Empire Transportation Company were induced to, and - did sell, transfer, mortgage and dispose of, to said defendants and - to the several corporations and firms of which they were members, - all of the pipe-lines, crude oil cars and transportation equipment - of which they had control or ownership in the Oil Regions of - Pennsylvania, including the county of Clarion, and all the - refineries, for refining crude petroleum, of which they had - ownership or control. - - _Fourth._—The objects and purposes of said representations and said - transfer were to enable the said defendants to control the business - of buying and selling crude and refined petroleum, and the - transportation and storage thereof. - - _Fifth._—That, as stated in the foregoing paragraphs, during the - greater part of the year of 1877, and for some time previously, the - Pennsylvania Railroad Company owned or controlled through its - shipping agents, the Empire Line, a full and complete system of - pipe-lines throughout the counties of Clarion, Armstrong and Butler, - known as the Empire Line, numerous and well appointed tank oil cars, - the shortest and best route to the seaboard over its own lines and - the Allegheny Valley Railroad, and other connecting lines, also - controlled large and complete refineries, situated in Pittsburg, - Philadelphia and New York, and was by these means a competitor with - the defendants and the several corporations owned by them, in the - business of piping, transporting, buying and refining crude oil, - enabling producers, citizens of Clarion County and elsewhere, - without difficulty, to have their oil piped and transported, and to - sell the same at enhanced prices, owing to competition. That the - defendants, combining and conspiring to monopolise the entire and - sole business of buying, selling and refining oil in Clarion County - and elsewhere, did demand of the Empire Line and the Pennsylvania - Railroad Company that they and each of them should abandon and - desist from the said business of buying, selling and refining oil, - and that the said railroad company and Empire Line should grant to - them exclusively large rebates and low or cheap rates of - transportation of oil, and by means of withdrawing and procuring - others to withdraw the transportation of crude and refined oil over - and along said Pennsylvania Railroad, and by means of the procuring - from other railroads exclusive rebates and low rates of freight for - transportation below a fair and just compensation for such - transportation did compel the said Pennsylvania Railroad Company and - the Empire Line to sell to said defendants, or to some of the - corporations controlled and owned by them, said pipe-line, tank cars - and refineries, to the injury of the producers of oil of Clarion - County and elsewhere, by depriving them of the benefit of - competition in buying, piping, storing or refining this crude oil. - - _Sixth._—That the defendants and others combined and confederated - with them did conspire to monopolise the entire and exclusive - business of refining crude petroleum in Clarion County and elsewhere - by means of throwing quantities of refined oil on the market and - selling the same at less price than the fair market value of the - same in the vicinity of independent refiners in Clarion County and - elsewhere, and by means of such sales did compel such refineries to - sell out to companies with which defendants were connected, or to - abandon or quit the business of refining. - - _Seventh._—That the said defendants did with others conspire - together to purchase all the pipe-lines for the transportation of - oil within the producing oil region and all the refineries for the - refining of oil, for the purpose of controlling the price of oil and - compelling the oil producers of Clarion County and elsewhere to sell - their oil to the said defendants at ruinous low rates far below the - value thereof and the price that could have been obtained for the - same in a competitive market. - - _Eighth._—Although the said representations were false, the said - defendants and the several firms and corporations of which they were - members procured the control of the business of producing, buying - and selling crude petroleum, and of about ninety per cent. thereof - by following acts done in furtherance of the agreements aforesaid: - - _A._—To buy only petroleum for immediate shipment from the wells of - producers. And when so bought they refused to remove it. It was so - bought at less than its value and market price, and the producers of - petroleum were compelled to sell the same by reason of the false - representations as to capacity, storage and transportation - hereinbefore fully set forth. - - _B._—By giving themselves and procuring for themselves exorbitant - and unreasonable rebates, commissions and allowances from the - railroads and pipe-lines owned and controlled by them, which - rebates, commissions and allowance could not be procured by any - other than the said defendants and the several firms and - corporations of which they were members. - - _C._—By impeding transportation by railroads, procuring them to - refuse and delay cars for shipment of petroleum, procuring the - breaking connections with connecting railroad lines, refusing and - procuring the refusal of railroad companies and pipe-lines to - receive and transport petroleum, by refusals and procuring refusals - to store petroleum, by refusing and procuring the refusal of - railroad companies to furnish side tracks, cars and transportation - facilities to pipe-line companies other than those of the defendants - and to individuals, by selling refined petroleum at less than the - cost of manufacture, by carrying and storing oil at less than the - cost of transportation and storage, by thereby forcing competing - lines to sell to them at a loss, by issuing certificates or accepted - orders of pipe-line companies in violation of law not representing - the petroleum in the custody of said corporations of the said - defendants, and placing such certificates upon the market, thereby - causing an apparent increase in the quantity of oil in the market - for sale and depressing the price of crude petroleum by making false - and fictitious reports of stock of petroleum in the custody of the - United Pipe Lines, a corporation of which the defendants are the - owners and which they control, by violating the laws relative to - making reports of business of the said pipe-line company; by - neglecting and refusing to make the required oath thereto, by - destroying refineries purchased by them at less than their value, of - those they had compelled to sell to them by the fraudulent acts - aforesaid, by hiring and paying salaries to men to remain out of - business for a term of years, and to act as spies for the said - defendants and the corporations and firms of which they are members; - by selling crude and refined petroleum at less than its cost to - them; by increasing the production by entering into agreements - relative to the price the said defendants and the corporations and - firms of which they were members; by threatening common carriers - with destruction of the business of carrying oil, if they carried - for others than themselves, and those associated with them, or - permitted other pipe-line companies to deliver petroleum to them, or - railroads to carry to them; by means of said threats to prevent the - building or operation of competing lines of pipe or railroad for - transportation of petroleum; by refusing to store petroleum in tanks - owned by individuals for them, and by filling such tanks with their - own oil, thereby causing a waste and loss both of petroleum and in - the price obtained; by refusals to the citizens of Clarion County - and elsewhere, at the several localities named, to transport or - store crude petroleum. - - SECOND COUNT. All of the evidence hereinbefore offered in support of - the first count. - - THIRD COUNT. All of the evidence hereinbefore stated to be offered - in support of the first and second counts, and, in addition thereto, - evidence of purchase of refineries under false representations; that - refiners were forced to sell by reasons of enormous rebates, - fraudulently obtained from railroad companies, as hereinbefore - stated, the business being thereby, and not otherwise, rendered - unprofitable to such refineries as could not obtain said rebates, - commissions and allowances, they being all in the said business, - except the said defendants, and the firms and corporations of which - they were members. - - FOURTH COUNT. All the evidence hereinbefore stated to be offered in - support of the first, second and the third counts, and, in addition - thereto, that the said defendants and their agents diverted traffic - from the Allegheny Valley Railroad Company by threatening the said - company and those who were delivering petroleum to it for - transportation, with loss and injury to their business, and by - shipping themselves over other railroads, unless the said Allegheny - Valley Railroad Company would allow them exorbitant rebates, - commissions and allowances upon petroleum carried, that other - dealers and shippers could not obtain. - - FIFTH COUNT. All the evidence hereinbefore stated to be offered in - support of the first, second, third and fourth counts, and, in - addition thereto, that the traffic was diverted from the - Pennsylvania Railroad Company, a common carrier, by the same means, - devices and threats as hereinbefore stated. - - SIXTH, SEVENTH AND EIGHTH COUNTS. All the evidence hereinbefore - stated to be offered as the first, second, third, fourth and fifth - counts. - - - NUMBER 35 (See page 1253) - CONTRACT OF PETROLEUM PRODUCERS’ UNION WITH STANDARD COMBINATION - - - [From “A History of the Organisation, Purposes and Transactions of - the General Council of the Petroleum Producers’ Unions, and of the - Suits and Prosecutions instituted by it from 1878 to 1880,” pages - 41–44.] - - - Articles of agreement made the 29th day of January, 1880, by and - between the Standard Oil Company, a corporation of the state of - Ohio; the Standard Oil Company of Pittsburg, a corporation of the - state of Pennsylvania; the Imperial Refining Company (limited) of - Oil City, Pennsylvania; the Acme Oil Company of New York and - Pennsylvania; the Atlantic Refining Company of Philadelphia; the - American Transfer Company; the United Pipe Lines, a corporation of - Pennsylvania; the Devoe Manufacturing Company of New York; the - Eclipse Lubricating Oil Company (limited) of Franklin, Pennsylvania; - J. D. Rockefeller, William Rockefeller, H. M. Flagler, William G. - Warden, Charles Lockhart, William Frew, Charles Pratt, Henry H. - Rogers, Jabez A. Bostwick, Jacob J. Vandergrift, O. H. Payne, John - D. Archbold, respectively, buyers, refiners and carriers of - petroleum, parties of the first part, each, however, contracting - severally for himself, themselves or itself, and not one for the - others, and Benjamin B. Campbell, for himself and as president of - the General Council of Petroleum Producers’ Union, and for the - members thereof as shall signify their assent hereto by signing this - agreement within sixty days from the date thereof, the parties of - the second part, each contracting severally and in the manner - aforesaid, Witnesseth, - - _Whereas_, The several parties above named have been and are now - engaged in some one or all of the branches of business connected - with the petroleum trade, in buying, selling, shipping, storing, - refining, transporting and producing petroleum, and controversies - have arisen between the said parties of the first and second part - hereinbefore named, out of which have grown certain suits - hereinafter named, and it is desirable to amicably adjust said - controversies and settle said suits and proceedings, therefore, it - is hereby agreed between the said parties of the first and second - parts: - - I. That the said parties of the first part shall and will make no - opposition to an entire abrogation of the system of rebates, - drawbacks and secret rates of freight in the transportation of - petroleum on the railroads. - - II. That said parties of the first part further agree that the - railroad companies may make known to the other shippers of petroleum - on their several roads all the rates of freight, and that said - parties of the first part or any of them will not receive any rebate - or drawback that the railroad companies are not at liberty to give - to other shippers of petroleum. - - III. The said parties of the first part further agree that so far as - the said pipe-lines are concerned there shall be no discrimination - used or permitted by the said pipe-line companies between or against - their patrons; that the rates of pipage and storage shall be - reasonable, uniform, and equal to all parties, and shall not be - advanced except on thirty days’ notice; that to the extent of their - influence the United Pipe Lines and the other companies parties - hereto do agree that there shall be no difference in the price of - crude oil between one district and another, excepting such as may be - based upon a difference in quality, to be determined by tests; that - the said pipe-lines will make every reasonable effort to receive, - transport, store and deliver all oil tendered them, and will - receive, transport, store and deliver all oil so tendered so long as - the production does not exceed an average of sixty-five thousand - barrels per day during fifteen (15) consecutive days, unforeseen - emergencies and unavoidable accidents excepted, and if the - production shall exceed the amount stated, and also the storage - capacity of the pipe-lines, the parties of the first part, buyers of - oil, agree that they will not purchase any so-called immediate - shipment oil, at a lower price than the price of certificate oil, - provided that the owners of immediate shipment oil in the Oil Region - do not sell to any other party or parties at a lower price. - - IV. And all the parties of the first part further agree that until - the production of oil reaches the daily maximum of sixty-five - thousand barrels as aforesaid, certificates or other vouchers will - be given for all oil taken into the custody of the pipe-lines and - the transfer of such certificates or other vouchers in the usual - manner shall be considered as a delivery of the oil mentioned - therein as between the pipe-lines and the seller, subject to the - provisions of such certificate or other vouchers. - - In consideration of the agreement hereinbefore set forth, and of the - execution thereof by the first parties, the said second parties do - hereby agree as follows: - - That the Governor and Attorney-General of the Commonwealth of - Pennsylvania shall be requested by them within ten days of the - execution hereof, to enter a motion to dismiss the bill filed by the - Commonwealth of Pennsylvania against the United Pipe Lines and - others at Number 309, October and November term, 1878, in the - Supreme Court of Pennsylvania, and the proceedings by _quo warranto_ - Number 12, November term, 1878, in Venango County, and will do all - that may be lawfully done to have the same dismissed of record. That - upon written motion and agreement the Supreme Court of Pennsylvania - may make of record by consent of both parties, an order discharging - the rules to show cause in the case of the Commonwealth _vs._ - Rockefeller _et al._, granted by E. M. Paxson on the 11th day of - December, 1879, and made returnable January 5, 1880, and annulling - the order staying proceedings made by the Supreme Court on the 8th - day of January, 1880. - - It is further agreed that this agreement shall, upon execution - thereof by the parties, be a full release and satisfaction between - the parties of all causes of action of any and every kind - whatsoever, arising out of the past transactions involved in the - said several suits, controversies, or prosecutions, or incident - thereto, so far as the parties hereto or any of them are in any - manner interested or have any cause or rights of action for or - against each other. And it is hereby further agreed that the Court - of Quarter Sessions of Clarion County be, and they are hereby - respectfully requested to give their consent to the entering of a - _nolle prosequi_ in the case of the Commonwealth of Pennsylvania - _vs._ John D. Rockefeller _et al._, of April sessions, 1879, Number - 25, in which the defendants named in said case are charged with - conspiracy, and the district-attorney of said county is hereby - requested, on receiving the consent of the said court, to enter in - said case a _nolle prosequi_, and the same to be entered of record - in said court, with the intent that the same be a judgment of said - court disposing of and ending all proceedings under indictment - hereinbefore referred to, forever. - - _In Witness Whereof_ the aforesaid parties to these presents have - hereunto set their hands and seals, the said corporations having - caused their seals to be affixed this fifth day of February, A.D. - 1880. - - Standard Oil Company, by - (Seal) JOHN D. ROCKEFELLER, _President_, [L.S.] - Attest: H. M. FLAGLER, [L.S.] - JOHN D. ROCKEFELLER, [L.S.] - O. H. PAYNE. [L.S.] - - United Pipe Lines, by - (Seal) J. J. VANDERGRIFT, _President_, [L.S.] - Attest: H. M. HUGHES, _Secretary_, [L.S.] - HENRY M. FLAGLER, [L.S.] - J. J. VANDERGRIFT, [L.S.] - WILLIAM ROCKEFELLER. [L.S.] - - Imperial Refining Company, Limited, by - (Seal) J. J. VANDERGRIFT, _Chairman_, [L.S.] - Attest: D. MCINTOSH, _Secretary_. [L.S.] - - Eclipse Lubricating Oil Company, Limited, by - THOMAS BROWN, _Chairman_, [L.S.] - F. Q. BARSTOW, _Secretary_. [L.S.] - - Standard Oil Company, by - (Seal) CHARLES LOCKHART, _President_, [L.S.] - A. F. BROOKS, _Secretary_, [L.S.] - W. G. WARDEN, [L.S.] - CHARLES LOCKHART. [L.S.] - - The Atlantic Refining Company, by - CHARLES LOCKHART, _President_, [L.S.] - CHARLES PRATT, [L.S.] - HENRY H. ROGERS. [L.S.] - - Acme Oil Company, by - JOHN D. ARCHBOLD, _President_, [L.S.] - Attest: GEORGE F. CHESTER, _Secretary_, [L.S.] - JOHN D. ARCHBOLD. [L.S.] - - American Transfer Company, by - GEORGE H. VILAS, _President_, [L.S.] - Attest: GEORGE F. CHESTER, _Secretary_, [L.S.] - J. A. BOSTWICK, [L.S.] - B. B. CAMPBELL. [L.S.] - Witness, JOHN V. KEEF. - Witness as to signature of B. B. Campbell, - W. BAKEWELL. - - - NUMBER 36 (See page 1254) - AGREEMENT BETWEEN B. B. CAMPBELL AND THE PENNSYLVANIA RAILROAD COMPANY - - - [From “A History of the Organisation, Purposes and Transactions of - the General Council of the Petroleum Producers’ Unions, and of the - Suits and Prosecutions instituted by it from 1878 to 1880,” pages - 45–46.] - - - This agreement, made on the twenty-seventh day of April, A.D. 1880, - between B. B. Campbell and the Pennsylvania Railroad Company. - - _Whereas_, It having been alleged by persons engaged in the - production and shipping of petroleum and the products of petroleum, - that discrimination had been practised in the rates of freight and - in the distribution of cars by the Pennsylvania Railroad Company, in - such manner as to be injurious to the business of such producers, - and bills in equity having been filed in the name of the - Commonwealth in the Western District of the Supreme Court of the - state of Pennsylvania, for the purpose of restraining such - discrimination; and - - _Whereas_, In pursuance of an agreement signed on the twelfth of - February, 1880, by the said B. B. Campbell, representing the oil - producers, at whose instance such bills were filed, and Thomas A. - Scott as president of the Pennsylvania Railroad Company, the said - bills were withdrawn; and - - _Whereas_, In said agreement the Pennsylvania Railroad Company - agreed, upon the withdrawal of said bills, that it would enter into - written contracts with the said B. B. Campbell, representing said - producers, and all such producers as should within sixty days after - the date of said agreement signify their assent to said agreement by - signature to the same or duplicate thereof, which contracts should - stipulate as therein mentioned, and as hereinafter provided; and - - _Whereas_, On the twenty-fifth of February, 1880, the board of - directors of the Pennsylvania Railroad Company approved the action - of the president in signing said agreement, and authorised the - president or one of the vice-presidents to execute such further and - formal agreements as might be deemed necessary to carry out the - terms of said agreement, - - _Now therefore_, this agreement witnesseth, That in consideration of - the premises, and other good and valuable considerations to them - thereunto moving, it is covenanted and agreed between the parties - hereto as follows, to wit: - - _First_, That the Pennsylvania Railroad Company shall and will make - known to all shippers of petroleum and its products all the rates of - freight intended to be charged to all shippers upon such petroleum - and its products. - - _Second_, That the said Pennsylvania Railroad Company shall not and - will not pay or allow any shipper of petroleum or its products any - rebate, drawback or commission upon the shipments of such petroleum - or products different from or greater than that which shall be paid - to any other person shipping or offering to ship like quantity; and - that any discrimination that may be made in favour of shippers of - the large quantities shall be reasonable, and shall, upon demand - made, be communicated to all persons shipping, or who are now or may - be hereafter engaged in the business and desire to ship petroleum - and its products. - - _Third_, That the said Pennsylvania Railroad Company further agrees - that upon its own road, and upon any other road or roads upon which - it shall furnish cars and engage in the business of a common carrier - of petroleum and its products, it will not practise any - discrimination in the distribution of its cars, but will make fair - apportionment in such distribution among all applicants for cars - having actually in their custody and ready for shipment at the time - of their application the petroleum or products for the shipment of - which they ask facilities. - - _In Witness Whereof_, the individuals parties hereto have hereunto - set their hands and seals, and the said Pennsylvania Railroad - Company has caused its corporate seal to be hereunto affixed, duly - attested, the day and year first above written. - - The Pennsylvania Railroad Company, by - - THOMAS A. SCOTT, - _President_. - - Attest JOHN C. SIMS, - _Assistant Secretary_. - - B. B. CAMPBELL. - - (Seal) - - - - - THE HISTORY OF - - THE STANDARD OIL COMPANY - - -[Illustration: - - JOHN D. ROCKEFELLER - - A sketch from life by George Varian, made in Cleveland, October, 1903 -] - - - - - THE HISTORY OF - THE STANDARD OIL COMPANY - - - BY - - IDA M. TARBELL - - AUTHOR OF THE LIFE OF ABRAHAM LINCOLN, THE LIFE OF NAPOLEON BONAPARTE, - AND MADAME ROLAND: A BIOGRAPHICAL STUDY - - ILLUSTRATED WITH PORTRAITS PICTURES AND DIAGRAMS - -[Illustration] - - VOLUME TWO - - NEW YORK - McCLURE, PHILLIPS & CO. - MCMV - - - - - _Copyright, 1904, by_ - McCLURE, PHILLIPS & CO. - - Published, November, 1904, N - - SECOND IMPRESSION - - - Copyright, 1902, 1903, 1904, by The S. S. McClure Co. - - - - - CONTENTS - - - CHAPTER NINE - - THE FIGHT FOR THE SEABOARD PIPE-LINE - - PROJECT FOR SEABOARD PIPE-LINE PUSHED BY - INDEPENDENTS—TIDEWATER PIPE COMPANY FORMED—OIL PUMPED - OVER MOUNTAINS FOR THE FIRST TIME—INDEPENDENT - REFINERS READY TO UNITE WITH TIDEWATER BECAUSE IT - PROMISES TO FREE THEM FROM RAILROADS—THE STANDARD - FACE TO FACE WITH A NEW PROBLEM—DAY OF THE RAILROADS - OVER AS LONG-DISTANCE TRANSPORTERS OF OIL—NATIONAL - TRANSIT COMPANY FORMED—WAR ON THE TIDEWATER - BEGUN—PLAN TO WRECK ITS CREDIT AND BUY IT - IN—ROCKEFELLER BUYS A THIRD OF THE TIDEWATER’S - STOCK—THE STANDARD AND TIDEWATER BECOME - ALLIES—NATIONAL TRANSIT COMPANY NOW CONTROLS ALL - PIPE-LINES—AGREEMENT ENTERED INTO WITH PENNSYLVANIA - RAILROAD TO DIVIDE THE BUSINESS OF TRANSPORTING OIL Pages 2003–2030 - - - CHAPTER TEN - - CUTTING TO KILL - - ROCKEFELLER NOW PLANS TO ORGANISE OIL MARKETING AS HE - HAD ALREADY ORGANISED OIL TRANSPORTING AND - REFINING—WONDERFULLY EFFICIENT AND ECONOMICAL SYSTEM - INSTALLED—CURIOUS PRACTICES INTRODUCED—REPORTS OF - COMPETITORS’ BUSINESS SECURED FROM RAILWAY - AGENTS—COMPETITORS’ CLERKS SOMETIMES SECURED AS - ALLIES—IN MANY INSTANCES FULL RECORDS OF ALL OIL - SHIPPED ARE GIVEN STANDARD BY RAILWAY AND STEAMSHIP - COMPANIES—THIS INFORMATION IS USED BY STANDARD TO - FIGHT COMPETITORS—COMPETITORS DRIVEN OUT BY - UNDERSELLING—EVIDENCE FROM ALL OVER THE - COUNTRY—PRETENDED INDEPENDENT OIL COMPANIES STARTED - BY THE STANDARD—STANDARD’S EXPLANATION OF THESE - PRACTICES IS NOT SATISFACTORY—PUBLIC DERIVES NO - BENEFIT FROM TEMPORARY LOWERING OF PRICES—PRICES MADE - ABNORMALLY HIGH WHEN COMPETITION IS DESTROYED Pages 2031–2062 - - - CHAPTER ELEVEN - - THE WAR ON THE REBATE - - ROCKEFELLER’S SILENCE—BELIEF IN THE OIL REGIONS THAT - COMBINED OPPOSITION TO HIM WAS USELESS—INDIVIDUAL - OPPOSITION STILL CONSPICUOUS—THE STANDARD’S SUIT - AGAINST SCOFIELD, SHURMER AND TEAGLE—SEEKS TO ENFORCE - AN AGREEMENT WITH THAT FIRM TO LIMIT OUTPUT OF - REFINED OIL—SCOFIELD, SHURMER AND TEAGLE ATTEMPT TO - DO BUSINESS INDEPENDENTLY OF THE STANDARD AND ITS - REBATES—FIND THEIR LOT HARD—THEY SUE THE LAKE SHORE - AND MICHIGAN SOUTHERN RAILWAY FOR DISCRIMINATING - AGAINST THEM—A FAMOUS CASE AND ONE THE RAILWAY - LOSES—ANOTHER CASE IN THIS WAR OF INDIVIDUALS ON THE - REBATE SHOWS THE STANDARD STILL TO BE TAKING - DRAWBACKS—THE CASE OF GEORGE RICE AGAINST THE - RECEIVER OF THE CINCINNATI AND MARIETTA RAILROAD Pages 2063–2087 - - - CHAPTER TWELVE - - THE BUFFALO CASE - - THE STANDARD BUYS THREE-FOURTHS OF THE VACUUM OIL WORKS - OF ROCHESTER—TWO VACUUM EMPLOYEES ESTABLISH BUFFALO - LUBRICATING OIL COMPANY AND TAKE WITH THEM AN - EXPERIENCED STILLMAN FROM THE VACUUM—THE BUFFALO - LUBRICATING OIL COMPANY HAS AN EXPLOSION AND THE - STILLMAN SUDDENLY LEAVES—THE BUFFALO LUBRICATING OIL - COMPANY IS SUED BY VACUUM FOR INFRINGEMENT OF - PATENTS—MATTHEWS SUES THE EVERESTS OF THE VACUUM FOR - DELIBERATELY TRYING TO RUIN HIS BUSINESS—MATTHEWS - WINS HIS FIRST CIVIL SUIT—HE FILES A SECOND SUIT FOR - DAMAGES, AND SECURES THE INDICTMENT OF SEVERAL - STANDARD OFFICIALS FOR CRIMINAL CONSPIRACY—ROGERS, - ARCHBOLD AND McGREGOR ACQUITTED—THE EVERESTS FINED Pages 2088–2110 - - - CHAPTER THIRTEEN - - THE STANDARD OIL COMPANY AND POLITICS - - OIL MEN CHARGE STANDARD WITH INTRENCHING ITSELF IN - STATE AND NATIONAL POLITICS—ELECTION OF PAYNE TO - SENATE IN OHIO IN 1884 CLAIMED TO ESTABLISH CHARGE OF - BRIBERY—FULL INVESTIGATION OF PAYNE’S ELECTION DENIED - BY UNITED STATES SENATE COMMITTEE ON ELECTIONS—PAYNE - HIMSELF DOES NOT DEMAND INVESTIGATION—POPULAR FEELING - AGAINST STANDARD IS AGGRAVATED—THE BILLINGSLEY BILL - IN THE PENNSYLVANIA LEGISLATURE—A FORCE BILL DIRECTED - AGAINST THE STANDARD—OIL MEN FIGHT HARD FOR IT—THE - BILL IS DEFEATED—STANDARD CHARGED WITH USING MONEY - AGAINST IT—A GROWING DEMAND FOR FULL KNOWLEDGE OF THE - STANDARD A RESULT OF THESE SPECIFIC CASES Pages 2111–2128 - - - CHAPTER FOURTEEN - - THE BREAKING UP OF THE TRUST - - EPIDEMIC OF TRUST INVESTIGATION IN 1888—STANDARD - INVESTIGATED BY NEW YORK STATE SENATE—ROCKEFELLER’S - REMARKABLE TESTIMONY—INQUIRY INTO THE NATURE OF THE - MYSTERIOUS STANDARD OIL TRUST—ORIGINAL STANDARD OIL - TRUST AGREEMENT REVEALED—INVESTIGATION OF THE - STANDARD BY CONGRESS IN 1888—AS A RESULT OF THE - UNCOVERING OF THE STANDARD OIL TRUST AGREEMENT - ATTORNEY-GENERAL WATSON OF OHIO BEGINS AN ACTION IN - QUO WARRANTO AGAINST THE TRUST—MARCUS A. HANNA AND - OTHERS TRY TO PERSUADE WATSON NOT TO PRESS THE - SUIT—WATSON PERSISTS—COURT FINALLY DECIDES AGAINST - STANDARD AND TRUST IS FORCED TO MAKE AN APPARENT - DISSOLUTION Pages 2129–2155 - - - CHAPTER FIFTEEN - - A MODERN WAR FOR INDEPENDENCE - - PRODUCERS’ PROTECTIVE ASSOCIATION FORMED—A SECRET - INDEPENDENT ORGANIZATION INTENDED TO HANDLE ITS OWN - OIL—AGREEMENT MADE WITH STANDARD TO CUT DOWN - PRODUCTION—RESULTS OF AGREEMENT NOT AS BENEFICIAL TO - PRODUCERS AS EXPECTED—PRODUCERS PROCEED TO ORGANISE - PRODUCERS’ OIL COMPANY, LIMITED—INDEPENDENT REFINERS - AGREE TO SUPPORT MOVEMENT—PRODUCERS AND REFINERS’ - COMPANY FORMED—LEWIS EMERY, JR.’S, FIGHT FOR SEABOARD - PIPE-LINE—THE UNITED STATES PIPE LINE—STANDARD’S - DESPERATE OPPOSITION—INDEPENDENT REFINERS ALMOST WORN - OUT—THEY ARE RELIEVED BY FORMATION OF PURE OIL - COMPANY—PURE OIL COMPANY FINALLY BECOMES HEAD OF - INDEPENDENT CONSOLIDATION—INDEPENDENCE POSSIBLE, BUT - COMPETITION NOT RESTORED Pages 2156–2191 - - - CHAPTER SIXTEEN - - THE PRICE OF OIL - - EARLIEST DESIGNS FOR CONSOLIDATION INCLUDE PLANS TO - HOLD UP THE PRICE OF OIL—SOUTH IMPROVEMENT COMPANY SO - INTENDS—COMBINATION OF 1872–1873 MAKES OIL - DEAR—SCHEME FAILS AND PRICES DROP—THE STANDARD’S - GREAT PROFITS IN 1876–1877 THROUGH ITS SECOND - SUCCESSFUL CONSOLIDATION—RETURN OF COMPETITION AND - LOWER PRICES—STANDARD’S FUTILE ATTEMPT IN 1880 TO - REPEAT RAID OF 1876–1877—STANDARD IS CONVINCED THAT - MAKING OIL TOO DEAR WEAKENS MARKETS AND STIMULATES - COMPETITION—GREAT PROFITS OF 1879–1889—LOWERING OF - THE MARGIN ON EXPORT SINCE 1889 BY REASON OF - COMPETITION—MANIPULATION OF DOMESTIC PRICES EVEN MORE - MARKED—HOME CONSUMERS PAY COST OF STANDARD’S FIGHTS - IN FOREIGN LANDS—STANDARD’S VARIOUS PRICES FOR THE - SAME GOODS AT HOME—HIGH PRICES WHERE THERE IS NO - COMPETITION AND LOW PRICES WHERE THERE IS COMPETITION Pages 2192–2230 - - - CHAPTER SEVENTEEN - - THE LEGITIMATE GREATNESS OF THE STANDARD OIL COMPANY - - CENTRALISATION OF AUTHORITY—ROCKEFELLER AND EIGHT OTHER - TRUSTEES MANAGING THINGS LIKE PARTNERS IN A - BUSINESS—NEWS-GATHERING ORGANIZATION FOR COLLECTING - ALL INFORMATION OF VALUE TO THE TRUSTEES—ROCKEFELLER - GETS PICKED MEN FOR EVERY POST AND CONTRIVES TO MAKE - THEM COMPETE WITH EACH OTHER—PLANTS WISELY - LOCATED—THE SMALLEST DETAILS IN EXPENSE LOOKED OUT - FOR—QUICK ADAPTABILITY TO NEW CONDITIONS AS THEY - ARISE—ECONOMY INTRODUCED BY THE MANUFACTURE OF - SUPPLIES—A PROFIT PAID TO NOBODY—PROFITABLE EXTENSION - OF PRODUCTS AND BY-PRODUCTS—A GENERAL CAPACITY FOR - SEEING BIG THINGS AND ENOUGH DARING TO LAY HOLD OF - THEM Pages 2231–2255 - - - CHAPTER EIGHTEEN - - CONCLUSION - - CONTEMPT PROCEEDINGS BEGUN AGAINST THE STANDARD IN OHIO - IN 1897 FOR NOT OBEYING THE COURT’S ORDER OF 1892 TO - DISSOLVE THE TRUST—SUITS BEGUN TO OUST FOUR OF THE - STANDARD’S CONSTITUENT COMPANIES FOR VIOLATION OF - OHIO ANTI-TRUST LAWS—ALL SUITS DROPPED BECAUSE OF - EXPIRATION OF ATTORNEY-GENERAL MONNETT’S - TERM—STANDARD PERSUADED THAT ITS ONLY CORPORATE - REFUGE IS NEW JERSEY—CAPITAL OF THE STANDARD OIL - COMPANY OF NEW JERSEY INCREASED, AND ALL STANDARD OIL - BUSINESS TAKEN INTO NEW ORGANISATION—RESTRICTION OF - NEW JERSEY LAW SMALL—PROFITS ARE GREAT AND STANDARD’S - CONTROL OF OIL BUSINESS IS ALMOST ABSOLUTE—STANDARD - OIL COMPANY ESSENTIALLY A REALISATION OF THE SOUTH - IMPROVEMENT COMPANY’S PLANS—THE CRUCIAL QUESTION NOW, - AS ALWAYS, IS A TRANSPORTATION QUESTION—THE TRUST - QUESTION WILL GO UNSOLVED SO LONG AS THE - TRANSPORTATION QUESTION GOES UNSOLVED—THE ETHICAL - QUESTIONS INVOLVED Pages 2256–2292 - - - APPENDIX Pages 2293–2396 - - - INDEX Pages 2397–2409 - - - - - LIST OF ILLUSTRATIONS - - - SKETCH OF JOHN D. ROCKEFELLER _Frontispiece 2_ - - A sketch from life by George Varian, made in - Cleveland, October, 1903. - - FACING PAGE - - PORTRAIT OF ALANSON A. SUMNER 2004 - - Prominent supporter of the Tidewater Pipe - Company, still active in its counsels. - - - PORTRAIT OF HENRY HARLEY 2004 - - President of the Pennsylvania Transportation - Company. Projector of the first seaboard pipe - line. - - - PORTRAIT OF SAMUEL VAN SYCKEL 2004 - - The first successful pipe line for gathering and - transporting oil was completed by Mr. Van - Syckel in 1865. - - - PORTRAIT OF GENERAL HERMAN HAUPT 2004 - - Civil Engineer for the first and second pipe - lines projected to the seaboard. - - - PORTRAIT OF BYRON D. BENSON 2012 - - The first president of the Tidewater Pipe - Company. - - - PORTRAIT OF DAVID K. McKELVY 2012 - - The successor of Mr. Benson as president of the - Tidewater. - - - PORTRAIT OF MAJOR ROBERT E. HOPKINS 2012 - - Treasurer of the Tidewater from its organization - until his death in 1901. - - - PORTRAIT OF SAMUEL Q. BROWN 2012 - - The present president of the Tidewater, successor - to Mr. McKelvy. - - - PORTRAIT OF JOHN D. ROCKEFELLER IN 1880 2032 - - From a photograph by Sarony. - - - PORTRAIT OF WILLIAM C. SCOFIELD 2068 - - Senior member of the firm of Scofield, Schurmer - and Teagle, of Cleveland. Plaintiff in - important suits against Lake Shore Railroad for - freight discriminations. - - - PORTRAIT OF DANIEL SCHURMER 2068 - - Associate of Mr. Scofield and Mr. Teagle in the - war on railroad rebates which the firm waged - for nearly twenty years. - - PORTRAIT OF JOHN TEAGLE 2068 - - Independent refiner of Cleveland, Ohio, prominent - in struggle against freight discriminations by - the railroads. - - - PORTRAIT OF CHARLES B. MATTHEWS 2068 - - Independent refiner of Buffalo. Plaintiff in - “Buffalo case,” where members of the Standard - Oil Company were indicted for conspiracy. - - - BURST IN A PIPE LINE 2076 - - - BLEACHING TANK 2092 - - - CONSTRUCTING AN IRON TANK FOR STORING OIL 2092 - - - OIL AGITATORS 2092 - - - FIVE-BARREL STILL USED IN THE FIFTIES IN DISTILLING - CRUDE OIL AS A LUMINANT 2092 - - - PORTRAIT OF JOHN D. ROCKEFELLER 2120 - - By Eastman Johnson. - - - PORTRAIT OF DAVID K. WATSON 2142 - - Attorney-General of Ohio from 1887 to 1891. Mr. - Watson brought suit against the Standard Oil - Company in May, 1890, in the Supreme Court of - Ohio. - - - PORTRAIT OF FRANK S. MONNETT 2142 - - Attorney-General of Ohio from 1895 to 1899. Mr. - Monnett brought suit against the Standard Oil - Company in 1897 in the Supreme Court of Ohio. - - - PORTRAIT OF LEWIS EMERY, JR. 2142 - - Independent oil operator and refiner. Leader in - movement for free pipe-line bill and - anti-discrimination laws. Founder of the United - States Pipe Line. - - - PORTRAIT OF GEORGE RICE 2142 - - Plaintiff in numerous cases brought against the - Standard Oil Company. Prominent independent - witness in various State and congressional - investigations. - - - GROUP OF CLEVELAND CITIZENS 2146 - - Who called on John D. Rockefeller at his - residence, “Forest Hill,” on July 25, 1896, to - thank him for his gift of park lands to the - city. Mr. Rockefeller is in the centre of the - group, the late Senator Marcus A. Hanna in the - right lower corner, and Governor Myron T. - Herrick in the centre of the top row. - - - MICHAEL MURPHY 2164 - - The present President of the Pure Oil Company. - - - DAVID KIRK 2164 - - The first President of the Pure Oil Company. - - - JAMES W. LEE 2164 - - The chief counsel of the Pure Oil Company. - President of the company from 1897 to 1901. - - THOMAS W. PHILLIPS 2164 - - A leader in the independent movement, which - resulted in the Pure Oil Company. - - - LAYING A SIX-INCH PIPE LINE, CAIRO, WEST VIRGINIA 2182 - - - A TYPICAL OIL FARM OF THE EARLY DAYS 2216 - - - PORTRAIT OF S. C. T. DODD 2232 - - Chief counsel of the Standard Oil Company. Framer - of the Trust agreement of 1882. - - - PORTRAIT OF JABEZ A. BOSTWICK 2232 - - From 1872 to 1892 the chief oil buyer of the - Standard Oil Company. - - - PORTRAIT OF JOSEPH SEEP 2232 - - Head of the “Seep Agency,” through which all oil - transported by the Standard Oil Company goes. - - - PORTRAIT OF DANIEL O’DAY IN 1872 2232 - - Vice-president of the National Transit Company, - the pipe-line company owned by the Standard Oil - Company. - - - PORTRAIT OF JOHN D. ROCKEFELLER 2256 - - From a photograph by Allen Ayrault Green, taken - about 1892. - - - A 25,000–BARREL TANK OF OIL IN FLAMES 2280 - - - - - THE HISTORY OF - - THE STANDARD OIL COMPANY - - - - - CHAPTER NINE - THE FIGHT FOR THE SEABOARD PIPE-LINE - - PROJECT FOR SEABOARD PIPE-LINE PUSHED BY INDEPENDENTS—TIDEWATER PIPE - COMPANY FORMED—OIL PUMPED OVER MOUNTAINS FOR THE FIRST - TIME—INDEPENDENT REFINERS READY TO UNITE WITH TIDEWATER BECAUSE IT - PROMISES TO FREE THEM FROM RAILROADS—THE STANDARD FACE TO FACE WITH - A NEW PROBLEM—DAY OF THE RAILROADS OVER AS LONG DISTANCE - TRANSPORTERS OF OIL—NATIONAL TRANSIT COMPANY FORMED—WAR ON THE - TIDEWATER BEGUN—PLAN TO WRECK ITS CREDIT AND BUY IT IN—ROCKEFELLER - BUYS A THIRD OF THE TIDEWATER’S STOCK—THE STANDARD AND TIDEWATER - BECOME ALLIES—NATIONAL TRANSIT COMPANY NOW CONTROLS ALL - PIPE-LINES—AGREEMENT ENTERED INTO WITH PENNSYLVANIA RAILROAD TO - DIVIDE THE BUSINESS OF TRANSPORTING OIL. - - -The project for a seaboard pipe-line to be built by the producers and to -be kept independent of Standard capital and direction had been pushed -with amazing energy. Early in the fall of 1878 General Haupt reported -that his right of way was complete from the Allegheny River to -Baltimore; contracts were let for the telegraph line and preparation -begun to lay the pipe. Before much actual work had been done it became -clear to the company that it was not from the Butler oil field but from -that of Bradford that a seaboard pipe-line should run; that the former -field was showing signs of exhaustion, while the latter was evidently -going to yield abundantly. With a promptness which would have done -credit to Mr. Rockefeller himself, Messrs. Benson, Hopkins and McKelvy -changed their plan. The new idea was to lay a six–inch line from -Rixford, in the Bradford field, to Williamsport, on the Reading -Railroad, a distance of 109 miles. The Reading, not having had so far -any oil freight, was happy to enter into a contract with them to run oil -to both Philadelphia and New York until they could get through to the -seaboard themselves. In November, 1878, a limited partnership, called -the Tidewater Pipe Company, was organised with a capital of $625,000 to -carry out the scheme. Many of the best known producers of the Oil -Regions took stock in the company, the largest stockholders being A. A. -Sumner and B. D. Benson.[86] - -The first work was to get a right of way. The company went at the work -with secrecy and despatch. Its first move was to buy from the Equitable -Pipe Line, the second independent effort to which, as we have seen, the -Producers’ Union lent its support in 1878, a short line it had built, -and a portion of a right of way eastward which Colonel Potts had been -quietly trying to secure. This was a good start, and the chief engineer, -B. F. Warren, pushed his way forward to Williamsport near the line which -Colonel Potts had projected. The Standard, intent on stopping them, and -indeed on putting an end to all future ventures of this sort, set out at -once to get what was called a “dead line” across the state. This was an -exclusive right for pipe-line purposes from the northern to the southern -boundary of Pennsylvania. As there was no free pipe-line bill in those -days, this “dead line,” if it had been complete, would have been an -effectual barrier to the Tidewater. Much money was spent in this sordid -business, but they never succeeded in completing a line. The Tidewater, -after a little delay, found a gap not far from where it wanted to cross, -and soon had pushed itself through to Williamsport. With the actual -laying of the pipe there was no interference which proved serious, -though the railroads frequently held back shipments of supplies. At -Williamsport, where the pipe crossed under the railroad, it was torn out -once. The Tidewater had no trouble in this case in getting an injunction -which prevented further lawlessness. - -[Illustration: - - ALANSON A. SUMNER - - Prominent supporter of the Tidewater Pipe Company, still active in its - counsels. -] - -[Illustration: - - HENRY HARLEY - - President of the Pennsylvania Transportation Company. Projector of the - first seaboard pipe line. -] - -[Illustration: - - SAMUEL VAN SYCKEL - - The first successful pipe line for gathering and transporting oil was - completed by Mr. Van Syckel in 1865. -] - -[Illustration: - - GENERAL HERMAN HAUPT - - Civil Engineer for the first and second pipe lines projected to the - seaboard. -] - -By the end of May the company was ready for operation. The plant which -they had constructed proposed to transport 10,000 barrels of oil a day -over a distance of 109 miles. The apparatus for doing this consisted -simply of tanks, pumps and pipes. At Coryville, on the edge of the -Bradford field, two iron tanks, each holding 25,000 barrels of oil, were -connected with an enormous pump of a new pattern devised by the Holly -Company especially for this work. This pump, which was driven by an -engine of seventy horse-power, was expected to force the oil through a -six–inch pipe to a second station twenty-eight miles away and about 700 -feet higher. Here a second pump took up the oil again, driving it to the -summit of the Alleghanies, a few miles east. From this point the oil ran -by gravitation to Williamsport. - -It was announced that the pumps would be started on the morning of May -28. The experiment was watched with keenest interest. Up to that time -oil had never been pumped over thirty miles, and no great elevation had -been overcome. Here was a line 109 miles long, running over a mountain -nearly 2,600 feet high. It was freely bet in the Oil Regions that the -Tidewater would get nothing but a drizzle for its pains. However, oil -men, Standard men, representatives of the Pennsylvania Railroad, -newspaper men and natives gathered in numbers at the stations, and -indeed all along the route, to watch the result. - -The pump at station one was started by B. D. Benson, the president of -the company. There were present with him several members of the concern, -and to-day these men speak with emotion of the moment when Mr. Benson -opened the valve to admit the oil to the pump. Would the great venture, -on which they had staked all, be a success? Without a hitch the oil -flowed in a full stream into the pipe and began its long journey over -the mountains. It travelled about as fast as a man could walk and, as -the pipe lay on the ground, the head of the stream could be located by -the sound. Patrolmen followed the pipe the entire length watching for -leaks. There was now and then a delay from the stopping of the pumps; -but the cause was trivial enough, never anything worse than chips under -the valves or clogging in the pipe by stones and bits of wood which the -workmen had carelessly left in when joining the pipe. When the oil -reached the second station there was general rejoicing; nevertheless, -the steepest incline, the summit of the Alleghanies, had yet to be -overcome. The oil went up to the top of the mountain without difficulty, -and on June 4, the seventh day after Mr. Benson opened the valve at -Station One, oil flowed into the big receiving tank beyond Williamsport. -A new era had come in the oil business. Oil could be pumped over the -mountains. It was only a matter of time when the Tidewater would pump to -New York. - -Once at the seaboard, the Tidewater had a large and sure outlet for its -oil in the group of independent refiners left at the mercy of the -Standard in the fall of 1877 by the downfall of the Empire Line. These -refiners had most of them run the entire gamut of experiences forced on -the trade by the railroads and the Standard. Take, for instance, the -experience of Ayres, Lombard and Company, related by Josiah Lombard in -1879 in the Pennsylvania suits. They had gone into the business in 1869 -in West Sixty-sixth street. At the beginning they had shipped -principally over the Erie, sometimes as high as 50,000 barrels a month; -but when that road came into the hands of Fisk and Gould those gentlemen -began to try to build up a refining business in New York for their own -friends. Edward Stokes was at that time hand in glove with Fisk; he had -in the Oil Regions an able friend, Henry Harley. Harley bought and -shipped the oil over the Erie; special rates were given him, and the -Stokes refinery soon began to flourish at the expense of the former -shippers of the Erie. Mr. Lombard finding, as he says, that there was no -possibility of doing business with that road under the Fisk and Gould -management, went over to the New York Central. Here he furnished his own -cars. Ayres, Lombard and Company owned 100 cars on the Central in 1872, -worth about $35,000, and in these they shipped the bulk of their oil. -The South Improvement Company manœuvres in the spring of 1872 completely -stopped their shipping over that road and in 1872 they sold their cars. -Mr. Lombard said in his testimony: “We sold them (the cars) because the -Standard Oil Company were getting the ascendency so much over the New -York roads that we could not get a rate of freight from the lower -districts and the Parker district, where the bulk of the oil was -produced at that time, that would enable us to compete with them in the -New York market, so there was no use in owning the cars.” - -Driven off the Erie and Central, the firm made a running arrangement -with Mr. Rockefeller for a year; the Standard bought the cars and agreed -to furnish Ayres, Lombard and Company crude oil for a certain price at a -certain time, and take the refined oil from them at a fixed price. This -contract was made probably under the Refiners’ Association which Mr. -Rockefeller succeeded in effecting in August, 1872, after the failure of -the South Improvement Company, which association, as we have already -seen, took in fully four-fifths of the refining interests of the -country. The contract continued, Mr. Lombard said in testimony, for a -year or more, and was then terminated by notice from the Standard Oil -Company. Soon after the termination of the contract with the Standard, -which was either late in 1873 or early in 1874 (Mr. Lombard was not able -to decide this when he was under examination), the firm began shipping -over the Pennsylvania road. They bought part of their oil at this time -from Adnah Neyhart. Now, sometime in 1875, as we have seen, Mr. Neyhart -began to feel the Standard pressure and his business was sold to the -Standard. Again Ayres, Lombard and Company found a large part of their -supply of oil cut off. For about a year they shipped over the -Pennsylvania. It was not long, however, before the concern found that -even on the Pennsylvania they were under a disadvantage, that road -having made in 1875 discriminating contracts with the Standard. Again -the firm changed, buying its oil from J. A. Bostwick and Company of New -York. Now Bostwick was the Standard Oil buyer, one of the original South -Improvement Company, and a stockholder in the Standard Oil Company. Mr. -Lombard swore that he had not been taking oil of Bostwick for more than -a year before the Standard began to draw its lines around him, as he put -it, and again the question arose how were they to get oil for their -refinery. There seemed no way but to try to make a contract with the -Pennsylvania Company. On the 18th of May, 1877, he went to Philadelphia -and saw Colonel Potts, who told him he would be glad to have his -shipments on the Pennsylvania. Accordingly a contract was made for a -year, the company guaranteeing them as low a rate as anybody else had. -But this contract of Mr. Lombard was destined to end as speedily and as -disastrously as all of those he had been making for over five years, for -in the fall of the year the Empire Line was sold to the Standard, and in -the spring of 1878, when Mr. Lombard’s contract ran out, the -Pennsylvania refused to renew it on the terms they gave the Standard. -Mr. Lombard gave a very interesting account of the interview he and his -fellow refiners of New York had with Mr. Cassatt in reference to this -matter: - - - “In March, 1878, I think it was by appointment, we had an interview - with Mr. Cassatt, third vice-president of the Pennsylvania Railroad. - There were present Mr. Bush, Mr. Gregory, Mr. Burke, Mr. Ohlen, and - myself, besides Mr. Cassatt. It was held in Mr. Bush’s office, 123 - Pearl street, New York. We sought that interview for the purpose of - finding out what our position would be on the Pennsylvania Railroad - after the termination of our contract with the Empire Line, which - they had assumed. We had quite a plain talk on the subject. We began - by telling Mr. Cassatt something that he already knew—that we for - the past year had been probably the largest shippers over the - Pennsylvania Railroad that they had had; largest shippers of - petroleum. He acknowledged it, and we asked him if we should, after - the first of May, be on the same footing and have as low a rate of - freight as anybody else, which was guaranteed by contract up to that - time. He said no, we would not. We asked him why not. Well, he said, - it would not be satisfactory to the Standard Oil Company. I then put - the question to him what difference it made to the Pennsylvania - Railroad Company whether it was satisfactory to the Standard Oil - Company or not. He said that the Standard Oil Company was the only - party which could keep peace between the trunk lines. I said, It - seems to me you have the matter very much in your own hands; there - are but four of you; if you agree upon a certain rate of freight the - oil is to come forward at, I see no use of the intervention of a - third party or a fifth party in this case. He said, I cannot - trust—or rather, he said, They are the only people that can keep - harmony. Then we had a little discussion about the rates. He said - that they had been bringing oil for the past year at a very low - rate. I told him I understood it was a little over seventy cents an - average on crude petroleum. He denied it, and said it was not. Then - when we were talking about the subject of rates, he said of course - the rates on petroleum were very profitable, and said we could find - out the rate at which they could bring petroleum, if they were - compelled to, by looking up their annual report, and seeing the cost - a ton per mile, which was something like five or six mills per ton - per mile, and which if we figured that it would be a very profitable - business. We told him we did not object to him making a good profit - at any time; all we wished was to have as low a rate of freight as - anybody else had, which we could not get. - - “He said we had better make an arrangement with the Standard and we - would all of us make money, and that they had a very large business - and proposed to make money, and the discrimination would be so light - against us that we would hardly notice it, and we formed the idea - from what he said. We asked him whether the discrimination against - us would be larger if the rate of freight were high than it would if - the rate of freight were low. He said, yes, it would be, but he said - the discrimination would be very small. We tried to find out by - asking what it would be, but did not succeed. He then said if we - would unite with the Standard we would do better and everything - would be peaceable and harmonious, and he would use his efforts to - promote such a union if we wished it. We told him we did not wish to - unite with the Standard; we dealt on freight matters with the - Pennsylvania Railroad, not with the Standard Oil Company. - - “There was another interview at which Mr. Bush, Mr. Ohlen, Mr. - Cassatt, and myself were the only parties as I remember it; it was - held in Pennsylvania, at the office of the Pennsylvania Railroad - Company, in the last part of May or early part of June; it was at - the time of what we called the squeeze in cars. Previous to that - time we had had all the cars we wanted without any difficulty; at - that time and when we were wanting just about the same kind of cars - we had previously been wanting, and business was running on very - easily, we found we were unable to get anything like the amounts we - had before; instead of getting for the firm I represented from - twelve to fifteen cars a day, we were getting only one or - two—utterly insufficient for the business. We came over to see Mr. - Cassatt about it—Mr. Bush, Mr. Ohlen, and myself. He said he knew - there was trouble; that the other side, the Standard Oil Company, - had some five hundred cars full here at Philadelphia and Baltimore; - that he had not discovered it until recently, but that he would have - it remedied. They had been holding them here full. I asked him why, - if he knew of the cars being detained, he kept giving them cars. He - said he did not know exactly how that was. I told him if these cars - were shipped here and held, it seemed to me they ought to stop - giving cars to parties holding them. He said the matter would be - remedied soon. We asked him how soon. He could not tell exactly. I - said, ‘Can’t you stop giving them cars?’ He said he would remedy the - matter, we should have all the cars we needed; and it was at that - time that he made the remark to which Mr. Bush testified, when we - had some little general conversation, that if we built a pipe-line - he would buy it up for old iron in sixty days. I think I remarked - that the Conduit Pipe brought a good price for old iron, in a - laughing way. The interview was pleasant enough. Then early in - July—I think it was the last part of June or early part of July—Mr. - Ohlen, Mr. Bush, Mr. Wilson, Mr. King, Mr. Gregory, and myself came - to Philadelphia and met Colonel Scott, president of the Pennsylvania - Railroad, Mr. Cassatt and Mr. Brundred at the office of the - Pennsylvania road, with the same trouble, the same two troubles as - of old, a scarcity of cars and a discrimination in freight. As to - scarcity of cars, they claimed that we were getting our allotment. - We told them we knew nothing about an allotment, that previous to - the first of May we had sufficient cars for our business; since that - time we got scarcely any; that if they had not sufficient cars to do - the business with we would put on cars. Mr. Scott said they would - not allow that, they had bought out one line and did not propose to - have another; we then demanded cars for the business, making again - the offer to put on cars if they could not furnish them, with the - same result. He said they had already fought one fight in our behalf - which cost them a million and a half of dollars. We told them not at - all in our behalf, we had nothing to do with it; we were simply - shippers over the road and did not participate in the matter at all; - it was a matter of their own. He seemed to be a little sore about - that. When he made the remark which has been given in evidence - before, he said there would be no peace or profit in the business - until we made some arrangement with the Standard Oil Company; he - would be very glad to have such an arrangement made, and would do - all in his power to accomplish it. We told him we did not wish any - arrangement with the Standard Oil Company; we had been dealing for - years with the Pennsylvania Railroad Company, and we wished to deal - with them now on all transportation and freight matters. I think - there was nothing further in that interview. - - “He asked why we did not apply to the other roads for - transportation. We told him we had. He said, with what results? That - the Central Road had no cars of their own. He said that was a very - flimsy pretext. I said that the Erie road cars were controlled by - the Standard Oil Company, and the Central cars were controlled by - the Standard Oil Company. That in fact the whole transportation of - the oil country seemed to be controlled by the Standard Oil Company, - and the New York Central, and the Erie, and the Pennsylvania - Central, and the Baltimore and Ohio, they controlled the whole - thing, and there was no chance, and in addition to that we had been - shippers and customers of the Pennsylvania road for years.” - - -Naturally enough, men who had been through such experiences as these of -Mr. Lombard were glad to unite with the Tidewater, which promised to -free them from the railroads and their chief competition, and they -promised to take all their supply from the line. - -The success of the Tidewater experiment brought Mr. Rockefeller face to -face with a new situation. Just how serious this situation was is shown -by the difference in the cost of transporting a barrel of oil to the -seaboard by rail and transporting it by pipe. According to the -calculation of Mr. Gowen, the president of the Reading Railroad, the -cost by rail was at that time from thirty-five to forty-five cents. The -open rate was from $1.25 to $1.40, and the Standard Oil Company probably -paid about eighty-five cents, when the roads were not protecting it from -“injury by competition.” Now, according to General Haupt’s calculation -in 1876, oil could be carried in pipes from the Oil Regions to the -seaboard for 16⅔ cents a barrel. General Haupt calculated the average -difference in cost of the two systems to be twenty-three cents, enough -to pay twenty-eight per cent. dividends on the cost of a line even if -the railway put their freights down to cost. This little calculation is -enough to show that the day of the railroads as long-distance -transporters of crude oil was over; that the pipe-lines were bound to -replace them. Now, Mr. Rockefeller had by ten years of effort made the -roads his servant; would he be able to control the new carrier? A man of -lesser intellect might not have foreseen the inevitableness of the new -situation; a man of lesser courage would not have sprung to meet it. Mr. -Rockefeller, however, is like all great generals: he never fails to -foresee where the battle is to be fought; he never fails to get the -choice of positions. He wasted no time now in deciding what should be -done. He proposed not merely to control future long-distance oil -transportation; he proposed to own it outright. - -Hardly had the news of the success of the Tidewater’s experiment reached -the Standard before this truly Napoleonic decision was being carried -out. Mr. Rockefeller had secured a right of way from the Bradford field -to Bayonne, New Jersey, and was laying a seaboard pipe-line of his own. -At the same time he set out to acquire a right of way to Philadelphia, -and soon a line to that point was under construction. Even before these -seaboard lines were ready, pipes had been laid from the Oil Regions to -the Standard’s inland refining points—Cleveland, Buffalo and Pittsburg. -With the completion of this system Mr. Rockefeller would be independent -of the railroads as far as the transportation of crude oil was -concerned. It was, of course, a new department in his business, and, to -manage it, a new company was organised in April, 1881—the National -Transit Company—with a capital of five million dollars, and a charter of -historical interest, for it was a mate of the charter of the ill-fated -South Improvement Company, granted by the same Legislature and giving -the same omnibus privileges—the right in fact to do any kind of -business, except banking, in any part of the world. The South -Improvement Company charter, as we have seen, was repealed. The charter -which the National Transit Company now bought seems to have gone into -hiding when the character of its mate was disclosed and so had been -forgotten. How it came to be unearthed by the Standard or what they paid -for it, the writer does not know. However, as H. H. Rogers aptly told -the Industrial Commission in 1899, when he was asked if a considerable -sum was not given for it: “I should suppose every good thing had to be -paid for; I should say a man owning a charter of that kind would sell it -at the best price he could get.” - -[Illustration: - - BYRON D. BENSON - - The first president of the Tidewater Pipe Company. -] - -[Illustration: - - DAVID K. MCKELVY - - The successor of Mr. Benson as president of the Tidewater. -] - -[Illustration: - - MAJOR ROBERT E. HOPKINS - - Treasurer of the Tidewater from its organization until his death in - 1901. -] - -[Illustration: - - SAMUEL Q. BROWN - - The present president of the Tidewater, successor to Mr. McKelvy. -] - -And while Mr. Rockefeller was making this lavish expenditure of money -and energy to meet the situation created by the bold development of the -Tidewater, what was his attitude toward that company? One would suppose -that Mr. Rockefeller, of all men, would be the first to acknowledge the -service the Tidewater had rendered the oil business; that in this case -he would have felt an obligation to make an exception to his claim that -the oil business was his; that he would have allowed the new company to -live. But Mr. Rockefeller’s commercial vision is too keen for that; that -would _not_ be business. The Tidewater had been built to feed a few -independent refineries in New York. If these refineries operated outside -of him, they might disturb his system; that is, they might increase the -output of refined and so lower its price. The Tidewater must not be -allowed to live, then. But how could it be put out of commission? It had -money to operate. There were plenty of oil producers glad to give it -their product, because it was independent. The Reading Railroad had gone -heart and soul into its fight—it had refiners pledged to take its oil, -and these refiners had markets of their own at home and abroad. What was -he going to do about it? There were several ways to accomplish his end; -in two of them, at least, Mr. Rockefeller excelled from long practice. -The first was to get out of the way the refineries which the Tidewater -expected to feed, and this was undertaken at once. The refiners were -approached usually by members of the Standard Oil Company as private -individuals, and terms of purchase or lease so generous made to them -that they could not afford to decline. At the same time they were -assured confidentially that the Tidewater scheme was a pure chimera, -that they understood the pipe-line business better than anybody else and -they knew oil could not be pumped over the mountains. All but one firm -yielded to the pressure. Ayres and Lombard stood by the Tidewater, but -soon after their refusal to sell they were condemned as a public -nuisance and obliged to move their works! The Tidewater met the -situation by beginning to build refineries of its own—one at Bayonne, -New Jersey, and another near Philadelphia—in the meantime storing the -oil it had expected to sell. - -Having done his best to cut off his rival’s outlet, Mr. Rockefeller -called upon the railroads to carry out that article of their contract -with him which bound them to protect him from “injury by competition.” -What was done was told a few months later to the Committee on Commerce -in the House of Representatives by Franklin B. Gowen, the president of -the Reading Railroad. According to Mr. Gowen the Tidewater and Reading -were no sooner ready to run oil than a meeting of the trunk lines was -held at Saratoga, at which the representatives of the Standard Oil -Company were present, and on that day the through rate on oil was -reduced to twenty cents per barrel to the Standard Oil Company. “It was -subsequently reduced to fifteen cents,” Mr. Gowen told the Committee, -“and I believe, though I do not certainly know, to ten cents per barrel -in cars of the Standard Oil Company; ... and I am told that at the -meeting at Saratoga a time was fixed by the Standard Oil Company within -which they promised to secure the control of the pipe-line—provided the -trunk lines would make the rate for carrying oil so low that all -concerned in transportation would lose money. - -“I know this, that only three or four months ago we were told—I do not -mean myself, but the gentlemen who directly represented the pipe-line -which leads to our road—that if they would agree to give all their oil -to the Standard Oil Company to be refined, we could carry 10,000 barrels -a day, and the rates would be advanced by the trunk lines. But, to use -the language of those making the offer, ‘we’ (meaning the Standard Oil -Company) ‘will never permit the trunk lines to advance the rate on oil -until your pipe-line gives us all its product to refine,’ and the -prophesy of four months ago has become the history of to-day.” Mr. -Flagler differs with Mr. Gowen in his explanation of this cut in rates. -Mr. Flagler contends that the Standard Oil Company really opposed it, -but that the railroads insisted on it. Mr. Flagler’s testimony is -interesting reading in connection with all that we know about the -Tidewater Company. It will be found in the appendix.[87] - -This was the Tidewater’s first year’s experience. The second and third -were not unlike it. But the company lived and expanded. It bought and -built refineries, it sent its president to Europe to open markets, it -extended its pipe-line still nearer to the seaboard, and it did this by -a series of amazingly plucky and adroit financial moves—borrowing money, -speculating in oil, exchanging credit, chasing checks from bank to bank, -“hustling,” in short, as few men ever did to keep a business alive. And -every move had to be made with caution, for the Standard’s eye was -always on them, its hand always outstretched. Samuel Q. Brown, the -present president of the organisation, when on the witness stand in -December, 1882, said that so much did the Tidewater fear espionage that -they were accustomed to keep their oil transactions as a private and not -a general account, in order that they might not be reported to the -Standard; that even matters which they believed they were keeping in an -absolutely private way frequently leaked out, to the injury of the -business. - -[Illustration: - - Scale—3 miles to each division. CONDENSED PROFILE OF TIDEWATER PIPE - LINE BETWEEN RIXFORD AND TAMANEND, PENNSYLVANIA - - The pipe followed the jagged line representing surface of the ground. - The numbers above the surface line show the location of the pumping - stations from which the oil was forced. The pump at Station 1 lifted - the oil over 600 feet. From here it flowed by gravitation until the - gradient line—the sloping straight line above the surface - line—touched the ground. A new station, No. 2, then lifted the oil - to the next high point, the crest of the Alleghanies. As the - gradient line shows, the oil now would flow to Station 4, making - many steep ascents without further pumping. Station 3 was added to - increase the speed of the flow. -] - -By January, 1882, the Tidewater was in such a satisfactory condition -that it decided to negotiate a loan of $2,000,000 to carry out plans for -enlargement. The First National Bank of New York, after a thorough -examination of the business, agreed to take the bonds at ninety cents on -the dollar, but trouble began as soon as the probable success of the -bond issue was known. The officials of the First National Bank were -called upon by stockholders of the Tidewater, men holding nearly a third -of the company’s stock, and assured that the company was insolvent, and -that it would be unsafe for the bank to take the loan. The First -National declined to be influenced by the information, on the ground -that the disgruntled stockholders had sold themselves to the Standard -Oil Company, and were trying to discredit the Tidewater, so that the -Standard might buy it in. It had been planned to place some of these -bonds in Europe, and Franklin B. Gowen was sent over for that purpose. -Mr. Brown said on the witness stand, a few months later, that as soon as -Mr. Gowen started from this side it was cabled to Europe that he was -going over to place bonds which were not sound; that the stockholders -were all of them wealthy men, and if the bonds had been good property -they would have taken them themselves. Mr. Brown declared this report -was spread so generally on the other side that it interfered seriously -with Mr. Gowen’s attempt to place the loan. - -These manœuvres failing to ruin the Tidewater’s credit, a more serious -attack was made in the fall of 1882, by the filing of a long bill of -complaint against the management of the company, followed by an appeal -that a receiver be appointed and the business wound up. The appeal came -from E. G. Patterson, a stockholder of the Tidewater, and a man who, up -to this time, had been one of the most intelligent opponents of the -Standard in the Oil Regions. Mr. Patterson was one of the few who had -realised, from the first development of Mr. Rockefeller’s pretensions, -that it was a question of transportation, and that, if the railroads -could be forced by courts and legislatures to do their duty, the -coal-oil business would not belong to Mr. Rockefeller. He had been one -of the strongest factors in the great suits compromised in 1880, and his -disgust at the outcome had been so great that he had washed his hands of -the Producers’ Union. Later he had been engaged by the state of -Pennsylvania to collect evidence on which to support a claim against the -Standard Oil Company for some $3,000,000 of back taxes. The Standard had -made Mr. Patterson’s services unnecessary by coming forward and giving -the attorney-general all the information as to its financial condition -which he desired. Exasperated at the result of all his efforts, and -feeling that he had been deserted by the public he had tried to serve, -Mr. Patterson sent word to the Standard that he proposed still further -to attack them (just how he never explained) unless they would give him, -not to attack, as much as there was in the contract from the state.[88] -They seem to have thought it worth while to buy peace, and agreed to -give Mr. Patterson some $20,000 in all, and secure him a position for a -term of years. The first payment was made at the end of April, 1882, and -$5,000 of the money received Mr. Patterson paid to the Tidewater for -stock he had taken at its organisation. No sooner was the stock in his -hands than he began the preparation of the bill of complaint above -referred to, and in December the case was heard. - -The Oil Regions watched it with keenest interest. That Mr. Patterson had -made some settlement with the Standard was generally known, and the -charge was freely circulated that they had bribed him to bring this suit -in hopes of blasting the credit of the Tidewater and getting its stock -for a song. The testimony brought out in the trial did not bear out this -popular notion. The case was rather more complicated. That the suit was -backed by the Standard, one would have to be very naïve to doubt, but -they were using other and stronger parties than Mr. Patterson, and that -was a faction of the company known as the “Taylor-Satterfield crowd.” -These men, controlling some $200,000 worth of Tidewater stock, had been -professing themselves dissatisfied with the management of the business -for some months, though always refusing to sell their holdings at an -advanced price. It was generally believed in the Oil Regions that their -“dissatisfaction” was fictitious, that they were in reality in league -with the Standard in an attempt to create a panic in Tidewater stock, a -belief which was strengthened when it was learned that a big oil -company, which the gentlemen controlled, the Union, had been sold about -that time to the Standard Oil Trust for something like $500,000 in its -stock. The first manœuvre of the Taylor-Satterfield faction had been the -attempt to dissuade the First National Bank from taking the Tidewater -loan referred to above. Failing in this, they seem to have imbued Mr. -Patterson thoroughly with their pretended dissatisfaction and to have -persuaded him to bring the suit. For some reason which is not clear they -failed properly to support him in the suit, and when it came off they -practically deserted him. The Tidewater had no trouble in proving that -the complaints of insolvency and mismanagement were without foundation, -and Judge Pierson Church, of Meadville, before whom the case was argued, -refused to appoint the receiver, intimating strongly that, in his -judgment, the case was an attempt to levy a species of blackmail, in -which it must not be expected that his court would co-operate. Judge -Church’s decision was given on January 15. Two days later a sensation -came in Tidewater affairs, which quite knocked the Patterson suit out of -the public mind; it was nothing less than a bold attempt by the Taylor -party, or, as it was now known, “the Standard party,” to seize the reins -of government. It was a very cleverly planned coup. - -The yearly meeting for the election of officers in the company was fixed -for a certain Wednesday in January. By verbal agreement it had been -postponed, in 1882, to some time in February, the controller, D. B. -Stewart, a member of the Taylor faction, representing that he could not -have his statement ready earlier. No notices were sent out to this -effect, although this should have been done. Taylor and his party, -taking advantage of this fact perfectly well known to them, appeared at -the Tidewater offices on January 17, and although one of the Benson -faction, as the majority was known from the name of the company’s -president, was present with sufficient proxies to vote nearly two-thirds -of the stock, they overruled him and elected themselves to the control. -They also elected to the Board of Managers, Franklin B. Gowen, the -president of the Reading, and James R. Keene, the famous speculator, -both large holders of Tidewater bonds. They followed their election -immediately by sending out notices to the banks with which the company -did business not to honour checks drawn by the Benson party, and to the -post-office to deliver mail to no one but themselves. - -The announcement caused a terrible commotion in oil circles. Both Mr. -Keene and Mr. Gowen refused to recognise the new board, Mr. Gowen -telegraphing in answer to the notification of his election: - - - JOHN SATTERFIELD, - Titusville. - - At quarter of three o’clock to-day I received a despatch signed with - your name as manager and chairman, stating that a meeting of the - Board of Managers would be held at noon to-day. While the notice - itself is sufficient to render invalid any action you may have - attempted at such meeting as has been held, even if you had power to - act at all, I deny your right to call any meeting or act in any - manner as an officer of the company, and will hold you and all your - associates responsible at law for the occurrences of yesterday, and - for your subsequent action thereunder. - - (Signed) F. B. GOWEN. - - -The Benson party took immediate action, applying for an injunction -restraining the new board from taking possession of the books and -offices. This was granted and a date for a hearing appointed. Up to the -hearing the old board did business behind barricaded doors! The case was -heard in Meadville before Judge Pierson Church—the same who had heard -the Patterson case. As it was a case to be decided on purely technical -matters—the rules governing elections—no sensation was looked for, but -one came immediately. It was a long affidavit from James R. Keene, even -more notorious then than now—there were fewer of his kind—for deals and -corners and devious stock tricks, declaring that both the Patterson case -and this attempt to obtain control were dictated by the “malicious -ingenuity” of the Standard for the purpose of destroying the Tidewater -and getting hold of its property: - - - “From my first connection with the company,” said Mr. Keene, “it has - been hampered and embarrassed in its business by the unscrupulous - competition of the Standard Oil Company. When it first began to - transport and deliver oil at tidewater, the refineries which - purchased and refined oil were one after another bought up by the - Standard Oil Company or driven out of business by vexatious and - oppressive annoyances. The most private details of our business have - been communicated to the officers of the Standard Oil Company, and - they have, by every means in their power, interfered with our - affairs. By the arrangement which they were able to make with the - railroads leading from the Oil Regions, other than the Philadelphia - and Reading Railroad Company and the Central Railroad of New Jersey, - the Standard Oil Company have been able to obtain a control of the - business of transporting and refining oil, with the exception of - that part of the business which has been carried on by the Tidewater - Pipe Company and their refineries, to which it had made deliveries. - Repeated efforts have been made by parties in their interest to - secure the control of the Tidewater Pipe Company, and if they could - succeed, the monopoly thereby secured would add many million dollars - a year to their profit.” - - -Mr. Keene’s putting of the case was undoubtedly correct, but pious -horror of commercial brigandage, coming from “Jim” Keene, was useful -only to give joy to a cynical world, unencumbered by the possession of -stock in either concern. The Keene sensation was followed by a second, -an affidavit from John D. Archbold, of the Standard Oil Company, denying -that his company had any interest in the present suit, but adding that -for some time the officers of the Tidewater had been seeking an alliance -with the Standard: - - - “Byron D. Benson and David McKelvy have at various times for the - past years met me at their own instance, and have proposed to - combine the business of the Tidewater Pipe Company with that of the - Standard Oil Company, desiring the Standard Oil Company to agree on - a division of the business of transporting and refining oil, and to - agree with the Tidewater Pipe Company in fixing the rate of - transporting oil and the price of refined oils. These proposals were - renewed to me by B. D. Benson during the summer of 1882, he coming - to my office at his own instance and urging, by various arguments, - such an arrangement. These proposals, in whatever shape made, have - always been declined. This deponent has also had many interviews - with James R. Keene, and always at his request, upon the same - subject, in which interviews said Keene has earnestly urged such a - combination and has used many arguments in favour of the advantage - which would result from such a combination. These proposals have - always been declined.” - - -Naturally they were declined—the Standard was not seeking an alliance, -it was seeking ownership of the Tidewater; and it expected so to -discredit the company that it could buy in its stock for a song. Mr. -Archbold’s affidavit cooled popular sympathy for the hunted concern no -little, however. A suggestion of any kind of a compromise with the -Standard was looked upon as rank disloyalty by the Oil Regions, free -competition in rates and in prices being, they contended, the only hope -of the country. Mr. Archbold’s affidavit must have something in it, -everybody thought, though it might be, as Mr. Benson immediately swore, -“grossly inaccurate.” - -Such was the character of the charges and countercharges in this purely -technical case. The judge took little notice of them in his decision, -but, after an exhaustive discussion of the points involved in the -election, decided it was illegal and continued the injunction he had -granted against the new board. Judge Church’s decision aroused general -exultation in the Oil Regions—as any failure of the Standard to get what -it wanted was bound to do, and with good reason. The Tidewater’s growth -in the face of the Standard’s constant interference with its business -was proof that independent pipe-lines and independent refineries could -be built up if men had sufficient brains and courage and patience. What -one set of men had done, another could do. Their hope of restoring -freedom of competition to the oil business was still further brightened -in June by the news that the Legislature of Pennsylvania had passed a -free pipe-line bill—the measure that they had been urging for twelve -years without avail. With a sturdy example of independence, like the -Tidewater, before them, and the right of eminent domain for pipes, the -future of competition in oil seemed to be up to the oil men themselves. - -But the Oil Regions have always been prone to jump at conclusions. They -were forgetting Mr. Rockefeller’s record when they concluded that he was -through with the Tidewater. Because he had failed in his old South -Improvement Company trick, that is, failed to create a panic among -Tidewater stockholders, and so get their property at panic prices, was -no reason at all to suppose he had abandoned the chase. There still -remained a legitimate method of getting into the company, and, as a last -resort, Mr. Rockefeller accepted it. He bought the minority stock of the -concern, held by the Taylor party. Up to this time Mr. Rockefeller had -appeared in Tidewater affairs as a destroyer. He now appeared in a rôle -in which he is quite as able—as a pacifier, and his extraordinary -persuasiveness was never exercised to better effect. “We own $200,000 -worth of your stock,” he could tell the people he had been fighting. “If -you will consent to confine yourselves to a fixed percentage of our -joint business, and will sustain pipage rates and the price of refined -oil, we will let you alone. Let us dwell together in peace.” - -The Tidewater, tired of the fight, accepted. And so these men—to whom -the oil business owes one of its most remarkable developments, who, in -face of the most powerful and unscrupulous opposition, had in four years -built up a business worth five and one-half millions of dollars—signed -contracts in October, 1883, fixing the relative amount of business they -were henceforth to do as 11½ per cent. of the aggregate, the Standard -having 88½ per cent. The two simply became allies. The agreement between -them was the same in effect as all Mr. Rockefeller’s running -agreements—it limited and kept up prices.[89] Any benefit the oil -business might have reaped from natural and decent competition between -the two was of course ended by the alliance. For all practical purposes -the two were one. In the phrase of the region, the Tidewater had “gone -over to the Standard,” and there it has always remained. The contract -was made for fifteen years, but since its expiration it has been lived -up to honourably by both parties without other than a verbal -understanding. For, note this: Mr. Rockefeller always keeps his word. -Indeed, in studying his career, one is frequently reminded of Tom -Sawyer’s great resolution—never to sully piracy by dishonesty! - -The Tidewater has prospered within the boundary Mr. Rockefeller drew for -it, as those who have accepted submissively his boundaries have never -failed to do. Mr. Rockefeller is right when he says, as he does so -often, that all who come with him prosper. That the company would have -succeeded in becoming eventually a formidable rival of the Standard, and -in controlling much more than eleven per cent. of the business, no one -can doubt who knew Mr. Benson, Major Hopkins, Mr. McKelvy, and their -colleagues. They were business men of the first order, as their -tremendous work from 1878 to 1883 shows. - -Once more the good of the oil business was secure, and Mr. Rockefeller -at once proceeded to arrange his great house in the new order made -necessary by the introduction of the seaboard pipe-line. The entire -transportation department of the business had to be reorganised. When -the seaboard pipe-line became a factor in the oil business, in 1879, the -Standard Oil Company owned practically the entire system of -oil-gathering pipe-lines—that is, the lines carrying oil from the wells -to the storing or shipping points. These lines were organised under the -name of the United Pipe Lines, and the organisation was magnificent in -both extent and in character of service rendered. Never, indeed, has the -ability of the men Mr. Rockefeller gathered into his machine shone to -better advantage than in the building up and management of the pipe-line -business. At the end of 1883, when the alliance was made with the -Tidewater, the United Pipe Lines were taking from the wells of -Pennsylvania fully a million and a half barrels of oil a month. Their -pipes, of an aggregate length of 3,000 miles, connected with thousands -of wells scattered all over the wide Oil Regions. - -Whenever the oil men opened a new field, no matter how remote from those -already developed, the United Pipe Lines immediately went there to care -for the oil. In more than one case, in these years of rapid and -excessive development of oil territory, the pipe-line company invested -great sums in preparing to take care of oil fields whose yield never -paid the cost of the pipe laid. Thus, in 1882, there was a tremendous -excitement over the opening of the Cherry Grove field. The Standard -spent $2,000,000 getting ready to take care of a great outpouring of -oil—which came, but did not stay. In 1882 Cherry Grove produced -2,345,400 barrels; in 1883, 755,512! It cost the company forty-six cents -a barrel to take care of the production of one short-lived group of -wells in this field, on which they never realised more than twenty cents -pipage. - -The Standard not only gathered this oil; it stored it, to wait its -owner’s demand. At this date it controlled 40,000,000 barrels of iron -tankage, in which it stored the enormous stocks, over 35,000,000 -barrels, which had accumulated in the five previous years. When the oil -passed to the pipe-line, the owner received his money for it at once, if -he wished, or the line “carried” it. When a producer had 1,000 barrels -in the line, he received a pipe-line certificate for it. In December of -1883 the United Pipe Lines had issued certificates for nearly all of the -35,000,000 barrels of stocks above ground. The oil men thus had a bank -for their oil, a bank recognised generally as sound as any in the United -States. - -Such were the returns from the pipe-line for its services that no -business ever justified more fully the extraordinary outlays of money -and energy which it had taken to perfect it. For each barrel of oil the -United Pipe Lines gathered, they received, when it was taken from the -lines, twenty cents. The service cost them perhaps two cents after -installation, though in these years, when they were obliged to carry -some 30,000,000 barrels, they had constantly $6,000,000 on their books -on which they did not at once realise. They could afford to let this sum -stand because of the storage charge. For every 1,000 barrels carried in -their tanks they received $6.25 each fifteen days—$152 a year. Now, -tankage did not cost over $250 per 1,000 barrels, so that the storage -more than paid its cost in two years. There were often great losses by -fire, but these were paid by the owners of the oil—a pro rata assessment -being made. There was a deterioration in quantity and quality of oil -from holding, but this again was paid by the owners in a shrinkage -charge of three per cent., deducted from the quantity of oil when run. -Thus on every side the pipe-line business was guarded. So long as it -could keep out competition and hold up its prices, there was no better -paying business in the United States than piping oil. - -As we have seen, Mr. Rockefeller began to add long-distance pipe-lines -to his business as soon as the Tidewater demonstrated their feasibility, -and before the time the Tidewater was brought into harmony he had a -complete system to the seaboard and to his inland refinery points, -organised under the name of the National Transit Company. The United -Pipe Lines and the National Transit Company were really one business, -the former consisting of local lines and the other of trunk lines, and -to make the organisation more compact the former was transferred to the -latter on April 1, 1884. The paid-up capital of the concern at this date -was $31,000,000. Just as Mr. Rockefeller claimed, in 1878, that he was -“prepared to enter into a contract to refine all the petroleum that -could be sold in the markets of the world,” so now he could announce -that he was prepared to gather, store and transport all the crude -petroleum not only that the markets of the world demanded, but that the -producers took from the ground. As things now stood the only remaining -point where he could possibly be affected by competition was the -railroads. A new relation to the railroads was created by the new -development. Mr. Rockefeller was not only independent of them, he was -their competitor, for, like them, he was a common carrier obliged to -transport what was offered. His open rate to New York was forty-five -cents, to Philadelphia forty, though the actual service probably did not -cost over ten cents. By the alliance with the Tidewater any danger of -competition from a pipe-line, which could of course afford to cut the -price, was shut off. The railroads might possibly, however, lower the -prices a little and still make a profit. It was very necessary that the -price be kept up in order that too much encouragement should not be -given to outside refiners. The only group which threatened to grow to -large proportions, at this time, was in the Oil Regions, a group which -was the direct outgrowth of the compromise of 1880. As will be -remembered, the agreement with the Pennsylvania Railroad made then -stipulated that all rates should be open, and that if a rebate was given -to one shipper another could have it on demand. After the compromise the -Pennsylvania had undertaken again to stimulate the growth of independent -refineries, and several plants had been built in Titusville and Oil -City. Having removed the New York group from competition by the alliance -with the Tidewater it was Mr. Rockefeller’s business to make it as hard -as possible for the independents in the Oil Regions to do business, and -to do this he must make a contract with the Pennsylvania. - -Moreover, when Mr. Rockefeller entered New Jersey with his seaboard -pipe-line, he had been obliged to cross the Pennsylvania Railroad. He -could not do so without the consent of the company, there being no free -pipe-line in the country. He accordingly had been obliged to make a -traffic arrangement with them to get his pipe through. A new arrangement -was now necessary in order to prevent competition, and in August, 1884, -a contract was signed, for “considerations mutually interchanged,” by -which the National Transit Company agreed to give to the Pennsylvania -Railroad twenty-six per cent. of “all petroleum brought to the Atlantic -seaboard by all existing carriers, whether rail or pipe, now engaged in -transporting such property, or which may hereafter engage in such -transportation in conjunction with the Transit Company’s pipes.” At the -same time that the Transit Company agreed to give the railroad this -amount of oil, it also signed an agreement to carry this oil for the -railroad on a sliding scale. When the open rate of the pipe-line was -forty cents to Philadelphia the railroad was to pay the company eight -cents—with each five cents difference, up or down, in the open rate, -there was to be one cent difference to the railroad, the Transit never -to receive less than six or more than ten cents.[90] Suppose, for -example, that the entire seaboard shipment of oil in the month ending -December 20, 1884, had been 1,000,000 barrels. 260,000 barrels belonged -to the Pennsylvania. If the Transit Company ran all the railroad’s -percentage it would get eight cents a barrel for the service, $20,800, -and it would pay the railroad $104,000 less $20,800, or $83,200. The -pipe-line probably never ran the whole amount. More or less refined -oil—naphtha, benzine, and other petroleum products—would necessarily go -by rail. Large sums were paid monthly by the National Transit, however, -to the railroad. Mr. Rockefeller seems to have been paying the -Pennsylvania Railroad this money not to compete with him as an oil -carrier. It would be difficult to find in our variegated commercial -history a more beautiful example of the beneficence of combination—to -those in the deal! - -With the removal of danger of any competition by the Pennsylvania -Railroad, the transportation department of the Standard Oil Trust seems -to have been as nearly a perfect machine, both in efficiency and in its -monopolistic power, as ever has been devised. It was more perfect, -indeed, than the refining end of the trust, for independent refiners did -exist, and since 1880 they had been showing increasing vigour, whereas -there seemed now no opportunity for an independent pipe-line ever again -to develop. Who, with the Tidewater’s story in mind, would be bold -enough to attempt to reach the sea? For the time being, then, the -Standard Oil Company had things all its own way. It collected with its -ally, the Tidewater, practically the entire output of a great raw -product. It manufactured fully ninety per cent. of this product, and -aimed to manufacture 100 per cent. It was a common carrier, and so -obliged to deliver oil to rival refineries if they called for it, but -these refineries paid forty or forty-five cents for a service which cost -the Standard Oil Trust not over one-fourth of the sum. - -Mr. Rockefeller had every reason to be satisfied with oil transportation -in 1884, but there was a part of the oil business which was not so -completely in his grasp. The markets of the country were still open. -There the few independent refiners who had escaped strangulation were -free to barter as they could. But the right to make all the oil in the -world, which Mr. Rockefeller claimed, carried with it the right to sell -all the oil the world consumed. The independent was therefore a poacher -in the market and must be driven out. - - - - - CHAPTER TEN - CUTTING TO KILL - - ROCKEFELLER NOW PLANS TO ORGANISE OIL MARKETING AS HE HAD ALREADY - ORGANISED OIL TRANSPORTING AND REFINING—WONDERFULLY EFFICIENT AND - ECONOMICAL SYSTEM INSTALLED—CURIOUS PRACTICES INTRODUCED—REPORTS OF - COMPETITORS’ BUSINESS SECURED FROM RAILWAY AGENTS—COMPETITORS’ - CLERKS SOMETIMES SECURED AS ALLIES—IN MANY INSTANCES FULL RECORDS OF - ALL OIL SHIPPED ARE GIVEN STANDARD BY RAILWAY AND STEAMSHIP - COMPANIES—THIS INFORMATION IS USED BY STANDARD TO FIGHT - COMPETITORS—COMPETITORS DRIVEN OUT BY UNDERSELLING—EVIDENCE FROM ALL - OVER THE COUNTRY—PRETENDED INDEPENDENT OIL COMPANIES STARTED BY THE - STANDARD—STANDARD’S EXPLANATION OF THESE PRACTICES IS NOT - SATISFACTORY—PUBLIC DERIVES NO BENEFIT FROM TEMPORARY LOWERING OF - PRICES—PRICES MADE ABNORMALLY HIGH WHEN COMPETITION IS DESTROYED. - - -To know every detail of the oil trade, to be able to reach at any moment -its remotest point, to control even its weakest factor—this was John D. -Rockefeller’s ideal of doing business. It seemed to be an intellectual -necessity for him to be able to direct the course of any particular -gallon of oil from the moment it gushed from the earth until it went -into the lamp of a housewife. There must be nothing—_nothing_ in his -great machine he did not know to be working right. It was to complete -this ideal, to satisfy this necessity, that he undertook, late in the -seventies, to organise the oil markets of the world, as he had already -organised oil refining and oil transporting. Mr. Rockefeller was driven -to this new task of organisation not only by his own curious intellect; -he was driven to it by that thing so abhorrent to his mind—competition. -If, as he claimed, the oil business belonged to him, and if, as he had -announced, he was prepared to refine all the oil that men would consume, -it followed as a corollary that the markets of the world belonged to -him. In spite of his bold pretensions and his perfect organisation, a -few obstinate oil refiners still lived and persisted in doing business. -They were a fly in his ointment—a stick in his wonderful wheel. He must -get them out; otherwise the Great Purpose would be unrealised. And so, -while engaged in organising the world’s markets, he incidentally carried -on a campaign against those who dared intrude there. - -When Mr. Rockefeller began to gather the oil markets into his hands he -had a task whose field was literally the world, for already, in 1871, -the year before he first appeared as an important factor in the oil -trade, refined oil was going into every civilised country of the globe. -Of the five and a half million barrels of crude oil produced that year, -the world used five millions, over three and a half of which went to -foreign lands. This was the market which had been built up in the first -ten years of business by the men who had developed the oil territory and -invented the processes of refining and transporting, and this was the -market, still further developed, of course, that Mr. Rockefeller -inherited when he succeeded in corralling the refining and transporting -of oil. It was this market he proceeded to organise. - -[Illustration: - - JOHN D. ROCKEFELLER IN 1880 - - FROM A PHOTOGRAPH BY SARONY -] - -The process of organisation seems to have been natural and highly -intelligent. The entire country was buying refined oil for illumination. -Many refiners had their own agents out looking for markets; others sold -to wholesale dealers, or jobbers, who placed trade with local dealers, -usually grocers. Mr. Rockefeller’s business was to replace independent -agents and jobbers by his own employees. The United States was mapped -out and agents appointed over these great divisions. Thus, a certain -portion of the Southwest—including Kansas, Missouri, Arkansas and -Texas—the Waters-Pierce Oil Company, of St. Louis, Missouri, had charge -of; a portion of the South—including Kentucky, Tennessee and -Mississippi—Chess, Carley and Company, of Louisville, Kentucky, had -charge of. These companies in turn divided their territory into -sections, and put the subdivisions in the charge of local agents. These -local agents had stations where oil was received and stored, and from -which they and their salesmen carried on their campaigns. This system, -inaugurated in the seventies, has been developed until now the Standard -Oil Company of each state has its own marketing department, whose -territory is divided and watched over in the above fashion. The entire -oil-buying territory of the country is thus covered by local agents -reporting to division headquarters. These report in turn to the head of -the state marketing department, and his reports go to the general -marketing headquarters in New York. - -To those who know anything of the way in which Mr. Rockefeller does -business, it will go without saying that this marketing department was -conducted from the start with the greatest efficiency and economy. Its -aim was to make every local station as nearly perfect in its service as -it could be. The buyer must receive his oil promptly, in good condition, -and of the grade he desired. If a customer complained, the case received -prompt attention and the cause was found and corrected. He did not only -receive oil; he could have proper lamps and wicks and burners, and -directions about using them. - -The local stations from which the dealer is served to-day are models of -their kind, and one can easily believe they have always been so. Oil, -even refined, is a difficult thing to handle without much disagreeable -odour and stain, but the local stations of the Standard Oil Company, -like its refineries, are kept orderly and clean by a rigid system of -inspection. Every two or three months an inspector goes through each -station and reports to headquarters on a multitude of details—whether -barrels are properly bunged, filled, stencilled, painted, glued; whether -tank wagons, buckets, faucets, pipes, are leaking; whether the glue -trough is clean, the ground around the tanks dry, the locks in good -condition; the horses properly cared for; the weeds cut in the yard. The -time the agent gets around in the morning and the time he takes for -lunch are reported. The prices he pays for feed for his horses, for -coal, for repairs, are noted. In fact, the condition of every local -station, at any given period, can be accurately known at marketing -headquarters, if desired. All of this tends, of course, to the greatest -economy and efficiency in the local agents. - -But the Standard Oil agents were not sent into a territory back in the -seventies simply to sell all the oil they could by efficient service and -aggressive pushing; they were sent there to sell all the oil that was -bought. “The coal-oil business belongs to us,” was Mr. Rockefeller’s -motto, and from the beginning of his campaign in the markets his agents -accepted and acted on that principle. If a dealer bought but a barrel of -oil a year, it must be from Mr. Rockefeller. This ambition made it -necessary that the agents have accurate knowledge of all outside -transactions in oil, however small, made in their field. How was this -possible? The South Improvement scheme provided perfectly for this, for -it bound the railroad to send daily to the principal office of the -company reports of all oil shipped, the name of shipper, the quantity -and kind of oil, the name of consignee, with the destination and the -cost of freight.[91] Having such knowledge as this, an agent could -immediately locate each shipment of the independent refiner, and take -the proper steps to secure the trade. But the South Improvement scheme -never went into operation. It remained only as a beautiful ideal, to be -worked out as time and opportunity permitted. The exact process by which -this was done it is impossible to trace. The work was delicate and -involved operations of which it was wise for the operator to say -nothing. It is only certain that little by little a secret bureau for -securing information was built up until it is a fact that information -concerning the business of his competitors, almost as full as that which -Mr. Rockefeller hoped to get when he signed the South Improvement -Company contracts, is his to-day. Probably the best way to get an idea -of how Mr. Rockefeller built up this department, as well as others of -his marketing bureau, is to examine it as it stands to-day. First, then, -as to the methods of securing information which are in operation. - -Naturally and properly the local agents of the Standard Oil Company are -watchful of the condition of competition in their districts, and -naturally and properly they report what they learn. “We ask our salesmen -and our agents to keep their eyes open and keep us informed of the -situation in their respective fields,” a Standard agent told the -Industrial Commission in 1898. “We ask our agents, as they visit the -trade, to make reports to us of whom the different parties are buying; -principally to know whether our agents are attending to their business -or not. If they are letting too much business get away from them, it -looks as if they were not attending to their business. They get it from -what they see as they go around selling goods.” But there is no such -generality about this part of the agent’s or salesman’s business as this -statement would lead one to believe. As a matter of fact it is a -thoroughly scientific operation. The gentleman who made the above -statement, for instance, sends his local agents a blank like the -following to be made out each month: - -[Illustration: - - EXHIBIT “B—R.”[92] -] - -The local agent gets the information to fill out such a report in -various ways. He questions the dealers closely. He watches the railway -freight stations. He interviews everybody in any way connected with the -handling of oil in his territory. All of which may be proper enough. -When, in the early eighties, Howard Page, of the Standard Oil Company, -was in charge of the Standard shipping department in Kentucky, his -agents visited the depots once a day to see what oil arrived there from -independent shippers. A record of these shipments was made and reported -monthly to Mr. Page. He was able to tell the Interstate Commerce -Commission, in 1887, almost exactly what his rivals had been shipping by -rail and by river. Mr. Page claimed that his agents had no special -privileges; that anybody’s agents would have been allowed to examine the -incoming cars, note the consignor, contents and consignee. It did not -appear in the examination, however, that anybody but Mr. Page had sent -agents to do such a thing. The Waters-Pierce Oil Company, of St. Louis, -once paid one of its Texas agents this unique compliment: “We are glad -to know you are on such good terms with the railroad people that Mr. -Clem (an agent handling independent oil) gains nothing by marking his -shipments by numbers instead of names.” In the same letter the writer -said: “Would be glad to have you advise us when Clem’s first two tanks -have been emptied and returned, also the second two to which you refer -as having been in the yard nine and sixteen days, that we may know how -long they have been held in Dallas. The movement of tank cars enters -into the cost of oil, so it is necessary to have this information that -we may know what we are competing with.”[93] - -The superior receiving the filled blanks carefully follows them by -letters of instructions and inquiries, himself keeping track of each -dealer, however insignificant, in the local agent’s territory, and when -one out of line has been brought in, never failing to compliment his -subordinate. But however diligent the agent may be in keeping his eyes -open, however he may be stirred to activity by the prodding and -compliments of his superiors, it is of course out of the question that -he get anything like the full information the South Improvement scheme -insured. What he is able to do is supplemented by a system which -compares very favourably with that famous scheme and which undoubtedly -was suggested by it. For many years independent refiners have declared -that the details of their shipments were leaking regularly from their -own employees or from clerks in freight offices. At every investigation -made these declarations have been repeated and occasional proof has been -offered; for instance, a Cleveland refiner, John Teagle, testified in -1888 to the Congressional Committee that one day in 1883 his bookkeeper -came to him and told him that he had been approached by a brother of the -secretary of the Standard Oil Company at Cleveland, who had asked him if -he did not wish to make some money. The bookkeeper asked how, and after -some talk he was informed that it would be by his giving information -concerning the business of his firm to the Standard. The bookkeeper -seems to have been a wary fellow, for he dismissed his interlocutor -without arousing suspicion and then took the case to Mr. Teagle, who -asked him to make some kind of an arrangement in order to find out just -what information the Standard wanted. The man did this. For twenty-five -dollars down and a small sum per year he was to make a transcript of Mr. -Teagle’s daily shipments with net price received for the same; he was to -tell what the cost of manufacturing in the refinery was; the amount of -gasoline and naphtha made and the net price received for them; what was -done with the tar; and what percentage of different grades of oil was -made; also how much oil was exported. This information was to be mailed -regularly to Box 164 of the Cleveland post-office. Mr. Teagle, who at -that moment was hot on the tracks of the Standard in the courts, got an -affidavit from the bookkeeper. This he took with the money which the -clerk had received to the secretary of the Standard Oil Company and -charged him with bribery. At first the gentleman denied having any -knowledge of the matter, but he finally confessed and even took back the -money. Mr. Teagle then gave the whole story to the newspapers, where it -of course made much noise. - -Several gentlemen testified before the recent Industrial Commission to -the belief that their business was under the constant espionage of the -Standard Oil Company. Theodore Westgate, an oil refiner of Titusville, -told the Commission that all of his shipments were watched. The -inference from his testimony was that the Standard Oil Company received -reports direct from the freight houses. Lewis Emery, Jr., of Bradford, a -lifelong contestant of the Standard, declared that he knew his business -was followed now in the same way as it was in 1872 under the South -Improvement Company contract. He gave one or two instances from his own -business experience to justify his statements, and he added that he -could give many others if necessary. Mr. Gall, of Montreal, Canada, -declared that these same methods were in operation in Canada. “When our -tank-cars come in,” Mr. Gall told the Commission, “the Standard Oil -Company have a habit of sending their men, opening a tank-car, and -taking a sample out to see what it contains.” Mr. Gall declared that he -knew this a long time before he was able to get proof of it. He declared -that they knew the number of cars that he shipped and the place to which -they went, and that it was their habit to send salesmen after every -shipment. Mrs. G. C. Butts, a daughter of George Rice, an independent -refiner of Marietta, Ohio, told the Ohio Senate Committee which -investigated trusts in 1898 that a railroad agent of their town had -notified them that he had been approached by a Standard representative -who asked him for a full report of all independent shipments, to whom -and where going. The agent refused, but, said Mrs. Butts: “We found out -later that someone was giving them this information and that it was -being given right from our own works.... A party writing us from the -Waters-Pierce office wrote that we had no idea of the network of -detectives, generally railroad agents, that his company kept, and that -everything that we or our agents said or did was reported back to the -managers through a regular network of detectives who were agents of the -railroads and oil company as well.” - -But while the proofs the independents have offered of their charges show -that such leaks have occurred at intervals all over the country, they do -not show anything like a regular system of collecting information -through this channel. From the evidence one would be justified in -believing that the cases were rare, occurring only when a not over-nice -Standard manager got into hot competition with a rival and prevailed -upon a freight agent to give him information to help in his fight. In -1903, however, the writer came into possession of a large mass of -documents of unquestionable authenticity, bearing out all and more than -the independents charge. They show that the Standard Oil Company -receives regularly to-day, at least from the railroads and steamship -lines represented in these papers, information of _all_ oil shipped. A -study of these papers shows beyond question that somebody having access -to the books of the freight offices records regularly each oil shipment -passing the office—the names of consignor and consignee, the addresses -of each, and the quantity and kind of oil are given in each case. This -record is made out usually on a sheet of blank paper, though -occasionally the recorder has been indiscreet enough to use the railroad -company’s stationery. The reports are evidently intended not to be -signed, though there are cases in the documents where the name of the -sender has been signed and erased; in one case a printed head bearing -the name of the freight agent had been used. The name had been cut out, -but so carelessly that it was easy to identify him. These reports had -evidently been sent to the office of the Standard Oil Company, where -they had received a careful examination, and the information they -contained had been classified. Wherever the shipment entered was from -one of the distributing stations of the Standard Oil Company, a line was -drawn through it, or it was checked off in some way. In every other case -in the mass of reports there was written, opposite the name of the -consignee, the name of a person _known_ to be a Standard agent or -salesman in the territory where the shipment had gone. - -Now what is this for? Copies of letters and telegrams accompanying the -reports show that as soon as a particular report had reached Standard -headquarters and it was known that a carload, or even a barrel, of -independent oil was on its way to a dealer, the Standard agent whose -name was written after the shipment on the record had been notified. “If -you can stop car going to X, authorise rebate to Z (name of dealer) of -three-quarters cent per gallon,” one of the telegrams reads. There is -plenty of evidence to show how an agent receiving such information -“stops” the oil. He _persuades_ the dealer to countermand the order. -George Rice, when before the House Committee on Manufactures in 1888, -presented a number of telegrams as samples of his experience in having -orders countermanded in Texas. Four of these were sent on the same day -from different dealers in the same town, San Angelo. Mr. Rice -investigated the cause, and, by letters from the various firms, learned -that the Standard agent had been around “threatening the trade that if -they bought of me they would not sell them any more,” as he put it. - -Mrs. Butts in her testimony in 1898 said that her firm had a customer in -New Orleans to whom they had been selling from 500 to 1,000 barrels a -month, and that the Standard representative made a contract with him to -pay him $10,000 a year for five years to stop handling the independent -oil and take Standard oil! Mrs. Butts offered as evidence of a similar -transaction in Texas the following letter: - - - “LOCKHART, TEXAS, November 30, 1894. - - “Mr. Keenan, who is with the Waters-Pierce people at Galveston, has - made us several visits and made us propositions of all kinds to get - us out of the business. Among others, he offered to pay us a monthly - salary if we would quit selling oil and let them have full control - of the trade, and insisted that we name a figure that we would take - and get out of the business, and also threatened that if we did not - accept his proposition they would cut prices below what oil cost us - and force us out of business. We asked him the question, should we - accept his proposition, would they continue to sell oil as cheap as - we were then selling it, and he stated most positively that they - would advance the price at once should they succeed in destroying - competition. - - “J. S. LEWIS AND COMPANY.” - - -In the Ohio Investigation of 1898 John Teagle, of Cleveland, being upon -his oath, said that his firm had had great difficulty in getting goods -accepted because the Standard agents would persuade the dealers to -cancel the orders. “They would have their local man, or some other man, -call upon the trade and use their influence and talk lower prices, or -make a lower retail price, or something to convince them that they’d -better not take our oil, and, I suppose, to buy theirs.” Mr. Teagle -presented the following letter, signed by a Standard representative, -explaining such a countermand: - - - “DES MOINES, IOWA, January 14, 1891. - - “JOHN FOWLER, - Hampton, Iowa. - - “_Dear Sir_:—Our Marshalltown manager, Mr. Ruth, has explained the - circumstances regarding the purchase and subsequent countermand of a - car of oil from our competitors. He desires to have us express to - you our promise that we will stand all expense provided there should - be any trouble growing out of the countermand of this car. We - cheerfully promise to do this; we have the best legal advice which - can be obtained in Iowa, bearing on the points in this case. An - order can be countermanded either before or after the goods have - been shipped, and, in fact, can be countermanded even if the goods - have already arrived and are at the depot. A firm is absolutely - obliged to accept a countermand. The fact that the order has been - signed does not make any difference. We want you to absolutely - refuse, under any circumstances, to accept the car of oil. We are - standing back of you in this matter, and will protect you in every - way, and would kindly ask you to keep this letter strictly - confidential.... - - “Yours truly, E. P. PRATT.” - - -Peter Shull, of the Independent Oil Company of Mansfield, Ohio, -testified before the same committee to experiences similar to those of -Mr. Teagle. - -“If I put a man on the road to sell goods for me,” said Mr. Shull, “and -he takes orders to the amount of 200 to 300 barrels a week, before I am -able to ship these goods possibly, the Standard Oil Company has gone -there and compelled those people to countermand those orders under a -threat that, if they don’t countermand them, they will put the price of -oil down to such a price that they cannot afford to handle the goods.” - -In support of his assertion Mr. Shull offered letters from firms he has -been dealing with. The following citations show the character of them: - - - “TIFFIN, OHIO, February 1, 1898. - - “INDEPENDENT OIL COMPANY, - Mansfield, Ohio. - - “_Dear Sirs_:—The Standard Oil Company, after your man was here, had - the cheek to come in and ask how many barrels of oil we bought and - so forth, then asked us to countermand the order, saying it would be - for our best; we understand they have put their oil in our next door - and offer it at six cents per gallon, at retail. Shall we turn tail - or show them fight? If so, will you help us out any?... - - “Yours truly, - “TALBOTT AND SON.” - - - “TIFFIN, OHIO, January 24, 1898. - - “INDEPENDENT OIL COMPANY. - - “_Dear Sirs_: ... I am sorry to say that a Standard Oil man from - your city followed that oil car and oil to my place, and told me - that he would not let me make a dollar on that oil, and was dogging - me around for two days to buy that oil, and made all kinds of - threats and talked to my people of the house while I was out, and - persuaded me to sell, and I was in a stew what I should do, but I - yielded and I have been very sorry for it since. I thought I would - hate to see the bottom knocked out of the prices, but that is why I - did it—the only reason. The oil was all right. I now see the - mistake, and that is of getting a carload—two carloads coming in - here inside of a week is more than the other company will stand.... - - “Yours truly, - “H. A. EIRICK.” - - -In case the agent cannot persuade the dealer to countermand his order, -more strenuous measures are applied. The letters quoted above hint at -what they will be. Many letters have been presented by witnesses under -oath in various investigations showing that Standard Oil agents in all -parts of the country have found it necessary for the last twenty-five -years to act at times as these letters threaten. One of the most -aggressive of these campaigns waged at the beginning of this war of -exterminating independent dealers was by the Standard marketing agent at -Louisville, Kentucky—Chess, Carley and Company. This concern claimed a -large section of the South as its territory. George Rice, of Marietta, -Ohio, had been in this field for eight or ten years, having many regular -customers. It became Chess, Carley and Company’s business to secure -these customers and to prevent his getting others. Mr. Rice was -handicapped to begin with by railroad discrimination. He was never able -to secure the rates of his big rival on any of the Southern roads. In -1888 the Interstate Commerce Commission examined his complaints against -eight different Southern and Western roads, and found that no one of -them treated him with “relative justice.” Railroad discriminations were -not sufficient to drive him out of the Southwest, however, and a war of -prices was begun. According to the letters Mr. Rice himself has -presented he certainly in some cases began the cutting, as he could well -afford to do. For instance, Chess, Carley and Company were selling -water-white oil in September, 1880, in Clarksville, Tennessee, at -twenty-one cents a gallon delivered in carloads—export oil was selling -in barrels in New York at that date at 10⅝ cents a gallon. Rice’s agent -offered at eighteen cents. The dealer to whom he made the offer, -Armstrong by name, wished to accept, but as he had been buying of Chess, -Carley and Company, went first to see them about the matter. He came -back “scared almost out of his boots,” wrote the agent to Rice. - - - “Carley told him he would break him up if he bought oil of anyone - else; that the Standard Company had authorised him to spend $10,000 - to break up any concern that bought oil from anyone else; that he - (Carley) would put all his drummers in the field to hunt up - Armstrong’s customers and sell his customers groceries at five per - cent. below Armstrong’s prices, and turn all Armstrong’s trade over - to Moore, Bremaker and Company, and settle with Moore, Bremaker and - Company for their losses in helping to break Armstrong up, every - thirty days. - - “That if Armstrong sent any other oil to Clarksville, Tennessee, he - (Carley) would put the price of oil so low in Clarksville as to make - the party lose heavily, and that they (the Standard) would break up - anyone that would sell him (Armstrong) oil, and that he (Carley) had - told Stege and Reiling the same thing. Did you ever? What do you - think of that?” - - -[Illustration] - -Very soon after this, Chess, Carley and Company took in hand a Nashville -firm, Wilkinson and Company, which was buying of Rice. “It is with great -reluctance,” they wrote, “that we undertake serious competition with any -one, _and certainly this competition will not be confined to coal-oil or -any one article, and will not be limited to any one year_. We always -stand ready to make reasonable arrangements with any one who chooses to -appear in our line of business, and it will be unlike anything we have -done heretofore if we permit any one to force us into an arrangement -which is not reasonable. Any loss, however great, is better to us than a -record of this kind.” And four days later they wrote: “If you continue -to bring on the oil, it will simply force us to cut down our price, and -no other course is left to us but the one we have intimated.” Wilkinson -and Company seem to have stuck to Rice’s oil, for sixteen months later, -we find Chess, Carley and Company calling on the agent of a railroad, -which already was giving the Standard discriminating rates, to help in -the fight. - -The screw was turned, Mr. Rice affirms, his rate being raised fifty per -cent. in five days. - -Rice carried on his fight for a market in the most aggressive way, and -everywhere he met disastrous competition. In 1892 he published a large -pamphlet of documents illustrating Standard methods, in which he -included citations from some seventy letters from dealers in Texas, -received by him between 1881 and 1889, showing the kind of competition -his oil met there from the Waters-Pierce Oil Company, the Standard’s -Texas agents. A dozen sentences, from as many different towns, will show -the character of them all: - - - “I have had wonderful competition on this car. As soon as my car - arrived the Waters-Pierce Oil Company, who has an agent here, - slapped the price down to $1.80 per case 110.” - - “... Oil was selling at this point for $2.50 per case, and as soon - as your car arrived it was put down to $1.50, which it is selling at - to-day.” - - “The Waters-Pierce Oil Company reduced their prices on Brilliant oil - from $2.60 to $1.50 per case and is waging a fierce war.” - - “Waters-Pierce Oil Company has our state by the throat and we would - like to be extricated.” - - “I would like to handle your oil if I could be protected against the - Waters-Pierce Oil Company. I am afraid if I would buy a car of oil - from you this company would put the oil way below what I pay and - make me lose big money. I can handle your oil in large quantities if - you would protect me against them.” - - “The Waters-Pierce Oil Company has cut the stuffing out of coal-oil - and have been ever since I got in my last car. They put the price to - the merchants at $1.80 per case.” - - “We have your quotations on oil. While they are much lower than what - we pay, yet unless a carload could be engaged it would pay no firm - to try and handle, as Waters-Pierce Oil Company would cut below cost - on same.” - - “The day your oil arrived here, their agent went to all my customers - and offered their Eupion oil at ten cents per gallon in barrels and - $1.50 per case, and lower grades in proportion, and told them if - they did not refuse to take the oil he would not sell them any more - at any price, and that he was going to run me out of the business, - and then they would be at his mercy.” - - “Now we think Waters-Pierce Oil Company have been getting too high a - price for their oil. They are able and do furnish almost this entire - state with oil. They cut prices to such an extent when any other oil - is offered in this state that they force the parties handling the - oil to abandon the trade.” - - “Trace and hurry up car of oil shipped by you. We learn it is - possible that your oil is side-tracked on the line, that - Waters-Pierce might get in their work.” - - “If we were to buy a car or more, the Waters-Pierce Oil Company - would manage to sell a little cheaper than we could, and continue - doing so until they busted me up.” - - “In regard to oil, we are about out now, and Waters-Pierce have put - their oil up again and quote us at the old price.” - - “Jobbers say when they take hold of another oil they are at once - boycotted by Waters-Pierce Oil Company, who not only refuse to sell - them, but put oil below what they pay for it, and thus knock them - out of the oil trade, unless they sell at a loss.” - - “If I find that I can handle your oil in Texas without being run out - and losing money by this infernal corporation, the Waters-Pierce Oil - Company, I want to arrange with you to handle it extensively. I - received verbal notice this morning from their agent that they would - make it hot for me when my oil got here.” - - -Mr. Rice claims, in his preface to the collection of letters here quoted -from, that he has hundreds of similar ones from different states in the -Union, and the writer asked to examine them. The package of documents -submitted in reply to this request was made up literally of hundreds of -letters. They came from twelve different states, and show everywhere the -same competitive method—cutting to kill. One thing very noticeable in -these letters is the indignation of the dealers at the Standard methods -of securing trade. They resent threats. They complain that the Standard -agents “nose” about their premises, that they ask impudent questions, -and that they generally make the trade disgusting and humiliating. In -Mississippi, in the eighties, the indignation of the small dealers -against Chess, Carley and Company was so strong that they formed -associations binding themselves not to deal with them. - -These same tactics have been kept up in the Southwest ever since. A -letter, dated April 28, 1891, from the vice-president of the -Waters-Pierce Oil Company, A. M. Finlay, to his agent at Dallas, Texas, -says bluntly: “We want to make the prices at Dallas and in the -neighbourhood on Brilliant and water-white oil, that will prevent Clem -(an independent dealer) from doing any business.” And Mr. Finlay adds: -“Hope you will make it a point to be present at the next meeting of the -city council, to-morrow night, and do everything possible to prevent -granting a permit to build within the city limits, unless building -similar to ours is constructed, for it would not be fair to us to allow -someone else to put up constructions for the storage of oil, when they -had compelled us to put up such an expensive building as we have.”[94] - -Mr. Rice is not the only independent oil dealer who has produced similar -testimony. Mr. Teagle and Mr. Shull, in Ohio, have furnished -considerable. “The reason we quit taking your oil is this,” wrote a -Kansas dealer to Scofield, Shurmer and Teagle, in 1896: “The Standard -Oil Company notified us that if we continued handling your oil they -would cut the oil to ten cents retail, and that we could not afford to -do, and for that reason we are forced to take their oil or do business -for nothing or at a loss.” “The Standard agent has repeatedly told me -that if I continued buying oil and gasoline from your wagon,” wrote an -Ohio dealer to the same firm in 1897, “they would have it retailed here -for less than I could buy. I paid no attention to him, but yesterday -their agent was here and asked me decidedly if I would continue buying -oil and gasoline from your wagon. I told him I would do so; then he went -and made arrangements with the dealers that handle their oil and -gasoline to retail it for seven cents.” - -Mr. Shull summed up his testimony before the same committee to which Mr. -Teagle gave the above, by declaring: “You take $10,000 and go into the -business and I will guarantee you won’t be in business ninety days. -Their motto is that anybody going into the oil business in opposition to -them they will make life a burden to him. That is about as near as you -can get to it.” - -Considerable testimony of the same sort of practices was offered in the -recent “hearing before the Industrial Commission,” most of it general in -character. The most significant special case was offered by Mr. -Westgate, the treasurer of the American Oil Works, an independent -refinery of Titusville, Pennsylvania. - -The American Oil Works, it seems, were in 1894 shipping oil called -“Sunlight” in barrels to South Bend, Washington. This was in the -territory of the Standard agents at Portland, Oregon, one of whom wrote -to a South Bend dealer when he heard of the intrusion: “We will state -for your information that never a drop of oil has reached South Bend of -better quality than what we have always shipped into that territory. -They can name it ‘Sunlight,’ ‘Moonlight,’ or ‘Starlight,’ it makes no -difference. You can rest assured if another carload of ‘Sunlight’ -arrives at your place, it will be sold very cheap. We do not purpose to -allow another carload to come into that territory unless it comes and is -put on the market at one-half its actual cost. You can convey this idea -to the young man who imported the carload of ‘Sunlight’ oil.” - -When John D. Archbold, of the Standard Oil Company, had his attention -called to this letter by Professor Jenks, of the Industrial Commission, -Mr. Archbold characterised the letter as “a foolish statement by a -foolish and unwise man” and promised to investigate it. Later he -presented the commission with an explanation from the superior of the -agent, who declared that the writer of the letter did not have any -authority to say that oil would be sold on the basis mentioned. “The -letter,” he continued, “was intended to be written in a jocular manner -to deny a claim that he was selling oil inferior in quality to that sold -by others.” It is hard for the mere outsider to catch the jocularity of -the letter, and it must have been much more difficult for the dealer who -received it to appreciate it. - -Independent oil dealers of the present day complain bitterly of a rather -novel way employed by the Standard for bringing into line dealers whose -prejudices against buying from them are too strong to be overcome by the -above methods. This is through what are called “bogus” oil companies. -The obdurate dealer is approached by the agent of a new independent -concern, call it the A B C Oil Company, for illustration. The agent -seeks trade on the ground that he represents an independent concern and -that he can sell at lower prices than the firm from which the dealer is -buying. Gradually he works his way into the independent’s trade. As a -matter of fact, the new company is merely a Standard jobbing house which -makes no oil, and which conceals its real identity under a misleading -name. The mass of reports from railroad freight offices quoted from in -this article corroborate this claim of the independents. The A B C Oil -Company is mentioned again and again as shipping oil, and in the audited -reports it is always checked off in the same fashion as the known -Standard companies, and none of its shipments is referred to Standard -agents. Independents all over the country tell of loss of markets -through underselling by these “bogus” companies. The lower price which a -supposedly independent concern gives to a dealer who will not, under any -condition, buy of the Standard, need not demoralise the Standard trade -in the vicinity if the concession is made with caution. After the trade -is secure, that is, after the genuine independent is ousted, the -masquerading concern always finds itself obliged to advance prices. When -the true identity of such a company becomes known its usefulness -naturally is impaired, and it withdraws from the field and a new one -takes its place. - -There is never a dealer in oil too small to have applied the above -methods of competition. In recent years they have frequently been -applied even to oil peddlers. In a good many towns of the country oil is -sold from door to door by men whose whole stock in trade is their -peddling wagons. Many of these oil peddlers build up a good trade. As a -rule they sell Standard oil. Let one take independent oil, however, and -the case is at once reported. His customers are located and at once -approached by a Standard tank-wagon man, who frequently, it is said, not -only sells at a lower price than they have been paying, but even goes so -far as to clean and fill the lamps! In these raids on peddlers of -independent oil, refined oil has been sold in different cities at the -doors of consumers at less than crude oil was bringing at the wells, and -several cents per gallon less than it was selling to wholesale dealers -in refined. It is claimed by independents that at the present time the -“bogus” companies generally manage this matter of driving out peddlers, -thus saving the Standard the unpopularity of the act and the -dissatisfaction of the rise in price which, of course, follows as soon -as the trade is secured. - -The general explanation of these competitive methods which the Standard -officials have offered, is that they originate with “over-zealous” -employees and are disapproved of promptly if brought to the attention of -the heads of the house. The cases seem rather too universal for such an -explanation to be entirely satisfactory. Certainly the system of -collecting information concerning competitive business is not practised -by the exceptional “over-zealous” employee, but is a recognised -department of the Standard Oil Company’s business. In the mass of -documents from which the reports of oil shipments referred to above were -drawn, are certain papers showing that the system is nearly enough -universal to call for elaborate and expensive bookkeeping at the -headquarters of each Standard marketing division. For instance, on the -next page is a fragment illustrating the page of a book kept at such a -headquarters. - -What does this show? Simply that every day the reports received from -railroad freight agents are entered in records kept for the purpose; -that there is on file at the Standard Oil headquarters a detailed list -of the daily shipments which each independent refiner sends out, even to -the initials and number on the car in which the shipment goes. From this -remarkable record the same set of documents shows that at least two sets -of reports are made up. One is a report of the annual volume of business -being done by each particular independent refiner or wholesale jobber, -the other of the business of each individual local dealer, so far as the -detectives of the Standard have been able to locate it. For instance, -among the documents is the report on a well-known oil jobbing house in -one of the big cities of the country—reproduced on the next page. - -[Illustration: - - The figures, dates, consignees and destination on the above are - fictitious. The names of shippers were copied from the original in - possession of the writer. -] - -A comparison of this report with the firm’s own accounts shows that the -Standard came within a small per cent. of an accurate estimate of the X -Y Z’s business. - -[Illustration: - - The above is similar to the form compiled by the Standard Oil Company. -] - -Another curious use made of these reports from the freight offices is -forming a card catalogue of local dealers. (See form on page 55.) Oil is -usually sold at retail by grocers. It is with them that the local agents -deal. Now the daily reports from the freight offices show the oil they -receive. The competition reports from local agents also give more or -less information concerning their business. A card is made out for each -of them, tabulating the date on which he received oil, the name and -location of the dealer he got it from, the quality, and the price he -sells at. In a space left for remarks on the card there is written in -red ink any general information about the dealer the agent may have -picked up. Often there is an explanation of why the man does not buy -Standard oil—not infrequently this explanation reads: “Is opposed to -monopolies.” It is impossible to say from documentary evidence how long -such a card catalogue has been kept by the Standard; that it has been a -practice for at least twenty-five years the following quotation from a -letter written in 1903 by a prominent Standard official in the Southwest -to one of his agents shows: “Where competition exists,” says the -official, “it has been our custom to keep a record of each merchant’s -daily purchase of bulk oil; and I know of one town at least in the -Southern Texas Division where that record has been kept, whether there -was competition or not, for the past fifteen years.”[95] - -[Illustration: - - The names, figures, and locations on the above form are fictitious. - The remarks are copied from cards in possession of the writer. -] - -The inference from this system of “keeping the eyes open” is that the -Standard Oil Company knows practically where every barrel shipped by -every independent dealer goes; and where every barrel bought by every -corner-grocer from Maine to California comes from. The documents from -which the writer draws the inference do not, to be sure, cover the -entire country, but they do cover in detail many different states, and -enough is known of the Standard’s competitive methods in states outside -this territory to justify one in believing that the system of gathering -information is in use everywhere. That it is a perfect system is -improbable. Bribery is not as dangerous business in this country as it -deserves to be—of course nothing but a bribe would induce a clerk to -give up such information as these daily reports contain—but, happily, -such is the force of tradition that even those who have practised it for -a long time shrink from discovery. It is one of those political and -business practices which are only respectable when concealed. Naturally, -then, the above system of gathering information must be handled with -care, and can never have the same perfection as that Mr. Rockefeller -expected when he signed the South Improvement Company charter. - -The moral effect of this system on employees is even a more serious -feature of the case than the injustice it works to competition. For a -“consideration” railroad freight clerks give confidential information -concerning freight going through their hands. It would certainly be -quite as legitimate for post-office clerks to allow Mr. Rockefeller to -read the private letters of his competitors, as it is that the clerks of -a railroad give him data concerning their shipments. Everybody through -whose hands such information passes is contaminated by the knowledge. To -be a factor, though even so small a one, in such a transaction, blunts -one’s sense of right and fairness. The effect on the local Standard -agent cannot but be demoralising. Prodded constantly by letters and -telegrams from superiors to secure the countermand of independent oil, -confronted by statements of the amount of sales which have gotten away -from him, information he knows only too well to have been secured by -underhand means, obliged to explain why he cannot get this or that trade -away from a rival salesman, he sinks into habits of bullying and -wheedling utterly inconsistent with self-respect. “Is there nothing you -independents can do to prevent our people finding out who you sell to?” -an independent dealer reports a hunted Standard agent asking him. “My -life is made miserable by the pressure brought on to chase up your -sales. I don’t like such business. It isn’t right, but what can I do?” - -The system results every now and then, naturally enough, in flagrant -cases of bribing employees of the independents themselves. Where the -freight office does not yield the information, the rival’s own office -may, and certainly if it is legitimate to get it from one place it is -from the other. It is not an unusual thing for independent refiners to -discharge a man whom they have reason to believe gives confidential -information to the Standard. An outrageous case of this, which occurred -some ten years ago, is contained in an affidavit which has been recently -put at the writer’s disposition. It seems that in 1892 the Lewis Emery -Oil Company, an independent selling concern in Philadelphia, employed a -man by the name of Buckley. This man was discharged, and in September of -that year he went into the employ of the leading Standard refinery of -Philadelphia, a concern known as the Atlantic Refining Company. -According to the affidavit made by this man Buckley, the managers of the -Standard concern, some time in February, 1893, engaged him in -conversation about affairs of his late employer. They said that if they -could only find out the names of the persons to whom their rival sold, -and for what prices, they could soon run him out of business! And they -asked Buckley if he could not get the information for them. After some -discussion, one of the Standard managers said: “What’s the matter with -the nigger?” alluding to a coloured boy in the employment of the Lewis -Emery concern. Buckley told them that he would try him. “You can tell -the nigger,” said one of the men, “that he needn’t be afraid, because if -he loses his position there’s a position here for him.” - -Buckley saw the negro and made a proposition to him. The boy agreed to -furnish the information for a price. “Starting from February, 1893,” -says Mr. Buckley, “and lasting up to about August of the same year, this -boy furnished me periodically with the daily shipments of the Lewis -Emery concern, which I took and handed personally, sometimes to one and -sometimes to the other manager. They took copies of them, and usually -returned the originals.” The negro also brought what is known as the -price-book to Buckley, and a complete copy of this was made by the -Standard managers. “In short,” says Mr. Buckley in his affidavit, “I -obtained from the negro all the inside facts concerning the Lewis Emery -Oil Company’s business, and I furnished them all to the Standard -managers.” In return for this information the negro lad was paid various -sums, amounting in all to about ninety dollars. Buckley says that they -were charged upon the Standard books to “Special Expenses.” The -transaction was ended by the discharge of the coloured boy by the Lewis -Emery concern. - -The dénouement of this case is tragic enough. The concern was finally -driven out of business by these and similar tactics, so Mr. Emery and -his partner both affirm. The negro was never taken into the Atlantic -Refinery, and Buckley soon after lost his position, as he of course -richly deserved to. A man who shows himself traitorous, lying, thieving, -even for the “good of the oil business,” is never kept long in the -employment of the Standard Oil Company. It is notorious in the Oil -Regions that the people who “sell” to the Standard are never given -responsible positions. They may be shifted around to do “dirty work,” as -the Oil Regions phrase goes, but they are pariahs in the concern. Mr. -Rockefeller knows as well as any man ever did the vital necessity of -honesty in an organisation, and the Buckleys and negroes who bring him -secret intelligence never get anything but money and contempt for their -pains. - -For the general public, absorbed chiefly in the question, “How does all -this affect what we are paying for oil?” the chief point of interest in -the marketing contests is that, after they were over, the price of oil -has always gone back with a jerk to the point where it was when the -cutting began, and not infrequently it has gone higher—the public pays. -Several of the letters already quoted in this chapter show the immediate -recoil of the market to higher prices with the removal of competition. A -table was prepared in 1892 to show the effect of competition on the -price of oil in various states of the Union. The results were startling. -In California, oil which sold at non-competitive points at 26½ cents a -gallon, at competitive points brought 17½ cents. In Denver, Colorado, -there was an “Oil War” on in the spring of 1892, and the same oil which -was selling at Montrose and Garrison at twenty-five cents a gallon, in -Denver sold at seven cents. This competition finally killed opposition -and Denver thereafter paid twenty-five cents. The profits on this price -were certainly great enough to call for competition. The same oil which -was sold in Colorado in the spring of 1892 at twenty-five cents, sold in -New York for exportation at 6.10 cents. Of course the freight rates to -Colorado were high, the open rate was said to be nine cents a gallon, -but that it cost the Standard Oil Company nine cents a gallon to get its -oil there, one would have to have documentary proof to believe, and, -even if it did, there was still some ten cents profit on a gallon—five -dollars on a barrel. In Kansas, at this time, the difference between the -price at competitive and non-competitive points was seven cents; in -Indiana six cents; in South Carolina four and one-half cents.[96] - -In 1897 Scofield, Shurmer and Teagle, of Cleveland, prepared a circular -showing the difference between prices at competitive and non-competitive -points in Ohio, and sent it out to the trade. According to this circular -the public paid from 25 to 33⅓ per cent. more where there was no -competition. The fact that oil is cheaper where there is competition, -and also that the public has to pay the cost of the expensive “Oil Wars” -which have been carried on so constantly for the last twenty-five years -all over the country, is coming to be recognised, especially in the -Middle West of this country, by both dealers and communities. There is -no question that the attempts of Standard agents to persuade or bully -dealers into countermanding orders, or giving up an independent with -whose oil they are satisfied, meet with much less general success than -they once did. It even happens now and then that communities who have -had experience with “Oil Wars” will stand by an independent dealer for -months at a time, resisting even the temptation to have their lamps -cleaned and filled at next to nothing. - -Briefly put, then, the conclusion, from a careful examination of the -testimony on Standard competitive methods, is this: - -The marketing department of the Standard Oil Company is organised to -cover the entire country, and aims to sell all the oil sold in each of -its divisions. To forestall or meet competition it has organised an -elaborate secret service for locating the quantity, quality, and selling -price of independent shipments. Having located an order for independent -oil with a dealer, it persuades him, if possible, to countermand the -order. If this is impossible, it threatens “predatory competition,” that -is, to sell at cost or less, until the rival is worn out. If the dealer -still is obstinate, it institutes an “Oil War.” In late years the -cutting and the “Oil Wars” are often intrusted to so-called “bogus” -companies, who retire when the real independent is put out of the way. -In later years the Standard has been more cautious about beginning -underselling than formerly, though if a rival offered oil at a less -price than it had been getting—and generally even small refineries can -contrive to sell below the non-competitive prices of the Standard—it -does not hesitate to consider the lower price a declaration of war and -to drop its prices and keep them down until the rival is out of the way. -The price then goes back to the former figure or higher. John D. -Archbold’s testimony before the Industrial Commission in 1898 -practically confirms the above conclusion. Mr. Archbold said that the -Standard was in the habit of fighting vigorously to hold and advance its -trade—even to the extent of holding prices down to cost until the rival -gives way—though he declared it to be his opinion that the history of -the company’s transactions would show that the competitor forces the -fight. Mr. Archbold told the commission that he personally believed it -was not advisable to sell below cost for the sake of freezing out a -smaller rival, save in “greatly aggravated cases,” though he admitted -the Standard sometimes did it. The trouble is that, accepting Mr. -Rockefeller’s foundation principle that the oil business belongs to him, -any competition is “an aggravated case.” All that is reassuring in the -situation has come from the obstinate stand of individuals—the refiners -who insisted on doing an independent business, on the theory that “this -is a free country”; the grocers who resented the prying and bullying of -Standard agents, and asserted their right to buy of whom they would; the -rare, very rare, community that grasped the fact that oil sold below -cost temporarily, meant later paying for the fight. These features of -the business belong to the last decade and a half. At the period we have -reached in this history—that is, the completion of the monopoly of the -pipe-lines in 1884 and the end of competition in transporting oil—there -seemed to the independents no escape from Mr. Rockefeller in the market. - -The sureness and promptness with which he located their shipments seemed -uncanny to them. The ruthlessness and persistency with which he cut and -continued to cut their prices drove them to despair. The character of -the competition Mr. Rockefeller carried on in the markets, particularly -of the South and Middle West of this country, at this time, aggravated -daily the feeble refining element, and bred contempt far and wide among -people who saw the cutting, and perhaps profited temporarily by it, but -who had neither the power nor the courage to interfere. The knowledge of -it fed greatly the bitterness in the Oil Regions. Part of the stock in -conversation of every dissatisfied oil producer or ruined refiner became -tales of disastrous conflicts in markets. They told of crippled men -selling independent oil from a hand cart, whose trade had been wiped out -by a Standard cart which followed him day by day, practically giving -away oil. They told of grocers driven out of business by an attempt to -stand by a refiner. They told endless tales, probably all exaggerated, -perhaps some of them false, yet all of them believed, because of such -facts as have been rehearsed above. There came to be a popular -conviction that the “Standard would do anything.” It was a condition -which promised endless annoyance to Mr. Rockefeller and his colleagues. -It meant popular mistrust, petty hostilities, misinterpretations, -contempt, abuse. There were plenty of people even willing to deny Mr. -Rockefeller ability. That the Standard was in a venture was enough in -those people’s minds to damn it. Anything the Standard wanted was wrong, -anything they contested was right. A verdict for them demonstrated the -corruption of the judge and jury; against them their righteousness. Mr. -Rockefeller, indeed, was each year having more reason to realise -monopoly building had its trials as wells as its profits. - - - - - CHAPTER ELEVEN - THE WAR ON THE REBATE - - ROCKEFELLER’S SILENCE—BELIEF IN THE OIL REGIONS THAT COMBINED - OPPOSITION TO HIM WAS USELESS—INDIVIDUAL OPPOSITION STILL - CONSPICUOUS—THE STANDARD’S SUIT AGAINST SCOFIELD, SHURMER AND - TEAGLE—SEEKS TO ENFORCE AN AGREEMENT WITH THAT FIRM TO LIMIT OUTPUT - OF REFINED OIL—SCOFIELD, SHURMER AND TEAGLE ATTEMPT TO DO BUSINESS - INDEPENDENTLY OF THE STANDARD AND ITS REBATES—FIND THEIR LOT - HARD—THEY SUE THE LAKE SHORE AND MICHIGAN SOUTHERN RAILWAY FOR - DISCRIMINATING AGAINST THEM—A FAMOUS CASE AND ONE THE RAILWAY - LOSES—ANOTHER CASE IN THIS WAR OF INDIVIDUALS ON THE REBATE SHOWS - THE STANDARD STILL TO BE TAKING DRAWBACKS—THE CASE OF GEORGE RICE - AGAINST THE RECEIVER OF THE CINCINNATI AND MARIETTA RAILROAD. - - -The apathy and inaction which naturally flow from a great defeat lay -over the Oil Regions of Northwestern Pennsylvania long after the -compromise with John D. Rockefeller in 1880, followed, as it was, by the -combination with the Standard of the great independent seaboard -pipe-line which had grown up under the oil men’s encouragement and -patronage. Years of war with a humiliating outcome had inspired the -producers with the conviction that fighting was useless, that they were -dealing with a power verging on the superhuman—a power carrying -concealed weapons, fighting in the dark, and endowed with an altogether -diabolic cleverness. Strange as the statement may appear, there is no -disputing that by 1884 the Oil Regions as a whole looked on Mr. -Rockefeller with superstitious awe. Their notion of him was very like -that which the English common people had for Napoleon in the first part -of the 19th century, which the peasants of Brittany have even to-day for -the English—a dread power, cruel, omniscient, always ready to spring. - -This attitude of mind, altogether abnormal in daring, impetuous, and -self-confident men, as those of the Oil Regions were, was based on -something more than the series of bold and admirably executed attacks -which had made Mr. Rockefeller master of the oil business. The first -reason for it was the atmosphere of mystery in which Mr. Rockefeller had -succeeded in enveloping himself. He seems by nature to dislike the -public eye. In his early years his home, his office, and the Baptist -church were practically the only places which saw him. He did not -frequent clubs, theatres, public meetings. When his manœuvres began to -bring public criticism upon him, his dislike of the public eye seems to -have increased. He took a residence in New York, but he was unknown -there save to those who did business with him or were interested in his -church and charities. His was perhaps the least familiar face in the -Standard Oil Company. He never went to the Oil Regions, and the Oil -Regions said he was afraid to come, which might or might not have been -true. Certainly the Oil Regions never hesitated to express opinions -about him calculated to make a discreet man keep his distance. - -Even in Cleveland, his home for twenty-five years, Mr. Rockefeller was -believed to conceal himself from his townsmen. It is certain that the -operations of his great business were guarded with the most jealous -care. The New York Sun sent an “experienced observer” to Cleveland in -1882 to write up the Standard concern. He speaks with amazement in his -letters of the atmosphere of secrecy and mystery which he found -enveloping everything connected with Mr. Rockefeller. You could not get -an interview with him, the observer complained; even his home papers had -ceased to go to the Standard offices to inquire about the truth of -rumours which reached them from the outside. The hundreds of employees -of the trust in the town were as silent as their master in all that -concerned the business, and if one talked—well, he was not long an -employee of Mr. Rockefeller. There was between the Standard Oil Company -and the town and press of Cleveland none of the _camaraderie_, the -mutual good-will and pride and confidence which usually characterise the -relations between great businesses and their environment. - -In Cleveland, as in the Oil Regions, Mr. Rockefeller’s careful effort to -cover up his intentions and his tracks had been at first met with jeers -and blunt rebuffs, but he had finally succeeded in silencing and awing -the people. It is worth noting that while all of the members of the -Standard Oil Company followed Mr. Rockefeller’s policy of saying -nothing, there was no such popular dread of any other one of them. In -the Oil Regions, for instance, there was a bitter hatred of the Standard -Oil Company as an organisation, but for the most part the people liked -the men who served it, and certainly had no awe of them, for these men -circulated freely among their fellow-townsmen; they were active in all -the pleasures and enterprises of the communities in which they lived; -they were generous, able, cordial, and whatever the people said of the -concern they served, they generally qualified it by expressing their -personal likings for the men themselves. - -A second reason for the popular dread of Mr. Rockefeller was that this -man, whom nobody saw and who never talked, knew everything—even -unexpected and trivial things—and those who saw the effect of this -knowledge and did not see how he could obtain it, regarded him as little -short of an omniscient being. There was really nothing in the least -occult about Mr. Rockefeller’s omniscience. He obtained part of his -knowledge of other people’s affairs by a most extensive and thoroughly -organised system of news-gathering, such as any bright business man of -wide sweep might properly employ. But he combined with this perfectly -legitimate work the sordid methods of securing confidential information -described in the last chapter. Certainly there is nothing of the -transcendental in this kind of omniscience, and the feeling of -supernaturalism which Mr. Rockefeller had inspired by 1884 has entirely -evaporated since, as evidence of his methods has been circulated. The -source was, however, long secret, and when again and again men who could -hardly suppose their existence known to Mr. Rockefeller saw movements -anticipated which they believed known only to themselves and their -confidential agents, they began to dread him and to invest him with -mysterious qualities. If Mr. Rockefeller had been as great a -psychologist as he is business manipulator he would have realised that -he was awakening a terrible popular dread, and he would have foreseen -that one day, with the inevitable coming to light of his methods, there -would spring up about his name a crop of scorn which would choke any -crop of dollars and donations which the wealth of the earth could -produce. - -The effect of this dread was deplorable, for it intensified the feeling, -now wide-spread in the Oil Regions, that it was useless to make further -effort at a combined resistance. And yet these men, who were now lying -too supine in Mr. Rockefeller’s steel glove even to squirm, had laid the -foundation of freedom in the oil business. It has taken thirty years to -demonstrate the inestimable value of the efforts which in 1884 they -regarded as futile—thirty years to build even a small structure on the -foundation they had laid, though that much has been done. - -The situation was saved at this critical time by individuals scattered -through the oil world who were resolved to test the validity of Mr. -Rockefeller’s claim that the coal-oil business belonged to him. “We have -a right to do an independent business,” they said, “and we propose to do -it.” They began this effort by an attack on the weak spot in Mr. -Rockefeller’s armour. The twelve years just passed had taught them that -the realisation of Mr. Rockefeller’s great purpose had been made -possible by his remarkable manipulation of the railroads. It was the -rebate which had made the Standard Oil Trust, the rebate, amplified, -systematised, glorified into a power never equalled before or since by -any business of the country. The rebate had made the trust, and the -rebate, in spite of ten years of combination, Petroleum Associations, -Producers’ Unions, resolutions, suits in equity, suits in quo warranto, -appeals to Congress, legislative investigations—the rebate still was Mr. -Rockefeller’s most effective weapon. If they could wrest it from his -hand they could do business. They had learned something else in this -period—that the whole force of public opinion and the spirit of the law -were against the rebate, and that the railroads, knowing this, feared -exposure of discrimination, and could be made to settle rather than have -their practices made public. Therefore, said these individuals, we -propose to sue for rebates and collect charges until we make it so -harassing and dangerous for the railroads that they will shut down on -Mr. Rockefeller. - -The most interesting and certainly the most influential of these private -cases was that of Scofield, Shurmer and Teagle, of Cleveland, one of the -firms which, in 1876, entered into a “joint adventure” with Mr. -Rockefeller for limiting the output and so holding up prices.[97] The -adventure had been most successful. The profits were enormous. Scofield, -Shurmer and Teagle had made thirty-four cents a barrel out of their -refinery the year before the “adventure.” With the same methods of -manufacture, and enjoying simply Mr. Rockefeller’s control of -transportation rates and the enhanced prices caused by limiting output, -they made $2.52 a barrel the first year after. This was the year of the -Standard’s first great coup in refined oil. The dividends on 88,000 -barrels this year were $222,047, against $41,000 the year before. In -four years Scofield, Shurmer and Teagle paid Mr. Rockefeller $315,345 on -his investment of $10,000—and rebates. - -After four years the Standard began to complain that their partners in -the adventure were refining too much oil—the first year the books showed -they had exceeded their 85,000–barrel limitation by nearly 3,000, the -second year by 2,000, the third by 15,000, the fourth by 5,000. -Dissatisfied, the Standard demanded that the firm pay them the entire -profit upon the excess refined; for, claimed Mr. Rockefeller, our -monopoly is so perfect that we would have sold the excess if you had not -broken the contract, consequently the profits belong to us. Scofield, -Shurmer and Teagle paid half the profit on the excess, but refused more, -and they persisted in exceeding their quota; then Mr. Rockefeller, -controlling by this time the crude supply in Cleveland through ownership -of the pipe-lines, shut down on their crude supply. If they would not -obey the contract of their own will they could not do business. The firm -seems not to have been frightened. “We are sorry that you refuse to -furnish us crude oil as agreed,” they wrote Mr. Rockefeller; “we do not -regard the limitation of 85,000 barrels as binding upon us, and as we -have a large number of orders for refined oil we must fill them, and if -you refuse to furnish us crude oil on the same favourable terms as -yourselves, we shall get it elsewhere as best we can and hold you -responsible for its difference in cost.” - -[Illustration: - - WILLIAM C. SCOFIELD - - Senior member of the firm of Scofield, Schurmer and Teagle, of - Cleveland. Plaintiff in important suits against Lake Shore Railroad - for freight discriminations. -] - -[Illustration: - - DANIEL SCHURMER - - Associate of Mr. Scofield and Mr. Teagle in the war on railroad - rebates which the firm waged for nearly twenty years. -] - -[Illustration: - - JOHN TEAGLE - - Independent refiner of Cleveland, Ohio, prominent in struggle against - freight discriminations by the railroads. -] - -[Illustration: - - CHARLES B. MATTHEWS - - Independent refiner of Buffalo. Plaintiff in “Buffalo case,” where - members of the Standard Oil Company were indicted for conspiracy. -] - -Mr. Rockefeller’s reply was a prayer for an injunction against the -members of the firm, restraining them individually and collectively -“from distilling at their said works at Cleveland, Ohio, more than -85,000 barrels of crude petroleum of forty-two gallons each in every -year, and also from distilling any more than 42,500 barrels of crude -petroleum of forty-two gallons each, each and every six months, and also -from distilling any more crude petroleum until the expiration of six -months from and after July 20, 1880, and also from directly and -indirectly engaging in or being concerned in any business connected with -petroleum or any of its products except in connection with the plaintiff -under their said agreement, and that on the final hearing of this case -the said defendants may in like manner be restrained and enjoined from -doing any of said acts until the expiration of said agreement, and for -such other and further relief in the premises as equity can give.” In -this petition, really remarkable for its unconsciousness of what seems -obvious—that the agreement was preposterous and void because confessedly -in restraint of trade—the terms of the joint adventure are renewed in a -way to illustrate admirably the sort of tactics with refiners which, at -this time, was giving Mr. Rockefeller his extraordinary power over the -price of oil.[98] - -Scofield, Shurmer and Teagle did not hesitate to take up the gauntlet, -and a remarkable defence they made. In their answer they declared the -so-called agreement had at all times been “utterly void and of no effect -as being by its terms in restraint of trade and against public policy.” -They declared that the Standard Oil Company had never kept the terms of -the agreement, that it had intentionally withheld the benefits of the -advantages it enjoyed in freight contracts, and that it now was pumping -crude oil from the Oil Regions to Cleveland at a cost of about twelve -cents a barrel and charging them (Scofield, Shurmer and Teagle) twenty -cents. They denied that the Standard had sustained any damage through -them, but claimed that their business had been carried on at a large -profit. “There is such a large margin between the price of crude oil and -refined,” declared the defendants, “that the manufacture and sale of -refined oil is attended with large profit; it is impossible to supply -the demand of the public for oil if the business and refineries of both -plaintiff and defendant are carried on and run to their full capacities, -and if the business of the defendants were stopped, as prayed for by the -plaintiff, it would result in a still higher price for refined oil and -the establishment of more perfect monopoly in the manufacture and sale -of the same by plaintiff.” To establish such a monopoly, the defendants -went on to declare, had been the sole object of the Standard Oil Company -in making this contract with them, and similar ones with other firms, to -establish a monopoly and so maintain unnaturally high prices,[99] and -certainly Scofield, Shurmer and Teagle knew whereof they swore, for they -had shared in the spoils of the winter of 1876 and 1877, and at this -very period, October, 1880, they were witnessing an attempt to repeat -the coup. - -The charge of monopoly Scofield, Shurmer and Teagle sustained by a -remarkable array of affidavits—the most damaging set for the Standard -Oil Company which had ever been brought together. It contained the -affidavits of various individuals who had been in the refining business -in Cleveland at the time of the South Improvement Company and who had -sold out in the panic caused by it. It contained a review of the havoc -which that scheme and the manipulation of the railroads by the Standard -which followed it had caused in the refining trade in Pennsylvania, and -it gave the affidavits of Mrs. B—— and of her secretary and others -concerning the circumstances of her sale in 1878 (see Chapter VI). The -affidavits filed by John D. Rockefeller, Oliver H. Payne and Henry M. -Flagler in reply to the set presented by Scofield, Shurmer and Teagle -are curious reading. From the point of view of our present knowledge -they deny a number of things now known to be true.[100] - -It was not necessary, however, for the defendants to have presented -their elaborate array of evidence to support the charge of intended -monopoly. The character of the agreement itself was sufficient to -prevent any judge from attempting to enforce it. The amazement was that -the Standard Oil Company ever had the hardihood to ask for its -enforcement. “That it should venture to ask the assistance of a court of -equity to enforce a contract to limit the production and raise the price -of an article of so universal use as kerosene oil,” said the Chicago -Tribune, “shows that the Standard Oil Company believed itself to have -reached a height of power and wealth that made it safe to defy public -opinion.” This case is not the only one belonging to the period which -goes to support the opinion of the Tribune. - -Scofield, Shurmer and Teagle were now obliged to stand on their own -feet. They could refine all the oil they wished, but they must make -their own freight contracts, and they found rates when you worked with -Mr. Rockefeller were vastly different from rates when you competed with -him. The agent of the Lake Shore Railroad, by which most of their -shipments went, told them frankly that they could not have the rates of -the Standard unless they gave the same volume of business. The -discrimination against them was serious. For instance, in 1880, when the -Standard paid sixty-five cents a barrel from Cleveland to Chicago, -Scofield, Shurmer and Teagle paid eighty. From April 1 to July 1, 1881, -the Standard paid fifty-five cents and their rival eighty cents; from -July 1 to November 1, 1881, the rates were thirty-five and seventy cents -respectively, and so it went on for three years, when the firm, -despairing of any change, took the case into court. This case, fought -through all the courts of Ohio, and in 1886 taken to the Supreme Court -of the United States, is one of the clearest and cleanest in existence -for studying all the factors in the rebate problem—the argument and -pressure by which the big shipper secures and keeps his advantage, the -theory and defence of the railroad in granting the discrimination, the -theory on which the suffering small shipper protests, and finally the -law’s point of view. The first trial of the case was in the Court of -Common Pleas, and the refiners won. The railroad then appealed to the -District Court (the present Circuit Court), where it was argued. So -“important and difficult” did the judges of the District Court find the -questions involved to be, that on the plea of the railroad they sent -their findings of the facts in the case to the Supreme Court of the -state for decision—a privilege they had under the law in force at that -time. - -These findings are elaborate, including some twenty-three -propositions.[101] They have been confused by certain writers with the -_opinion_ on them given later by the Supreme Court; for instance, in an -economic study recently published—“The Rise and Progress of the Standard -Oil Company,”—the twelfth and thirteenth and part of the fourteenth -proposition which the District Court sent up to the Supreme Court in its -“findings of facts” are quoted separately, and the inference from the -context is that the writer supposed he was citing part of the court’s -_opinion_. As the reader will see from what follows, the paragraphs in -question are important, for, taken as quoted, they seem to show that the -rebate the Standard received, and which Scofield, Shurmer and Teagle -wanted, was on account of facilities it gave which the other refiners -could not give: - - - “The court further find that prior to 1875 it was a question whether - the Standard Oil Company would remain in Cleveland or remove its - works to the oil-producing country, and such question depended - mainly upon rates of transportation from Cleveland to market; that - prior thereto said Standard Company did ship large quantities of its - products by water to Chicago and other lake points, and from thence - distributed the same by rail to inland markets; that it then - represented to defendant the probability of such removal; that water - transportation was very low during the season of navigation; that - unless some arrangement was made for rates at which it could ship - the year round as an inducement, it would ship by water and store - for winter distribution; that it owned its tank-cars and had tank - stations and switches, or would have, at Chicago, Toledo, Detroit - and Grand Rapids, on and into which the cars and oil in bulk could - be delivered and unloaded without expense and annoyance to - defendant; that it had switches at Cleveland leading to its works at - which to load cars, and would load and unload all cars; that the - quantity of oil to be shipped by the company was very large, and - amounted to ninety per cent. or more of all the oil manufactured or - shipped from Cleveland, and that if satisfactory rates could be - agreed upon it would ship over defendant’s road all its oil products - for territory and markets west and northwest of Cleveland, and agree - that the quantity for each year should be equal to the amount - shipped the preceding year; that upon the faith of these - representations the defendant did enter into the contract and - arrangement substantially as set forth in defendant’s answer; that - the rates were not fixed rates, but depended upon the general card - tariff rates as charged from time to time, but substantially to be - carried from time to time for about ten cents per barrel less than - tariff rates, and, in consideration of such reduced rates as to bulk - oil, the Standard Company agreed to furnish its own cars and tanks, - load them on switches at distributing points, and unload them into - distributing tanks, and was also to load and unload oil shipped in - barrels, and without expense to defendant, and with, by reason - thereof, less risk to defendant, which entered into the - consideration, and was also to ship all its freight to points west - and northwest of Cleveland, except small quantities to lake ports - not reached by rail, and to so manage the shipments, as to cars and - times, as would be most favourable to defendant; that defendant then - agreed to said terms; that said agreement so made in 1875 has - remained in force ever since. - - “That, at a cost exceeding $100,000, said Standard Company had and - constructed the terminal facilities promised and herein found; that, - in fact, the risk of danger from fire to defendant, the expense of - handling, in loading and unloading, and in the use of the Standard - tank-cars is less (but how much the testimony does not show) than - upon oil shipped without the use of such or similar terminal - facilities; that said Standard Company commenced by shipping about - 450,000 barrels a year over defendant’s road, which increased from - year to year until, in 1882, the year before filing the petition in - this action, the quantity so shipped on defendant’s road amounted to - 742,000 barrels, equal to 2,000 barrels or one full train-load per - day. - - “That said arrangement was not exclusive, but was at all times open - to others shipping a like quantity and furnishing like service and - facilities; that it was not made or continued with any intention on - the part of the defendant to injure the plaintiffs in any manner.” - - -Now, as a matter of fact, other propositions in this same set from which -the above are quoted, find that Scofield, Shurmer and Teagle offered the -railroad exactly the same facilities as the Standard, a switch, loading -racks, exemption from loss by fire or accident.[102] “The manner of -making shipments for plaintiffs and for the Standard Oil Company was -precisely the same, and the only thing to distinguish the business of -the one from the other was the aggregate yearly amounts of freight -shipped,” said Judge Atherton, of the Supreme Court, who gave the -decision on the findings of fact, and he held in common with his -predecessors that a rebate on account of volume of business only was “a -discrimination in favour of capital,” and contrary to a sound public -policy, violation of that equality of rights guaranteed to every -citizen, and a wrong to the disfavoured person. “We hold, ...” he said, -“that a discrimination in the rate of freights resting extensively on -such a basis ought not to be sustained. The principle is opposed to -sound public policy. It would build up and foster monopolies, add -largely to the accumulated power of capital and money, and drive out all -enterprise not backed by overshadowing wealth. With the doctrine, as -contended for by the defendants, recognised and enforced by the courts, -what will prevent the great grain interest of the Northwest, or the coal -and iron interests of Pennsylvania, or any of the great commercial -interests of the country bound together by the power and influence of -aggregated wealth and in league with the railroads of the land, driving -to the wall all private enterprises struggling for existence, and with -an iron hand thrusting back all but themselves?” Judge Atherton was -scathing enough in his opinion of the contract between the Lake Shore -and the Standard. Look at it, he said, and see just what is shown. In -consideration of the company giving to the railroad its entire freight -business in oil, they transport this freight about ten cents a barrel -cheaper than for any other customer. “The understanding was to keep the -price _down_ for the favoured customer, but _up_ for all others, and the -inevitable tendency and effect of this contract was to enable the -Standard Oil Company to establish and maintain an overshadowing -monopoly, to ruin all other operators and drive them out of business in -all the region supplied by the defendant’s road, its branches and -connecting lines.” - -Judge Atherton was particularly hard on the portion of the contract[103] -which pledged the Standard to give the Lake Shore _all_ its freight in -return for the rebates, and for this reason: In 1883 a new road Westward -was opened from Cleveland, the New York, Cincinnati and St. Louis. It -might become an active competitor in transporting petroleum for -customers other than the Standard Oil Company. It might establish such a -tariff of rates that other operators in oil might successfully compete -with the Standard Oil Company. To prevent this, the Lake Shore road, on -the completion of the new road, entered into a tariff arrangement giving -to it a portion of the Westward shipments of the Standard Oil Company, -on condition of its uniting in carrying out the understanding in regard -to rebates to the Standard Oil Company. “How peculiar!” exclaimed Judge -Atherton. “The defendant, by a contract made in 1875, was entitled to -all the freights of the Standard Oil Company, and yet, say the District -Court, ‘for the purpose of securing the _greater part_ of said trade,’ -they entered into a contract to divide with the new railroad, if the -latter would only help to keep the rates _down_ for the Standard and -_up_ for everybody else.” Such a contract so carried out was, in the -opinion of the court, “not only contrary to a sound public policy, but -to the lax demands of the commercial honesty and ordinary methods of -business.” - -Another fact found by the District Court incensed Judge Atherton. This -was that the contract “was not made or continued with any intention on -the part of the defendant to injure the plaintiffs in any manner.” It -does not “make any difference in the case,” he declared. “The plaintiffs -were not doing business in 1875, when the contract was entered into, -and, of course, it was not made to injure them in particular. If a man -rides a dangerous horse into a crowd of people, or discharges loaded -firearms among them, he might, with the same propriety, select the man -he injures and say he had no intention of wounding him. And yet the law -holds him to have intended the probable consequences of his unlawful act -as fully as if purposely directed against the innocent victim, and -punishes him accordingly. And this contract, made to build up a monopoly -for the Standard Oil Company and to drive its competitors from the -field, is just as unlawful as if its provisions had been aimed directly -against the interests of the plaintiffs.”[104] - -Having lost their case in the Supreme Court of the state, the Lake Shore -now appealed to the Supreme Court of the United States, and the record -was filed in November, 1886. It was never heard; the railroad evidently -concluded it was useless, and finally withdrew its petition, thereby -accepting the decision of the Supreme Court of Ohio restraining it from -further discrimination against Scofield, Shurmer and Teagle. - -[Illustration: - - BURST IN A PIPE LINE -] - -This case, which was before the public constantly during the six or -seven years following the breaking up of the Producers’ Union, in which -the Oil Regions presented no united front to Mr. Rockefeller, served to -keep public attention on the ruinous effect of the rebate and to -strengthen the feeling that drastic legislation must be taken if Mr. -Rockefeller’s exploit was to be prevented in other industries. - -One other case came out in this war of individuals on the rebate system -which heightened the popular indignation against the Standard. It was a -case showing that the Standard Oil Company had not yet abandoned that -unique feature of its railroad contracts by which a portion of the money -which other people paid for their freight was handed over to them! This -peculiar development of the rebate system seems to have belonged -exclusively to Mr. Rockefeller. Indeed, a careful search of all the -tremendous mass of materials which the various investigations of -railroads produced shows no other case—so far as the writer knows—of -this practice. It was the clause of the South Improvement contracts -which provoked the greatest outcry. It was the feature of Mr. Cassatt’s -revelations in 1877 which dumfounded the public and which no one would -believe until they saw the actual agreements Mr. Cassatt presented. The -Oil Regions as a whole did not hesitate to say that they believed this -practice was still in operation, but, naturally, proof was most -difficult to secure. The demonstration came in 1885, through one of the -most aggressive and violent independents which the war in oil has -produced, George Rice, of Marietta, Ohio. Mr. Rice, an oil producer, had -built a refinery at Marietta in 1873. He sold his oil in the state, the -West, and South. Six years later his business was practically stopped by -a sudden raise in rates on the Ohio roads—an advance of fully 100 per -cent. being made on freights from Marietta, where there were several -independent refineries, although no similar advance was made from -Wheeling and Cleveland, where the Standard refineries were located. -These discriminations were fully shown in an investigation by the Ohio -State Legislature in 1879. From that time on Mr. Rice was in constant -difficulty about rates. He seems to have taken rebates when he could get -them, but he could never get anything like what his big competitors got. - -In 1883 Mr. Rice began to draw the crude supply for his refinery from -his own production in the Macksburg field of Southeastern Ohio, not far -from Marietta. The Standard had not at that time taken its pipe-lines -into the Macksburg field; the oil was gathered by a line owned by A. J. -Brundred, and carried to the Cincinnati and Marietta Railroad. Now, Mr. -Brundred had made a contract with this railroad by which his oil was to -be carried for fifteen cents a barrel, and all other shippers were to -pay thirty cents. Rice, who conveyed his oil to the railroad by his own -pipe-line, got a rate of twenty-five cents by using his own tank-car. -Later he succeeded in getting a rate of 17½ cents a barrel. Thus the -rebate system was established on this road from the opening of the -Macksburg field. In 1883 the Standard Oil Company took their line into -the field, and soon after Brundred retired from the pipe-line business -there. When he went out he tried to sell the Standard people his -contract with the railroad, but they refused it. They describe this -contract as the worst they ever saw, but they seem to have gone Mr. -Brundred one better, for they immediately contracted with the road for a -rate of ten cents on their own oil, instead of the fifteen cents he was -getting, and a rate of thirty-five on independent oil. And in addition -they asked that the extra twenty-five cents the independents paid _be -turned over to them_! If this was not done the Standard would be under -the painful necessity of taking away its shipments and building -pipe-lines to Marietta. The Cincinnati and Marietta Railroad at that -time was in the hands of a receiver, one Phineas Pease—described as a -“fussy old gentleman, proud of his position and fond of riding up and -down the road in his private car.” It is probably a good description. -Certainly it is evident from what follows that the receiver was much -“fussed up” ethically. Anxious to keep up the income of his road, Mr. -Pease finally consented to the arrangement the Standard demanded. But he -was worried lest his immoral arrangement be dragged into court, and -wrote to his counsel, Edward S. Rapallo, of New York City, asking if -there was any way of evading conviction in case of discovery. - - - “Upon my taking possession of this road,” the receiver wrote, “the - question came up as to whether I would agree to carry the Standard - Company’s oil to Marietta for ten cents per barrel, in lieu of their - laying a pipe-line and piping their oil. I, of course, assented to - this, as the matter had been fully talked over with the Western and - Lake Erie Railroad Company before my taking possession of the road, - and I wanted all the revenue that could be had in this trade. - - “Mr. O’Day, manager of the Standard Oil Company, met the general - freight agent of the Western and Lake Erie Railroad and our Mr. - Terry, at Toledo, about February 12, and made an agreement (verbal) - to carry their oil at ten cents per barrel. But Mr. O’Day compelled - Mr. Terry to make a thirty-five cent rate on all other oil going to - Marietta, and that we should make the rebate of twenty-five cents - per barrel on all oil shipped by other parties, and that the rebate - should be paid over to them (the Standard Oil Company), thus giving - us ten cents per barrel for all oil shipped to Marietta, and the - rebate of twenty-five cents per barrel going to the Standard Oil - Company, making that company say twenty-five dollars per day clear - money on George Rice’s oil alone. - - “In order to save the oil trade along our line, and especially to - save the Standard Oil trade, which would amount to seven times as - much as Mr. Rice’s, Mr. Terry verbally agreed to the arrangement, - which, upon his report to me, I reluctantly acquiesced in, feeling - that I could not afford to lose the shipment of 700 barrels of oil - per day from the Standard Oil Company. But when Mr. Terry issued - instructions that on and after February 23 the rate of oil would be - thirty-five cents per barrel to Marietta, George Rice, who has a - refinery in Marietta, very naturally called on me yesterday and - notified me that he would not submit to the advance, because the - business would not justify it, and that the move was made by the - Standard Oil Company to crush him out. (Too true.) Mr. Rice said: ‘I - am willing to continue the 17½ cent rate which I have been paying - from December to this date.’ - - “Now, the question naturally presents itself to my mind, if George - Rice should see fit to prosecute the case on the ground of unjust - discrimination, would the receiver be held, as the manager of this - property, for violation of the law? While I am determined to use all - honourable means to secure traffic for the company, I am not willing - to do an illegal act (if this can be called illegal), and lay this - company liable for damages. Mr. Terry is able to explain all minor - questions relative to this matter.”[105] - - -Mr. Rapallo, after consulting his partner and “representative -bondholders,” “fixed it” for the receiver in the following amazing -decision: - - - “You may, with propriety, allow the Standard Oil Company to charge - twenty-five cents per barrel for all oil transported through their - pipes to your road; and I understand from Mr. Terry that it is - practicable to so arrange the details that the company can, in - effect, collect this direct without its passing through your hands. - You may agree to carry all such oil of the Standard Oil Company, or - of others, delivered to your road through their pipes, at ten cents - per barrel. You may also charge all other shippers thirty-five cents - per barrel freight, _even though they deliver oil to your road - through their own pipes_; and this, I gather from your letter and - from Mr. Terry, would include Mr. Rice.”[106] - - -Now, how was this to be done “with propriety”? Simply enough. The -Standard Oil Company was to be charged ten cents per barrel, less an -amount equivalent to twenty-five cents per barrel upon all oil shipped -by Rice. “Provided your accounts, bills, vouchers, etc., are consistent -with the real arrangement actually made, you will incur no personal -responsibility by carrying out such an arrangement as I suggest.” Even -in case the receiver was discovered nothing would happen to _him_, so -decided the counsel. “It is possible that, by a proper application to -the court, some person may prevent you, in future, from permitting any -discrimination. Even if Mr. Rice should compel you, subsequently, to -refund to him the excess charge over the Standard Oil Company, the -result would not be a loss to your road, taking into consideration the -receipts from the Standard Oil Company.” - -Fortified by his counsel, Receiver Pease put the arrangement into force, -and beginning with March 20, 1885, a joint agent of the Standard -pipe-line and of the Cincinnati and Marietta road collected thirty-five -cents per barrel on the oil of all independent shippers from Macksburg -to Marietta. Ten cents of this sum he turned over to the receiver and -twenty-five cents to the pipe-line. When Mr. Rice found that the rate -was certainly to be enforced he began to build a pipe of his own to the -Muskingum River, whence he was to ship by barge to Marietta. By April 26 -he was able to discontinue his shipments over the Cincinnati and -Marietta road. This was not done until a rebate of twenty-five cents a -barrel had been paid to the Standard Oil Company on 1,360 barrels of his -oil—$340 in all. - -Mr. Rice, outraged as he was by the discrimination, was looking for -evidence to bring suit against the receiver, but it was not until -October that he was ready to take the matter into court. On the 13th of -that month he applied to Judge Baxter of the United States Circuit Court -for an order that Phineas Pease, receiver of the Cleveland and Marietta -Railroad, report to the court touching his freight rates and other -matters complained of in the application. The order was granted on the -same day the application was made. It was specific. Mr. Pease was to -report his rates, drawbacks, methods of accounting for discrimination, -terms of contracts, and all other details connected with his shipment of -oil. No sooner was this order of the court to Receiver Pease known than -the general freight agent, Mr. Terry, hurried to Cleveland, Ohio, to -meet Mr. O’Day of the Standard Oil Company, with whom he had made the -contract. The upshot of that interview was that on October 29, twelve -days _after_ the judge had ordered the contracts produced, a check for -$340, signed by J. R. Campbell, Treasurer (a Standard pipe-line -official), was received from Oil City, headquarters of the Standard -pipe-line, by the agent who had been collecting and dividing the freight -money. This check for $340 was the amount the pipe-line had received on -Mr. Rice’s shipments between March 20 and April 25. The agent was -instructed to send the money to the receiver, and later, by order of the -court, the money was refunded to Mr. Rice. But the Standard was not out -of the scrape so easily. - -Receiver Pease filed his report on November 2, but the judge found it -“evasive and unsatisfactory,” and further information was asked for. -Finally the judge succeeded in securing the correspondence between Mr. -Pease and Mr. Rapallo, quoted above, and enough other facts to show the -nature of the discrimination. He lost no time in pronouncing a judgment, -and he did not mince his words in doing it: - - - “But why should Rice be required to pay 250 per cent. more for the - carriage of his oil than was exacted from his competitor? The answer - is that thereby the receiver could increase his earnings. This - pretence is not true; but suppose it was, would that fact justify, - or even mitigate, the injustice done to Rice? May a receiver of a - court, in the management of a railroad, thus discriminate between - parties having equal claim upon him, because thereby he can - accumulate money for the litigants? It has been repeatedly adjudged - that he cannot legally do so. Railroads are constructed for the - common and equal benefit of all persons wishing to avail themselves - of the facilities which they afford. While the legal title thereof - is in the corporation of individuals owning them, and to that extent - private property, they are by the law and consent of the owners - dedicated to the public use. By its charter and the general - contemporaneous laws of the state which constitute the contract - between the public and the railroad company—the state, in - consideration of the undertaking of the corporators to build, equip, - keep in repair and operate said road for the public accommodation, - authorised it to demand reasonable compensation from everyone - availing himself of its facilities, for the service rendered. But - this franchise carried with it other and correlative obligations. - - “Among these is the obligation to carry for every person offering - business under like circumstances, at the same rate. All unjust - discriminations are in violation of the sound public policy, and are - forbidden by law. We have had frequent occasions to enunciate and - enforce this doctrine in the past few years. If it were not so, the - managers of railways in collusion with others in command of large - capital could control the business of the country, at least to the - extent that the business was dependent on railroad transportation - for its success, and make and unmake the fortunes of men at will. - - “The idea is justly abhorrent to all fair minds. No such dangerous - power can be tolerated. Except in the modes of using them, every - citizen has the same right to demand the service of railroads on - equal terms that they have to the use of a public highway or the - government mails. And hence when, in the vicissitudes of business, a - railroad corporation becomes insolvent and is seized by the court - and placed in the hands of a receiver to be by him operated pending - the litigation, and until the rights of the litigants can be - judicially ascertained and declared, the court is as much bound to - protect the public interests therein as it is to protect and enforce - the rights of the mortgagers and mortgagees. But after the receiver - has performed all obligations due the public and every member of - it—that is to say, after carrying passengers and freight offered, - for a reasonable compensation not exceeding the maximum authorised - by law, if such maximum rates shall have been prescribed, upon equal - terms to all, he may make for the litigants as much money as the - road thus managed is capable of earning. - - “But all attempts to accumulate money for the benefit of corporators - or their creditors, by making one shipper pay tribute to his rival - in business at the rate of twenty-five dollars per day, or any - greater or less sum, thereby enriching one and impoverishing - another, is a gross, illegal, inexcusable abuse of a public trust - that calls for the severest reprehension. The discrimination - complained of in this case is so wanton and oppressive it could - hardly have been accepted by an honest man having due regard for the - rights of others, or conceded by a just and competent receiver who - comprehended the nature and responsibility of his office; and a - judge who would tolerate such a wrong or retain a receiver capable - of perpetrating it ought to be impeached and degraded from his - position. - - “A good deal more might be said in condemnation of the unparalleled - wrong complained of, but we forbear. The receiver will be removed. - The matter will be referred to a master to ascertain and report the - amount that has been as aforesaid unlawfully exacted by the receiver - from Rice, which sum, when ascertained, will be repaid to him. The - master will also inquire and report whether any part of the money - collected by the receiver from Rice has been paid to the Standard - Oil Company, and if so—how much, to the end that, if any such - payments have been made, suit may be instituted for its - recovery.”[107] - - -On December 18 George K. Nash, a former governor of Ohio, was appointed -master commissioner to take testimony and clear up the point doubtful in -the judge’s mind—to whom had the extra money paid by Rice been paid; the -receiver declared that he never paid the Standard Oil Company any part -of Rice’s money. Mr. Nash summoned a large number of witnesses and -gradually untangled the story told above. Mr. Pease spoke truly, he had -never paid the Standard Oil Company any part of Mr. Rice’s money. A -joint agent of the railroad and the pipe-line had been appointed, at a -salary of eighty-five dollars a month, sixty dollars paid by Pease and -twenty-five dollars by the Standard, who collected the freight on -independent shipments and divided the money between the two parties. It -was from this agent that it was learned that, twelve days _after_ Judge -Baxter ordered Receiver Pease to bring his contracts into court, the -money paid on Mr. Rice’s oil had been returned by the Standard Oil -Company.[108] While the investigation in regard to Mr. Rice’s oil was -going on, complaints came to Commissioner Nash from two other oil works -at Marietta that they had been suffering a like discrimination for a -much longer time. The commissioner investigated the cases and found the -complaints justified. The Standard Oil Company had received $649.15 out -of the money paid by one concern to the railroad for carrying its oil, -and $639.75 out of the sum paid by another concern! Both of these sums -were returned by the Standard.[109] - -Of course the case aroused violent comment. In 1888 it came before the -Congressional Committee which was investigating trusts, and an effort -was made to explain the twenty-five cents extra as a charge of the -pipe-line for carrying oil to the railway. Now, the practice in vogue in -the Oil Regions then and now is that the _purchaser of the oil pays the -pipe-line charge_. The railroad has nothing to do with it. Even if the -Standard Oil Company puts a tax on railroads for allowing them to take -oil carried by its pipe-lines—thus collecting double pay—the tax would -not apply in Mr. Rice’s case, for the oil came to the Cincinnati and -Marietta road not through Standard pipes but through Mr. Rice’s own -pipes. This much Mr. O’Day was obliged to admit in 1888: - - - _Q._ But did that other oil which was in competition with you pass - through your pipe? - - _A._ No, sir. - - _Q._ Did not they, therefore, on that oil which only passed over - their railroad and not through your pipe-line, pay to you the same - allowance or rebate that they did on your oil which did pass? - - _A._ They did, but we returned it through the advice of our counsel, - Mr. Dodd. - - _Q._ Now, out of that sum how much did you get from the railroad out - of what they had received from Mr. Rice? - - _A._ We did not get any; that is, we did not retain any. The - railroad company agreed to account to us for the oil that went over - its lines, and they did make an accounting, to my recollection, of - about $200, or something like that, on oil other than that which - passed through the lines. Our counsel, Mr. Dodd, advised me that we - could not do that business, and we refunded the money. - - -Soon after the report of the Congressional Committee was published John -D. Rockefeller himself explained the case in an interview published in -the New York World for March 29, 1890: “When the arrangement was -reported to the officers of the company at New York,” Mr. Rockefeller -told the interviewer, “it was not agreed to because our counsel -pronounced it illegal in so far as it embraced oil carried by the -pipe-line. Some $250 had been paid to the pipe-line under this contract -on oil which the line had not transported. This was refunded. We -repudiated the contract before it was passed upon by the courts and made -full recompense. In a business as large as ours, conducted by so many -agents, some things are likely to be done which we cannot approve. We -correct them as soon as they come to our knowledge. The public hears of -the wrong—it never hears of the correction.” In the Digest of Evidence -made by the Industrial Commission in its report published in 1900 (page -158), it is stated that the money collected was refunded _before_ suit -was brought. The facts show that the statement in the report of the -Industrial Commission that the money was refunded _before_ suit was -brought is wrong, and that, while Mr. Rockefeller is technically correct -in stating that the Standard repudiated the contract before it was -passed on by the courts, he should have added they did not repudiate the -contract until _eight months after_ it was made, and did not refund the -money until _twelve days after_ it became certain that the contract -would be produced in court. He also does not explain why the Standard -Oil Company did not return the money unjustly paid to them on the -shipments of the other independent oil concerns of Marietta until -exposure by Commissioner Nash’s investigation made it inevitable.[110] - -But it was not only manipulation of the railroads by the Standard Oil -Company of which the public was complaining at this time. The policy of -making it impossible for even small independent concerns to do business -was attracting more and more attention. Indeed, there was going on in -Buffalo, New York, simultaneously with these two cases, a most -sensational trial, growing out of an indictment for the crime of -conspiracy, by the Grand Jury of Erie County, New York, of three -prominent members of the Standard Oil Company—H. H. Rogers, John D. -Archbold and Ambrose McGregor—with two refiners with whom they were -associated—H. B. Everest and C. M. Everest. The case is reported in the -next chapter at some length, because of the importance it has assumed in -the popular controversy which has been going on for the last twenty -years over “Standard methods,” it being the case on which is based the -often-repeated charge that Mr. Rockefeller, to win his point, has been -known to burn refineries. - - - - - CHAPTER TWELVE - THE BUFFALO CASE - - THE STANDARD BUYS THREE-FOURTHS OF THE VACUUM OIL WORKS OF - ROCHESTER—TWO VACUUM EMPLOYEES ESTABLISH BUFFALO LUBRICATING OIL - COMPANY AND TAKE WITH THEM AN EXPERIENCED STILLMAN FROM THE - VACUUM—THE BUFFALO LUBRICATING OIL COMPANY HAS AN EXPLOSION AND THE - STILLMAN SUDDENLY LEAVES—THE BUFFALO LUBRICATING OIL COMPANY IS SUED - BY VACUUM FOR INFRINGEMENT OF PATENTS—MATTHEWS SUES THE EVERESTS OF - THE VACUUM FOR DELIBERATELY TRYING TO RUIN HIS BUSINESS—MATTHEWS - WINS HIS FIRST CIVIL SUIT—HE FILES A SECOND SUIT FOR DAMAGES, AND - SECURES THE INDICTMENT OF SEVERAL STANDARD OFFICIALS FOR CRIMINAL - CONSPIRACY—ROGERS, ARCHBOLD AND McGREGOR ACQUITTED—THE EVERESTS - FINED. - - -Very soon after Mr. Rockefeller began to “acquire” independent -refineries, whose owners were loath to sell or go out of business, -unpleasant stories began to be circulated in the oil world of the -methods used in getting the offending plants out of the way. When -freight discriminations, cutting off of crude supply, and price wars in -the market failed, other means were tried, and these means included -sometimes, it was whispered, the actual destruction of the plants. The -only case in which this charge was made which ever came to trial was -that of the Buffalo Lubricating Oil Company, Limited. For sake of -clearness, a narrative of the case has been drawn from the testimony -offered, no statements being admitted which were not brought out in the -trials. - -It seems that some time in 1879 the owners of the Vacuum Oil Works, of -Rochester, New York—H. B. and C. M. Everest, father and son—sold to H. -H. Rogers, J. D. Archbold and Ambrose McGregor of the Standard Oil -Company, for $200,000, a three-fourths interest in that concern. The -purchase was not made for the gentlemen in whose names it appeared, but -for the Standard. Thus, when on the witness-stand J. D. Archbold was -questioned as to the real ownership of the stock which had been bought -in his name, the examiner wanted to know whether the purchasers -represented themselves or somebody else. - - - “Mr. Archbold,” he asked, “you made the contract, did you not, with - reference to the transfer of the seventy-five shares of the Vacuum - Oil Company’s stock by the Messrs. Everest?” - - _A._ I bought the seventy-five shares, yes, sir. - - * * * * * - - _Q._ Whom did you represent in that transaction? - - _A._ I represented the shareholders of the Standard Oil Company. - - _Q._ After this purchase was made did you continue to represent the - purchasers in the management of the affairs of the Vacuum Oil - Company? - - _A._ I did. - - _Q._ By virtue of power delegated to you, or by virtue of being a - member of the board of directors or trustees of the Vacuum? - - _A._ By the virtue of power delegated to me. - - _Q._ By the purchasers? - - _A._ By the purchasers. - - -The Vacuum manufactured principally lubricating oils used on harness and -car wheels. It controlled several valuable patents and had been doing a -prosperous business for a number of years. By the terms of the sale in -1879 the Everests remained as managers of the refinery, on a salary of -$10,000 a year. They also contracted to enter into no outside oil -business for ten years. The business policy of the Vacuum, including the -fixing of salaries, was dictated by a board of directors made up of -Messrs. Rogers, Archbold, McGregor and the two Everests. The meetings of -this board were held at the office of the Standard Oil Company, in New -York or in Rochester, as convenient. - -So far as can be inferred from the testimony, the works were well -managed, the dividends large, and the employees well treated. In 1880 -the salesman of the concern, J. Scott Wilson, decided to leave the -Vacuum and go into business for himself. The decision seems natural, for -until 1878 Mr. Wilson had carried on an independent oil business of one -kind or another. He had been a partner in a refinery and understood -making oils. He had been a jobber on his own account before going with -the Everests, and as such had had a considerable clientele. Wilson told -one of his fellow employees, Charles B. Matthews, of his decision, and -asked him to go with him. Matthews had been with the Everests about the -same length of time as Wilson—some two years. Previous to this -engagement he had been a farmer, and his acquaintance with the Vacuum -people had come about by his drilling on his farm for oil. Matthews was -worth some $20,000, but he had had no experience in oil refining, for -his duties at the Vacuum had been mainly looking after outside -business—for instance, he had several times gone to New York to consult -J. D. Archbold and H. H. Rogers concerning business matters, and -particularly concerning patents owned by the Vacuum, of whose validity -there was some doubt. For some time Matthews had been dissatisfied with -his salary—he had asked for a raise, but had not got it—a fact which -probably made him more favourable to Wilson’s suggestion. - -The two men decided finally to form a company and to build an oil -refinery at Buffalo. Wilson said on the witness-stand that he did not -want to handle the Vacuum processes in the new works, but to make only -the oils with which he was familiar. Matthews, however, had convinced -himself that the patents which covered certain of the Vacuum processes -and apparatus were invalid, and insisted that they build at least one -Vacuum still. The question of what steps the Vacuum might take to stop -them was discussed, and according to Wilson’s testimony Matthews -remarked that he expected they would pay $100,000 or $150,000 to prevent -their going into business. Matthews’s remark was natural enough, -considering the conditions under which outside refiners were forced to -do business. It is probable that no man undertook any kind of -independent oil business at that time, particularly oil refining, -without considering the possibility of being driven to sell. - -The new firm needed an experienced stillman accustomed to the Vacuum -processes, and early in 1881 they asked one Albert Miller, a stillman in -the Vacuum works, to join them. “If we have Miller,” they told each -other, “we can go to the customers of the Vacuum Oil Company and say to -them: ‘We have the same process and the same apparatus and the same oils -as the Vacuum Oil Company, and we have their former superintendent, Mr. -Miller, to manufacture the oils.’” Miller had been with the Everests for -several years, having worked his way up from a labourer at two dollars a -day to a position where, as stillman, he was paid by the hour, and -earned from $1,200 to $1,400 a year. He and his wife had been thrifty, -and had several thousand dollars in property. Miller thought there was -money in the new venture, and consented to join Wilson and Matthews. The -three set about carrying out their plans before they notified their -employers of their intention to leave—Miller going so far as to order -certain iron castings needed in the construction of their works, made -after patterns owned by the Everests. He had these made at the foundry -patronised by the Everests. He paid for them himself, and carried them -away, presumably giving the impression that they were for his employers. - -Early in March Matthews and Miller notified C. M. Everest, who was in -charge, his father being in California, that they were going to leave -and establish at Buffalo an independent oil refinery. Mr. Everest, -surprised out of discretion by the news, told them plainly that although -he had nothing against them personally, he should do all in his power to -injure the proposed concern. He asked them where they expected to get -oil, and they replied that they would get it from the Atlas Refining -Company, an independent concern in Buffalo, which had its own pipe-line. -“You will wake up some morning and find it is in the Standard,” replied -Mr. Everest. Apparently Mr. Everest’s threat had little influence on the -men, for they pushed the building of the works in Buffalo as rapidly as -possible. On March 15 they signed an agreement to carry on the proposed -business for five years, each man to put in $2,000. A month later the -three men, with two relatives of Matthews, organised a stock company—the -Buffalo Lubricating Oil Company, Limited—with a capital of $40,000. - -Although Miller had gone to Buffalo the first of March with Matthews and -Wilson, he returned frequently to Rochester to see his family. On -several of these visits he saw C. M. Everest, who never failed to ask -about the progress of the new concern, and to warn him that the Vacuum -Company would never allow it to do business. “Don’t you think, Miller,” -Everest said to him once, “that it would be better for you to leave -those men and have $20,000 deposited to your wife’s credit than to go to -these parties?” Miller affirms that he answered that he had gone with -the new firm in good faith, and thought he ought not to leave them. - -[Illustration: - - BLEACHING TANK -] - -[Illustration: - - CONSTRUCTING AN IRON TANK FOR STORING OIL -] - -[Illustration: - - OIL AGITATORS -] - -[Illustration: - - FIVE-BARREL STILL USED IN THE FIFTIES IN DISTILLING CRUDE OIL AS A - LUMINANT -] - -About two months after the new firm began building, the elder Everest, -who had been in California, returned to Rochester, and soon after had -several interviews with Miller. He impressed on the man, as his son had -done, that the Buffalo Lubricating Works would never succeed. He told -him that the Vacuum meant to bring suit against them for infringing -their patents, and would get an injunction and stop the works; that -Miller would lose all the money he had put in. To save himself, Everest -advised Miller to come back to the Vacuum. “But that would leave them in -a pretty bad fix,” Miller said. “That is exactly what I want to do,” -replied Everest. The fear that the new concern might be ruined through -the hostility of the Vacuum, and he lose his savings, seems to have -preyed on Miller’s mind. He took his wife into his confidence, and she, -too, became alarmed. He began to neglect his work in Buffalo. He was -often away at nights. Matthews began to be worried by Miller’s neglect -and absence, and to watch the stations to find, if possible, where he -went. Miller’s question now became, how could he get away from the -Buffalo firm? He had signed for the company a note for $5,000. He was -under contract for a term of years. He discussed the question with the -Everests, and they advised him to see his lawyer. On the seventh of -June, according to H. B. Everest,[111] who went with him to help present -the case, Miller did consult George Truesdale, a lawyer of Rochester, -who had always handled his business. Mr. Truesdale afterwards told in -court what occurred: - - - “Mr. Everest stated that Miller had left his employ, and got engaged - with another oil concern in the City of Buffalo; that he desired to - get back again; he wanted him to come back; and he said he supposed - Miller had explained to me his situation, and the obligations he was - under to the Buffalo company. I told him that he had made some - statements to me about his contract with the parties in Buffalo; - that he had spoken about being an endorser or party to the note made - by, I think he said, Matthews and Wilson and himself, and I think - another party—four or five of them had made, endorsed a note to - raise money, done to start the Buffalo business, and that he had a - contract or an arrangement with them to go into a company at Buffalo - to manufacture oil, and that he wanted to know how he could get out - of that arrangement. I stated what I had said to Miller, that he - would, of course, be liable on the note, if he was _charged_ - properly when it became due, and that if he wanted to get out of - that arrangement my advice to him had been to see if he couldn’t get - released; if they wouldn’t release him or buy out his interest; - then, if he couldn’t do that, the only other way I saw was for him - to leave them and take the consequences. I told him that I did not - know the exact terms of his contract, but, if he had entered into a - contract and violated it, I presumed there would be a liability for - damages, as well as a liability for the debts of the Buffalo party. - Mr. Miller and Everest both talked on the subject, and Mr. Everest - says, ‘I think there is other ways for Miller to get out of it.’ I - told him I saw no way except either to back out or to sell out; no - other honourable way. Mr. Everest says, substantially, I think, in - these words: ‘Suppose he should arrange the machinery so it would - bust up, or smash up, what would the consequences be?’—something to - that effect. ‘Well,’ I says, ‘in my opinion, if it is negligently, - carelessly done, not purposely done, he would be only civilly liable - for damages caused by his negligence; but if it was wilfully done, - there would be a further criminal liability for malicious injury to - the property of the parties, the company.’ Mr. Everest said he - thought there wouldn’t be anything only civil liability, and said - that would—he referred to the fact that I had been police justice, - had some experience in criminal law—and he said that he would like - to have me look up the law carefully on that point, and that they - would see me again.” - - -Miller’s version of this interview is similar: - - - “I think Mr. Truesdale or myself, I am not positive which, asked the - question what means I could take to get out of the company. H. B. - says, ‘There is a good many ways he could get out.’ Either Mr. - Truesdale or myself asked him how. ‘Well,’ he says, ‘he can cut up - something or do something to injure them; something of that kind, to - get out’; H. B. said this. Mr. Truesdale spoke up and said, ‘You - must be very careful what you do or you will lay yourself criminally - liable.’ Mr. Everest says to me, ‘There is ways that you can get - out.’ I says to him, ‘You wouldn’t want me to do anything, would - you, to lay myself liable?’ I think Mr. Truesdale spoke up and says, - ‘You must be very careful or you will end in state’s prison,’—that - is, I. There was considerable conversation I cannot just exactly - remember; I have told all I recollect at present. Mr. Truesdale - asked me if I had a contract with the Buffalo parties; I told him I - had; ‘Well,’ he says, ‘the best thing you can do is to stay there, - then,’ or something of that kind. I cannot say those were his exact - words. H. B. Everest says, ‘If he comes back with us, why, we will - look after him.’ I think Mr. Truesdale said that these men would be - after me for leaving them. I think I told him the terms of the - contract.... Mr. Everest says, ‘They will have to catch Miller - before they can do anything to him; we will take care of him.’”[112] - - -In a talk with Miller a little while after this, C. M. Everest said to -him: “You go back to Buffalo and construct the pipes so that they cannot -make a good oil, and then, I think, if you would give them a little -scare. You might scare them a little, they not knowing anything about -the business, and you know how to do it.” On account of Miller’s -neglect, the first still in the new refinery was not ready to be fired -until June 15—it was an ordinary still, as was the second one built—the -third only was built for the Vacuum process. As soon as the still was -ready it was filled with some 175 barrels of crude oil and a very hot -fire—“inordinary hot” was the droll description of the fireman—built -under it. Miller, who superintended the operations, swore at the fireman -once or twice because the fire was not hot enough, and then disappeared. -While he was gone the brickwork around the still began to crack. The -safety valve finally blew off, and a yellow gas or vapour escaped in -such quantities that the superintendent of a neighbouring refinery came -out and warned the fireman that he was endangering property. Miller was -hunted up. He had the safety valve readjusted—it was thought by certain -witnesses that he had it too heavily weighted—and ordered the fires to -be rebuilt, hot as before. He again disappeared. In his absence the -safety valve again blew off. The run of oil was found to be a failure. -It was not a pleasant augury, but oil refiners are more or less hardened -to explosions and no one seems to have thought much of the accident. -Nobody was injured; nothing was burned, nothing but 175 barrels of oil -spoiled; that, in an oil refinery, is getting off easy. - -On the 23d of June Miller made the transfer of property advised by the -Everests, talked over things with Truesdale, and a week later left the -Buffalo Works suddenly on receipt of a telegram, and joined H. B. -Everest at the Union Square Hotel in New York. Here Everest advised him -to telegraph his wife to move at once to Rochester lest Matthews attach -their household goods, and then proposed the two go to Boston. The only -event of interest at the Union Square Hotel was an entirely casual -meeting with H. H. Rogers, one of the directors of the Vacuum Oil -Company. Mr. Rogers seems to have had no conversation with Miller other -than to remark, in leaving, that he would see him the next day if he did -not go to Boston. The men did, however, go to Boston, where they -registered as “H. B. Everest and friend,” and where several times, at -least, Everest introduced Miller under an assumed name. They junketed -about for some days on what Everest tried, with indifferent success, to -persuade Miller was a pleasure excursion! While they were amusing -themselves, Everest hired Miller at $1,500 a year to “do any fair job we -put him at, either at Rochester or some other place.” The job turned out -to be a rambling one—a few weeks of semi-idleness in Boston—then nothing -until September, when he undertook to supervise the drilling of a salt -well in Leroy, New York. This lasted until February, 1882; then nothing -until May, when, on the advice of H. B. Everest, who had returned to -California, Miller went there: “Pack up, sell your property there and -come on. Come right to my house and I will help you to get a place and -show you how to raise fruit and be an independent man.” Miller went, the -Vacuum Oil Company paying his expenses. On his arrival he was put to -work in a cannery. The Everests explained that they made this -arrangement because they thought it would put Miller where he could not -be brought back to trouble them any more. - -In the meantime things were going badly with the Buffalo Lubricating -Works. Miller’s loss was a severe one. The men were all novices in -making oil, save Wilson, and he was on the road, and they seem to have -been unable to find a competent manager. The Everests soon succeeded, -too, in getting Wilson out of the new firm by bringing a suit against -him for damaging its business by unlawfully leaving it. The suit was -withdrawn and the costs paid, when Wilson consented, in December, 1881, -to leave the Buffalo Works. Wilson’s loss was particularly serious, as -he was a salesman of experience. - -The suits for infringing the Vacuum patents and processes, which Everest -at the start had warned Matthews would be brought, were begun in -September, 1881—four separate suits within a year. Matthews, as has been -said, had convinced himself that the patents were not valid, and some -time in the spring of 1882 he saw H. H. Rogers in New York concerning -the suits. “I told him I had come in to talk with him about the patent -litigation, or suits that were begun by the Vacuum Oil Company against -my company,” Matthews said in his testimony. “‘Well,’ he said, ‘well, -what about it?’—something like that. I told him that the product patent, -that I well knew, was without merit, and that he knew it was without -merit, and I could not see what object or good they could get out of it -by bringing suit on that patent. And also the steam patent I considered -was without value, and that he knew it was without value. He said that -if one court did not sustain the patents they would carry along up until -we got enough of it—that was the substance of that talk.” - -Matthews was evidently discouraged by the result of his talk with Mr. -Rogers, for, meeting Benjamin Brewster, of the Standard Oil Company, he -offered to sell the Buffalo Lubricating Works for $100,000. The offer -was refused, and the suits against which Mr. Matthews protested were -pushed. On the 21st of February, 1882, the Vacuum Oil Company filed a -complaint in the United States Circuit Court of the Northern District of -New York, asking that the Buffalo company be prevented from -manufacturing lubricating oils, on the ground that the Vacuum Oil -Company had a patent covering the process of manufacturing lubricating -oils. The action was regarded as unfounded by the court, and was -dismissed on July 16, 1884, “the ground being that the letters sued on -in this cause are void.” April 25, 1882, another action was commenced by -the Vacuum Oil Company against the Buffalo company to obtain an -injunction and an accounting for damages upon the ground that the -Buffalo company was using an apparatus covered by a patent belonging to -the Vacuum Oil Company, but this action also was dismissed March 17, -1885, upon the ground that the letters patent sued upon were “null and -void.” On February 23, 1883, the Vacuum Oil Company commenced still -another action against the Buffalo company asking for an injunction to -prevent the Buffalo company from using a label advertising “The Acme -Harness Oil made by the Vacuum Process,” because the Vacuum Company had -long used a somewhat similar label advertising “The Vacuum Harness Oil -manufactured by Vacuum Oil Company,” but the judge in the case decided -that the Vacuum Company had no more right to use labels than the Buffalo -company. This decision has since been affirmed by the General Term of -the Supreme Court. Still another action was brought against the Buffalo -company April 25, 1882, for infringing a patent on a steam process, also -a patent upon a fire test. This action resulted in a decree sustaining -the fire-test patent, but declaring the steam patent void. The case was -then referred to James Breck Perkins, of the Rochester bar, to decide -the amount which the Buffalo company had infringed on this patent. Mr. -Perkins on a number of different occasions took a large amount of proof -there in behalf of the Vacuum Company upon which its counsel claimed -that it was entitled to $12,000 damages upon the accounting. The Buffalo -company submitted no proof in contradiction, but insisted that the whole -proof showed nothing more than a purely technical infringement of the -patent, and this view was sustained by Mr. Perkins in his report which -awarded six cents damages against the Buffalo company. - -The disappearance of Miller, the man on whom the firm had depended for -superintending building and refining, the withdrawal of Wilson, with -whom the enterprise had originated and on which it had staked its hopes -of finding a ready market, and the series of suits for infringement of -patents, suits which cost Matthews thousands of dollars as well as much -embarrassment and delay, were troubles brought on him, so he believed, -as the result of a deliberate attempt on the part of the Vacuum Oil -Company to make good C. M. Everest’s threat to do all in his power to -ruin the Buffalo Lubricating Works, and, in the spring of 1883, he -brought a civil suit against the Everests for $100,000. While Matthews -was working up his case he learned that Miller had returned from -California, that he had left the Everests because he claimed they had -“not treated him right,” and that he was idle in Rochester. Miller seems -to have left California chiefly because he had gotten it into his head -that the information he had about the measures the Vacuum had taken to -prevent the Buffalo Works carrying on their business was valuable. H. B. -Everest testified that Miller once said to him after he was settled in -California: “Mr. Everest, you have always been kind to me, and I shall -do nothing to injure you, but I am going to bust the Standard.” I said: -“Al, how will you go to work to do that?” “More ways than one,” he said; -“they can’t afford to let me loose,” he said. “Sha’n’t be bought off, -either, unless I get something for it. It will cost them more than -twenty-five or fifty thousand dollars before they get through with me.” -I said: “Al, I think you can make more money raising fruit in California -than you can fighting the Standard.” This conversation was held -immediately after the Vacuum had paid Miller $1,000, in addition to the -salary of $1,500 they gave him, and for no apparent purpose except to -keep him quiet. - -When Matthews learned of Miller’s return he asked him to come to -Buffalo, and evidently got from him then, for the first time, the story -of the pressure the Everests had brought to bear on him to leave the -Buffalo Lubricating Works, the “fixing” of the still at their advice so -that something would “smash,” the transfer of his property, his two -years of semi-idleness on $1,500 a year and a bonus of $1,000, paid for -a reason which can only be surmised, and his final breaking in -California, because, as he claimed, he saw no settled employment in view -and no prospect of the Everests doing more for him than they were, and, -as they claimed, because he believed he could get a big sum from the -Standard to keep silent. To all of this Miller made deposition in July, -1884. - -The first civil suit was brought to trial early in March, 1885, and it -resulted in the jury giving a verdict of $20,000 to Matthews for -damages. The court set the sum aside, claiming that they had proved only -$4,000 in damages and that he would not sustain an award of punitive -damages. Matthews’s counsel now obtained a stay of proceedings and -finally a new trial. Now about this time Matthews secured evidence which -emboldened him to give his suit a much wider range than he had at first -intended. This was the testimony of the lawyer Truesdale, quoted above, -that in his office Everest had suggested that Miller “arrange the -machinery so that it would bust up or smash up.” The explosion of June -15 was immediately construed as the result of this counsel. On the -strength of this evidence Matthews instituted a second civil suit for -damages of $250,000 caused by conspiracy to blow up the works of the -Buffalo company, to entice away its employees, to bring unfounded suits -against it, and to slander the company’s product, and he added to the -original defendants the three other directors of the Vacuum Works—H. H. -Rogers, J. D. Archbold and Ambrose McGregor—and the Standard Oil Company -of New York, the Acme Oil Company of New York and the Vacuum Oil -Company. Matthews seems to have argued that, as Rogers, Archbold and -McGregor were directors with the Everests in the Vacuum Oil Company, -they had probably been consulted by the Everests concerning Miller, and -could be included in the conspiracy, and, as the Vacuum, Standard Oil -Company and Acme Oil Company were all concerns in the Standard Oil -Trust, they, too, could be included. He also went before the Grand Jury -of Erie County in opposition to the advice of his counsel and secured -there an indictment of H. H. Rogers, J. D. Archbold, Ambrose McGregor -and the two Everests for criminal conspiracy. The defendants succeeded -in getting the indictment set aside the first time, but Matthews -represented the case, and a second indictment was found of the same -persons. It should be noted that Mr. McGregor was indicted only because -he was a director of the Vacuum Works, his name not being mentioned in -the evidence presented to the Grand Jury. - -An indictment for conspiracy of three men of such prominence as Mr. -Rogers, Mr. Archbold and Mr. McGregor riveted the attention of the whole -country on the coming trial. It was apparent from the first that the -Standard meant to put up a big fight to have the indictment quashed. -They had, indeed, set a strong machinery at work immediately to get -evidence on which to bring a counter charge of conspiracy; that is, that -Matthews’s intention in starting the Buffalo Lubricating Works was never -to do business, but to force the Standard to buy him out at a big price. -They at once set a detective to work on the case, one item of his -instructions reading: “We have reason to believe that the suit is -brought for the purpose of forcing the Standard to purchase the works of -the Buffalo Lubricating Company, and Matthews has made certain -statements to that effect; would like reports of any statements or -admissions by him in relation to his objects in these suits.” Under the -direction of this detective, a man employed in Matthews’s works for some -months made daily reports of what he saw and heard there, copies of -which were forwarded to the Standard office in New York. A detective was -also put on Miller’s track. Miller was now employed in a refinery in -Corry, Pennsylvania, and here he was for a long time under espionage. -The chief expression obtained from him was by luring him into a saloon -one Sunday afternoon and getting him half drunk. While in this -condition, the saloon-keeper testified, he said the Buffalo suit was a -—— humbug, but there was money in it and that they (he and the persons -who were drinking with him) might as well make it as anybody. - -It was on May 2, 1886, that the trial began. The array of wealth and -legal learning in the Buffalo court-room during the fourteen days’ case -set not only the town, but the country agape. There were not only the -Standard men indicted for conspiracy—H. H. Rogers, J. D. Archbold, -Ambrose McGregor—but Mr. Rockefeller himself was there, quiet, steady, -watchful. The hostile said the accused and their counsel were disdainful -of the proceedings—nobody charged Mr. Rockefeller with disdain. With him -were other strong men of the concern, William Rockefeller, Daniel O’Day, -J. P. Dudley. There was a great array of legal learning—five eminent -lawyers—Wilson S. Bissell, a former law partner of ex-President -Cleveland; W. F. Cogswell, of Rochester, counted then one of the ablest -lawyers of the state; Theodore Bacon and F. G. Outerbridge, both of -Rochester; Daniel Lockwood, famous in politics as well as law; and, of -course, S. C. T. Dodd. This for the accused. For the people was the -district-attorney of Erie County, George T. Quinby, with one assistant. -For fourteen days witnesses were examined, and the above story was -dragged from them by dint of questioning and cross-questioning. On May -10 the testimony for the prosecution ended, and the “people rested.” The -Standard lawyers immediately applied for the acquittal of Mr. Rogers, -Mr. Archbold and Mr. McGregor, on the ground that no fact or -circumstance had been proved that connected them in the slightest degree -with the charge of conspiracy to lure Miller away or to destroy the -Buffalo Works. The district-attorney combated the proposition -vigorously. These gentlemen, he contended, owned three-fourths of the -Vacuum Works; they were always present at directors’ meetings; it was a -fair presumption that they knew what was done to persuade Miller to -leave the Buffalo Works; they must have known the moneys paid him while -he was doing little work. Mr. Rogers had certainly threatened Matthews -that he would carry up the patent suits until the Buffalo Works got -enough of it. Judge Haight, however, advised the jury to acquit Mr. -Rogers, Mr. Archbold and Mr. McGregor. “The indictment charges a -conspiracy,” the judge said. “It also charges certain overt acts. One of -the acts charged in the indictment is the enticing away from the Buffalo -company of a servant. Another of the acts alleged is an attempt to blow -up or destroy the Buffalo Works, and another act that of bringing false -suits against the corporation. So far as the agreement or combination to -entice away a servant from the Buffalo company is concerned, I have not -been able to recall any evidence which shows that either of these three -defendants ever knew of it, ever heard of it, or ever took any part in -it at all. So far as the charge of an attempt to blow up the Buffalo -Works is concerned, I have been unable to recall any evidence that has -been given in which either of these three defendants ever knew of it, -ever heard of it, ever advised it, or ever took any part in it whatever. -The only thing about which I have had any doubt was in reference to the -maintaining of actions which have been brought upon patent rights which -were formerly owned by the Everests, and by the Everests transferred to -the Vacuum Oil Company, and it appears that two suits were brought upon -patents, and that there was another suit, a third one, in reference to a -trade-mark. It appears from the evidence that upon one occasion Mr. -Matthews went to New York and had a talk with Mr. Rogers, and that his -conversation has already been discussed and related in your hearing. The -query in my mind was as to whether or not the inference could not be -drawn, from this conversation, that Rogers did know of the bringing of -these actions, acquiesced in their being brought, and in that way became -a party to them; but, even conceding that the actions were brought with -his knowledge and consent, I am inclined still to think that the -evidence is hardly sufficient to warrant his conviction, for the reason -that it does not appear that the actions were brought without probable -cause; in other words, the bringing of an action and being defeated in -the action is not of itself sufficient to authorise a jury to say that -it was a false action. That standing alone is not sufficient to -authorise a jury to say that it is a false action, but there must be -shown in addition to that that there was a want of probable cause; in -other words, that the party bringing the action knew and understood -beforehand that he had no good cause of action.... I am inclined to the -opinion that the evidence would not warrant his conviction upon that -ground.” - -The acquittal of the three Standard gentlemen was followed by an -application for the acquittal of the Everests, but the case with them -was different. It had been proved conclusively that they threatened at -the start to ruin the new concern, and that they had counselled Miller -“to arrange the machinery so it would bust up or smash up”; there was a -strong presumption that Miller, acting on this advice, had arranged for -the explosion of June 15, though, as he claimed, he meant only to “give -them a scare.” The judge denied the application in their case, -therefore, and the trial went on. The whole force of the defence was now -thrown to proving that Matthews had gone into the Buffalo Lubricating -Company merely to sell out. His offer to Mr. Brewster in 1882, his talk -of making the Standard settle, were rehearsed. Two witnesses were -produced also who told of seeking Matthews in 1885, after the criminal -suit was brought, and of offering, on the ground that they knew the -Standard defendants, to attempt to settle the affair. Matthews had told -these men that if the Standard would give him $250,000 for his refinery, -he would withdraw the civil suit, but that he could not touch the -criminal suit, as it was in the hands of the district-attorney. The jury -was not greatly influenced by the evidence produced to show that -Matthews was a blackmailer. Evidently they concluded that, granting that -the Everests had cause of complaint against the men for using their -processes—they certainly had no just cause in the fact of the three men -setting up in business for themselves—granting that the enterprise was -started for blackmailing purposes—and there was no proof offered that it -was—the Everests should have taken their case into the courts—not -plotted the destruction of the refinery by any such underhand methods as -they employed. Whatever the jury’s process of reasoning, however, it is -certain that on May 16 they brought in a verdict of “guilty as charged -by the indictment.” - -The most strenuous efforts were made to set the verdict aside. The judge -granted a stay, and an attempt to get a new trial was made, but -unsuccessfully. The sentence was stayed until May, 1888. The statute -provided a penalty of one year’s imprisonment or $250 fine, or both. -Efforts were at once made to soften the sentence. A petition signed by -over forty “leading citizens” of Rochester, New York, the home of the -Everests, was sent to Judge Haight, praying him, on account of the -“untarnished fidelity and integrity” of the convicted men, to make the -penalty as light as the court was authorised by law to fix. Six of the -jurors were induced by Standard agents to sign a paper claiming that in -their belief the jury in rendering its verdict of guilty did not mean to -pronounce the Everests guilty of an attempt to blow up or burn the works -of the Buffalo company, but guilty only of enticing Miller away, and -they recommended that the sentence, therefore, be a fine and not -imprisonment. District-Attorney Quinby offered to prove on a hearing for -a new trial that the Standard’s representatives used money in getting -these affidavits. The result was that the two Everests were each fined -$250. This sentence was made light, the judge explained, because of the -civil suits brought to recover damages for the very same acts—a person -could not be punished twice for the same offence. - -The first civil suit referred to above resulted in an award by the jury -of $20,000 to Matthews. The second civil suit was for $250,000, but -before it was tried Matthews’s business had become so involved by all -this trouble that in January, 1888, it was put into the hands of a -receiver. The defendants finally offered to settle the civil suits for -$85,000. The judge ordered the receiver to accept the offer, on the -ground that the Everests had already been declared guilty of criminal -conspiracy and had been fined, and that a person could not be punished -twice for the same offence! - -It was not until June, 1889, that the receiver filed his account of the -settlement of the affairs of the Buffalo Works. Of the $85,000 paid by -the Standard, Matthews seems not to have gotten a cent. The entire sum -went to settle the debts of the concern and pay the lawyers. The leading -claimants among the lawyers were Thomas Corlett, Edward W. Hatch and -Adelbert Moot, all of Buffalo. Their claims aggregated nearly $35,000. -The receiver thought these fees exorbitant, and a referee was appointed -by the court to take the testimony of the claimant as to their services. -The testimony was voluminous, and the upshot was that the referee cut -these claims to about $22,000. The final account filed by the receiver -shows that the three gentlemen finally were paid about $15,000. - -The large claims made by the lawyers and certain circumstances of the -settlement have led the Standard, in later years, to advance a counter -charge of conspiracy of much more serious nature than that which they -depended on in the trial. This new charge makes Matthews’s counsel his -fellow conspirators, and alleges that at least two of them used -important official positions to influence the verdict. In the present -year (1904) the Standard’s official organ, the Oil City Derrick, -published a supplement containing the evidence on which this counter -charge is based, and editorially accused the writer of bias in not using -this material in the story of the Buffalo case which was published -practically as it stands here in McClure’s Magazine for March, 1904. It -is true, as the Derrick claims, that through the courtesy of the -Standard Oil Company this material was placed in the writer’s hands -before the article was published. It was not used because it was not -thought it established the charge. - -The points brought out in the evidence published by the Derrick which -are held by the Standard to establish the charge of a conspiracy between -Matthews and his counsel are the following: In the first place, they -declare it a conspiracy because Corlett, who was called to the bench in -January, 1884, and Hatch, who was called to the bench in January, 1886, -were both in consultation with their successors after they became -judges. That this is true there is no doubt whatever. Mr. Moot in his -full statement of his services made to the referee refers again and -again to consultations with Corlett and Hatch after they had given up -the case. Hatch speaks freely in his statement to the referee of -counselling with Quinby and Moot.[113] If there was an impropriety in -what he did, he certainly made no effort to conceal it, nor did the -referee, the court, or the receiver, to whom this statement was -submitted, raise any question of impropriety. The counsel which both -Judge Corlett and Judge Hatch gave Quinby and Moot they owed Matthews. -They had been his counsel for years. They were obliged to give up his -cases because of their election to the bench. They were debarred by -their relation to the case, of course, from hearing it, but there was no -reason why their knowledge and experience should not be drawn upon to a -reasonable degree by the new attorneys. Certainly this is a universal -practice in law courts. It is difficult to see how it could be -otherwise. If either judge had used his position to influence his fellow -judge who heard the case there would be a just criticism, but no such -intimation has ever been made, to the writer’s knowledge. - -The second proof of conspiracy drawn from this testimony to the referee -is the statements of both Hatch and Moot that they had no contracts for -compensation and that they knew they would receive nothing if they lost. -For instance, when Moot was examined by the referee he was asked: - - - _Q._ Did you have any contract or agreement as to how you should be - compensated? - - _A._ Not the slightest. I never had such a contract in my life, - except that I should be liberally paid if I succeeded. If I did not - succeed, the party being poor, my work would be without - compensation.... - - _Q._ Did you ever have any conversation with Matthews or with any - officer of the company with reference to that? - - _A._ No, sir. I feel very clear that I never had a conversation with - a single member of this company about what we should receive for our - services, except to this extent: Mr. Matthews once said, in - referring to or commenting on these litigations, that they were like - any other independent company, as I very well knew; that if the - lawyers could not keep them alive with litigation, the Standard - would beat them—we would not get anything. - - -Judge Hatch in his statement said: “Matthews and I or any one for his -company never had any talk with respect to compensation for services at -the time of their commencement or during their rendition. I knew, -however, that the payment for services was largely contingent upon the -success of the litigation, and the company was not able to pay much more -than the actual expenses in the event they failed to succeed, and that -we would get a very meagre compensation unless we succeeded in the -actions. I think no conversation was ever had except Mr. Matthews -stating that if we should succeed we should be well paid. I think he -mentioned that once or twice.” - -It is not an unusual thing for lawyers to take cases they believe just, -knowing that their compensation depends on their winning. Many clients -with just cases would be deprived of counsel if they had to insure a -fixed compensation, for not infrequently all that a client has is -involved in a suit. The practice is so common among reputable lawyers -that it certainly cannot be regarded as a proof of a conspiracy, unless -there is a reason to suppose that they have taken a case of whose merits -they themselves are suspicious. There is absolutely no evidence that -Matthews’s counsel were not convinced from the first that they had a -strong case. Quinby, the district-attorney who tried the criminal case, -certainly conducted it with a fire and a logic which nothing but -conviction could have inspired. Moreover, it must be remembered that -these attorneys never failed to convince the juries before whom they -appeared of the merits of their case. Four juries, two grand juries and -two petit juries gave unanimous verdicts of conspiracy against the -defendants in the course of the litigation. A case backed by evidence -which would convince such diversified bodies of men could hardly be -called a speculation. Their claims were large, but lawyers are not -proverbial for the modesty of their charges, and in the cases of Hatch -and Moot, the two making the largest claims, the labour had been very -great and had extended over long periods, as one can see who will -examine the testimony published by the Derrick; and besides, exorbitant -charges can hardly be construed as a proof of conspiracy. - -This, then, in outline, is the history of the case on which are based -all charges, so far as the writer knows, that the Standard Oil Company -has deliberately destroyed property to get rid of rivals. The case is of -importance not only as showing to what abuses the Standard policy of -making it hard for a rival to do business will lead men like the -Everests, but it shows to what lengths a hostile public will go in -interpreting the acts of men whom it has come to believe are lawless and -relentless in pursuing their own ends. The public, particularly the oil -public, has always been willing to believe the worst of the Standard Oil -Company. It read into the Buffalo case deliberate arson, and charged not -only the Everests, but the three co-directors, with the overt acts. They -refused to recognise that no evidence of the connection of Mr. Rogers, -Mr. Archbold and Mr. McGregor with the overt acts was offered, but -demanded that they be convicted on presumption, and when the judge -refused to do this they cursed him as a traitor. To-day, in spite of the -full airing this case has had in the courts and investigations, Judge -Haight is still accused of selling himself to a corporation, and Mr. -Rogers is accused daily in Montana of having burned a refinery in -Buffalo. As a matter of fact, no refinery was burned in Buffalo, nor was -it ever proved that Mr. Rogers knew anything of the attempts the -Everests made to destroy Matthews’s business. - - - - - CHAPTER THIRTEEN - THE STANDARD OIL COMPANY AND POLITICS - - OIL MEN CHARGE STANDARD WITH INTRENCHING ITSELF IN STATE AND NATIONAL - POLITICS—ELECTION OF PAYNE TO SENATE IN OHIO IN 1884 CLAIMED TO - ESTABLISH CHARGE OF BRIBERY—FULL INVESTIGATION OF PAYNE’S ELECTION - DENIED BY UNITED STATES SENATE COMMITTEE ON ELECTIONS—PAYNE HIMSELF - DOES NOT DEMAND INVESTIGATION—POPULAR FEELING AGAINST STANDARD IS - AGGRAVATED—THE BILLINGSLEY BILL IN THE PENNSYLVANIA LEGISLATURE—A - FORCE BILL DIRECTED AGAINST THE STANDARD—OIL MEN FIGHT HARD FOR - IT—THE BILL IS DEFEATED—STANDARD CHARGED WITH USING MONEY AGAINST - IT—A GROWING DEMAND FOR FULL KNOWLEDGE OF THE STANDARD A RESULT OF - THESE SPECIFIC CASES. - - -The cases described in the last two chapters naturally aroused intense -interest in the Oil Regions. The two in Ohio demonstrated afresh the -chief grievances which the oil men had against the Standard Oil Company -since 1872—that they were securing rebates on their own shipments and -drawbacks on those of their competitors. The Buffalo case demonstrated -that when their ordinary advantages failed to get a rival out of the way -they winked at methods which a jury called criminal. It was fresh proof -of what the oil men had always claimed, that the Standard Oil Company -was a conspiracy! At the same time that these cases were arousing their -indignation anew there occurred in Ohio an affair which gave them new -evidence of their old charge that the Standard was steadily intrenching -itself in state and national politics in order to direct the course of -legislation to suit itself. There had been many evidences of this, -satisfactory enough to the initiated. There was no doubt that the -investigation of 1876 and the first bill to regulate interstate commerce -introduced at that time had been squelched largely through the efforts -of two members of Congress, one of them directly and the other -indirectly interested in the Standard—these were J. N. Camden of West -Virginia, head of the Camden Consolidated Oil Company, now one of the -constituent companies of the Standard Oil Trust, and H. B. Payne of -Ohio, the father of the treasurer of the Standard, Oliver H. Payne. It -had certainly used its influence to oppose the free pipe-line bill which -the independent oil men had been fighting for since the early days of -the industry. In 1878 and 1879, during the prosecution of the suits -against the railroads and the Standard by the Petroleum Producers’ -Union, there had been incessant charge of the use of political influence -to secure delay. It was a matter of constant comment in Ohio, New York -and Pennsylvania that the Standard was active in all elections, and that -it “stood in” with every ambitious young politician, that rarely did an -able young lawyer get into office who was not retained by the Standard. -The company seems to have taken a hand in politics even before the days -of the South Improvement Company, for Mr. Payne once said in the United -States Senate that when he was a candidate for the House of -Representatives in 1871, “no association, no combination” in his -district did more to bring about his defeat or spent so much money to -accomplish it as the Standard Oil Company![114] - -But all of the examples they quoted were more or less poor in evidence. -Of no one of them perhaps could they have produced satisfactory proof. -Now, however, simultaneously with the three cases outlined in the last -two chapters there came a case of bribery in an election which they held -established their charge. The case was the familiar one of the election -of H. B. Payne of Ohio to the United States Senate in January, 1884. Mr. -Payne was at the time of his election the aristocrat _par excellence_ of -Cleveland, Ohio. He had birth and education, distinction of manner and -mind. His fine old mansion still remains one of the most distinguished -houses in a city of beautiful homes. He had been active in Democratic -politics for many years—a member of the state Senate and a member of -Congress, and he had been mentioned as the Democratic candidate for the -presidency in 1880, receiving eighty-one votes on the first ballot. At -the time of his election to the Senate he was a man seventy-four years -old. Now Mr. Payne’s son, Oliver H. Payne, was one of the thirteen -original members of the South Improvement Company, and one of the rare -Cleveland refiners who had a strong enough stomach to go into the -Standard Oil Company when it swept up the oil trade of Cleveland in -1872, and he had gathered in his share of the spoils of that raid. -Oliver Payne was proud of his father, and it was well known that he -wanted to see him in the Senate of the United States, but there had been -no movement to nominate him, and in 1883 he seems to have made up his -mind to see what he could do. - -A United States Senator was to be elected in Ohio in November. In -October a new State Legislature was chosen, and the Democratic members -were instructed for one of two candidates for the Senate, George H. -Pendleton or General Durbin Ward, both men of prominence and long -service in the public life of the state. Mr. Payne’s name was not -mentioned in the canvass. Nevertheless, hardly had the Legislature -convened when there sprang up at the Neil House in Columbus an -extraordinary Payne boom. Its backers were Senator Payne’s own son, -Oliver H. Payne, at that time treasurer of the Standard Oil Company, and -Colonel Thompson, a prominent personage in the same concern. Their -lieutenants were also members of the company in one capacity or another. -Large sums of money were alleged to have been circulated. There was a -rumour that Oliver Payne said the election cost him $100,000. It was -claimed that it could be proved that a check for $65,000 had been cashed -in Cleveland by one of the men most prominent in the Payne boom, and -that the whole sum had been spent in Columbus. - -A perfect uproar of indignation followed the announcement of Mr. Payne’s -choice. All over the state the Standard Oil Company was charged with the -election. The Democratic press was particularly bitter: - - - Said the Butler County Democrat: “It was simply a question whether - Pendleton, Ward, Thurman, Converse, Follett, Geddes, or any other - capable and honest Democrat, should receive the compliments of a - seat in the Senate, or that the Standard Oil Company should buy the - place for Henry B. Payne. It was an honest and divided Democracy - against a hydra-headed dictatorship of rich men on whose banner was - inscribed ‘Money Talks.’” - - The Carroll County Chronicle in commenting on the election said: “It - is a great mistake to suppose Standard Oil has captured the - Democratic party of Ohio. It may have captured a score or two of men - elected to the Legislature, but they are not the Democracy of Ohio - by a long shot. When the British got General Benedict Arnold they - imagined they had captured the United States army, but it was a - mistake.” - - “The monopoly of the Standard Oil Company must be destroyed,” - declared the Columbus Times. “Its intrusion into political circles - must be prevented. There must be no later acceptance of this - outrage. Political purity and perpetuity permit no complacency. - These pernicious foreign elements must be eradicated, and until they - are no Democrat will enter the capitol of Ohio or of the nation. The - rottenness that uncovered itself last night has not its confines in - Ohio.” - - -The comments were not confined to papers of the state. The New York Sun, -under the head “Was Payne’s Election Bought?” said: - - - “The subjoined communication from a source which we always respect - is worthy of more attention than is usually bestowed upon the - animated expressions of those whose preferences have not been - realised: - - “‘It is now believed, and I believe, that the Standard Oil Company - recently bought with money Ohio’s seat in the Senate of the United - States for Mr. Payne. Now, can the social respectability of a man - make such a crime respectable? Or is there to be one standard of - political morality for Republicans and another for Democrats? Or are - Democrats expected to condemn corruption only when practised by - Republicans, and to condone, defend, and cover it up when practised - by Democrats, or when it is found only in the Democratic party? In - my opinion there is no danger so threatening to free institutions as - the sale and purchase of political power, and nothing more to be - condemned.’” - - -Although these charges were kept up for two years neither the Standard -Oil Company, Mr. Payne, nor the Legislature which had elected him -noticed them. The scandal became one of the issues of the next campaign -and was instrumental in making the next Legislature of Ohio Republican. -As soon as the new Legislature convened at the opening of 1886 an -investigation of the Payne case was ordered. Some fifty-five witnesses -were examined, and the resulting testimony turned over to the Senate of -the United States for its examination. The testimony did not prove the -charge of bribery, the Ohio Legislature said, but it was of such a -nature as to require the Senate’s attention. The matter went to the -Senate Committee on Elections, and in July, 1886, a majority reported -against the further investigation asked by the state of Ohio.[115] -Against this decision two members of the committee, Senators Hoar and -Frye, protested: - - - “Is the Senate to deny to the people of a great state, speaking - through their Legislature and their representative citizens, the - only opportunity for a hearing of this momentous case which can - exist under the constitution? We have not prejudged the case, nor do - we mean to prejudge it. We sincerely trust that the investigation, - which is as much demanded for the honour of the sitting members as - for that of the Senate or the state of Ohio, may result in - vindicating his title to his seat and the good name of the - Legislature that elected him. - - * * * * * - - - “How can a question of bribery ever be raised or ever be - investigated if the arguments against this investigation prevail? - You do not suppose that the men who bribe or the men who are bribed - will volunteer to furnish evidence against themselves? You do not - expect that impartial and unimpeachable witnesses will be present at - the transaction? Ordinarily, of course, if a claim like this be - brought to the attention of the Senate from a respectable quarter - that a title to a seat here was obtained by corrupt means, the - Senator concerned will hasten to demand an investigation. But that - is wholly within his own discretion and does not affect the due mode - of procedure by the Senate. From the nature of the case, the process - of the Senate must compel the persons who conducted the canvass and - the persons who made the election to appear and disclose what they - know; and until that process issue, you must act upon such - information only as is enough to cause inquiry in the ordinary - affairs of life. - - “The question now is not whether the case is proved; it is only - whether it shall be inquired into. That has never yet been done. It - cannot be done until the Senate issues its process. No unwilling - witness has ever yet been compelled to testify; no process has gone - out which could cross state lines. The Senate is now to determine, - as the law of the present case and as the precedent for all future - cases, as to the great crime of bribery—a crime which poisons the - waters of republican liberty in the fountain—that the circumstances - which here appear are not enough to demand its attention.” - - -For three oppressive July days the Senate gave almost all of its time to -a bitter debate on the report. The name of the Standard was freely used. -“The Senate of the United States,” said Senator Frye, “when the question -comes before it as this has been presented, whether or not the great -Standard Oil Company, the greatest monopoly to-day in the United States -of America, a power which makes itself felt in every inch of territory -in this whole republic, a power which controls business, railroads, men -and things, shall also control here; whether that great body has put its -hands upon a legislative body and undertaken to control, has controlled, -and has elected a member of the United States Senate, that Senate, I -say, cannot afford to sit silent and let not its voice be heard in an -inquiry as to the truth of the allegation.” The majority report was -adopted, however, by a vote of forty-four to seventeen. “The most -unfortunate fact in the history of the Senate,” said Senator Hoar.[116] - -For the time the matter rested, but only for the time. The failure to -investigate rather intensified the convictions that Payne’s seat was -bought by the Standard Oil Company. In 1887 Mr. Payne voted against the -Interstate Commerce Bill. “That is why he was put in the Senate,” people -said bitterly. The feeling became still more intense in 1888. The -question of trusts was before Congress. The Republicans had come out -with an anti-trust plank in their platform; the Democrats, in response -to Mr. Cleveland’s message, were declaring the tariff the greatest -trust-builder in existence, and calling on their opponents for reform -there if they were sincere in their anti-trust attitude. In this -agitation the Standard Oil Company undoubtedly exerted its influence -against all trust investigation and legislation. The charge became -general that they were helping the Democrats. This is why they wanted a -Democratic Senate. In September, 1888, when a phase of the question was -before the Senate, Mr. Hoar, with his genius for asking far-reaching -questions, said one day: “Is there a Standard Oil Trust in this country -or not?... If there be such a trust, is it represented in the Cabinet at -this moment? Is it represented in the Senate? Is it represented in the -councils of any important political party in the country?” - -It was the first time that Mr. Payne had been sufficiently aroused to -reply. “There is nothing whatever to sustain the insinuation which the -honourable Senator conveys. I make the declaration now for the first -time, and it will be the last time I shall ever take notice of it. The -Standard Oil Company is a very remarkable and wonderful institution. It -has accomplished within the last twenty years of commercial enterprise -what no other company or association of modern times has accomplished, -but, Mr. President, I never had a dollar’s interest in that company. I -never owned a dollar of its stock; I never rendered it any service, and -that company never rendered me any service. On the contrary, when a -candidate for the other House in 1871, no institution, no association, -no combination in my district did more to bring about my defeat and went -to so large an expense in money to accomplish it as the Standard Oil -Company.... - -“As a matter of fact, nine-tenths of the stockholders of the Standard -Oil Company are now and always have been Republicans. Within my -knowledge there are but two Democrats who have ever been stockholders in -that company.” Farther on Mr. Payne interpolated this irrelevant remark: -“Not only are the majority Republicans, but they are very liberal in -their philanthropic contributions to charities and benevolent works, and -I venture the assertion that two gentlemen in that company have donated -more money for philanthropic and for benevolent purposes than all the -Republican members of the Senate put together.” - -Mr. Payne’s denial was not sufficient to silence Senator Hoar. He -returned to the attack. It was a “general public belief,” he declared, -that the Standard Oil Company was represented in the Cabinet and Senate. -He called attention to the newspapers’ charge to that effect, and -declared that he had received many personal letters charging that the -Standard was helping the Democrats. He asked for information when he -asked his question; he made no charges. Mr. Whitney was the member of -Mr. Cleveland’s Cabinet to whom Senator Hoar referred, and he promptly, -in a public letter, disclaimed all connection with the Standard Oil -Company. Mr. Hoar said he “cheerfully accepted” the denial. As for Mr. -Payne, he was not satisfied, and when Mr. Payne in heat replied to him, -Senator Hoar closed his lips forever in a burst of biting sarcasm: - - - “A Senator who, when the Governor of his state, when both branches - of the Legislature of his state complained to us that a seat in the - United States Senate had been bought, when the other Senator from - the state rose and told us that that was the belief of a very large - majority of the people of Ohio without distinction of party, failed - to rise in his place and ask for the investigation which would have - put an end to those charges if they had been unfounded, sheltering - himself behind the technicalities which were found by some gentlemen - on both sides of this chamber, that the investigation ought not to - be made, but who could have had it by the slightest request on his - own part and then remained dumb, I think should forever after hold - his peace.... I think few men ever sat in the Senate who would - refrain from demanding an investigation under such circumstances, - even if it were not required by the Senate itself.... There were - Senators who thought that the admission of that Senator, the - continuance of that Senator in his seat without investigation, - indicated the low-water mark of the Senate of the United States - itself.”[117] - - -And there the Payne case rested. It was never _proved_ that the Standard -Oil Company had contributed a cent to his election. It was never -_proved_ that his seat was bought, but the fact that, in the face of -such serious charges, rehearsed constantly for four years, neither Mr. -Payne nor the Standard Oil Company had done aught but keep quiet, -convinced a large part of the country that the suspicion under which -they rested was less damaging than the truth would be. In the minds of -great numbers this silence was a confession of guilt. The Payne case -certainly aggravated greatly the popular feeling that the Standard Oil -Company was using the legislative bodies of the country in its own -interest. - -This feeling was intensified in 1887 by a terrific battle between the -oil producers and Standard forces in the Legislature of the state of -Pennsylvania. Since the compromise of 1880 the body of the oil producers -had been taking no concerted action against the Standard. But their -inaction was not due to reconciliation to Standard domination. As a -matter of fact they were almost as bitter in 1886 as they had been in -1878, when they formed the Union which for two years fought so good a -fight. The specific complaint of the oil producers at this time was that -they were being “robbed” by the National Transit Company—the big -Standard pipe-line consolidation, which had secured by the series of -manœuvres already outlined the monopoly of handling and transporting -crude oil. If the oil producers had been making money at this time it is -quite possible that they would have paid little attention to the profits -of the National Transit Company. The service they got was about as -perfect as any human machine could render, and they would probably have -recognised this and been willing to pay high if they too had been -prosperous. But the condition of the oil producer in these days was in -glaring contrast to that of Mr. Rockefeller. They had piled up oil until -there were in 1886 over 33,000,000 barrels on hand. Naturally this had -driven prices down. The average price for the last years had been under -a dollar a barrel. In 1886 it fell down to 71⅜, and everyone said it -must go lower. Embittered and discouraged, the producers fell to -comparing what they were getting out of the business with what Mr. -Rockefeller was getting. It was not a consoling showing. The Standard -Oil Trust had from its organisation in 1882 paid dividends on its -$70,000,000 capital. In spite of the extraordinary outlay for tank -building and seaboard pipe-lines made from 1881 to 1884—$30,000,000 it -is computed to have been—the trust paid 10½ per cent. in 1885, ten per -cent. in 1886, and Standard Oil stock stood near 200! In contrast, the -oil producer, in 1886, is estimated to have lost about six per cent. on -his expenditures, and oil property depreciated one-third in value.[118] - -[Illustration: - - JOHN D. ROCKEFELLER - - By Eastman Johnson -] - -Something was wrong. They could not charge the Standard with the price -of oil. As long as over 33,000,000 barrels in stock lay on the market it -could not rise. But they could and did complain of what it cost them to -handle this oil, of storage and carrying charges, of the deductions for -shrinkage and for loss by fire. If the Standard had not forced out every -competing line, there would have been sufficient competition to have -lowered these items—which at the present prices soon ate up the value of -oil. And they fell to rehearsing the raids by which the various -transporting companies which had fought themselves into independent -positions had been forced into combination, their chief grievances being -naturally the affair of the Tidewater. In this state of mind, and -incited by the Buffalo, the Payne, and the Rice cases, it was natural -enough that when suddenly, at the opening of 1887, a bill evidently -intended to strike a blow at the Standard was introduced into the -Legislature of Pennsylvania, the oil producers rushed pell-mell to -support it. The opening sentence was enough for them. It was “An act to -_punish_ corporations.”[119] This was what they had always sought, some -way to _punish_ Mr. Rockefeller for what they believed to be a -conspiracy against their interests. The way in which the Billingsley -Bill, as it was called from the name of its father, proposed to punish -the Standard was to make it a criminal offence to charge in excess of -certain rates it fixed—ten cents a barrel for gathering and delivering -oil to storing points (the current rate was twenty cents); one-sixtieth -of one per cent. per barrel a day for storage, with no storage charge -for the first thirty days (one-half of one per cent. was the current -rate); one-half of one per cent. shrinkage, instead of three per cent. -Besides, the bill required the Standard to go to any well on application -of the owner, it made the company liable for damage, and it required it -to deliver oil of like kind and quality as that received. - -The enthusiasm with which the bill was greeted was cooled a little by -the announcement that as it stood it was unconstitutional—acts to punish -being forbidden by the constitution of the state—as well as by an -immediate realisation that the prices fixed for services were in nearly -every case less than cost. The bill was immediately amended. When it -came back it was at once apparent that, in spite of this preliminary -hitch, a tremendous fight to carry it was being organised by the oil -men. Then determination to push it grew in proportion to the Standard -opposition. The Standard, indeed, realised immediately that unless a -hard fight was made the bill would go through by popular clamour, and -they turned their big lawyer, Mr. Dodd, against it, set their -newspapers—the Oil City Derrick, Titusville Herald and Bradford Era, all -of them by this time subsidised organs—to argue against it, and sent Mr. -Scheide, one of the ablest of their pipe-line managers, to present their -side at Harrisburg. They also secured the services of a well-known young -Republican member of the Legislature, Wallace Delemater, of Crawford -County, one of the counties in the Oil Regions, to organise an -opposition to the bill in the Legislature. - -In February a hearing was given the bill, Mr. Dodd presenting the -Standard side. It is rare that so able a lawyer has to fight so weak a -measure, and Mr. Dodd riddled it easily. As a matter of fact the -Billingsley Bill was as bad as it could be. It was characterised by all -sorts of constitutional, legal and practical difficulties. The pipe-line -business was an interstate business, and this bill attempted to regulate -it—which evidently it could not do. It could, of course, regulate -Pennsylvania oil, but, by so doing, it created two classes of oil in the -lines, a situation which would have been confusing and undesirable. It -was evidently intended that the prices it fixed should apply to the -30,000,000 barrels of stocks on hand, but these were held under -contract, and could not be touched. There were many other objections to -the bill. Even Judge Heydrick, the able lawyer whom the oil men had -engaged to defend it, was obliged to apologise for it at every point, -and its most valiant supporter, Senator Lewis Emery, Jr., said frankly -that the framer of the bill knew too little of the oil men’s needs to be -able to make a bill, and that this would have to be thoroughly revised. - -In spite of all the reasonable, indeed overwhelming, objections to the -Billingsley Bill, the oil men clung to it. Mass-meetings were held -nightly from one end of the region to the other, petitions flooded the -Legislature, a big delegation was kept constantly in Harrisburg lobbying -for it. The support was intemperate, bitter, unreasonable. In March it -was intensified by the knowledge that a self-constituted committee of -leading oil men were in New York treating with the Standard in regard to -certain of the abuses the bill aimed to cure. These men felt that the -Standard was unjust in its dealings with the oil men, excessive in its -charges, and arbitrary in its service, but they felt that the confusion -the Billingsley Bill would bring into the business more than offset the -grievances it righted, and they had gone to Mr. Rockefeller to see if -matters could not be compromised. Now nothing could have more -effectually added to the warlike spirit abroad in the Oil Regions at -that moment than the suggestion of a compromise. Their cause was being -“sold.” It was “compounding with felony,” and when, after a three days’ -sitting in New York, the committee came home with an agreement from the -National Transit Company, making certain concessions—as two per cent. -instead of three for shrinkage, twenty-five cents a day per 1,000 -barrels, instead of forty, for storage, and with a promise that certain -other points should be settled by joint committees—two of the leading -members were hung in effigy in Titusville! - -In April the final vote on the Billingsley Bill came. Harrisburg was -alive with oil men determined that the bill should go through. The -Standard was present, and if it had less of a _claque_, it had more of -the “sinews of war.” Indeed, it was charged later by Senator Lewis Emery -that the leader of the Standard forces in the Senate received $65,000 -for his services—a charge which, so far as the writer knows, has never -been either proved or disproved. The bill came to a vote after a -passionate wrangle. It was defeated eighteen to twenty-five. A storm of -violent protest from the oil men’s representatives followed the defeat, -and the lobbies, the hotels, and even the streets of Harrisburg were -scenes in the next hours of bitter quarrels and excited gatherings. When -finally the oil men withdrew from the town it was with the understanding -that they were to meet two weeks later in Oil City to organise a new -protective association. The protests and resolutions passed at their -final gatherings foreshadowed no intention of reviving the Billingsley -Bill. Indeed, the bill itself had received scant attention from them in -the violent campaign over its passage which they had carried on for -three months. All their passion had been expended on the Standard. This -was a question of whether the Standard Oil Company ruled the Legislature -of Pennsylvania or whether the people ruled it—so declared the oil men; -and when their bill was defeated they charged it was by bribery, and -henceforth quoted the defeat of the Billingsley Bill along with the -Payne case as proof of the corrupt power of the Standard Oil Company in -politics. Their outbreak, for it was nothing else, was the culmination -of their indignation and resentment at fifteen years of unfair play on -the part of the Standard Oil Company, of resentment at the South -Improvement Company, at forced combination of refineries and pipe-lines, -at railroad rebates and drawbacks, at the immediate shipment outrages, -at the Tidewater defeat. It was revolt against the incessant pressure of -Mr. Rockefeller’s pitiless steel grip. It was bitterness at the idea -that it was he who was reaping all the profit of a business in which -they were taking the chief risks, and if things went on as they were -that it was he who always would. Out of their burst of passion was to -grow a solid determined effort, but for the moment they were defeated, -and the defeat, which really was merited, was another added to their -series of just and unjust complaints against Mr. Rockefeller. - -All of these bitter and spectacular struggles aroused intense public -interest. The debate on the Interstate Commerce Bill was contemporaneous -with them—the bill was passed in 1887, and had its effect. The feeling -grew all over the country that whatever the merits of these specific -cases, there was danger in the mysterious organisation by which such -immense fortunes and such excessive power could be built up on one side -of an industry, while another side steadily lost money and power. A new -trial was coming to Mr. Rockefeller, one much more serious than any -trial for overt acts, for the very nature of his great creation was to -be in question. It was a hard trial, for all John D. Rockefeller asked -of the world by the year 1887 was to be let alone. He had completed one -of the most perfect business organisations the world has ever seen, an -organisation which handled practically all of a great natural product. -His factories were the most perfect and were managed with the strictest -economy. He owned outright the pipe-lines which transported the crude -oil. His knowledge of the consuming power of the world was accurate, and -he kept his output strictly within its limit. At the same time the great -marketing machinery he had put in operation carried on an aggressive -campaign for new markets. In China, Africa, South America, as well as in -remote parts of Europe and the United States, Standard agents carried -refined oil. The Standard Oil Company had been organised to do business, -and if ever a company did business it was this one. From Mr. Rockefeller -himself, sitting all day in his den, hidden from everybody but the -remarkable body of directors and heads of departments which he had -“acquired” as he wiped up one refinery and one pipe-line after another, -to the humblest clerk in the office of the most remote marketing agency, -everybody worked. There was not a lazy bone in the organisation, nor an -incompetent hand, nor a stupid head. It was a machine where everybody -was kept on his mettle by an extraordinary system of competition, where -success met immediate recognition, where opportunity was wide as the -world’s craving for a good light to cheer its hours of darkness. The -machine was pervaded and stimulated by the consciousness of its own -power and prosperity. It was a great thing to belong to an organisation -which always got what it wanted, and which was making money as no -business in the country had ever made it. - -What more, indeed, could Mr. Rockefeller ask than to be let alone? And -why not let him alone? He had the ability to keep together the -wide-spread interests he had acquired—not only to keep them together, -but to unify and develop them; why not let him alone? Many people even -in the Oil Regions were inclined to do so, some because they feared -him—rumour said Mr. Rockefeller was vindictive and never forgot -opposition; others because they were canny and foresaw that they might -want his help one day; still others because criticism of success is an -ungracious business and arouses a suspicion that the critic may be -envious or bitter. But there were a few people, as there always are, -whom no cowardice, no self-interest, no fear of public opinion could -keep quiet, and these people insistently urged that the Standard Oil -Company was a menace to the commerce of the country. We have been and -are being wronged, they repeated. We have a right to do an independent -business. Interference to drive us out is conspiracy. Let Mr. -Rockefeller succeed in the oil business and he will attack other -industries; he will have imitators. In fifty years a handful of men will -own the country. - -Mr. Rockefeller handled his critics with a skill bordering on genius. He -ignored them. To see them, to answer them, called attention to them. He -was too busy to answer them. “We do not talk much—we saw wood.” This -attitude of serene indifference is supremely wise. It belittles the -critic and it gives the outsider who watches the game a feeling that a -serenity so high must come from an impregnable position. There is no -question but many a mouth opened to testify against the Standard Oil -Company has been closed by Mr. Rockefeller’s policy of silence. Only the -few irreconcilables withstood his sphinx-like attitude, and yearly, from -the compromising of 1880, these warnings and accusations were louder and -more fierce. Probably the greatest trial Mr. Rockefeller has ever had -has come from the persistency with which the few malcontents kept him -before the public. They interfered with two of his great -principles—“hide the profits” and “say nothing.” It was they who had -ruined the South Improvement Company; it was they who had indicted him -for conspiracy and compelled him to compromise in 1880. It was they who -now, after the splendid pipe-line organisation was completed and his -market machinery was in order, kept up their agitation and their -cursing. Their work began to tell. The feeling grew that the Standard -Oil Company, or Trust, as it was by this time generally called, must be -looked into. Even those who, dazzled by Mr. Rockefeller’s achievement, -were inclined to overlook its ethical side and to refuse to consider to -what aggregation of power and abuse it might lead, began to feel that it -would be quite as well to have the matter thrashed out, to have it -settled once for all, whether the thing had been so bad in its making -and was so dangerous in its tendencies as the “oil-shriekers” pretended. -In the House of Representatives, when the question of ordering an -investigation of trusts by the Committee on Manufactures was up in 1887, -the liveliest concern was shown as to whether the Standard Oil Company, -“the most important case” of all, would escape. More than one member -asked to be assured before consenting to the investigation that the -Standard would be put on the rack. The same interest was shown in the -Senate of New York State, where an investigation was ordered for -February, 1888. It was certain indeed now that Mr. Rockefeller would not -be allowed much longer to work in the dark. He was to be dragged into -the open, much as he might deplore it, to explain what his trust really -was, to prove to a suspicious and hostile public that he had a right to -exist. - - - - - CHAPTER FOURTEEN - THE BREAKING UP OF THE TRUST - - EPIDEMIC OF TRUST INVESTIGATION IN 1888—STANDARD INVESTIGATED BY NEW - YORK STATE SENATE—ROCKEFELLER’S REMARKABLE TESTIMONY—INQUIRY INTO - THE NATURE OF THE MYSTERIOUS STANDARD OIL TRUST—ORIGINAL STANDARD - OIL TRUST AGREEMENT REVEALED—INVESTIGATION OF THE STANDARD BY - CONGRESS IN 1888—AS A RESULT OF THE UNCOVERING OF THE STANDARD OIL - TRUST AGREEMENT ATTORNEY-GENERAL WATSON OF OHIO BEGINS AN ACTION IN - QUO WARRANTO AGAINST THE TRUST—MARCUS A. HANNA AND OTHERS TRY TO - PERSUADE WATSON NOT TO PRESS THE SUIT—WATSON PERSISTS—COURT FINALLY - DECIDES AGAINST STANDARD AND TRUST IS FORCED TO MAKE AN APPARENT - DISSOLUTION. - - -There was no characteristic of Mr. Rockefeller and his great corporation -which from the beginning had been more exasperating to the oil world -than the secrecy with which operations were conducted. The plan of the -South Improvement Company had only been revealed to those who signed an -agreement to keep secret all transactions they might have with it. The -purchase in 1874 and 1875 by the Standard Oil Company of Lockhart, Frew -and Company of Pittsburg, of Warden, Frew and Company of Philadelphia, -and of Charles Pratt and Company of New York was so thoroughly concealed -that Mr. Rockefeller, five years after it occurred, dared make an -affidavit that it had never occurred![120] Men who entered into running -arrangements with Mr. Rockefeller were cautioned “not to tell their -wives,” and correspondence between them and the Standard Oil Company was -carried on under assumed names! Whenever the subject of the relations -between the various companies came up in a lawsuit or an investigation, -a candid and straightforward answer was always avoided by both Mr. -Rockefeller and the men known to be associated with him in some way. For -instance, in 1879, when H. H. Rogers was before the Hepburn Committee, -an effort was made to find out what relation the firm of Charles Pratt -and Company, of which he was a member, sustained to the Standard Oil -Company. Mr. Rogers’s testimony was a masterpiece of good-natured -evasion,[121] and all that the examiners could get, though they returned -again and again to the inquiry, was that Charles Pratt and Company -worked in “harmony” with the Standard Oil Company. - -When ex-Governor Nash of Ohio was investigating the relations of the -Cleveland and Marietta Railroad and the National Transit Company, try -his best he could not find out anything definite. In his report Mr. Nash -said: “I have purposely referred to the parties who entered into this -arrangement with Receiver Pease and his freight agent, J. E. Terry, as -the parties represented by O’Day and Scheide, for the reason that I have -not been able to ascertain who or what the parties are.” That they were -officers of the National Transit Company he had evidence, but what -relation had the National Transit Company to the Standard Oil Company? -Was it a part of it? Mr. Nash was unable to find from Mr. O’Day, closely -as he might question him.[122] - -In the Buffalo case, when John D. Rockefeller was on the stand, he was -put through a questioning in regard to the relations of the persons -concerned in the suit to the Standard Oil Trust, whose existence he -admitted. Mr. Rockefeller answered all the questions his lawyers would -allow, but at the end the plaintiffs had gained little or nothing, and -there was a strong impression, from the attitude of his lawyers rather -than from that of Mr. Rockefeller, that an effort was making to conceal -the nature of the agreement or charter or whatever it was under which -the companies involved were working. Naturally enough this attitude -inspired resentment and aggravated the feeling that this secrecy meant -evil-doing. When the epidemic of trust investigation broke out in 1888, -and the Standard Oil Trust was brought up for examination, there was a -general public demand to have the matter cleared up. The first -investigation of importance took place in February, 1888, in New York -City, and by the direction of the Senate of New York State. A list of -more than a score of trusts was in the hands of the committee, and, with -the limited time at their disposal, it was certain that they could not -look into more than half a dozen. There seems to have been no hesitation -about including the Standard Oil Trust. “This is the original trust,” -wrote the committee. “Its success has been the incentive to the -formation of all other trusts or combinations. It is the type of a -system which has spread like a disease through the commercial system of -this country.” - -There were several things the committee wanted to know about the -Standard Oil Trust, and its president was summoned for examination. (1) -What was it? Was it an organisation recognised by any law of the land? -Long ago men had decided that partnerships, corporations, companies, in -which men united to do business, must be regulated by law and subjected -to a certain amount of publicity, if the public good was to be -protected. Was the Standard Oil Trust within or without the law? (2) By -the testimony of its own members, in other years the Standard -Combination controlled from eighty to ninety per cent. of the oil -business of the country. Was this supremacy due in any measure to -special privileges, such as discrimination in railroad rates? (3) Was -its power used to manipulate production and prices, and to prevent men -outside entering the oil business? - -It was to learn these things that the commission summoned Mr. -Rockefeller. Flanked by Joseph H. Choate, present Ambassador to the -Court of King Edward and the most eminent lawyer of the day, and S. C. -T. Dodd, a no less able if a less well-known lawyer, Mr. Rockefeller -submitted himself to his questioners. In no case where he has appeared -on the stand can his skill as a witness be studied to better advantage. -With a wealth of polite phrases—“You are very good,” “I beg with all -respect”—Mr. Rockefeller bowed himself to the will of the committee. -With an air of eager frankness he told them nothing he did not wish them -to know. The committee had a desire to begin at the beginning. It -evidently had heard that a short-lived organisation, called the South -Improvement Company, had given Mr. Rockefeller his whip-hand in the oil -business as far back as 1872, enabling him in three months’ time to -raise his daily capacity as a refiner from 1,500 to 10,000 barrels, and -so they asked Mr. Rockefeller: - - - _Q._ There was such a company? - - _A._ I have heard of such a company. - - _Q._ Were you not in it? - - _A._ I was not.[123] - - -It is a perfectly well-known fact that Mr. Rockefeller owned 180 shares -in the South Improvement Company, of which he was a director; that, when -a public uprising caused the destruction of the company, he was one of -the two men who tried to save it; also that the Standard Oil Company of -Ohio was the only concern which profited by the short-lived conspiracy. - -Another staggering bit of testimony concerned railroad rates. Asked if -there had been any arrangements by which the trust or the companies -controlled by it got transportation at any cheaper rates than was -allowed to the general public, Mr. Rockefeller answered: “No, sir.” As a -matter of fact, the three great oil-carrying systems of the country—the -Central, Erie and Pennsylvania—had all of them, for much of the period -between 1872 and 1888, granted to Mr. Rockefeller rebates calculated to -keep freight rates down for the Standard Oil Company and up for its -competitors. Contracts and agreements to this effect are easily -accessible to any one caring to investigate the quality of Mr. -Rockefeller’s “no.” “No,” said Mr. Rockefeller, “we have had no better -rates than our neighbours,” and then, with that lack of the sense of -humour which, ethical qualities aside, is his chief limitation, he -hastened to add: “But, if I may be allowed, we have found repeated -instances where other parties had secured lower rates than we had.” - -Later in the day the committee, which seems to have known something of -Mr. Rockefeller’s former contracts with the railroads, returned to the -subject, and the following colloquy, worthy of the study of all -witnesses interested in how not to tell what you know, took place: - - - _Q._ Has not some company or companies embraced within this trust - enjoyed from railroads more favourable freight rates than those - rates accorded to refineries not in the trust? - - _A._ I do not recall anything of that kind. - - _Q._ You have heard of such things? - - _A._ I have heard much in the papers about it. - - _Q._ Was there not such an allegation as that in the litigation or - controversy recently disposed of by the Interstate Commerce - Commission, Mr. Rice’s suit; was not there a charge in Mr. Rice’s - petition that companies embraced within your trust enjoyed from - railroad companies more favourable freight rates? - - _A._ I think Mr. Rice made such a claim; yes, sir. - - _Q._ Did not the commission find that claim true? - - _A._ I think the return of the commission is a matter of record; I - could not give it. - - _Q._ You don’t know it; you haven’t seen that they did so find? - - _A._ It is a matter of record. - - _Q._ Haven’t you read that the Interstate Commerce Commission did - find that charge to be true? - - _A._ No, sir; I don’t think I could say that. I read that they made - a decision, but I am really unable to say what that decision was. - - _Q._ You did not feel interested enough in the litigation to see - what the decision was? - - _A._ I felt an interest in the litigation; I don’t mean to say that - I did not feel an interest in it. - - _Q._ Do you mean to say that you don’t know what the decision was? - that you did not read to see what the decision was? - - _A._ I don’t say that; I know that the Interstate Commerce - Commission had made a decision; the decision is quite a - comprehensive one, but it is questionable whether it could be said - that that decision in all its features results as I understand you - to claim. - - _Q._ You don’t so understand it? Will you say, as a matter of fact, - that none of the companies embraced within this trust have enjoyed - more favourable freight rates than the companies outside of your - trust? Will you say, as a matter of fact, that it is not so? - - _A._ I stated in my testimony this morning that I had known of - instances where companies altogether outside of the trust had - enjoyed more favourable freights than companies in this trust; and I - am not able to state that there may not have been arrangements for - freight on the part of companies within this trust as favourable as, - or more favourable than, other freight arrangements; but, in reply - to that, nothing peculiar in respect to the companies in this - association; I suppose they make the best freight arrangements they - can.[124] - - -The committee had a vague idea that refineries outside of the Standard -Combination had had a hard time to live, and asked if the trust had -sought in any way to make the operations of outsiders so unprofitable -that they would either have to come in or go out of the business. - -“They have not; no, sir, they have not,” replied Mr. Rockefeller. - -“And they have lived on good terms with their competitors?” - -“They have, and have to-day very pleasant relations with those -gentlemen.” - -It would have been interesting to have heard the comments of a number of -gentlemen trying to carry on an independent business in 1888 on that -answer: of the refiners in Oil City and Titusville, at that time -preparing to carry their troubles to the Interstate Commerce Commission; -of George Rice and others at Marietta, Ohio; of H. H. Campbell, of the -Bear Creek Refining Company at Pittsburg; of Scofield, Shurmer and -Teagle at Cleveland. - -If all of Mr. Rockefeller’s testimony had been of the nature of the -above, the investigation would have been worth little to the people who -demanded it. But when it came to the questions which, after all, it was -most essential to have answered at that moment, Mr. Rockefeller, after -some skirmishing, gave the committee as frank testimony as is on record -from him. The information wanted was in regard to the organisation of -the Standard Oil Trust. As pointed out in a previous chapter, there had -been some kind of an agreement adopted in 1882, binding together the -varied interests which controlled the oil business. But what it was, -where it was kept, by what authority it lived, nobody knew. For six -years it had succeeded in hiding itself. What was the understanding -which had made a trust of a company? The committee asked to know. Mr. -Rockefeller and his counsel were the soul of amiability under the -demand. They had only one request, and Mr. Choate made it persuasively: - - - “If the committee please,” he said, “I do not arise to make an - objection to a request of the committee; we think that it is very - proper that the committee should be made acquainted with this - document and everything pertaining to it in order to advise them as - to the nature and operation of this trust; at the same time, there - are private interests and controversies involved which might be - seriously prejudiced by a public exposition of its details, and - therefore, in producing it, we, without asking the committee to make - any promise or to commit themselves at all, request that while they - make whatever use of it they please, it shall not be in all its - details made a matter of public record or exhibition unless in their - final judgment, after consideration of the matter, they shall - consider it necessary. There are very important private interests - involved that ought not, under the guise of a public investigation, - to be interfered with.” - - -The committee examined the document and concluded to include it in its -report.[125] Like all great things, it was simplicity itself—an -agreement which anybody could understand, by which some fifty persons -holding controlling interests in corporations, joint stock associations, -and partnerships of different states, placed all their stock in the -hands of nine trustees, receiving in return trust certificates. These -nine trustees themselves owned a majority of the stock and had complete -control of all the property. Mr. Rockefeller, when questioned, stated -that one of the trustees was a responsible officer in almost every -refinery or organisation in the trust; that the trustees, as a body, -knew by reports and correspondence, and by frequent consultation in New -York with active promoters of each concern, just how the business was -going on. “We all know how the business goes,” said Mr. Rockefeller; “we -get reports once in thirty days showing what it has cost for -everything.” - -The trustees evidently ran the entire great combination under the -agreement. But consider the anomaly of the situation. Thirty-nine -corporations, each of them having a legal existence, obliged by the laws -of the state creating it to limit its operations to certain lines and to -make certain reports, had turned over their affairs to an organisation -having no legal existence, independent of all authority, able to do -anything it wanted anywhere; and to this point working in absolute -darkness. Under their agreement, which was unrecognised by the state, a -few men had united to do things which no incorporated company could do. -It was a situation as puzzling as it was new. The committee in reporting -on what it discovered did nothing to solve the puzzle. It simply sounded -a warning: - - - “The actual value of property in the trust control at the present - time is not less than one hundred and forty-eight millions of - dollars, according to the testimony of the trust’s president before - your committee. This sum in the hands of nine men, energetic, - intelligent, and aggressive—and the trustees themselves, as has been - said, own a majority of the stock of the trust which absolutely - controls the one hundred and forty-eight millions of dollars—is one - of the most active and possibly the most formidable moneyed power on - this continent. Its influence reaches into every state and is felt - in remote villages, and the products of its refineries seek a market - in almost every seaport on the globe. When it is remembered that all - this vast wealth is the growth of about twenty years, that this - property has more than doubled in value in six years, and that with - this increase the trust has made aggregate dividends during that - period of over fifty millions of dollars, the people may well look - with apprehension at such rapid development and centralisation of - wealth wholly independent of legal control, and anxiously seek out - means to modify, if not to prevent, the natural consequence of the - device producing it, a device of late invention, namely, the - aggregation of great corporations into partnerships with unbounded - resources and a field of operations quite as extended as its - resources. So much for the nature of the Standard Oil Trust. The - committee regret that they are not able to make a more complete and - satisfactory report as to the method of its operations and its - effect upon public interests. - - “The brevity of the time within which the investigation was required - to be made rendered it impossible for your committee to do more than - examine the persons most prominent in the management of its affairs. - Its cause was thus presented to the most favourable light possible, - and it is only fair to conclude that nothing was left unsaid by them - that could be said in its favour. No witness came forward to accuse - it of the great offences commonly laid to its charge. No proofs were - made of its rapacity or of the greed with which it lays hold of - every competitive industry, except such as might be drawn from the - fact that it is the almost sole occupant of the field of oil - operations, from which it has driven nearly every competitor. No - witness appeared to prove its power over railroad and transportation - companies and to wring from already impoverished lines better terms - than other shippers, except such as might be drawn from the - admission of its officers, made with hesitation, that this wealth - and the amount of its business enabled it to obtain better terms - than its poorer competitors.”[126] - - -The New York Senate made its investigation of trusts in February, 1888. -In March the Committee on Manufactures of the House of Representatives -began a similar inquiry. This committee, like the earlier one, made the -Standard its principal subject. Fully 1,000 pages of a report of 1,500 -pages are devoted to Mr. Rockefeller’s creation—five times the space -given to the Sugar Trust, ten times that given to the Whiskey Trust. The -testimony was wide in range. Indeed, from the volume alone, a pretty -complete history of the Standard Oil Company up to 1888 could be -written. Here are found the South Improvement Company charter and -contracts in full. Here is Mr. Cassatt’s testimony, taken in the case of -the Commonwealth of Pennsylvania _vs._ the Pennsylvania Railroad, -showing the character of the rebates the Standard Combination was able -to secure from the railroads at that time. Here is a partial history of -the growth of the Standard pipe-lines. Many personal histories of -refiners driven out of business by the conditions brought about by -railroad discriminations; full accounts of the war of the producing -element on the Standard; all of the testimony in the Buffalo case, where -two refiners were found guilty of conspiring to ruin an independent -refining concern; the reports of the Interstate Commerce Commission in -the cases of George Rice; and much interesting explanation of various -matters by leading Standard Oil officials appear in the report. - -Mr. Rockefeller was on the stand, and one item of his testimony affords -a curious comparison. On the 28th of February, when before the New York -Senate committee, Mr. Rockefeller was asked if he was not a member of -the South Improvement Company. - -“I was not,” he replied. - -On the 30th of the April following, when before the House Committee, the -following colloquy took place: - - - _Q._ I want the names particularly of gentlemen who either now or in - the past have been interested with you gentlemen who were in the - South Improvement Company? - - _A._ I think they were O. T. Waring, W. P. Logan, John Logan, W. G. - Warden, O. H. Payne, H. M. Flagler, William Rockefeller, J. A. - Bostwick, and—_myself_. - - -It was in this investigation that Henry M. Flagler gave explanations of -various operations of the Standard, which have been quoted in the course -of this narrative, notably explanations of the South Improvement -Company, of the ten-cent rebate secured from all the railroads in 1875, -of the purchase of the Empire Transportation Company, of the rebate on -other people’s shipments enjoyed in 1878 by the American Transfer -Company. Some of Mr. Flagler’s testimony in this investigation compares -as curiously with affidavits of his made in 1880 as does that of his -great chief. For instance, in 1880 Mr. Flagler swore that “the Standard -Oil Company owns and operates its refineries at Cleveland, Ohio, and -also a refinery at Bayonne in the state of New Jersey. That at no other -place in the United States does the said Standard Oil Company _own_, -operate, or control any refinery or refineries.”[127] But in this -investigation the following colloquy took place: - - - _Q._ When did the Standard Company of Ohio first enter into an - alliance with other refineries? - - _A._ If you mean (by) an alliance, Mr. Gowen, I should say never. - - _Q._ I am only endeavouring to aid your friends in getting at what - they want. Here, I notice, they propose to prove by you—I will give - it in this way—that on account of the disastrous condition of the - refining business, the Standard, on October 15, 1874, entered into - an alliance with a number of Pittsburg refineries. - - _A._ That is more correctly stated by saying that the Standard Oil - Company _purchased_ the refineries owned by the parties in - Pittsburg. - - _Q._ Who were they? - - _A._ Lockhart, Frew and Company, I think, was the company. Wait a - moment. It was the Standard Oil Company of Pittsburg, it being a - corporation, and Warden, Frew and Company, of Philadelphia, and, I - should say, Charles Pratt and Company, of New York. - - _Q._ Any others? - - _A._ That is all. - - _Q._ All those gentlemen, Warden, Frew and Company, and the Standard - Oil Company of Pittsburg, Charles Pratt and Company, of New York, - are now associated with you as parties interested in the present Oil - Trust? - - - _A._ They are stockholders. The property formerly owned by them was - at that time purchased by the Standard Oil Company. - - _Q._ When you speak of purchasing their interest, you do not exclude - them from their interest? They united with you and remained as your - associates in the business? - - _A._ If it was not from the fact that ours was a corporation, we - might call it a co-partnership. - - _Q._ They becoming interested in yours, and you in theirs? - - _A._ Yes, sir. - - _Q._ And you simply used your name to represent the joint ownership, - as it was a corporation? - - _A._ Yes, sir.[128] - - -Full as the testimony on the Standard Oil Trust gathered by the Federal -committee of 1888 is, its report touched but one point, and that was its -organisation. To the committee it seemed that the agreement under which -the trust operated was such as to make it exempt from the anti-trust -legislation which was then contemplated by Congress. The legislation -proposed was directed against “combinations to fix the price or regulate -the production of merchandise or commerce.” Now a mass of testimony had -been presented showing that, from the starting-point of the Standard’s -history with the South Improvement Company, its aim has been to regulate -the output of refined oil so as to fix the price, but this testimony, -the committee saw clearly enough, did not apply to the trust which it -was investigating. For—so swore the trustees—they had nothing to do with -the business operations of the separate concerns. They simply held the -stock of the various corporations, exercised their right as -stockholders, received and distributed the dividends. Each company did -its own business in its own way. The trustees were not responsible for -it. There was something humorous to those familiar with the oil world, -in the idea of J. D. Rockefeller, William Rockefeller, J. D. Archbold, -Henry H. Rogers, Charles Pratt, H. M. Flagler, Benjamin Brewster, W. H. -Tilford and O. B. Jennings, having nothing to do, as trustees of the -Standard Oil Trust, but to receive and divide dividends, engrossing and -interesting a task as that undoubtedly was. But, as a matter of fact, -nothing else could be settled on them by anything in the testimony. For -instance, in 1887 there was an alliance formed between the Oil -Producers’ Protective Association and the Standard for limiting the -production of crude oil (a movement of which we shall hear more later). -This certainly was in restraint of trade. But, on examination, the -committee found the contract had been signed by the Standard Oil Company -of New York. The trustees had nothing to do with it! Taking up, point by -point, the conditions of which the oil producers complained, not one of -them could be fixed on the trust. It had made no agreements, signed no -contracts, kept no books. It had no legal existence. It was a force -powerful as gravitation and as intangible. You could argue its existence -from its effects, but you could never prove it. You could no more grasp -it than you could an eel. Certainly the Committee on Manufactures was -justified in confining its report to pointing out the fact that the -Standard Oil Trust agreement was a shrewd and slippery device for -evading responsibility. - -And there the investigations of 1888 ended. There had been much noise -over them, and for what good? So asked the discontented oil public. It -simply had secured the form of an agreement which could no more be -touched by legislation than human greed. It was characteristic that the -oil public, intent on immediate remedies, should be discouraged. If they -had applied to their cause the same patience and foresight Mr. -Rockefeller did to his, they would have realised that, as a matter of -fact, a respectable first step had been taken toward their real goal, a -goal which has not by any means been reached—that is, a legal form of -organisation for corporations doing interstate business which would -enable the public to know promptly if they were securing special -privileges or were restricting trade. This first step was in securing -the famous trust agreement. That was now in the hands of people given to -thinking about things, and something came of it, even more quickly than -the philosophical observer of public events might expect, and in this -wise: - -In 1887 there was elected to the attorney-generalship of Ohio a lawyer, -something under forty years of age, named David K. Watson. Two years -later Mr. Watson was a candidate for re-election. One day, while busy -with his campaign, he came out of his office in the state-house on the -public square in Columbus, and, crossing the street, stopped, as he -often did, at a book-shop to look over new publications. He happened -there on a small yellow leatherette volume entitled “Trusts.” It was -written by William W. Cook, of the New York bar, and cost fifty cents. -Mr. Watson bought the book and spent the evening reading it. At the end -he found the Standard Oil Trust agreement. It was the first time he had -ever seen it. He read it carefully and saw at once that, if it was a -bona fide agreement, the Standard Oil Company of Ohio was and had been -for seven years violating the laws of the state of Ohio by taking the -affairs of the company from the directors and placing them in the hands -of trustees, nearly all of whom were non-residents of the state. Mr. -Watson knew on the instant that, if this were a bona fide agreement and -he were re-elected attorney-general of Ohio, it would be his duty to -bring an action against the Standard Oil Company of the state. He laid -the little book away until he knew the result of the election. - -[Illustration: - - DAVID K. WATSON - - Attorney-General of Ohio from 1887 to 1891. Mr. Watson brought suit - against the Standard Oil Company in May, 1890, in the Supreme Court - of Ohio. -] - -[Illustration: - - FRANK S. MONNETT - - Attorney-General of Ohio from 1895 to 1899. Mr. Monnett brought suit - against the Standard Oil Company in 1897 in the Supreme Court of - Ohio. -] - -[Illustration: - - LEWIS EMERY, JR. - - Independent oil operator and refiner. Leader in movement for free - pipe-line bill and anti-discrimination laws. Founder of the United - States Pipe Line. -] - -[Illustration: - - GEORGE RICE - - Plaintiff in numerous cases brought against the Standard Oil Company. - Prominent independent witness in various State and congressional - investigations. -] - -A few weeks later Mr. Watson was re-elected attorney-general. He at once -began a search into the authenticity of the documents in Mr. Cook’s -little volume. He sent for the reports of the investigations by the -committees of the New York Senate and of Congress. He read the testimony -word for word. But he still doubted the correctness of the document, -fearing that, even if it were in the main correct, there might be some -loophole by which the Standard Oil Company could escape. Now, in reading -the report of the House investigations, Mr. Watson had been particularly -impressed with the clearness and directness of the questions put by one -of the members of the investigating committee, Mr. Buchanan, of New -Jersey. He accordingly went to Washington, inquired from a friend if Mr. -Buchanan could be relied upon, and, receiving the assurance of his high -character, sought an interview with him. “Was the Standard trust -agreement as published in the committee’s report _bona fide_?” was the -inquiry. “Yes,” said Mr. Buchanan. “But why do you ask?” “Because if it -is,” replied Mr. Watson, “I believe the Standard Oil Company of Ohio has -violated the laws of the state, and on my return to Columbus I shall -file an action in _quo warranto_ against it in the Supreme Court of the -state.” - -“You would not _dare_ do that, would you?” exclaimed Mr. Buchanan. - -“I was young then,” Mr. Watson told the writer in describing this -interview, “and I supposed it was expected of a public officer to -perform his duty. So I explained to Mr. Buchanan that there was a -statute in Ohio which required an attorney-general to bring suit against -any corporation which he had reason to believe was violating the laws of -the state; that I had no personal feeling against the Standard Oil -Company, but I meant to enforce the law against it as I would against -any other company which I believed to be violating the law.” - -“I admire your courage,” said Mr. Buchanan, “but I would not do it.” - -On May 8, 1890, Mr. Watson filed his petition in the Supreme Court of -Ohio.[129] The petition averred that, in violation of the law of Ohio, -the Standard Oil Company had entered into an agreement by which it had -transferred 34,993 shares out of 35,000 to the trustees of the Standard -Oil Trust, most of whom were non-residents of the state; that it was -these trustees who chose the board of directors of the Standard Oil -Company of Ohio, and directed its policy, and prayed that, on account of -this violation of law, the company should be “adjudged to have forfeited -and surrendered its corporate rights, privileges, powers and franchises, -and that it be ousted and excluded therefrom, and that it be dissolved.” - -The petition came on the trust like a thunderbolt. There had been -already more or less erratic and ill-advised anti-trust legislation in -various states, but it had been framed in ignorance of the actual -organisation of the trust, and carried out with a crude notion that the -trust, in spite of the fact that it was already thoroughly intrenched in -the business life of the country, could be destroyed by a hostile act of -a Legislature. Mr. Watson’s suit was something very different. It was an -application of recognised laws to admitted facts. It brought the -Standard Oil Company face to face with several legal propositions it did -not like to meet. After a long delay an answer was filed by the -Standard. To Mr. Watson’s joy, the one thing he feared—the denial of the -correctness of the agreement—made no part of this answer. It admitted -the agreement, but it denied that the Standard Oil Company of Ohio was a -party to it. The agreement was signed by the individual stockholders of -the Standard Oil Company, not by the company in its corporate capacity. -The Standard Oil Company of Ohio had nothing to do with the Standard Oil -Trust. True, certain of its stockholders had turned over their stock to -the nine trustees, but the company did its business as before, -discharging all its duties as its charter required. This was the -essential point of the defendant’s answer. This, and the claim that if -the court should hold that the action of the stockholders in becoming -parties to the agreement in their individual capacity was a corporate -act of the Standard Oil Company, even then the charter should not be -forfeited, since the law barred an act committed more than five years -before a petition was filed. - -Anticipating that the trust would get together a strong array of counsel -to defend its attacked member, Mr. Watson retained his personal and -professional friend, John W. Warrington, an eminent lawyer of -Cincinnati, to assist him. They were opposed by Joseph H. Choate, S. C. -T. Dodd and Virgil P. Kline of Cleveland. - -But, while the preparation for the argument of the case was going on, -the courageous young attorney-general was beset on all sides for an -explanation. _Why_ had he brought the suit? What was the influence which -had controlled him? Men in power took him aside to question him, -incapable, evidently, of believing that an attorney-general could be -produced in Ohio who would bring a suit solely because he believed it -was his duty. Some suggested that some big interest, hostile to the -Standard, was behind him; others said the suit was suggested by Senator -Sherman, then interested in his anti-trust bill. Along with this -speculation came the strong and subtle restraining pressure a great -corporation is sure to exert when its ambitions are interfered with. -From all sides came powerful persuasion that the suit be dropped. Mr. -Watson has never made public the details of this influence in any -documentary way, but the accounts he at the time gave different friends -of it led to so much gossip in Ohio that in 1899 the attorney-general of -the state, F. S. Monnett, made detailed charges of six deliberate -attempts to bribe Mr. Watson to withdraw the suits.[130] But one bit of -documentary proof of the efforts to reach the attorney-general ever -reached the public—that came out without his knowledge or consent, Mr. -Watson claims, seven years after the suit was brought. It is interesting -enough as evidence of the character of the pressure Mr. Rockefeller can -set in motion when he will. Among Mr. Rockefeller’s Ohio friends was the -late Marcus A. Hanna, who was even then a strong factor in the -Republican party of the state. A few months after the suit was brought -he wrote Mr. Watson a letter of remonstrance. Many of Mr. Watson’s -friends saw this letter at the time and felt deep indignation over its -contents. In 1897, when Mr. Hanna was a candidate for the United States -Senate, an enterprising newspaper man of Ohio recalled that during 1890 -it was common gossip in Ohio that Mr. Hanna had written the -attorney-general a letter asking him to withdraw his suit against the -Standard Oil Company. The correspondent sought Mr. Watson, who, so he -avers, let him read the letter through, although he refused to allow him -to copy it for publication. “No one could read it and ever forget it,” -said the correspondent; but to reinforce himself he sought persons who -were associated with Mr. Watson at the time—yes, they remembered the -letter perfectly. Certain of them said that they could never forget some -of its expressions. Between them they pieced up the following portions -of the letter which they declared correct and which the correspondent -published in the New York World for August 11, 1897: - - - “I noticed some time ago that you had brought suit to take away the - charter of the Standard Oil Company. I intended at the time to write - you about it, but it slipped my memory. A few days ago while in New - York I met a friend, John D. Rockefeller, and he called my attention - to the fact that you had brought the suit, but did not ask me to - influence you in any way.” - - * * * * * - - “I have always considered you in the line of political promotion,” - said Hanna, and then went on to intimate that unless the suit - against the Standard was withdrawn, Watson would be the object of - vengeance by the corporation and its friends forever after. As if to - clinch his threat and argument, Hanna wrote: “_You have been in - politics long enough to know that no man in public office owes the - public anything._” - -[Illustration: - - GROUP OF CLEVELAND CITIZENS - - Who called on John D. Rockefeller at his residence, “Forest Hill,” - on July 25, 1896, to thank him for his gift of park lands to the - city. Mr. Rockefeller is in the centre of the group, the late - Senator Marcus A. Hanna in the right lower corner, and Governor - Myron T. Herrick in the centre of the top row. -] - - * * * * * - - The letter concluded with a reference to the present Secretary of - State, John Sherman. Hanna wrote: “I understood that Senator Sherman - inspired and instigated this suit. If this is so I will take - occasion to talk to him sharply when I see him.” - - The letter was written on the typewriter and letter-heads of Hanna’s - business office in Cleveland. - - -Having secured this much, the correspondent, thinking it possible Mr. -Watson might have answered Mr. Hanna’s letter, undertook a bit of -original investigation. He sought the files of the attorney-general’s -official correspondence for 1890, and the following is what he found. -This letter certainly is evidence enough of the sort of letter Mr. Hanna -had written even if the above restoration is not absolutely accurate: - - - December 13, 1890. - - HON. MARK HANNA, - Cleveland, Ohio. - - _My dear Sir_:—Your communication of the 21st ult. came to hand. The - delay in answering it has been caused largely by my being ill for - several days. I did not intend that bringing the action to which you - refer in your letter should be an attack on my part on “organised - capital,” for I am aware that great business transactions require - the union and concentration of moneyed interests, and fully - appreciate what has been done in that direction, yet I cannot but - feel that I am justified in bringing the suit against the Standard - Oil Company, and believe that there are many things relating to the - case which, if you understood, would cause you to entertain - different views concerning it and my relation to it. Let me impress - one thing on you with special particularity, and you may depend - absolutely on its truthfulness. Senator Sherman never suggested or - encouraged this suit, either directly or indirectly. This must be - understood in its broadest sense. The report probably arose from the - fact that the action was brought shortly after the Senator made his - great speech in support of his anti-trust bill. You will hardly - receive my statement with favour, I fear, but I am alone responsible - for the action. No one encouraged me to bring it or knew that it - would be brought until I determined to do so, and it is unfair to - other persons to charge them with suggesting it or encouraging it. - With the highest appreciation of your personal friendship, I am, - with great respect, - - Truly yours, - DAVID K. WATSON. - - -The part which the terse phrase attributed to Mr. Hanna, - - “NO MAN IN PUBLIC OFFICE OWES THE PUBLIC ANYTHING,” - -played in the Senatorial campaign of 1897 is familiar to those who -follow politics. It was kept standing for days in black-faced capitals -at the head of the opposition newspapers in Ohio, and remained a potent -weapon in the hands of Mr. Hanna’s enemies to the time of his death. - -Whatever the pressure Mr. Watson encountered, it had no effect on his -purpose. He quietly went ahead, presented his brief, and, when the time -came, he and Mr. Warrington argued the case. The following proposition -from the brief presented by Mr. Watson and Mr. Warrington show tersely -the line of their argument: - - - “Where the manifest object of an agreement is to unite corporations, - partnerships and individuals into, or include them in a common - enterprise, and control them through an agency unknown to the law of - their creation, and all the officers, directors and stockholders of - such corporations sign the agreement, and, in furtherance of its - provisions, transfer their stock to such agency, permit the - corporate executive agencies to make such transfers on the corporate - books, submit without objection to the domination of the agency to - which the stock is so transferred in the selection of directors and - officers, and in the management of the corporate affairs and - business suffer the corporate earnings to go to such agency and be - placed and mingled with the earnings of the other parties in the - combination so created, and, after deductions for uses of the - combination, be divided as part of such common earnings among the - persons interested, in such case the corporations become and are—or - at least will be treated by the courts as—parties to such agreement - and actors in its performance, although their corporate names are - withheld therefrom. Such proceedings constitute actual corporate - conduct, if not formal corporate action, on the part of each - corporation. - - “An agreement is in violation of law and void which in effect - creates a partnership between corporations, or where its probable - operation and effect—much more where its inevitable tendency—is to - create a substantial monopoly, or is in restraint of trade or - otherwise injurious to the public. - - “Where a corporation, either directly or indirectly, submits to the - domination of an agency unknown to the statute, or identifies itself - with and unites in carrying out an agreement whose performance is - injurious to the public, it thereby offends against the law of its - creation and forfeits all rights to its franchises, and judgment of - ouster should be entered against it. - - “Even if the statute which prescribes a time within which an action - against a corporation for forfeiture of its charter shall be - commenced, be applicable to a case of this kind, yet, where the - offences or acts committed or omitted by a corporation for which - forfeiture of its charter is sought at the suit of the state, are - concealed, or are of such character as to conceal themselves, such - offences and acts as against the state are frauds, and such statute - does not begin to run until the frauds are discovered.” - - -Joseph H. Choate appeared for the defence. The most eminent lawyer in -the country, his argument must have been anxiously awaited by Mr. -Watson. Curiously enough, as it seems to the non-legal mind, Mr. Choate -began his plea by a _prayer for mercy_. Whatever the sins of the -Standard Oil Company of Ohio, pleaded Mr. Choate, do not take away its -charter. Mr. Choate then proceeded with a strong argument in which he -claimed “absolute innocence and absolute merit for everything we have -done within the scope of the matters brought before the court by these -pleadings.” - -The argument did not convince the court of the innocence of the Standard -in the questions at issue. The court showed, out of the mouth of the -trust agreement itself, that the Standard Oil Company of Ohio was -“managed in the interest of the Standard Oil Trust—irrespective of what -might be its duties to the people of the state from which it derives its -corporate life.” The court gave as its opinion that an act of a majority -of the stockholders of a corporation affects the property of a company -in the same way that a resolution by the board of directors affects it. -“By this agreement,” said the court, “indirectly, it is true, but none -the less effectually, the defendant is controlled and managed by the -Standard Oil Trust, an association with its principal place of business -in New York City, and organised for a purpose contrary to the policy of -our laws. Its object was to establish a virtual monopoly of the business -of producing petroleum, and of manufacturing, refining and dealing in it -and all its products, throughout the entire country, and by which it -might not merely control the production, but the price, at its pleasure. -All such associations are contrary to the policy of our state and void. - - * * * * * - -“Much has been said in favour of the objects of the Standard Oil Trust -and what it has accomplished. It may be true that it has improved the -quality and cheapened the cost of petroleum and its products to the -consumer. But such is not one of the usual or general results of a -monopoly; and it is the policy of the law to regard, not what may, but -what usually happens. Experience shows that it is not wise to trust -human cupidity where it has the opportunity to aggrandise itself at the -expense of others. The claim of having cheapened the price to the -consumer is the usual pretext on which monopolies of this kind are -defended.”[131] - -From all this the court decided the Standard Oil Company deserved -punishment. The charter was not taken away—the statute of limitations -being advanced as a reason for this leniency, although, as Mr. Watson -and Mr. Warrington showed, the statute of limitations could hardly be -pleaded in this case, when the state had been kept in ignorance by the -concealment of the agreement. The company was allowed to live, but it -was ousted from the privilege of entering into the trust agreement, from -the power of recognising the transfer of the stock, and from the power -of permitting the trustees to control its affairs. It was also ordered -to pay the costs of the action. - -The judgment of the court was not rendered until March 2, 1892, almost -two years after the filing of the petition. As soon as it was received -Virgil P. Kline, the chief counsel of the Standard Oil Company of Ohio, -went to New York for consultation with the trustees. Five days later he -wrote to Judge Spear, the chief justice of the Ohio Supreme Court, -saying: “Decisive steps will be taken at once not only to release the -Standard Oil Company from any relations to the trust, but to terminate -the entire trust.” But there were “practical difficulties” in the task. -The company pleaded for a “temporary recognition,” and he asked an -interview where he could explain the situation. This was granted, and on -the 16th of March Mr. Kline explained to the judges in chambers, to Mr. -Watson, and to his successor in office, the situation of the company. -The trustees had all but seven shares of its stock. Trust certificates -had been issued for these ten years before. The Standard Oil Company did -not know who held these certificates, and could only know through the -trustees, therefore the trust certificates must be transferred back, the -owners hunted up, and each one induced to make an exchange. A system -must be devised for doing this. Anybody could see this would take time. -The court was friendly in the matter, and Chief Justice Spear gave to -Mr. Kline an informal note granting an extension. “The court is not -disposed to change its order at this time,” the chief justice wrote, -“but, so long as those in control appear to be engaged, as now, in an -honest effort to dissever the relations of the company with the trust, -and liquidate and wind up the affairs of the trust, the court will not -be disposed to interfere.” Thus time was gained. - -While Mr. Kline was securing time, the trustees were pushing a -liquidation scheme. On March 11 the following notice was mailed to all -holders of Standard Oil Trust certificates, and was published in a -newspaper in each state where a Standard Oil Company had been organised: - - - NOTICE - - A special meeting of the holders of Standard Oil Trust certificates - will be held at the office of the trust, Number 26 Broadway, in the - City of New York, on Monday, March 21, 1892, at eleven o’clock A.M., - for the purpose of voting upon a resolution to terminate the trust - agreement, in accordance with the terms of said agreement, and to - take such further action as may be thereby rendered necessary. - - H. M. FLAGLER, _Secretary_. - - -The meeting was held as called. Mr. Rockefeller was in the chair, and -Mr. Dodd, who had drawn the trust agreement, now presented the -resolution which was to dissolve it. The remarks with which Mr. Dodd -introduced his resolution denied every point which the courts had -charged against the combination: - - - “Something over ten years ago,” said Mr. Dodd, “a few individuals - owning stocks in a number of corporations engaged in transporting - and refining oil, entered into an agreement by which their stocks - were placed in the hands of trustees, and certificates were issued - by said trustees showing the amount of each owner’s equitable - interest in the stocks so held in trust. This was not done in order - to vest the voting power in the hands of a few persons, because the - persons chosen as trustees then held, and always have held, the - voting power by virtue of their absolute ownership of a majority of - the stocks. It was not done to reduce competition, because the - companies whose stocks were placed in trust were not competing - companies, and could not be so long as their stocks were owned by - these few persons. It was not done to limit production or to - increase prices, but, on the contrary, was done to increase - production, cheapen cost of manufacture, and to lower prices, and it - has been successful in that object far beyond the anticipations of - those who originated the plan. It was called a trust, because it was - a trust in the sense in which the word was then understood. It - vested a fiduciary obligation in a few for the benefit of many, and - the trustees thus created have faithfully observed the trust - confided in them. - - “Other persons, however, found this trust plan a convenient one, and - it is alleged that it has been adopted for and adapted to purposes - quite different from those which actuated the framers of this trust. - Whether these allegations be true or false, it is true that a trust - is now defined to be a combination to suppress competition and to - reduce production, and to increase prices. Public opinion has not - unwisely been aroused against combinations for such purposes, and - legislation of more or less severity, and rather more or less - peculiarity, has been directed against them in seventeen or eighteen - states of the Union. All such arrangements are now miscalled trusts, - and all trusts are popularly supposed to partake of the same nature. - For this reason, if for no other, it should be seriously considered - whether this trust should not be terminated. So long as it exists, - misconception of its purposes will exist. - - “But another reason exists which seems to make it desirable to - dissolve this trust. Some two years ago a _quo warranto_ issued in - the name of the state of Ohio against the Standard Oil Company, a - corporation of the state of Ohio, setting forth this trust agreement - and alleging that that corporation, by becoming a party thereto, had - done an act beyond its power, and thereby had forfeited its charter. - The defendant corporation denied that it was a party to the - agreement, and alleged that the agreement was on its face, and - plainly, an agreement only between individuals, owners of corporate - stocks, relating to their personal property, and was neither made by - the corporation nor for the corporation. The court, however, held - that the agreement was a corporate agreement, and decreed, among - other things, that the corporation must cease to permit trustees to - vote upon stocks held in trust. - - “As this agreement was not entered into as a corporate agreement, - and as this decision gives it an effect quite different from the - intent of the parties who entered into it, it seems better to end - it.”[132] - - -It is probable that Mr. Dodd had foreseen from the first just such an -attack on his agreement as had come, for he had put into that instrument -a paragraph providing for a dissolution, and it was in accordance with -that article that the trust was now dissolved. The trustees were to -continue to exist—under a new name: “Liquidating trustees.” The property -they had to take care of was vastly in excess of what it had been ten -years before. Then the capital of the thirty-nine constituent companies -was $70,000,000. These companies had been combined until they had been -reduced to twenty, and their combined capital was now $102,233,700.[133] -Property of about $20,000,000 in excess of the capital was held by the -trustees. Mr. Dodd’s resolution provided for the division of this -property, and for the transfer of the trust certificates back to the -corporations to which they belonged. The individual holders of the trust -certificates were to get in exchange a proportionate share in each of -the twenty companies. “A will not get stock in one corporation and B in -another; each will get his due proportion in the stocks of all,” said -Mr. Dodd. All of this change would make no difference with the -management of affairs. Mr. Dodd assured the stockholders: “Your -interests will be the same as now. The various corporations will -continue to do the same business as heretofore, and your proportion of -the earnings will not be changed.” - -The trustees went about liquidating at once, but it was not until the -following November that the immense number of certificates held by them -personally were exchanged. The process followed can be easily -illustrated by Mr. Rockefeller’s case. When the trust was ordered -dissolved Mr. Rockefeller held 256,854 of the 972,500 shares of Standard -Oil Trust which were out. He turned over to an attorney an assignment of -this amount, with instructions to secure from each of twenty companies -in the trust stock certificates for the portion belonging to him. The -corporate stocks were turned over to Mr. Rockefeller, and the assignment -of certificate, a properly framed and numbered document, was turned over -to the liquidating trustees. This assignment of legal title, for all -practical purposes, was the same thing as the trust certificate. It -enabled the trustees to collect dividends from the various companies and -pay them just as they had before. The documents showing the formal -procedure in the case of Mr. Rockefeller’s stocks are printed in the -Appendix.[134] - -At the end of the first year, after the dissolution of the trust, -477,881 shares were uncancelled. At the end of the second year it was -the same; at the end of the third, 477,881 were still out. At the end of -the fourth, 477,881. The dissolution of the trust seemed to have come to -a stand-still. Mr. Dodd was right; things were going on as they did -before; dividends were issued exactly as before. Nor was there any -indication of an intention on the part of the liquidating trustees to -change this state of things. If the monopolistic power of the Standard -Oil Trust was to be broken, it was evidently not to be by any order of -dissolution by the courts. Something more powerful than the courts was -at work, however. The spirit of individualism was beginning to reassert -itself in the oil industry—a new war for independence had been begun, -was indeed well under way even before the state of Ohio made the -dissolution of the trust necessary. - - - - - CHAPTER FIFTEEN - A MODERN WAR FOR INDEPENDENCE - - PRODUCERS’ PROTECTIVE ASSOCIATION FORMED—A SECRET INDEPENDENT - ORGANIZATION INTENDED TO HANDLE ITS OWN OIL—AGREEMENT MADE WITH - STANDARD TO CUT DOWN PRODUCTION—RESULTS OF AGREEMENT NOT AS - BENEFICIAL TO PRODUCERS AS EXPECTED—PRODUCERS PROCEED TO ORGANISE - PRODUCERS’ OIL COMPANY, LIMITED—INDEPENDENT REFINERS AGREE TO - SUPPORT MOVEMENT—PRODUCERS AND REFINERS’ COMPANY FORMED—LEWIS EMERY, - JR.’S, FIGHT FOR SEABOARD PIPE-LINE—THE UNITED STATES PIPE - LINE—STANDARD’S DESPERATE OPPOSITION—INDEPENDENT REFINERS ALMOST - WORN OUT—THEY ARE RELIEVED BY FORMATION OF PURE OIL - COMPANY—PURE OIL COMPANY FINALLY BECOMES HEAD OF INDEPENDENT - CONSOLIDATION—INDEPENDENCE POSSIBLE, BUT COMPETITION NOT RESTORED. - - -John D. Rockefeller’s one irreconcilable enemy in the oil business has -always been the oil producer. There is no doubt that Mr. Rockefeller has -sincerely deplored this. And well he might, for he learned in his first -great raid on the industry in 1872 that the producers aroused and united -made a powerful and dangerous foe. - -No doubt, if it had been practical, Mr. Rockefeller would have begun at -the start to take over oil production as he did oil refineries and -pipe-lines, and thus would have gotten his enemy out of the way; but -during the first fifteen years of his work it was not practical. The oil -fields were too vast and undefined. It not being practical to own the -oil fields, and yet essential that those who did own them, and of whose -oil he aspired to be the only buyer, should be kept sufficiently -satisfied not to interfere with his domination or to attempt to handle -the oil for themselves, Mr. Rockefeller, whenever he had the chance, -sought to persuade the producers to do what he would have done had he -owned the oil fields—that was, to keep the supply of crude oil short. - -“The dear people,” he said once when asked by an investigating committee -if his monopoly of oil refining and oil transportation had not prevented -the producer from getting his full share of the profits—“the dear -people,” he said, “if they had produced less oil than they wanted, would -have got their full price; no combination in the world could have -prevented that, if they had produced less oil than the world -required.”[135] - -It is quite possible that if Mr. Rockefeller had been able to convert -the majority of the producing body to this theory, and the supply of -crude oil had been kept scarce and prices consequently high, the oil -producers would have forgotten their resentment at his early raids and -would have relapsed into indifference toward his control. Material -prosperity is usually benumbing in its effects. There always has been a -factor in the great game playing in the Oil Regions, however, which not -even Mr. Rockefeller could match. Nature has been in the oil game, and -she has taken pains to prevent the only situation which would have -enabled Mr. Rockefeller to reconcile the oil producers. Again and again -when it seemed as if the limits of oil production were set, and when Mr. -Rockefeller and his colleagues must have believed that they would soon -have the industry sufficiently well in hand to pay the producers a -satisfactory price for crude oil, their calculations have been upset by -the discovery of a great deposit of oil which flooded the market and put -down the prices. This happened so often between Mr. Rockefeller’s first -public appearance in the business and the time when he completed his -control of transportation, refineries and markets, that the yearly -production of crude oil had risen from five and a half million barrels -to thirty million barrels, and instead of a half million barrels above -ground in stocks there were in 1883 over thirty-five million barrels, in -1884 nearly thirty-seven million, in 1885 thirty-three and a half -million. The low price for crude which these vast stocks caused, the -high charges for gathering, transporting and storing, all services out -of which the Standard was making big profits, the fact that the profit -on refined oil steadily increased in these years—the result of the -overthrow of independent refiners and pipe-lines—while the profit on -crude steadily diminished, were facts which the oil producers brooded -over incessantly, and the more bitterly because they felt they could do -nothing to help themselves. Every enterprise looking to relief which -they had undertaken had, for one reason or another, failed. They had no -faith that relief was possible. The Standard would never allow any -outside interest to get a foothold. It was the bitterness which this -conviction caused which was at the bottom of the outburst over the -Billingsley Bill described in Chapter XIII. The Billingsley Bill was -defeated, as it deserved to be, but the work done was by no means lost. -For the first time since 1880 the Oil Regions were aroused to concerted -action. The support of the Billingsley Bill had been a spontaneous -movement, a passionate, unorganised revolt against the tyranny of the -Standard, but it served to bring into action men who for six long years -had been saying it was no use to resist, that Mr. Rockefeller’s grip was -too strong to be loosened. It revived their confidence in united action -and steeled them to a determination to take hold of the industry and -force into it again a fair competition in handling oil. - -On the very night after the defeat of the bill (April 28, 1887) the oil -men who had gathered in Harrisburg to support the measure, angry and -sore as they were, arranged to call an early meeting in Oil City and -organise. The meeting was held. It was large, and it was followed by -others. In a very short time 2,000 oil men were enrolled in a Producers’ -Protective Association, and thirty-six local assemblies were holding -regular meetings throughout the region. There were several important -points about the new association, aside from the enthusiasm and -determination which animated it: - -(1) It was a secret order. - -(2) Its membership was composed entirely of persons outside of and -opposed to the Standard Oil Trust, one of its by-laws reading: “No -person connected with the Standard Oil Company or any of its allies, as -partners, stockholders, or employees, and friendly thereto, shall be -elected to membership; and members becoming such shall be liable to -expulsion.” - -(3) It proposed “to defend the industry against the aggregations of -monopolistic transporters, refiners, buyers and sellers” by _handling -its own oil_. - -Hardly had the Producers’ Protective Association been organised before -Mr. Rockefeller had an opportunity to try his plan for conciliation. An -independent movement had been started in the summer of 1887 by certain -large producers in favour of a general “shut-down,” its object, of -course, being to decrease the oil stocks. The president of the -Producers’ Association, Thomas W. Phillips, who at that time was the -largest individual producer in the oil country, his production averaging -not less than 6,000 barrels a day, was called into consultation with the -leaders of the “shut-down” movement. Mr. Phillips promptly told the -gentlemen interested that he would not join in such an undertaking -unless the Standard went into it. He pointed out that the Standard owned -a large proportion of the 30,000,000 barrels of oil above ground. They -had bought it at low prices. If the production was shut down prices -would go up and the Standard would reap largely on the oil they owned. -The producers would, as usual, be standing all the loss. - -The upshot of the council was that the Producers’ Protective Association -took hold of the shut-down movement, its representative seeking an -interview with the Standard officials as to their willingness to share -in the cost of reducing the production. Here was a chance for Mr. -Rockefeller to apply his theory of handling the oil producers—conciliate -them when possible—encourage them in limiting their production. The oil -men’s representatives were met half-way, and an interesting and curious -plan was worked out; the producers were to agree to limit their -production by 17,500 barrels a day. They were to do this by shutting -down their producing wells a part or all of the time and by doing no -fresh drilling for a year. If they would do this the Standard agreed to -sell the association 5,000,000 barrels of oil at sixty-two cents, and -let them carry it at the usual rates as long as they wanted to. Whatever -advance in price came from the shut-in movement the producers were to -have on their oil, and it was to be shared by them according to the -amount each shut in his production. Mr. Phillips, before agreeing to -this arrangement, demanded that provision be made for the workingmen who -would be thrown out of employment by the shut-down, and he proposed that -the association set aside for their benefit 1,000,000 barrels of the oil -bought from the Standard, and that the Standard set aside another -million; all the profits above sixty-two cents and the carrying charges -on the 2,000,000 barrels were to go to the workingmen. A memorandum -covering the above points of the agreement was drawn up, and it was -accepted by the two interests represented.[136] - -Mr. Rockefeller’s reason for signing the contract he gave to the New -York State Trust Investigating Committee four months later: - - - _Q._ ... What was the inducement for the Standard Oil Trust to enter - into such an agreement as that? - - _A._ The inducement was for the purpose of accomplishing a - harmonious feeling as between the interests of the Standard Oil - Trust and the producers of petroleum; there was great distress - throughout the oil-producing region; as an instance of that distress - there was an outcry that our interest was getting a return, that - theirs was not in the business, and we did not know, as a matter of - fact, that the oil-producing interest was abnormally depressed, and - we felt it to be to the interests of the American oil industry that - a reasonable price should be had by the producer for the crude - material, and we wanted to co-operate to that end. - - _Q._ By advancing the price of the crude material you necessarily - advance the price of the refined? - - _A._ Yes, sir.[137] - - -The shut-down went into effect the first of November, 1887. The effect -on stocks and the market was immediate—stocks fell off at the rate of a -million barrels a month, and prices rose by January, 1888, some twenty -cents. But at the end of the year, though oil was higher and stocks -considerably less, the benefits of the shut-down had not been -conspicuous enough to produce that “harmonious feeling” Mr. Rockefeller -so much desired; not sufficient to distract the minds of the producers -from the idea they had in forming their association, and that was a -co-operative enterprise for taking care of their own oil. Throughout -1888 and 1889 two schemes, known as the Co-operative Oil Company, -Limited, and the United Oil Company, Limited, were under consideration. -By the end of the latter year it looked as if something could be done -with the second, and it was turned over by the executive board of the -association to a special committee, of which H. L. Taylor, of the Union -Oil Company, one of the largest and oldest producing concerns of the Oil -Regions, was chairman. How Mr. Taylor had succeeded in getting into the -Producers’ Protective Association it is hard to say, for it was he and -his partner, Mr. Satterfield, who in 1883 had tried to throw the -Tidewater Pipe Line into the hands of the Standard Oil Company, and who, -when that unworthy scheme failed, had sold their stock to the Standard, -thus giving that company its first holdings in the Tidewater.[138] The -independents had forgotten or overlooked this fact, for Taylor was a -member of the Producers’ Protective Association and prominent in its -councils. - -The special committee, of which Mr. Taylor was chairman, went actively -to work. Lawyers were employed to consider the safest form of -organisation for a company doing an interstate pipe-line business and -carrying on refineries. Certain German capitalists, owners of tank -steamers and interested in foreign marketing agencies, were brought into -the scheme. Things were going well, when suddenly the committee found -the chairman cooling toward the enterprise. Then came the rumour that -Mr. Taylor and his partners—Mr. Satterfield and J. L. and J. C. -McKinney—had sold the Union Oil Company to the Standard. A meeting of -the executive board was at once called, Messrs. Taylor and J. L. -McKinney both being present. They acknowledged the truth of the report -and were promptly informed their resignations would be accepted. - -The rumour of the secret desertion of strong members of the Producers’ -Protective Association, while holding positions of trust, soon spread -through the Oil Regions. It was a staggering blow. It took from them one -of the largest single interests represented. It deprived them of men of -ability on whom they had depended. It introduced a fear of treachery -from others. It brought them face to face with a new and serious element -in the oil problem—_the Standard as an oil producer_. Up to 1887, the -year of the organisation of the Producers’ Protective Association, Mr. -Rockefeller had not taken his great combination into oil production to -any extent, and wisely enough from his point of view. It was a business -in which there were great risks, and as long as he could control the -output by being its only buyer, why should he take them? Now, however, -the situation was changing. A number of sure fields had been -developed—Bradford, Ohio, West Virginia. Their value was depressed by -over-production. Mr. Rockefeller had money to invest. The producers were -threatening to disturb his control by a co-operative scheme. It was -certain that he had not yet produced a “harmonious feeling.” It was not -sure he would. If he failed in that they might one day even shut off his -supply of oil, as they had done in 1872, and Mr. Rockefeller, with great -foresight, determined to become a producer. In 1887 he went into Ohio -fields. Soon after he began quietly to buy into West Virginia. When he -learned, in 1890, from Mr. Taylor and his partners, that a co-operative -company of producers was on foot, he naturally enough concluded that the -best way to dismember it was to buy out the largest interest in it. The -Union Oil Company saw the advantage of being a member of the Standard -Oil Trust, and sold. In this one year, 1890, over 40,000 shares of -Standard Oil Trust certificates were issued to oil-producing -companies,[139] as follows: - - For stock of Union Oil Company 18,249 shares - For stock of Forest Oil Company 17,378 〃 - For stock of North Pennsylvania Oil Company 2,647 〃 - For stock of Midland Oil Company 2,000 〃 - —————— - 40,274 〃 - -There was general consternation in producing circles, and if there had -not been a number of men in the organisation who realised that the life -of the independent effort was at stake, and who turned all their -strength to saving it, the association would undoubtedly have gone to -pieces. Chief among these men were Lewis Emery, Jr., and C. P. Collins, -of Bradford, Pennsylvania; J. W. Lee and David Kirk, of Pittsburg; A. D. -Wood, of Warren; Michael Murphy, of Philadelphia; Rufus Scott, of -Wellsville; J. B. Aiken, of Washington; R. J. Straight, of Bradford; -Roger Sherman and M. W. Quick, of Titusville. They urged an immediate -meeting of the General Assembly, at which a plan for co-operative action -should be adopted and at once put into force. - -On January 28, 1891, the General Assembly convened at Warren, -Pennsylvania. The whole miserable story of the co-operative plan which -the executive board had worked out, and its destruction by the desertion -of the Union Oil Company, came out. It was at once evident that, instead -of disheartening the Assembly, it was going to harden their -determination and spur them to action; that they would not leave Warren -until they had something to work on. The session lasted three days, and -before finally adjourning it had adopted a drastic plan, framed by a -committee of nine, of which Mr. Quick was chairman. This plan aimed, so -the resolution adopted by the Assembly stated, _to cut off the supplies -of the producers’ oil from the Standard Trust!_ This was to be -accomplished by forming a limited partnership, whose subscribers should -all be trusted members of the Producers’ Protective Association (only -persons having no affiliation with the Standard Oil Company were members -of the Producers’ Protective Association, it will be remembered), and -which should aim to take care of the crude oil from the wells of the -producers who went into the movement, furnish it local transportation, -and find a market for it either by building independent refineries or by -alliance with those already in existence. - -[Illustration: - - MICHAEL MURPHY - - The present President of the Pure Oil Company. -] - -[Illustration: - - JAMES W. LEE - - The chief counsel of the Pure Oil Company. President of the company - from 1897 to 1901. -] - -[Illustration: - - DAVID KIRK - - The first President of the Pure Oil Company. -] - -[Illustration: - - THOMAS W. PHILLIPS - - A leader in the independent movement, which resulted in the Pure Oil - Company. -] - -From Warren the delegates went home to work for the new scheme. J. W. -Lee and J. R. Goldsborough, the secretary of the association, at once -made a tour of the Oil Regions to explain the project and solicit -subscriptions. The response was immediate. In a few weeks over 1,000 -producers had subscribed to the new company, which was at once organised -as the Producers’ Oil Company, Limited, its capital being $600,000. - -But it is one thing to organise a company, and another to do business. -Where were they to begin? Where to set foot? The only thing of which -they were sure was a supply of crude oil, and in order to take care of -that they began operations by putting up four iron tanks at Coraopolis, -Pennsylvania, near the rich McDonald oil field. But they must have a -market for it, and their first effort was to ship it abroad. At Bayonne, -New Jersey, on the border of the territory occupied by the Standard’s -great plant, stands an independent oil refinery, the Columbia Oil -Company. The Columbia has “terminal privileges,” that is, a place on the -water-front from which it can ship oil—an almost impossible privilege to -secure around New York harbour. The Producers’ Oil Company now obtained -from Hugh King, the president of the Columbia, the use of his terminal. -They at once had fifty tank-cars built, and prepared to ship their crude -oil, but the market was against them, stocks were increasing, prices -dropping. The railroad charged a price so high for running their cars -that there was no profit, and the fifty tank-cars were never used in -that trade. A futile effort to use their crude oil as fuel in Pittsburg -occupied their attention for a time, but it amounted to nothing. It was -becoming clearer daily that they must refine their oil. The way opened -to this toward the end of their first year. - -In and around Oil City and Titusville there had grown up since 1881 a -number of independent oil refineries. They had come into being as a -direct result of the compromise made in 1880 between the producers and -the Pennsylvania Railroad, a clause of which stipulated that thereafter -railroad rates should be open and equal to all shippers. The -Pennsylvania seems to have intended at first to live up to this -agreement, and it encouraged refiners in both the Oil Regions and -Philadelphia to establish works. At first things had gone very well. -There were economies in refining near the point where the oil was -produced, and so long as the young independents had a low rate to -seaboard for their export oil they prospered. But in 1884 things began -to change. In that year the Standard Pipe Line made a pooling -arrangement with the Pennsylvania Railroad, by which rates from the Oil -Regions were raised to fifty-two cents a barrel, an advance of seventeen -cents a barrel over what they had been getting, and in return for this -raise the Standard agreed to give the railroad twenty-six per cent. of -all the oil shipped Eastward, or pay them for what they did not get. -This advance put the independents at a great disadvantage. In September, -1888, another advance came. Rates on oil in barrels were raised to -sixty-six cents, while rates on oil in tanks were not raised. The -explanation was evident. The railroad owned no tank-cars, but rented -them from the Standard Oil Company. It refused to furnish these -tank-cars to the independents, but forced them to ship in barrels, and -now advanced the price on oil in barrels. This second advance was more -than the refiners could live under, and they combined and took their -case to the Interstate Commerce Commission, a hearing being given them -in Titusville in May, 1889. No decision had as yet been rendered, and -they in the meantime were having a more and more trying struggle for -life, and their exasperation against the Standard was increasing with -each week. When, therefore, the representatives of the Producers’ Oil -Company proposed a league with the independent refiners they were -cordially welcomed. - -We have oil in tanks at Coraopolis, said the producers, plenty of it, -but we have no market. If we build a pipe-line from our tanks to Oil -City and Titusville and give you pipage at fifteen cents a barrel, -five cents less than the Standard charges, will you enter into an -agreement with us to take our oil for five years? The refiners saw at -once the possible future in such an arrangement, and in a short time -they had gone individually into a company to be called the Producers’ -and Refiners’ Company, with a capital of $250,000, of which the -Producers’ Oil Company held $160,000, and whose object was the laying -of a pipe-line from the fields in which the producers were interested -to the refineries at Oil City and Titusville. The new plan was carried -out with the greatest secrecy and promptness. Before the Standard men -in the region realised what was going on, a right of way was secured -and the pipe was going down. On January 8, 1893, the first oil was -run. Here, then, was the first link in a practical co-operative -enterprise—independent producers and refiners of oil joined by a -pipe-line of which they were the owners. - -While this enterprise was being carried out in Western Pennsylvania, in -the northern part of the state a still more ambitious, independent -project was under way, nothing less than a double pipe-line, one for -refined and the other for crude oil, from the Oil Regions to the sea. -This plan had originated with Lewis Emery, Jr., one of the most -implacable and intelligent opponents Mr. Rockefeller’s pretensions have -ever met. Mr. Emery sympathised with the idea that there was no way for -the producer to get his share of the profits in the oil business except -by handling the product entirely himself. In his judgment a pipe-line to -the seaboard was the first important link in such an attempt, and in -1891, on his own responsibility, he set out to see what hopes there were -of securing a right of way. The Columbia Oil Company, through whom the -Producers and Refiners were exporting, favoured such a scheme. It was -certain many producers would go into it; but on all sides there was much -scepticism about the Standard allowing a line to go through. Mr. Emery’s -first idea was a line from Bradford to Williamsport, on the Reading -road. He consulted the railroad officials. They would be glad of the -freight, they told him, and a preliminary contract was drawn up. The -contract was never completed. Mr. Emery returned to find out why. “If we -give you this contract,” the Reading officials told Mr. Emery, “we shall -disturb our relations with the Standard Oil Trust. We cannot do it.” - -Turning from the Reading, he projected a new route, a pipe-line from -Bradford to the New York, Ontario and Western Railway near Hancock, New -York, thence by rail to the Hudson River, and from there by water to New -York harbour. The New York, Ontario and Western officials welcomed the -proposal. It gave them a new and valuable freight. But the pipes must -cross the Erie road near both its terminals. Mr. Emery saw the president -of the road. “Yes,” the president told him, “we are disposed to assist -all progress. Go ahead.” Thus encouraged, he sent his men into the field -to get the right of way. They had made a good beginning before the -project was known, but as soon as it was rumoured there appeared -promptly on the route surveyed a number of men known to be Standard -employees. They, too, wanted a right of way, the same as Mr. Emery -wanted. They bought strips of land across his route, they bought up -mortgages on farms where rights had already been acquired, and, mortgage -in hand, compelled farmers to give them rights. It was an incessant -harassing by men who never used the rights acquired—who did not want -them save to hinder the independent project. This sort of hindrance by -the Standard was certain, whatever route was taken, and Mr. Emery went -ahead undismayed, and in September, 1892, organised his company—the -United States Pipe Line Company—with a capital of $600,000. Among the -incorporators were representatives of the independents’ interests, both -in New York and in the Oil Regions, and much of the stock was soon -placed in the hands of the men who were interested in the independent -concerns described above. - -It looked very much as if the United States Pipe Line were to be laid. -Now, the strength of the Standard Oil Trust had always been due to its -control of transportation. An independent pipe-line, especially to the -seaboard, was considered rightly as a much more serious menace to its -power than an independent refinery. The United States Pipe Line could -not be allowed, and prompt and drastic measures were taken to hinder its -work. There is no space here for an account of the wearisome obstructive -litigation which confronted the company, for the constant interference, -even by force, which followed them for months. It culminated when an -attempt was made to join the pipes laid to each side of the Erie tracks -near Hancock, New York, the Eastern terminal of the pipe-line. Mr. -Emery, relying on the promise of the Erie’s president to allow a -crossing, sent his men to the railway to connect the pipes. Hardly had -they arrived before there descended on them a force of seventy-five -railroad men armed for war. These men took possession of the territory -at the end of the pipes and intrenched themselves for attack. The -pipe-line men camped near by for three months, but they never attempted -to join the pipes. Mr. Emery had concluded, on investigation, that the -Erie officials, like the Reading, had found that it would be unwise to -disturb their relations with the Standard, and while his men were -keeping attention fixed on that point he was executing a flank movement, -securing a right of way from a point seventy miles back to Wilkesbarre, -on the Jersey Central. This new movement was executed with such celerity -that by June, 1893, the United States Pipe Line had a crude line 180 -miles long connecting the Bradford oil fields with a friendly railway, -and a refined line 250 miles long connecting the independent refiners of -Oil City, Titusville, Warren and Bradford with the same railway. - -With the completion of the refined line a question of vital importance -was to be settled: Could refined oil be pumped that distance without -deteriorating? The Standard had insisted loudly that it could not. When -the day came to make the experiment an anxious set of men gathered at -the Wilkesbarre terminal. They feared particularly that the oil would -lose colour, but, to their amazement, not only was the colour kept, but -it was found on experiment that the fire test was actually raised by the -extra agitation the oil had undergone in the long churning through the -pipes. A new advance had been made in the oil industry—the most -substantial and revolutionary since the day the Tidewater demonstrated -that crude oil could be pumped over the mountains. This new discovery, -it is well to note, was not the work of the Standard Oil Trust, but it -was accomplished in the face of their ridicule and opposition by men -driven to find some way to escape from their hard dealings. - -The success of the United States refined line aroused the greatest -enthusiasm among the independent interests. It gave them access to the -seaboard, and there was immediate talk of a closer union between them. -Why should the Producers’ and Refiners’ Pipe Lines not be sold to the -United States Line and completed to Bradford? By the spring of 1894 the -project seemed certain of realisation. - -The new movement was serious. Let this consolidation take place, and the -producers had exactly what they had set out in 1887 to build up—a -complete machine for handling the oil they produced. As the undertaking -grew in solidity and completeness, the war upon it grew more systematic -and determined. It took two main lines—discrediting the enterprise in -the eyes of stockholders so that they would sell the stock to Standard -buyers, the object being, of course, to get control of the companies; -cutting the refined market until the refiners in the alliance should -fail, or, becoming discouraged, sell. The work of discrediting the -enterprise was turned over to the Standard organs in the Oil Regions, -chief among which is the Oil City Derrick. Since 1885 the editor of this -interesting sheet has been a picturesque Irishman, Patrick C. Boyle by -name. Mr. Boyle’s position as editor and proprietor of the Derrick is -due to the generosity of the Standard Oil Trust, and he has discharged -his allegiance to his benefactor with a zeal which, if it has not always -contributed to the enlightenment of the Oil Regions, has, materially, to -its gaiety. Mr. Boyle now turned all his extraordinary power of -vituperation on three of the independents whose activity was -particularly offensive to him—Mr. Emery, Mr. Wood and Mr. Lee—and he -went so far that each of the three gentlemen finally sued him for libel. -They all got judgments. In Mr. Emery’s case, Mr. Boyle, after signing a -bond of $5,000 to keep the peace—which bond he was obliged later to pay, -with half as much more in costs—published the following retraction: - - - TO THE PUBLIC - - For many years past there have appeared in the editorial and news - columns of the Oil City Derrick various articles reflecting on the - business, social and political character and integrity of Lewis - Emery, Jr. - - P. C. Boyle, the editor of the Derrick, was indicted and convicted - for the publication of certain of such articles, and civil suit for - damages was instituted by Mr. Emery against P. C. Boyle for damages - for such publications. - - The litigation has now been adjusted, and Mr. Boyle voluntarily - retracts _in toto_ all matters and things which he has said - derogatory to the character, standing, or responsibility of Lewis - Emery, Jr., published by him or under his direction in the past. - - Mr. Boyle is fully satisfied that such articles have been published - under a misapprehension of the facts, and is satisfied that Mr. - Emery has been wronged, and should be vindicated, and this - retraction is freely made as such. - - Many of the articles have been republished in various papers in this - country and Europe, and it is the desire of Mr. Boyle that this - retraction shall be as freely and fully printed and published as - were the original articles reflecting on Mr. Emery. - - (Signed) P. C. BOYLE. - - -It is a satisfaction to the writer to be able to help gratify Mr. -Boyle’s laudable desire to have this document well circulated! - -Although the greater part of the Oil Regions never took Mr. Boyle -himself seriously, the conviction that his attacks were inspired, that -this was the Standard’s way of saying to the producers that their -enterprise would not be allowed to live, gave a sinister look to what he -said. More damaging still was the quiet confidence with which the solid -men of the Standard smiled at the independent effort. What were their -puny hundreds compared to the millions of the trust? What was a band of -scattered “oil-shriekers” against the cold-blooded deliberation of Mr. -Rockefeller’s solid phalanx? The oil men were conscious enough of the -inadequacy of their capital and their organisation, but they hung on, -many of them because their blood was up, and they preferred spending -their last cent to yielding; others on the principle which Mr. Phillips -confesses held him, “that God sometimes chooses the weak things of the -world to confound the mighty”; or that “one might chase a thousand, and -two put ten thousand to flight.” - -The efforts which the Standard made to discredit the independent -companies and their leaders were accompanied by a persistent, though -quiet, attempt of Standard agents to buy in all the stock in the -Producers’ Oil Company and the United States Pipe Lines which timid, -indifferent, or financially embarrassed stockholders could be induced to -give up. The movement began to be rumoured and caused no little -uneasiness in independent circles. How much would the Standard get? What -would they do with it? They were soon to find out. - -Before the use to be made of the stock developed, however, the Standard -turned against the independents the most powerful and cruel weapon it -wields—its control of the markets. The refiners were to be driven from -the combination. The extent to which cutting was carried on for two -years, beginning with the fall of 1893, is clear from a comparison of -prices. In January of 1893 crude oil was selling at 53½ cents a barrel -and refined oil for export at 5.33 cents a gallon. Throughout the year -the price of crude advanced until in December it was 78⅜ cents. Refined, -on the contrary, fell, and it was actually eighteen points lower in -December than it had been twelve months before. Throughout 1894 the -Standard kept refined oil down; the average price of the year was 5.19 -cents a gallon, in face of the average crude market of 83¾ -cents[140]—lower than in January, 1893, with crude at 53½ cents a -barrel! - -This much for the New York end of the export business. In Germany, where -the export oil of the independents all went, it being handled there by -one dealer, Herr Poth, whose depot was Mannheim, on the Rhine, prices -were cut at every point which the independent oil reached. It was a -matter of life and death to keep the foreign market they had developed, -and for twenty months the independent refiners met the demand of their -export agents and foreign dealers for lower prices with cut cargoes. For -twenty months they lost money on every barrel they sold. Oil was sold by -the Titusville refiners as low as 1.98 cents a gallon. The Lewis Emery -works at Bradford sold one cargo at 1.07 cents net, and many at or below -two cents. Had it not been for the union with pipe-lines such prices -would have been impossible, but all through the struggle in the market -the United States Pipe Line and the Producers’ and Refiners’ lines -carried oil at cost or below. The pipe-lines were heavily in debt to the -Reading Iron Works, but that company stood by them valiantly, extending -their notes until the struggle was over and the pipe-lines able to meet -them. - -Such a situation could not go on forever, evidently. It had come -apparently to be a question of how long the refiner had money to lose, -and, as month after month the independents saw their bank accounts -diminishing, and no relief in sight, the courage of a few began to ooze. -Finally, late in 1894, a committee of the Western refiners, consisting -of John Fertig of Titusville, H. P. Burwald of Titusville and S. W. -Ramage of Oil City, went to New York to consult the Standard. Is there -no hope of a better market? Is there any chance for us? None whatever, -they were told, except to sell. We will buy the refineries and the stock -of the independent concerns, but that is all we can do. The committee -came home to report. The situation was hopeless, they said, and, as for -them, they should sell. As they represented three of the largest -concerns in the Union, and all carried stock in the allied enterprises, -their withdrawal seemed at the moment a death-blow. It was a glum and -beaten body of men which listened to the report, surrender written in -every line of their faces. - -Now Mr. Lee and Mr. Wood, two active men of the Producers Oil Company, -had been invited to the meeting of the refiners. They realised fully -that if the refiners pulled out of the Union now, the independent effort -would in all probability go to pieces, and before a vote to sell could -be taken Mr. Lee was on his feet. In an impassioned speech he pleaded -for one more effort. He pointed out the fact that the abnormal condition -of the oil market could not remain, that crude oil was steadily rising, -and that no monopoly could permanently hold down a manufactured product -in the face of the rising raw product. The Standard had done this for -nearly two years—but it was contrary to the laws of nature that they do -it for two years more. He told them that already conditions were better -in Germany; that Mr. Emery had recently gone with Herr Poth, their -foreign buyer, to several members of the German government, and -presented to them the discrimination in prices of oil practised in the -empire, oil from one and a half to three cents higher on the Elbe than -on the Rhine, at points where freights were the same. He told the -refiners of the interest that had been taken by the government in their -case, and how they said, “Go home, gentlemen, and this shall stop,” and -that it had stopped. If criminal underselling can be checked in Germany, -Mr. Lee argued, we can keep our market. He reminded the refiners that it -was not merely a business they were establishing; it was a cause they -were defending—the right of men to work in their own way without -unlawful interference. The honour not only of themselves but of the Oil -Regions was at stake. They were struggling for great principles. They -were demonstrating that pluck, patience, and energy and brains can -conquer any combination that ability and unscrupulousness can devise. -“Do not give in,” pleaded Mr. Lee. “Hold on, and we will go to the -producers, lay your plight before them, and raise money to keep up the -fight.” - -Aroused by his plea, all of the refiners, excepting Messrs. Fertig, -Burwald and Ramage, who had seen the Standard, decided to make another -effort if the producers would help them out. In the next few days the -leading men of the independent alliance worked with fury to call the Oil -Regions into a mass-meeting. They travelled from assembly to assembly -exhorting to action; they circulated dodgers announcing the gathering, -and finally, in January, 1895, ran special trains to Butler, the -rallying place. There was no lack of enthusiasm and blunt talk at the -Butler mass-meeting. All the bitterness and determination of the region -poured forth against the Standard, and when a resolution was offered by -David Kirk, one of the most active and forceful of the independents, to -raise money to form a new company, to be called the Pure Oil Company, -its immediate object being to take care of the refiners in the tight -place where they were, it went through with a whoop, and in a few -moments $75,000 had been subscribed. A few days later this sum was -raised to $200,000. - -The objects of the company, as set forth in its prospectus issued at -this time, were: - - - To maintain and uphold the inherent right to do business, the right - to transport and market the producer’s own product, and his right to - the just reward of his labour and capital invested. - - -Another clause of the prospectus is interesting: - - - To prevent any interference of that monopoly which has obtained - control of the oil business, the voting power of one-half of the - stock of the Pure Oil Company is placed by the owners in the hands - of five champions of this right of independence, who are bound by - the terms of a permanent trust bond to vote only for such men and - measures as shall forever make this company INDEPENDENT, so that no - sales of interest will carry with them any power to jeopardise the - policy or existence of the company, or the investments of its - remaining members. - - -The Pure Oil Company had been organised none too soon. It was but a few -months after it was well under way before a hurried meeting of the -independents was called in New York. With scared faces the members -learned that the German dealer, who for four years had been handling -ninety per cent. of their export oil, had sold to the Standard marketing -concern, the Deutsche-Amerikanische Company. Consternation was great. -The independents had depended on the loyalty of Herr Poth as they did on -that of each other. He had been enlisted in their cause by Mr. Emery, -who, with the tragic earnestness which had characterised his entire -struggle for independence, had asked him for an oath of loyalty, and, -hand on his heart, Herr Poth had pledged his faith. In every respect he -had served them loyally. His desertion was inexplicable and -disheartening. Later they learned the truth, that Herr Poth had been -informed, by what he supposed to be reliable authority, that the -American independent interests had sold to the Standard. Believing that -this would cut off his supply, he had turned over his concern to the -Deutsche-Amerikanische. A few weeks later Herr Poth died suddenly. The -story goes in independent circles that when he learned the truth he -literally died of grief, believing he had perjured himself. - -Herr Poth’s sale left the independents in serious shape. They had -cargoes of oil ready for Europe and no tankage in Europe to take -it—nobody there to sell it. A meeting was at once called in Pittsburg to -raise money, and in a few days Mr. Emery and Mr. Murphy went abroad, -and, as quickly as such work could be done, they secured privileges in -Hamburg and Rotterdam to erect tanks and establish marketing stations. -The Pure Oil Company was in Europe. Once more the independents had been -driven to depend on themselves, and once more they had proved sufficient -to the emergency. But war was by no means over. With the establishment -of the Pure Oil Company came the foreshadowing of a still closer union -of the companies. At all hazards this was to be prevented. The Standard -determined to play the stock of the Producers’ Oil Company, Limited, and -the United States Pipe Line, which it had been picking up quietly. - -Already one attempt had been made to get into the former concern through -one of the most conspicuous and successful producers of the oil -country—Colonel John J. Carter, of Titusville, the president of the -Carter Oil Company. Colonel Carter owned 300 shares of the stock of the -Producers’ Oil Company, Limited, and had been elected a member on it; -according to the rules governing limited partnership in Pennsylvania, a -stockholder must be elected to membership before he can vote his stock. -In February, 1894, when a union of the pipe-lines had first been voted, -he suddenly appeared in court and got an injunction against the sale. In -the hearings on the injunction there came out a fact in regard to -Colonel Carter which aroused a storm of wrath against him among the -independents. The Standard Oil Company owned sixty per cent. of the -Carter Oil Company! A harder fact was to be digested. On April 11, 1894, -the company met in Warren, Pennsylvania. Colonel Carter was present and -voted not only his 300 shares, but 13,013 more! Where had he got them? -There was but one conclusion, and it proved to be true—the 13,013 -belonged to the Standard Oil Company. They had been _loaned_ to Mr. -Carter; there was a form of transfer, but no sale, not even a price -having been decided on—evidently in the hope that he, with a few other -stockholders who were disaffected, would control the meeting and prevent -the union of the pipe-lines. The attempt failed, for the Carter-Standard -faction succeeded in getting together only 21,848 shares, while the -independents held 30,560. The bitterness over this attack aroused -terrible excitement. More than one member of the Warren meeting shouted -“traitor” at Colonel Carter, and when the news of what happened reached -the Producers’ Protective Association there was a general demand that he -be expelled from the Titusville assembly. It was done promptly, Mr. -Carter not being given even a hearing. - -The Standard took back its 13,013 shares and patiently went on picking -up more. By January, 1896, they held 29,764 shares, enough, with Colonel -Carter’s 300, to give them a clean majority. Colonel Carter appeared at -26 Broadway at this opportune moment and offered to buy the stock at -100. Mr. Archbold and his colleagues thought it worth 150. (They are -said to have paid as high as 220 for some of it.) Mr. Carter, in his -frank colloquial testimony when on the witness-stand, described the -conversation over the price: - - - “Mr. Archbold says, ‘I don’t know, John, but what you are asking us - to sell that stock too cheap. Don’t you think it is worth more - money?’ I says, ‘Not to me, it is not.’ I says, ‘I am willing to - start in on this thing and put it on a paying basis and pay par for - it.’ ‘Well,’ he says, ‘I guess that we will have to think that thing - over,’ and it dropped right there.” - - -There were several interviews between Mr. Archbold, Mr. Rogers and Mr. -Carter. They wanted to know how he proposed to run the Producers’ Oil -Company if he obtained a majority of the stock. “If I run that -pipe-line,” Mr. Carter reports himself as saying, “I am going to run it -according to law and business principles. Any man that wants oil of me, -and has the money to pay for it, shall have it.” - -“Will you let Mr. Emery have some oil if he wants it?” asked Mr. Rogers. -“Yes, I will.” “And all the outside refiners?” “Yes, I will. I shall -make no discrimination against the outside refiner and in favour of the -Standard Oil Company, or _vice versa_.” - -The Standard Oil seems to have been convinced that Colonel Carter was -their friend—they probably never had any doubt of their ability to -manage _him_, and it is evident from the Colonel’s testimony that _he_ -never had any doubt about his own ability to manage both independents -and Standard—and the sale was made at 100, Colonel Carter giving his -check for $297,640 on the Seaboard Bank. - -Stock in hand, Colonel Carter went back to the Oil Regions to take -possession. It was not so easy as he anticipated. The secretary refused -to transfer the stock. He sought the president, Mr. Lee. What took place -Colonel Carter himself told later on the witness-stand: - - - “Senator Lee and myself retired to my room in the hotel and we had - quite a preliminary conversation on the situation and in regard to - the Producers’ Pipe Line. Then I stated to him my ownership of the - majority of the stock of the Producers’ Oil Company, Limited, and - stated furthermore that I purchased it from the National Transit - Company; that my desire was to stop all contention on the part of - the producers and myself, to run the business on a business - principle, so that the stock belonging to the various members and - myself might pay something, instead of dragging its slow length - along as it had been for the past six years. I told him, - furthermore, that I was perfectly willing that he should elect what - portion of the directors that his stock would warrant him, and I - would elect those that I could. The Senator replied then: ‘You - propose to take charge of the association?’ ‘Yes,’ I said; ‘I did.’ - The Senator then stated emphatically that I could not do it; he - would not permit it; if he had to spend the whole capital of the - company he would resist it.... He gave me to understand emphatically - that there was not anything except the management of the company by - himself and his associates that would be tolerated, and I told him - then I was sorry that I would have to go into court and determine my - rights in court. That was about all, but it is only fair, - furthermore, to say that at the time the Senator was rather warm, - and I presume I was warm in the collar myself. I stated to him - plainly that if there was any attempt to eject me from a legally - constituted meeting in which I was there, I would resist it if I - killed the man that attempted to put me out.” - - -Mr. Carter’s cool announcement that he meant to run the company “from a -business stand-point, and not from the stand-point of a gadfly”—there -seems to be a doubt about its being the producers who had played the -part of the gadfly—exasperated the independents to the last degree, and -in June, 1896, they met the colonel in court. His ownership of a -majority of the company’s stock was admitted, but it was urged by the -independents that the Producers’ Oil Company was a limited partnership, -and that under the Pennsylvania law no one owning stock can become a -member without being elected by a majority in number and value of the -interests. Colonel Carter had been elected member on only 300 shares. -Both the lower and supreme courts sustained the independents, and -Colonel Carter found himself an owner of a majority of the concern’s -stock without the right of control. Under those circumstances neither he -nor the Standard wanted the stock, and the company bought it below par. - -The winning of the Carter case gave encouragement that a similar suit -brought by the Standard pipe-lines against the United States Pipe Line -might fail. As already noted, the Standard began to buy into that -company as soon as it was under way, and by the summer of 1895 they had -collected 2,613 shares. In August of that year the annual meeting of the -company was held, and the agent of the Standard Oil Company who had been -buying the stock, J. C. McDowell, presented himself prepared to vote. He -was stopped at the door by Michael Murphy, the present president of the -Pure Oil Company, and told emphatically that they considered that he was -sent there by the Standard Oil Company to spy on their actions; that, -legal or illegal, they would throw him out if he crossed the threshold. -Mr. Murphy is well known to be a man of his word, and as he was backed -by young and athletic independent stockholders, Mr. McDowell discreetly -withdrew. Naturally a suit followed, but this time the independents -lost. The United States Pipe Line, being a corporation, was obliged to -recognise the Standard interest in the concern and eventually to allow -them a director on its board. - -The humiliation and disgust over this result shook the independents’ -interests to their foundation. There perhaps was never a period of more -heart-breaking discouragement for many of the men than when they saw -their dearest hopes frustrated, and a Standard representative in their -councils. This defeat came, too, when they were smarting under a -continued and intolerable interference by the Standard with the -extension of their pipe-lines to the seaboard. That both the crude and -refined lines should ultimately reach the sea had, of course, been the -intention from the first. But it was not until 1895 that the company -felt firm enough in its finances to push the extension. The route laid -out was from Wilkesbarre to Bayonne, New Jersey, by way of Hampton -Junction, on the Jersey Central Railroad. By this course two railroads -were to be crossed, the Pennsylvania and the Delaware, Lackawanna and -Western. Under both of them ran the pipe-lines of the Standard and the -Tidewater, and the United States Pipe Line officials believed they had -an equal right to go under, but they took it for granted they would be -opposed, and prepared for it. Looking over the titles of the land along -the Pennsylvania, Mr. Emery, the president of the company, who was -personally directing the extension, found one for an acre; the owner did -not know of his possession and was glad to sell it. This gave the United -States people a crossing, but even then they were obliged to carry on a -long litigation in the courts before they were free to use their right. - -Coming to the Delaware, Lackawanna and Western, they decided to test -their position by laying a pipe. It was promptly torn out. A farm over -which the railroad passed was then purchased and preparations made to -lay the pipe in a roadway under the tracks. As this road was some -seventeen feet below the rails, any claim that there was possible danger -from the oil seemed feeble. Knowing that the point was watched, Mr. -Emery tried strategy. Taking fifty men with him he went in the night to -the culvert under which he meant to cross, laid his pipes four feet -under ground, fastened them down with heavy timbers, piled rocks on -them, anchored them with chains, established a camp on each side of the -track, and prepared for war. They soon had it. First, with a body of -railroad men armed with picks and bars, who invaded the camp. “I told -the boys,” said Mr. Emery in describing the incident to the Industrial -Commission in 1899, “to take the men by the shoulders and the seat of -the pants, and take them out and lay them down carefully, which they -did.” The next day two wrecking-cars, with 250 men, came down the road -and charged the camp, but again they were routed. The matter was taken -by mutual agreement into court, and while Mr. Emery was before the -justice of the peace, two locomotives were run down and the camp -attacked with hot water and coals! - -[Illustration: - - LAYING A SIX-INCH PIPE LINE, CAIRO, WEST VIRGINIA -] - -By this time the whole countryside was aroused. The unfairness of the -thing was so patent that even the railroad employees engaged in it did -not hesitate to say, in excuse of their employers, that it was the -Standard Oil Company which was at the bottom of the opposition! As for -the inhabitants, they offered any aid they could give. The local G. A. -R. sent forty-eight muskets to the scene of war. Mr. Emery bought -eighteen Springfield rifles, the camp was barricaded, and for seven -months the pipes were guarded while the courts were deciding the legal -title to the crossing. - -This interim was employed by the pipe-line people in an attempt to get a -free pipe-line bill through the New Jersey Legislature. If this could be -done they could go under the Delaware, Lackawanna and Western without -its consent. The bill was introduced in February, 1896, J. W. Lee, Hugh -King and Lewis Emery, Jr., all appearing before the committee to argue -for it. At first there seemed to be no opposition to it. Everybody -agreed it was a just and proper measure. Then, suddenly, within a few -days of the end of the session, a violent opposition sprang up. Trenton -became alive with lobbyists—men well enough known to politicians. The -newspapers came out boldly with the charge that the railroads and -Standard were going to defeat the bill. Its friends could not believe -it, nor did they until they found, the morning it was to be presented, -that the Senator having it in charge had disappeared, taking with him -the bill and everything concerning it. Four days later the Legislature -adjourned, and the precious Senator, when next heard from, was in the -far West! - -[Illustration: - - TRUNK AND LOCAL PIPE LINES OF THE PURE OIL COMPANY. - - There are two lines from Oil City to Marcus Hook, near Philadelphia, - one for crude and one for refined oil. -] - -Deprived of this hope, and condemned to a litigation which was certain -to be made as long, as vexatious, and as costly as lawyers could make -it, the chief counsel of the United States Pipe Line, Roger Sherman, -advised a bold move—to bring suit against the Standard Trust under the -Sherman anti-trust law. The summons was issued in July, 1897, by John -Cunneen, of Buffalo. A very pretty list of wrongs it was of which the -plaintiff complained: the instigation of lawsuits and the causing of -injunctions without cause, and solely for the purpose of preventing the -independent line from doing business; the publishing of libellous matter -concerning the company and its officers in newspapers controlled by the -trust; engaging bodies of men to tear up parts of pipe-line already -laid; enticing away from the enterprise officers, agents and employees; -chartering or purchasing any vessels carrying independent oil, solely -for the purpose of interfering with the independent market; intimidating -merchants by threats of underselling until they refused to buy the oil -contracted for; criminal underselling solely for destroying the -plaintiff’s markets. - -It was a serious case Mr. Sherman made out, and the evidence he -collected was elaborate and detailed. But, for a sad reason, it was -never to come to trial. Less than two months after the summons was -issued Mr. Sherman died suddenly in New York City. The shock of his -death was such that the independent companies had no heart for the suit, -but allowed it to lapse. - -There was nothing now but the slow course of Jersey justice for the -United States Pipe Line, and for four long years it dragged itself -through the courts. Twice it won, but at last, in 1899, decisions of the -lower courts were reversed and the pipe-line had to come up. Ordered out -of New Jersey, the independents had to turn back to Pennsylvania. In -that state there is a free pipe-line bill. Philadelphia is a shipping -point. Luckily for the company, Mr. Murphy had, some time before this, -and in anticipation of a defeat in New Jersey, bought on his own -responsibility the land for a terminal at Marcus Hook, on the Delaware. -This terminal he now sold to the company at the nominal price he had -paid for it, and the United States Pipe Line was started again from -Wilkesbarre to the sea. Finally, on May 2, 1901, after nine years of -struggle in the face of an interference intolerable and unjust, after a -quarter of a million dollars spent in litigation, in useless surveys, in -laying and pulling up pipes, in loss of business, the first refined oil -ever piped from the Oil Regions to the seaboard reached Philadelphia. - -Mr. Emery, in telling his story of the difficulties of the United Pipe -Line to the Industrial Commission in 1899, did not hesitate to attribute -them to the Standard Oil Trust. John D. Archbold made a “general -denial”: “We have not at any time had any different relations with -reference to any obstruction or effort at obstruction of their line -_than would attach to any competitor in a line of business engaging -against another_.”[141] “We asked our friends on the railroad and in the -New Jersey Legislature to look after our interests, of course,” a -Standard official told the writer in discussing this case. “That was our -right.” Mr. Boyle, the editor of the Derrick, took the stand before the -Industrial Commission that the Standard Oil Trust’s opposition to the -United States Pipe Line was merely fair competition, as justifiable as -offering a higher price for land which your competitor is after. - -From the Standard point of view it is evident that all this is -legitimate business. They do not wish the United States Pipe Line to -reach New York. They say to their friends of the Delaware, Lackawanna -and Western, and in the Legislature of New Jersey: “These people are our -competitors.” Apparently neither the Delaware, Lackawanna and Western -nor the New Jersey Legislature can afford to forget who are the -competitors of the Standard Oil Trust. When the case becomes public and -clamour is raised against such methods, the Standard disclaims all -responsibility. It was the railroad who fought the pipe-line! - -It was not only from without that trouble came upon these men. There -were the inevitable internal struggles. They saw their stockholders -diminish from discontent and timidity. One of their staunchest members -withdrew because of his disbelief in the wisdom of a majority action, -and twice they were robbed by death of their most valued members. In -December, 1895, A. D. Wood, of Warren, died. Mr. Wood had been one of -the most inspiring members in the independent work, and there was nobody -left who could do what he had been doing there. In 1897 the chief -counsel, Roger Sherman, died. He had conducted the enormous and -vexatious litigation of the various concerns with consummate skill, and -there was nobody to take his place. Mr. Emery, overwhelmed by the death -of Roger Sherman and worn out by his six years of work and worry over -the United States Pipe Line, fell ill and was obliged to resign. On -every side it was fight and loss and despair, and yet these men hardened -under it. Not only hardened, they expanded. Ten years after the -unorganised uprising which brought them together in 1887 and forced from -them the resolution to take care of their own product, what had they? A -company of nearly 600 individual oil producers organised on a business -basis, and connected by pipe-lines with some dozen individual oil -refineries. For transporting this oil they had pipe-lines carrying both -crude and refined from the Oil Regions to within fifty miles of the sea, -and for markets they had those they had themselves worked up in the -United States and Europe. They had something more. In spite of the -continued hostility of the Standard they had the conviction that there -was a future for their venture; but they saw clearly that to realise it -they must get themselves into still more compact form—that their -holdings must be put into the hands of trustees in a single company if -they were to be free from the danger of the eventual dominance of the -Standard. Now, in November, 1895, as we have seen, the independents had -incorporated in New Jersey a marketing concern called the Pure Oil -Company. After months of discussion it was decided to enlarge the -capital of this company to $10,000,000, $2,000,000 in preferred and -$8,000,000 in common stock, and put into this concern all their -interests. There was opposition to the consolidation from some of the -strongest interests concerned, but finally the idea prevailed, and in -1900 a majority of the stock of the Producers’ Oil Company, the -Producers’ and Refiners’ Company, and the United States Pipe Line was -turned over to the Pure Oil Company. - -The purpose of the combination was frankly stated to be the maintenance -of the independence of the company. This was to be effected in the -following way: the holders of 16,000 shares of stock—more than a -majority—vested the voting power of these shares in fifteen persons for -twenty years, and it was agreed that one-half of all shares thereafter -subscribed should be transferred to those same trustees. Shares can be -sold and transferred, but this transfer does not give the purchaser any -right other than provided in the trust agreement. Any trustee may be -summarily removed by three-fifths of the trustees, together with -three-fifths of the shareholders in trust. It certainly looks as if the -Pure Oil Company has devised an organisation which will effectually -preserve its independence so long as its shareholders desire that -independence. Mr. Archbold, in describing this voting trust of the Pure -Oil Company to the Industrial Commission, called it “iniquitous.” It is -difficult to understand just how it is iniquitous, unless it is because -of its success so far in keeping the Standard out of its councils. It is -not a secret arrangement. It aims at no monopoly, at no restraint of -trade. It claims only to be a device for protecting its obvious right to -handle its own product. Of course, if we admit that the oil business -belongs to the Standard, as Mr. Rockefeller claims, then the Pure Oil -Company is certainly in the wrong! - -As it stands to-day, the independents have a good showing for their -fight. They have fully 900 stockholders, most of them producers. They -handle a daily production of 8,000 barrels of crude oil; operate 1,500 -miles of crude pipe-line and 400 miles of refined; are allied with some -fourteen refineries, in some of which all the by-products of oil, as -well as naphtha and illuminating oils, are produced; own one -tank-steamer, the Pennoil, with a capacity of 42,000 fifty-gallon -barrels, and charter several others; own oil barges on the Rhine, the -Elbe and the Baltic; have fully equipped stations in Europe at Hamburg, -Mannheim, Riesa, Stettin and Dusseldorf, in Germany; Rotterdam and -Amsterdam, Holland; London and Manchester, England; and, in the United -States, New York and Philadelphia. With conservative and loyal -management, there seems to be no reason that the Pure Oil Company should -not become a permanent independent factor in the oil business. Such a -thing is worth the best efforts of the men who have made it. Their -courageous and persistent struggle no doubt seems to most of them as of -purely personal and local meaning. All they asked was to get a fair -share of the profits in their business. They knew they did not get it, -and they believed it was because there was not fair play on the part of -the railroads and the Standard Oil Company. Aroused, they each fought -for the particular thing which would give them relief. They only -combined because driven to. They have become a strong organisation -almost solely because of the persistent opposition of the Standard Oil -Trust. The Standard’s efforts to break up the Producers’ Protective -Association by buying out the biggest producers precipitated a -co-operative company for handling oil. Its efforts to drive out the -independent refineries by the manipulation of the railroads drove the -producers and refiners to combine. The heavy charges for handling oil by -the Standard pipe-line and by the railways drove these independents to -build a seaboard pipe-line for both refined and crude, and to -demonstrate that refined as well as crude could be pumped to the sea in -pipes. The buying out of their foreign agents forced them to develop -their own market in Europe. The secret buying in of their stock, and the -combined effort to force the Standard directors on them, compelled them -into their present close trust organisation. It looks very much as if in -trying to make way with several small scattered bodies Mr. Rockefeller -had made one strong, united one. - -But while the experience of the Pure Oil Company demonstrates that it is -possible to-day to build up an independent oil business if men have the -requisite patience and fighting quality, it by no means follows that the -success of the Pure Oil Company has restored competition in the oil -business or that by its success the public is getting any marked -reduction in the price of oil. That the control of that price—within -limits—is now and has been almost constantly since 1876 in the hands of -the Standard Oil Company is demonstrated, the writer believes, by the -figures and diagrams of the next chapter. - - - - - CHAPTER SIXTEEN - THE PRICE OF OIL - - EARLIEST DESIGNS FOR CONSOLIDATION INCLUDE PLANS TO HOLD UP THE - PRICE OF OIL—SOUTH IMPROVEMENT COMPANY SO INTENDS—COMBINATION OF - 1872–1873 MAKES OIL DEAR—SCHEME FAILS AND PRICES DROP—THE - STANDARD’S GREAT PROFITS IN 1876–1877 THROUGH ITS SECOND - SUCCESSFUL CONSOLIDATION—RETURN OF COMPETITION AND LOWER - PRICES—STANDARD’S FUTILE ATTEMPT IN 1880 TO REPEAT RAID OF - 1876–1877—STANDARD IS CONVINCED THAT MAKING OIL TOO DEAR WEAKENS - MARKETS AND STIMULATES COMPETITION—GREAT PROFITS OF - 1879–1889—LOWERING OF THE MARGIN ON EXPORT SINCE 1889 BY REASON - OF COMPETITION—MANIPULATION OF DOMESTIC PRICES EVEN MORE - MARKED—HOME CONSUMERS PAY COST OF STANDARD’S FIGHTS IN FOREIGN - LANDS—STANDARD’S VARIOUS PRICES FOR THE SAME GOODS AT HOME—HIGH - PRICES WHERE THERE IS NO COMPETITION AND LOW PRICES WHERE THERE - IS COMPETITION. - - -It is quite possible that in keeping the attention fixed so long on Mr. -Rockefeller’s oil campaign the reader has forgotten the reason why it -was undertaken. The reason was made clear enough at the start by Mr. -Rockefeller himself. He and his colleagues went into their first -venture, the South Improvement Company, not simply because it was a -quick and effective way of putting everybody but themselves out of the -refining business, but because, everybody but themselves being put out, -they could control the output of oil and put up its price. “There is no -man in this country who would not quietly and calmly say that we ought -to have a better price for these goods,” the secretary of the South -Improvement Company told the Congressional Committee which examined him -when it objected to a combination for raising prices. - -Four years after the failure of the first great scheme, a similar one -went into effect. What was its object? J. J. Vandergrift, one of the -directors of the Standard Oil Company at that time, questioned once -under oath as to what they meant to do, said: “Simply to hold up the -price of oil—to get all we can for it.” Nobody pretended anything else -at the time. “The refiners and shippers who are in the association -intend there shall be no competition.” “It is a struggle for a margin.” -“The scope of the association is an attempt to control the refining of -oil, with the ultimate purpose of advancing its price and reaping a rich -harvest in profits.” These are some of the comments of the contemporary -press. The published interviews with the leaders confirm these opinions. -Mr. Rockefeller, always discreet in his remarks, denied that the scheme -was to make a “corner” in oil; it was “to protect the oil capital -against speculation and to regulate prices.” H. H. Rogers was more -explicit: “The price of oil to-day is fifteen cents per gallon” (March, -1875). “The proposed allotment of business would probably advance the -price to twenty cents.... Oil to yield a fair profit should be sold for -twenty-five cents per gallon.” - -What was the exact status of this refining business out of which it was -necessary to make more in the year 1871, when the first scheme to -control it was hatched? The simplest and safest way to study this -question is by means of the chart of prices on pages 194 and 195.[142] -On this chart the line A shows the variation in the average monthly -price, per gallon, of export oil in barrels in New York from 1866 to -June 1, 1904. The line B shows the average monthly price, per gallon, of -crude oil in bulk at the wells. A glance at the chart will show the -difference or margin between the two prices. It is out of this -difference that the refiner must pay the cost of transporting, -manufacturing, barrelling and marketing his product, and get his -profits. Now in 1866, the year after Mr. Rockefeller first went into -business, he had, as this chart shows, an average annual difference of -35 cents a gallon between what he paid for his oil and what he sold it -for. In 1867 he had from 26½ to 20 cents; in 1868, from 20 to 22½; in -1869, from 21 to 18; in 1870, from 20 to 15.[143] - -[Illustration: - - CHART SHOWING PRICE OF OIL FROM 1866 TO 1904. - - The above chart is adapted from one published in the Report of the - Industrial Commission, Volume 1, 1900, and is brought up to date. - The figures at the right and left stand for the price per gallon in - cents. The dates are placed at the top. The figures on which the - export and crude lines are based are those taken from the “Oil City - Derrick Hand-Book.” Those on which the water-white line is based are - from the Oil, Paint and Drug Reporter. - - A shows the variations in the price per gallon of refined oil for - export in barrels in New York. The price of barrels varies slightly, - but is usually estimated at 2½ cents per gallon. - - B shows the variations in the price per gallon of crude oil in bulk at - the wells. - - C shows the variations in the price per gallon of water-white oil - (150° test) in barrels in New York. This is the usual domestic oil. - - The margin or difference between the price of crude and refined is - easily calculated. Thus at the end of 1876 the crude line shows the - price of crude to be about nine cents—the price of refined about - twenty-nine; the margin was therefore twenty cents. -] - -There were many reasons why this margin fell so enormously in these -years. All of the refiners’ expenses had rapidly decreased. In 1866 but -two railroads came into the oil country; by 1872 there were four -connections, and freights fell in consequence. In 1866 carrying oil from -the wells by pipe-lines was first practised with success, by 1872 all -oil was gathered by pipes, thus saving the tedious and expensive -operations of teaming. Tank-cars for carrying crude oil in bulk had -replaced barrels and rack cars. The iron tank, holding 20,000 barrels, -was used instead of the wooden tank holding 1,000 barrels. On every side -there had been economies, and because of them the margin had fallen. But -not only were the expenses coming down; so were the profits. The money -which had been made in refining oil had led to a rapid multiplication of -refineries at all the centres. In 1872 there was a daily refining -capacity of about 46,000 barrels in the country, and the daily -consumption of that year had been but 15,000 barrels. This large -capacity produced the liveliest competition in selling, and every year -the margin of profit grew smaller. - -Now it is natural that men should struggle to keep up a profit. The -refiners had become accustomed to making from twenty-five per cent. to -fifty per cent., and even more, on every gallon of oil they put out. -They had the same extravagant notion of what they should make as the oil -producers of those early days had. No oil producer thought in the -sixties that he was succeeding if his wells did not pay for themselves -in six months! And as their new industry slowly but surely came under -the laws of trade, increased its production, was subjected to severe -competition, as they saw themselves, in order to sustain their business, -forced to practise economies and to accept smaller profits, they loudly -complained. There was never a set of men who found it harder to accept -the limitations of economic laws than the oil producers of Pennsylvania. -The oil refiners showed the same dislike of the harness, and in 1871, as -we have seen, Mr. Rockefeller and a few of his friends combined to throw -it off. What they proposed to do was simply to get all the refineries of -the country under their control, and thereafter make only so much oil as -they could sell at their own interpretation of a paying price. - -There was not enough profit in the margin of 1871. Now what was the -profit? According to the best figures accessible of the cost of oil -refining at that day, the man who sold a gallon of oil at 24¼ cents (the -average official price for that year) made a profit of not less than 1¼ -cents—52½ cents a barrel.[144] Josiah Lombard, a large independent -refiner of New York City, when questioned by the Congressional Committee -which, in 1872, looked into Mr. Rockefeller’s scheme for making oil -dearer, said that his concern was making money on this margin. “We could -ship oil and do very well.” A. H. Tack told the Congressional Committee -of 1888, which was trying to find out why he had been obliged to go out -of the refining business in 1873, that he could have made twelve per -cent. on his capital with a profit of ten cents a barrel. Scofield, -Shurmer and Teagle, of Cleveland, made a profit of thirty-four cents a -barrel in 1875, and cleared $40,000 on an investment of $65,000. -Fifty-two cents a barrel profit then was certainly not to be despised. -The South Improvement Company gentlemen were not modest in the matter of -profits, however, and they launched the scheme whose basic principles -have figured so largely in the development of the Standard Oil Trust. - -The success which Mr. Rockefeller had in getting the refiners of the -country under his control, and the methods he took to do it, we have -traced. It will be remembered that for a brief period in 1872 and 1873 -he held together an association pledged to curtail the output of oil, -but that in July, 1873, it went to pieces.[145] It will be recalled that -three years after, in 1875, he put a second association into operation, -which in a year claimed a control of ninety per cent. of the refining -power of the country, and in less than four years controlled ninety-five -per cent.[146] This large percentage Mr. Rockefeller has not been able -to keep, but from 1879 to the present day there has not been a time when -he has not controlled over eighty per cent. of the oil manufacturing of -the country. To-day he controls about eighty-three per cent. - -Now it is generally conceded that the man or men who control over -seventy per cent. of a commodity control its price—within limits, very -strict limits, too, such is the force of economic laws. In the case of -the Standard Oil Company the control is so complete that the price of -oil, both crude and refined, is actually issued from its headquarters. - -Now, with the help of the chart, let us see what Mr. Rockefeller and his -colleagues have been able to do from 1872 to 1904 with their power over -the price of oil. The first association which worked was brought about -late in 1872. What happened? Prices for refined oil were run up from 23 -cents a gallon in June to 27 cents a gallon in November, and the margin -increased from 13.6 cents to 17.7 cents. From a profit of about 1½ cents -a gallon they rose to one of over 4 cents. Unfortunately, however, the -refiners of that period were not educated to the self-restraint -necessary to carry out this scheme. They very soon failed to keep down -their output of oil and overstocked the market, and the whole machine -went to pieces. Mr. Rockefeller had been able to make oil dear for a -short time, but only for a short time. Worse than that, what he had been -able to do brought severe public condemnation. It had, indeed, produced -exactly the result the economists tell us too high prices must -produce—limitation of the market and stimulation of competition in rival -goods. Mr. Rockefeller’s second scheme to work out the good of the oil -business by making oil dear resulted in decreasing oil exports for the -first time since the discovery of oil.[147] It also increased one of the -chief grievances of the American refinery—that was, the exporting of the -crude oil to be refined in Europe. Where the exports of crude had been -something over eleven million gallons in 1871, they were now over -sixteen millions. And it set the shale-oil factories of Scotland to work -merrily. It was cheaper for Great Britain to use oil from Scottish -shales than to buy oil sold under Mr. Rockefeller’s great plan for -benefiting the oil business. So for the time the scheme fell down. - -As the diagram shows, the margin dropped rapidly back after this brief -success from eighteen to thirteen cents, nor did it stay there. With the -return of competition, in the fall of 1873, it continued to drop -rapidly. By the end of the year it was down to eleven cents; by the end -of 1874 to nine. What had done it? A decline in expenses, coming from -the multiplication of pipe-lines, reduction in freight charges, and free -competition in the markets. Nothing else. - -[Illustration: - - 1866 TO 1872. - - Fragment of oil chart, showing decline of margin between crude and - refined oil in the first seven years after the pipe-line was proved - practical. Notice sudden rise in refined oil in 1872 caused by the - first Refiners’ Association. -] - -[Illustration: - - 1872 TO 1877. - - Fragment of oil chart, showing decline in margin after the failure of - the Refiners’ Association in 1872, and the abnormal increase in the - margin in 1876, when the next combination was perfected. -] - -In spite of the obvious economic effects of his scheme in 1872 Mr. -Rockefeller did not give up his theory that to make oil dear was for the -good of the business. He went steadily ahead, developing quietly his -plan of a union of all refiners, pledged to limit their output of oil to -an allotment he should assign, to accept the freight rates he should -arrange for, to buy and sell at the prices he set. It was a year before -the alliance was nearly enough complete to make its power felt. By the -summer of 1876 it claimed to have nine-tenths of the refiners in the -country in line. At that time a situation rose in the crude oil market -well calculated to help it in its intention to raise prices. This was a -falling off in the production of crude oil. An advance in its price had -come in the summer of 1876. Refined had, of course, responded to the -rise. But as the fall came on and the exporters prepared to load their -cargoes, the syndicate demanded a price for refined much above that for -which the market price of crude called. The embargo which followed has -already been described in Chapter VII of this narrative. It was as -straight a hold-up as our commercial history offers, rich as it is in -that sort of operations. From October to February refined oil was held -at a price purely arbitrary. It was the first fruits of the Great -Scheme. - -The winter’s work was a great one for the Standard Combination. It not -only demonstrated that Mr. Rockefeller was correct in his theory that -the way to make oil dear was to refuse to sell it cheap, but not since -the coup of 1872, with the South Improvement Company, had Mr. -Rockefeller reaped such rewards. The profits were staggering. One of the -leading gentlemen in this pretty affair told the writer once that he had -sold one cargo at thirty-five cents a gallon, oil which cost him on -board the ship a trifle under ten cents. To-day one-fourth of a cent -profit a gallon is considered large on export oil. The Standard Oil -Company of Ohio had always paid a good dividend,[148] but the year of -this raid, 1877, it surpassed all bounds. On a capitalisation of -$3,500,000 it paid $3,248,650.01, only a fraction less than 100 per -cent. One of its stockholders, the late Samuel Andrews, when on the -witness-stand in 1879, said they might have paid the dividend twice over -and had money to spare. - -The profits were great, but notice the forces set in motion by this -coup. The exporters were angry. The buyers in Europe were angry. If the -Americans are going to force up prices in this way, they said, we will -not buy their refined oil. We will import their crude and refine it -ourselves. We will go back to shale oil. A first result, then, of this -attempt to hold prices up to a point conspicuously out of proportion to -the raw product was that the exports of illuminating oil fell off—they -were less by a million gallons in 1878 than in 1877. In the United -States the market was threatened in the same way. There had been much -trouble in the years just preceding these events with extortionate -prices for gas—particularly in New York and Brooklyn. Illuminating oil -was so much cheaper that it had been largely substituted, but this -artificial forcing of the oil market in 1876–1877 caused a threat to -return the next year to gas. - -The effect on the refiners who were operating with Mr. Rockefeller in -running arrangements was decidedly bad. Each refiner was under bonds to -use only a certain percentage of his capacity, and to shut down entirely -if Mr. Rockefeller said so. Scofield, Shurmer and Teagle, independents -of Cleveland, who had yielded to the attractiveness of Mr. Rockefeller’s -scheme, and had gone into a running arrangement with him to limit their -output, made $2.52 a barrel on their oil from July, 1876, to July, 1877! -They had been satisfied with thirty-four cents profit a barrel the year -before. Since making oil paid so well, why not make more? Why keep their -allotment down to exactly 85,000 barrels, as they had agreed, when they -were prepared to make 180,000? They did not. They put out a few extra -thousand barrels each year. Others did the same. It was, of course, -fatal to the “good of the oil business.” Not only did these profits -tempt many refiners to overrun their allotment; the few independents -left profited by the prices and increased their plants; the great Empire -Transportation Company combined refineries with its pipe-lines as Mr. -Rockefeller was adding pipe-lines to his refineries. Thus competition -was stimulated. - -The effect on the men who produced oil was, of course, bad. They had -found it impossible at any time, while the refined was kept so high, to -force crude up to a corresponding point, though every effort was made. -The producers threatened to combine and refine their own oil. When the -Empire Transportation Company went into refining the producers heartily -favoured the movement, and throughout the next year a severe competition -kept prices down. The Empire was finally wiped out; the producers, -aroused by this failure, combined against the Standard in one of the -greatest associations they ever had. From 1878 to 1880 they fought -continuously to restore competition. They secured the introduction into -Congress of a bill to regulate interstate commerce; they fought for more -drastic laws against railroad discrimination in the state of -Pennsylvania; they persuaded the state to prosecute the Pennsylvania -Railroad for discrimination; they indicted Mr. Rockefeller and eight of -his colleagues for criminal conspiracy; and they supported by money and -influence a scheme for a seaboard pipe-line connected with the -independent refineries.[149] - -If one will look at the chart he will see graphically the effect on Mr. -Rockefeller’s ambition of this fundamentally sound independent movement. -The margin between crude and refined, thrust up to over twenty cents by -the combination of 1878, fell rapidly under the combined efforts of the -independents through 1877, 1878 and 1879. In the latter year it touched -five cents for the first time in the history of the business. -Competition resulting in economies, in a revolutionising transportation -invention—the seaboard pipe-line—in a greatly extended foreign market, -brought down this margin in 1879. Nothing else. - -[Illustration: - - 1876 TO 1880. - - Fragment of chart, showing decline in margin after the coup of - 1876–1877, caused by alliance of independent oil men and the success - of the first seaboard pipe-line. -] - -Those who have read this history know what became of the competitive -movement of these years of 1878–1879. They remember how the Producers’ -Union compromised its suits and abandoned its efforts for interstate -commerce regulation. They remember, too, how, just before the great -seaboard pipe-line project was proved to be a success, all but one of -the independent refineries were, by one means or another, persuaded to -sell or to combine with the Standard, leaving the Tidewater without an -outlet for its oil. Before the end of 1879 the Standard claimed -ninety-five per cent. of the refining business. Now examine the chart -for the effect on the price of oil in 1880, of this doing away with -competition—another sudden uplift of the price of refined, this time -without the excuse of a rise or probable rise in crude. For three years -oil had not been sold so high as it was in 1880, when the exporters -began to take on their winter’s supply. An interesting contemporary -account of this coup of 1880, and the way in which it was managed, is -found in the excellent monthly Petroleum Trade Report, published by John -C. Welch. It is dated November, 1880, and headed “Very Sharp Practice”: - - - “There is made each day in New York what is known as an official - quotation for refined oil, this official quotation being made as a - matter of convenience in cabling the price of refined oil throughout - the world. Refined oil not being sold at an open board, it is - sometimes difficult to quote it accurately, but by having an - ‘official quotation’ this can be quoted, and the difficulty is - supposed to be, in a measure at least, remedied. The ‘official - quotation’ is made by three petroleum brokers appointed by the - Produce Exchange for that purpose, who meet each day after exchange - hours for the purpose of establishing it. There is one party, and - one party only, that have very large lots to sell, and so important - a position do they hold in the business that their prices are - ordinarily the market. Of course, to make transactions, their prices - and buyers’ prices have to come together, and transactions establish - a market much better than prices offered to buy or sell at, but - without transactions. At many times, if the Standard do not sell, - there are no transactions, and, consequently, the Standard’s asking - price is leaned upon to establish an official quotation. During - September, the official quotation went up from 9⅜ cents to 11⅞ - cents, with comparatively little demand, as the foreign stocks were - large, and very little oil was required to supply the world’s wants. - The upward movement was, consequently, purely arbitrary. Arbitrary - prices are, however, a part of the Standard’s every-day life, and I - am not taking at this time any exception to them. All through - October and up to November 13, the official quotation was 12 cents, - or sometimes a little over and sometimes a little under, and as this - price did not meet the views of buyers to but slight extent, the - Standard were supposed to be exercising a Roman virtue in not - selling. Twelve cents continued as the official quotation to - November 13, without any wavering, but from the 13th to the 18th, - while ‘12 cents asked by refiners’ continued in the quotation, such - sentences as these were included at different dates: ‘Other lots - obtainable at 11 cents.’ ‘Sales at 10½ cents, offered at that.’ - ‘Other lots obtainable at irregular prices, from 10 to 10½ cents.’ - On November 18, the quotation was ‘10 to 12 cents.’ I give the - following quotation of the New York refined market as published in - my Oil City daily report of November 11: ‘The New York market - yesterday closed, secretly offered and unsalable at 11½ cents, and - probably at 11¼ cents by resales and outside refiners, and likely by - Standard, though they openly ask 12.’ - - “The point that seems apparent is that the official quotation of 12 - cents ceased to be an honest quotation a considerable time before it - was abandoned. The committee making the quotation can probably - justify their position by the custom of the trade of regarding the - prices the Standard openly ask as the market, nevertheless they, and - the Produce Exchange whom they represent, were the bulwark from - behind which the Standard were able to get off their hot shot - against the consuming trade in the United States and the consuming - trade in Europe, who all this time were buying Standard oil on the - basis of 12 cents at New York, the supplies at the time being drawn - from their stock in Europe and from their various depots in the - United States.” - - -But the performance of 1876 and 1877 was not forgotten in Europe. In -1879 the exporters and buyers from all the great foreign markets had met -in Bremen in an indignation meeting over the way the Standard was -handling the oil business. Remonstrances came from the consuls at -Antwerp and Bremen to our State Department concerning even the quality -of oil which had been sent to Europe by the Standard. John C. Welch, who -was abroad in 1879, was told by a prominent Antwerp merchant: “I am of -the opinion that if the petroleum business continues to be conducted as -it has been in the past in Europe, it will go to smash.”[150] The -attempt to repeat in 1880 what had been done in 1876 failed. The exports -of illuminating oil that year fell much below what they had been the -year before. In 1879, 365,000,000 gallons of refined oil were exported; -in 1880, only 286,000,000 gallons. Exports of crude, on the contrary, -rose from about 28,000,000 gallons to nearly 37,000,000 gallons. The -foreigners could export and refine their own oil cheaper than they could -buy from Mr. Rockefeller. Competition was after him, too, for the -Tidewater, whose refineries he had cut off, had stored their oil, built -new plants, and were again ready to compete in the market. - -This third corner of the oil market seems to have convinced Mr. -Rockefeller and his colleagues at last that, however great the fun and -profits of making oil very dear, in the long run it does not pay; that -it weakens markets and stimulates competition. They learned a lesson in -these years they have never forgotten—that when you make a scoop it must -not be so big that you will never have a chance to make another one; -that if you want to keep your power to manipulate the market you must -use that power so modestly that the public in general will not realise -you have it. Again and again the effect of the experiences of 1872, 1876 -and 1880 crops out in the testimony of Standard officials. Benjamin -Brewster once said to a Federal Investigating Committee, which had asked -if the Standard could not fix the price of oil as it wished: “At the -moment many things may be done, but the reaction is like a relapse of -typhoid fever. The Standard Oil Company can never afford to sell goods -dear. The people would go to dipping tallow candles in the old-fashioned -way if we got the price too high.” The after-effects of the first great -raids, then, were salutary. The Standard learned the limitations set on -monopolies by certain great economic laws. - -[Illustration: - - 1879 TO 1889. - - Fragment of chart, showing how margin reached in 1879 by competition - was raised and sustained for ten years under the monopoly achieved - by the Standard Oil Company in 1880. The sudden rise in refined in - the fall of 1880 was a purely arbitrary price. Notice that crude was - stationary at the time. -] - -But if the Standard Oil Company learned in its first attempts to raise -the price of oil that they could not in the long run afford to make from -100 to 350 per cent., they by no means gave up their attempt to keep -their control, and to hold up profits as high as they could without -injuring the market or inviting too strong competition. If one will look -at the chart showing the fluctuations from 1879, when control was -achieved, to the beginning of 1889, one will find that for ten years the -margin between refined oil and crude never fell below the point reached -by competitive influences in the former year, though frequently it rose -considerably above. Yet it is in this period that the Standard did all -its great work in extending markets, in developing by-products, and in -introducing the small and varied economies on which it rests its claim -to be a great public benefactor. The first eight years of its existence -had been spent in bold and relentless warfare on its competitors. -Competition practically out of the way, it set all its great energies to -developing what it had secured. In this period it brought into line the -foreign markets and aided in increasing the exports of illuminating oil -from 365,000,000 gallons in 1879 to 455,000,000 in 1888; of lubricating, -from 3,000,000 to 24,000,000, and yet this great extension of the volume -of business profited the consumer nothing. In this period it laid hands -on the idea of the Tidewater, the long-distance pipe-lines for -transporting crude oil, and so rid itself practically of the railroads, -and yet this immense economy profited the public nothing. In spite of -the immense development of this system and the enormous economies it -brought about—a system so important that Mr. Rockefeller himself has -said: “The entire oil business is dependent upon this pipe-line system. -Without it every well would shut down, and every foreign market would be -closed to us”—the margins never fell the fraction of a cent from 1879 to -1889, though it frequently rose. In this period, too, the by-products of -oil were enormously increased. The waste, formerly as much as ten per -cent. of the crude product, was reduced until practically all of the oil -is worked up by the Standard people, and yet, in spite of the extension -of by-products between 1879 and 1889, the margin never went below the -point competition had forced it to in 1879. - -The enormous profits which came to the Standard in these ten years by -keeping out competition are evident if we consider for a moment the -amount of business done. The exports of illuminating oil in this period -were nearly 5,000,000,000 gallons; of this the Standard handled well -toward ninety per cent. Consider what sums lay in the ability to hold up -the price on such an amount even an eighth of a cent a gallon. Combine -this control of the price of refined oil with the control over the crude -product, the ability to depress the market for purchasing, an ability -used most carefully, but most constantly; add to this the economies and -development Mr. Rockefeller’s able and energetic machine was making, and -the great profits of the Standard Oil Trust between 1879 and 1889 are -easily explained. In 1879, on a capital of $3,500,000, the Standard Oil -Company paid $3,150,000 dividends; in 1880 it paid $1,050,000. In 1882 -it capitalised itself at $70,000,000. In 1885, three years later, its -net earnings were over $8,000,000; in 1886, over $15,000,000; in 1888, -over $16,000,000; in 1889, nearly $15,000,000. In the meantime the net -value of its holdings had increased from $72,000,000; in 1883, to over -$101,000,000. While the Standard was making these great sums, the men -who produced the oil saw their property depreciating, and the value of -their oil actually eaten up every two years by the prices the Standard -charged for gathering and storing it. - -But to return to the chart. With the beginning of 1889 the margin begins -to fall. This is so in spite of a rising crude line. It would look as if -the Standard Oil Company had suddenly had a change of heart. In the -report of that year’s business made to the trustees of the Standard Oil -Trust, the following elaborate and interesting calculation was -presented: - - - “The quantity of crude oil consumed by the Standard manufacturing - interests in 1889 was 896,250,325 gallons, or 20,339,293 barrels, an - increase over the previous year of 119,073,589 gallons, or 2,835,085 - barrels, an increase of 15.3 percent. - - “The sales of crude oil by our interests for purposes other than - their own manufacture were 135,788,959 gallons, or 3,232,832 - barrels, an increase of 43¼ per cent. over the previous year, making - the total consumption of crude oil through our interests - 1,032,029,284 gallons, or 24,572,126 barrels, an increase over 1888 - of 3,809,917 barrels, or 18.35 per cent., and exceeding the - consumption of 1887, which was the largest of any previous year, by - 12.7 per cent. - - “The quantity of refined oil produced was 666,742,547 gallons, or - 13,334,851 barrels of 50 gallons each; of lubricating paraffine and - compounded oils 43,862,795 gallons, or 877,256 barrels, and of other - products 160,712,183 gallons, or 3,214,243 barrels, making a total - of all products of 871,371,525 gallons, or 17,426,350 barrels, - valued at over $46,000,000. - - “The average cost of the crude consumed in refining was .211 of a - cent more than in 1888, while the average price realised per gallon - of crude was .090 of a cent less, showing a decrease in the margin - between the crude and finished product of .301 of a cent. This - represents a saving to the consumer over what the finished products - would have cost him if the same margin had been maintained on the - increased price of crude of $2,697,000. This has been done without a - corresponding loss to our interests by a decrease in cost of - manufacturing and marketing, and by the increased quantity handled - .204 of a cent, effecting a saving of $1,860,000, and the difference - has been more than made up by further reductions of cost of - marketing by our distributing interests, as well as in the increased - quantity handled. Although the average price of crude has been the - highest this year of any of the last five years, the increase over - the price of 1887 (when the price on both crude and refined was the - lowest for that period) being about 22¼ per cent., the average price - of products has increased but 12¼ per cent., showing a saving to the - consumer of 10 per cent. We have therefore continued to make good - the claim that the Standard has heretofore maintained of cheapening - the cost of the products to the consumers by giving them the - benefits of the saving in costs effected by consolidation of - interests.”[151] - - -This certainly sounds just—even philanthropic. It is exactly what the -consumer claims is his due—to have a share of the economies which -undoubtedly may be effected by such complete and intelligent -consolidation as Mr. Rockefeller has effected. But was it combination -that caused this falling of the margin? As a matter of fact this -lowering of the margin was the direct result of competition. In 1888 a -German firm, located in New York City, erected large oil plants in -Rotterdam and Bremerhaven. They put up storage tanks at each place of -90,000 barrels’ capacity. They also established a storage depot of -30,000 barrels at Mannheim, and took steps to extend their supply -stations in Germany and Switzerland. They built tank steamers in order -to ship their oil in bulk. These oil importers allied themselves with -certain independent refiners, and interested themselves also in the -co-operative movement which the producers of Pennsylvania were striving -to get into operation at this time. The extent of the undertaking -threatened serious competition. In the same year imports of Russian oil -into the markets of Western Europe began for the first time to assume -serious proportions. Russian oil had, from the beginning, been a -possible menace to American petroleum, for the wonderful fields on the -Caspian were known long before oil was “struck” in Pennsylvania. They -did not begin to be exploited in a way to threaten competition until -late in the eighties. In 1885 consuls at European ports began to report -its appearance—fifty barrels were landed at Bremen that year as against -180,855 of American oil. In this year, too, the first Russian oil went -to Asia Minor, where “Pratt” oil had long held sway. The first cargo -reported at Antwerp was in March, 1886. In April, 1890, the consul at -Rotterdam, in calling attention to the independent American competition, -said of Russian oil: “It is no longer a serious competitor for the -petroleum trade of Western Continental Europe.” The consul said that -while the American oil shipments to the five principal continental ports -were fully 4,000,000 barrels per year, those of Russian were less than a -tenth of that number. However, a growth of 400,000 barrels in five years -was something, and the Standard Oil Trust was the last to underestimate -such a growth. Prices of export oil immediately fell. There was nothing -in the world that gave oil consumers the benefit of the Standard’s -savings by economies in 1889 but the competition threatened by Russia -and the American and German independent alliance. The Standard, to -offset it, not only lowered its price, but it followed the German -company to Rotterdam in order to put up an oil plant similar to the one -which had been erected by those independents. They also purchased at -this time the great oil establishments at Bremen and Hamburg which had -hitherto been owned and operated by Germans. A full account of this new -development in the oil trade was reported by the American consul at -Rotterdam in April of 1890, and is to be found in the consular reports -of that year. - -[Illustration: - - 1890 TO 1904. - - Fragment of chart, showing relation between crude and refined oil in - the last fourteen years. Notice effect on margin from 1890 to 1894 - of rise of strong competitive forces. Notice also how margin between - price of crude and of domestic oil increased in the winter of - 1903–1904, during the coal famine. -] - -Follow the lines a little farther. Notice how, in 1892, the price of -refined oil begins to fall, although crude is stationary. Notice how the -refined line remains steady throughout 1893 and 1894, although the crude -line steadily rises. This went on for nearly three years, until there -was a margin of only three cents between crude and refined oil. The -barrel, which is always reckoned in the official quotations of export -refined oil, costs two and a half cents per gallon, and the price of -manufacturing is usually put at one-half a cent. The cost of -transporting the oil was not covered by the margin the greater part of -the year 1894. Now, the Standard Oil Company were not selling oil at a -loss at this time out of love for the consumers, although they made -enough money in 1894 on by-products and domestic oil to have done -so—their net earnings were over $15,000,000 in 1894, and they reckoned -an increase in net value of property of over $4,000,000—they were -fighting Russian oil and the independent combination started in 1889. By -1892 this combination was in active operation. The extent of this -movement was described in the last chapter of this narrative. At the -same time certain large producers in the McDonald oil field built a -pipe-line from Pittsburg to Baltimore, the Crescent Line, and began to -ship crude oil to France in great quantities. It looked as if both -combinations meant to do business, and the Standard set out to get them -out of the way. One method they took was to prevent the refiners in the -combination making any money on export oil. - -The extent to which cutting was carried on for two years, beginning with -the fall of 1892, has been referred to in the last chapter, but is -perhaps worth repeating in this connection. In January of 1892 crude oil -was selling at 53½ cents a barrel at the wells, and refined oil for -export at 5.33 cents a gallon in barrels. Throughout the year the price -of crude advanced, until in December it was 78⅜ cents. Refined, on the -contrary, fell, and it was actually 18 points lower in December than it -had been twelve months before. Throughout 1894 Standard kept refined oil -down; the average price of the year was 5.19 cents a gallon, in face of -an average crude market of 83¾ cents, lower than in January, 1893, with -crude at 53½ cents a barrel. - -After two years they gave it up. It was too expensive. The Crescent Line -sold to them, but the other independents were too plucky. They had lost -money for two years, but they were still hanging on like grim death, and -the Standard concluded to concentrate their attacks on other points of -the combination rather than on this export market where it was costing -them so much. - -About the end of 1894 the depression of export oil was abandoned, as the -chart shows. Notice that from 1895 to 1898 the margin remained at about -four cents, that in 1900 it rose to six cents, and from that time until -June, 1904, it swung between four and a half and five. The increasing -competition in Western Europe of independent American oils, and the -rapid rise since 1895, particularly of Russian oil, are what has kept -this margin down. It is doubtful, such is the growing strength of these -various competitive forces, if the Standard Oil Trust will ever be able -to put up the margin on export oils. If there were only the American -independents to reckon with, a compromise might be possible, but Russia, -Burmah and Sumatra are all in the game. By 1896 Russia was exporting -210,000,000 gallons of petroleum products (America in that year exported -over 931,000,000 gallons), and these products were going to nearly every -part of Europe and Asia. They began to cut heavily into the trade of the -Standard in China, India, Great Britain and France. By 1899 the exports -of Russian oil were over 347,000,000 gallons; in 1901, over 428,000,000 -gallons. In China, India, and Great Britain particularly, has the -Russian competition increased. While at one time the Standard Oil -Company had almost the entire oil trade at the port of Calcutta, last -year, 1903, out of 91,500,000 gallons imported, only about 6,500,000 -gallons were of American oil. In China, Sumatra oil is now ahead of -American, the report for 1903 being: American, 31,060,527 gallons; -Sumatra, 39,859,508. - -For the Standard there is good profit in this margin of four and a half -cents for export oil. The expenses the margin must cover are the -transportation of the crude from the wells to New York, the cost of -manufacture, the barrel and the loading. For twenty-five years the -published charge of the Standard Oil Company for gathering oil from the -wells has been twenty cents a barrel. The charge for bringing it to New -York has been forty cents, a little less than one and a half cents a -gallon. It costs, by rough calculation, one-half a cent to make the oil -and load it. The barrel is usually reckoned at two and a half cents. -Here are four and a half cents for expenses—the entire margin. Where the -Standard has the advantage is in its ownership of oil transportation. A -common carrier gathering and transporting in 1902 all but perhaps 10,000 -barrels of the 150,000 barrels’ daily production of Eastern oil, the -service for which the outsider pays sixty cents, costs it from ten to -twelve cents at the most liberal estimate. Here is over a cent saved on -a gallon, and a cent saved, where millions of gallons are in question, -makes not only great profits, but keeps down competition. The refiner -who to-day must pay the Standard rates for transportation cannot compete -in export oil with them. In January of 1904, when the chart shows the -margin to have been about four and three-quarter cents, an independent -refiner in the state of Ohio, dependent on the Standard for oil, gave -the writer a detailed statement of costs and selling prices of products -in his refinery. According to his statement he lost one and three-fifth -cents on his export oil. He was forced, of course, to pay Standard -transportation prices for crude and railroad charges for refined from -Ohio to New York harbour.[152] - -That there would have been such a transportation situation to-day had it -not been for the discrimination by the railways, which threw the pipes -into the Standard’s hands in the first place, and the long story of -aggression by which the Standard has kept out rival pipes, and so been -able for twenty-five years to sustain the price for transportation, is -of course evident. To-day, as thirty years ago, it is transportation -advantages, unfairly won, which give the Standard Oil Company its hold. -It is not only on transportation that the Standard to-day has great -advantages over the independent refiner in the export market. As said at -the beginning of this chapter, the Standard Oil Company “makes the price -of refined oil”—within strict limits. Of course, making the market, it -has all the advantages of the “inside track.” Its transactions can be -carried on in anticipation of the rise or fall. For instance, in January -of 1904, when there were strong fluctuations in the water-white (150 -degrees test) prices, the agent of an independent refiner, who was in -Wall Street trying to keep track of markets for out-of-town competitors, -reported the price as 9.20 cents a gallon. The refiners’ goods were -refused on the ground that this was above the market. The Standard Oil -export man and a broker who worked with the company were consulted. The -market was 9.20. Further investigation, however, showed that at -headquarters the figure given out privately was 8.70 cents. The -disadvantage of the outsider in disposing of his goods is obvious. The -Standard makes the official market, and undersells it. The situation -seems to be the same in practice as that described by Mr. Welch, in -1880, though now the fiction of a committee of brokers has been done -away with. Of course there is nothing else to be expected when one body -of men control a market. - -Thus far the illustrations of Mr. Rockefeller’s use of his power over -the oil market have been drawn from export oil. It is the only market -for which “official” figures can be obtained for the entire period, and -it is the market usually quoted in studying the movement of prices. It -is of this grade of oil that the largest percentage of product is -obtained in distilling petroleum. For instance, in distilling -Pennsylvania crude, fifty-two per cent. is standard-white or export oil, -twenty-two per cent. water-white—the higher grade commonly used in this -country—thirteen per cent. naphtha, ten per cent. tar, three per cent. -loss. The runs vary with different oils, and different refiners turn out -different products. The water-white oils, while they cost the same to -produce, sell from two to three cents higher. The naphtha costs the same -to make as export oil, but sells at a higher price, and many refiners -have pet brands, for which, through some marketing trick, they get a -fancy price. The Standard Oil Company has a great number of fancy brands -of both illuminating and lubricating oils, for which they get large -prices—although often the oil itself comes from the same barrels as the -ordinary grade. Now it is from the extra price obtained from naphtha, -water-white, fancy brands, and by-products that the independent refiner -makes up for his loss on export oil, and the Standard Oil Trust raises -its dividends to forty-eight per cent. The independent refiner quoted -above, who in January of 1904 lost 1⅜ cents on export oil, made enough -on other products to clear 8.3 cents a barrel on his output—eighty-three -dollars a day clear on a refinery of 1,000 barrels capacity, which -represents an investment of $150,000. - -[Illustration: - - A TYPICAL OIL FARM OF THE EARLY DAYS -] - -Turn now to the price of domestic oil, and examine the chart to see if -we have fared as well as the exporters. The line C on the chart -represents the price per gallon in New York City of 150° water-white oil -in barrels from the beginning of 1881 to June, 1904.[153] The figures -used are those of the Oil, Paint and Drug Reporter. A glance at the -chart is enough to show that the home market has suffered more violent, -if less frequent, fluctuations than the export market. A suggestive -observation for the consumer is the effect of a rise in crude on the -price of domestic oil. The refined line usually rises two or three -points to every one of the crude line. It is interesting to note, too, -how frequently high domestic prices are made to offset low export -prices; thus, in 1889, when the Standard was holding export oil low to -fight competition in Europe, it kept up domestic oil. The same thing is -happening to-day. We are helping pay for the Standard’s fight with -Russian, Roumanian and Asiatic oils. But this line, while it shows what -the New York trade has paid, is a poor guide for the country as a whole. -Domestic oil, indeed, has no regular price. Go back as far as anything -like trustworthy documents exist, and we find the most astonishing -vagaries, even in the same state. For instance, in a table presented to -a Congressional Committee in 1888, and compiled from answers to letters -sent out by George Rice, the price of 110° oil in barrels in Texas -ranged from 10 to 20 cents; in Arkansas, of 150° oil in barrels, from 8 -to 18; in Tennessee, the same oil, from 8 to 16; in Mississippi, the -same, from 11 to 17. In the eighties, prime white oil sold in barrels, -wholesale, in Arkansas, all the way from 8 to 14 cents; in Illinois, -from 7½ to 10; in Mississippi, from 7¼ to 13½; in Nebraska, 7½ to 18; in -South Carolina, 8 to 12½; and in Utah, 13 to 23. Freight and handling -might, of course, account for one to two cents of the difference, but -not more. - -A table of the wide variation in the price of oil, compiled in 1892, -showed the range of price of prime white oil in the United States to be -as follows: - - In barrels 6 to 25 cents - In cases 14 to 34½ cents - In bulk 3½ to 25 cents - -The same wide range was found in water-white oil: - - In barrels 6½ to 30 cents per gallon - In cases 16 to 35 cents per gallon - In bulk 3½ to 29 cents per gallon - -In 1896 an investigation of prices of oil sold from tank-wagons in the -different towns of Ohio, in the same week, was made, and was afterward -offered as sworn testimony in a trust investigation in that state. The -price per gallon ranged from 4¾ cents to 8¾ cents. - -The most elaborate investigation of oil prices ever made was that -instigated by the recent Industrial Commission. In February, 1901, the -commission sent out inquiries to 5,000 retail dealers, scattered from -the Atlantic to the Pacific and from the Lakes to the Gulf, asking the -prices of certain commodities, among them illuminating oils; 1,578 -replies were received. The tables prepared offered striking examples of -the variability of prices—thus: - -In Colorado the wholesale price of illuminating oil (150° test) varied -from 13 to 20 cents; in Delaware, 8 to 10; in Illinois, 6 to 10; in -Alabama, 10.50 to 16; in Michigan, 5.50 to 12.25; in Missouri, 7.50 to -12.50; in Kentucky, 7 to 11.50; in Ohio, 5.50 to 9.75; in California, -12.50 to 20; in Utah, 20 to 22; in Maine, 8.25 to 12.75 (freight -included in all these prices). - -The difference between the highest and the lowest wholesale prices in -the same states varies from 8 cents in Oregon (12.50 to 20.50) to 1.50 -in Rhode Island (8.50 to 10). Of course, in the former case, two or even -three cents of the difference may be due to freight, but hardly more. -Take adjoining states, for instance. In Vermont there is a difference of -4.50 cents between the highest and lowest price of oil; in New -Hampshire, only 1.75. In Delaware there is a difference of 2 cents; in -Virginia, of 6. - -Compare, now, the lowest price in different states. In Ohio and -Pennsylvania oil was sold as low as 5.50; 6.50 is the lowest in New York -State, 8.50 the lowest in Rhode Island, and 7 the lowest in New Jersey. -In Indiana oil sells as low as 5.50, but in Kansas nothing below 8.50 is -reported (the freight rate to Atchison, Kansas, from Whiting, Indiana, -which supplies both of these states, is 1.7 per gallon. The freight rate -from Whiting to Indianapolis is .5 per gallon). - -Not long ago there fell into the writer’s hands a sheet from one of the -ledgers forming a part of the Standard Oil Company’s remarkable system -of bookkeeping. This sheet gave the cost and selling price per gallon of -different grades of refined oil at over a dozen stations in the same -state in October, 1901. In the account of cost of oil were included net -cost, freight, inspection, cost of barrels and cost of marketing. The -selling price was given and the margin of profit computed. The selling -price of water-white from tank-wagons (it is customary for Standard -tank-wagons to deliver oil from their stations to local dealers) ranged -from 8½ to 11½ cents, and the profit on the oil sold from the wagons -varied from about one-half cent to over three cents. - -Now, in considering these differences, liberal allowance for freight -rates must be made. Something of what these allowances should be can be -judged from the table of oil freights which the Industrial Commission -published with its schedule of prices. From this table many interesting -comparisons can be made. For instance, it cost the Standard Oil Company -(if they paid the open rate their rivals did) 1.5 cents to send a gallon -of oil from Whiting, Indiana, their supply station, to Mobile, Alabama. -They sold their oil in Alabama at wholesale from 11½ to 16 cents. The -net cost of this oil was under five cents in February, 1901. It cost -them the same 1.5 cents to send a gallon of oil to Des Moines, Iowa (if -they paid the open rate), but in Iowa they sold it from 7 to 11. The -freight from Whiting to New Orleans was the same 1.5 cents, but prices -in Louisiana ranged from 9 to 14 cents. According to the investigation -the average wholesale price of oil, including freight, ranged from 8.27 -in Pennsylvania to 25.78 in Nevada. - -Freights and handling considered, there is, it is evident, nothing like -a settled price or profit for illuminating oil in the United States. -Now, there is no one who will not admit that it is for the good of the -consumer that the normal market price of any commodity should be such as -will give a fair and even profit all over the country. That is, that -freights and expense of handling being considered, oil should sell at -the same profit in Texas as in Ohio. That such must be the case where -there is free and general competition is evident. But from the beginning -of its power over the market the Standard Oil Company has sold domestic -oil at prices varying from less than the cost of the crude oil it took -to make it up to a profit of 100 per cent. or more. Wherever there has -been a loss, or merely what is called a reasonable profit of, say, ten -per cent., an examination of the tables quoted above shows conclusively -it has been due to competition. The competition is not, and has not been -since 1879, very great. In that year the Standard Oil Company claimed -ninety-five per cent. of the refining interests of the country. In 1888 -they claimed about eighty per cent.; in 1898, eighty-three per cent. -This five to seventeen per cent. of independent interest is too small to -come into active competition, of course, at all points. So long as one -interest handles eighty-three per cent. of a product it is clear that it -has the trade as a whole in its hands. The competition it encounters -will be local only. But it is this local competition, unquestionably, -that has brought down the price of oil at various points and caused the -striking variation in prices recorded in the charts of the Industrial -Commission and other investigations. The writer has before her a pile of -a hundred or more letters written in the eighties by dealers in twelve -different states. These letters tell the effect on the prices of the -introduction of an independent oil into a territory formerly occupied -exclusively by the Standard: - - - Calvert, Tenn.—The Waters-Pierce Oil Company (Standard) so reduced - the price of their oil here when mine arrived that I will have some - trouble to dispose of mine. - - Chattanooga, Tenn.— ... Cut the price of oil that had been selling - at 21 cents to 17 cents. - - Pine Bluff, Ark.—While the merchants here would like to buy from - some other than the Standard they cannot afford to take the risks of - loss. We have just had an example of one hundred barrels opposition - oil which was brought here, which had the effect of bringing - Waters-Pierce Oil Company’s oil down from 18 to 13 cents—one cent - less than cost of opposition, with refusal on their part to sell to - anyone that bought from other than their company. - - Vicksburg, Miss.—The Chess Carley Company (Standard) is now offering - 110° oil at nine cents to any and every one. Shall we meet their - prices? All they want is to get us out of the market, then they - would at once advance price of oil. - - -These are but illustrations of the entire set of letters; prices dropped -at once by Standard agents on the introduction of an independent oil. A -table offered to Congress in 1888, giving the extent of their cutting in -the Southwest, shows that it ranged from 14 to 220 per cent. - -Every investigation made since shows that it is the touch of the -competitor which brings down the price. For instance, in the cost and -profit sheet from a Standard ledger referred to above, there was one -station on the list at which oil was selling at a loss. On investigation -the writer found it to be a point at which an independent jobber had -been trying to get a market. If one examines the tables of prices in the -recent report of the Industrial Commission, he finds that wherever there -is a low price there is competition. Thus, at Indianapolis, the only -town in the state of Indiana reporting competition, the wholesale price -of oil was 5½ cents, although forty out of the fifty-three Indiana towns -reporting gave from 8 cents to 10½ cents as the wholesale price per -gallon. (These prices included freight. Taking Indianapolis as a centre, -the local freight on oil to any point in Indiana is in no case over a -cent.) In April, 1904, inquiry showed the same striking difference -between prices in Indianapolis, where six independent companies are now -established, and neighbouring towns to which competition has not as yet -reached. - -The advent of an independent concern in Morristown, New Jersey, brought -down the price to grocers to 7½ cents and to housewives to 10, but in -the neighbouring towns of Elizabeth and Plainfield, where only the -Standard is reported, the grocers pay 9 cents and the housewives 12 and -11, respectively. In Akron, Ohio, where an independent company was -operating at the time the investigation was made, oil was sold at -wholesale at 5¾ cents; at Painesville, nearer Cleveland, the shipping -point, at 9¼ cents. In Richmond, Virginia, one dealer reported to the -commission a wholesale price of 5 cents, and added: “A cut rate between -oil companies; has been selling at 9 and 10 cents.” - -In the month of April of 1904 150° oil was selling from tank-wagons in -Baltimore, where there is competition, at 9 cents. In Washington, where -there is no competition, it sold at 10½ cents, and in Annapolis (no -competition) at 11 cents. In Seaford, Delaware, the same oil sold at 8 -cents under competition. The freight rates are practically the same to -all these points. And so one might go on indefinitely, showing how the -introduction of an independent oil has always reduced the price. As a -rule, the appearance of the oil has led to a sharp contest or “Oil War,” -at which, not infrequently, both sides have sold at a loss. The -Standard, being able to stand a loss indefinitely, usually won out. - -An interesting local “Oil War,” which occurred in 1896 and 1897 in New -York and Philadelphia, figured in the reports of the Industrial -Commission, and illustrates very well the usual influence on Standard -prices of the incoming of competition. On March 20, 1896, the Pure Oil -Company put three tank-wagons into New York City. The Standard’s price -of water-white oil from tank-wagons that day was 9½ cents, and the Pure -Oil Company followed it. In less than a week the Standard had cut to 8 -cents[154] _along the route of the Pure Oil Company wagons_. In April -the price was cut to 7 cents. By December, 1896, it had fallen to 6 -cents; by December, 1897, to 5.4. It is true that crude oil was falling -at this time, but the fall in water-white was out of all proportion. -For, while between the price of refined on March 20 and the average -price of refined in April along the Pure Oil Company route, there was a -fall of 2½ cents, in crude there was a fall of but four-tenths of a -cent. Refined fell from 7 cents in April to 6 cents in May, and crude -fell one-tenth of a cent. John D. Archbold, in answering the figures -given by the Pure Oil Company to the Industrial Commission, accused them -of “carelessness,” and gave the average monthly price of crude and -refined to show that no such glaring discrepancy had taken place. Mr. -Archbold gives the average price in March, for instance, as 7.98 and in -April as 7.31 cents. However, his price is the average to “all the trade -of Greater New York and its vicinity,” whereas the prices of the Pure -Oil Company are those they met in their limited competition. As -Professor Jenks remarked at the examination: “It might easily be, -therefore, that your” (Standard) “average price would be what you had -given, and that to a good many special customers with whom the Pure Oil -Company was trying to deal it could be five and a half cents.” That this -was the fact seems to be proved by the quotations for water-white oil -from tank-wagons, which were published from week to week in trade -journals like the Oil, Paint and Drug Reporter. These prices show 9⅞ -cents for water-white on March 21, and an average of 9.4 cents in April. -Evidently only a part of the trade of “all Greater New York and -vicinity” got the benefit of averages quoted to the Industrial -Commission by Mr. Archbold. - -If competition persists the result usually has been permanently lower -prices than in territory where competition has been run out or has never -entered. For instance, why should oil be sold to a dealer at nearly four -cents more on an average in Kansas than in Kentucky, when the freight -from Whiting to Kansas is only a cent more? For no reason except that in -Kentucky there has been persistent competition for twenty-five years, -and in Kansas none has ever secured a solid foothold. Why should -Colorado pay an average of 16.90 cents for oil per gallon and California -14.60 cents, when the freight from Whiting differs but one-tenth of one -cent? For no reason except that a few years ago competition was driven -from Colorado, and in California it still exists. - -Indeed, any consecutive study of the Standard Oil Company’s use of its -power over the price of either export or domestic oil must lead to the -conclusion that it has always been used to the fullest extent possible -without jeopardising it; that we have always paid more for our refined -oil than we would have done if there had been free competition. But why -should we expect anything else? This is the chief object of -combinations. Certainly the candid members of the Standard Oil Company -would be the last men to argue that they give the public any more of the -profits they may get by combination than they can help. One of the -ablest and frankest of them, H. H. Rogers, when before the Industrial -Commission in 1899, was asked how it happened that in twenty years the -Standard Oil Company had never cheapened the cost of gathering and -transporting oil in pipe-lines by the least fraction of a cent; that it -cost the oil producer just as much now as it did twenty years ago to get -his oil taken away from the wells and to transport it to New York. And -Mr. Rogers answered, with delightful candour: “We are not in business -for our health, but are out for the dollars.” - -John D. Archbold was asked at the same time if it were not true that, by -virtue of its great power, the Standard Oil Company was enabled to -secure prices that, on the whole, were above those under competition, -and Mr. Archbold said: “Well, I hope so.”[155] - -But these are frank answers, perhaps surprised out of the gentlemen. The -able and wary president of the great concern, John D. Rockefeller, is -more cautious in his admissions. On the witness-stand in 1888 he was -forced to admit, after some skilful evasion, that the control the -Standard Oil Company had of prices was such that they could raise or -lower them at will. “But,” added Mr. Rockefeller, “we would not do it.” -The whole colloquy between the examiner and Mr. Rockefeller is -interesting: - - - _Q._ Isn’t it a fact that the nine trustees controlling the large - amount of capital which the Standard Oil Trust does could very - easily advance or depress the market price of oil if they saw - fit?... - - _A._ I don’t think they would. - - _Q._ I don’t ask whether they would; could they do it? - - _A._ I suppose it would be possible for these gentlemen; if they - should buy enough oil, it would make the price go up. - - -There was considerable sparring, Mr. Rockefeller trying to explain away -his answer. - - - _Q._ I can’t get you down to my question ... that is a very great - power to wield. - - _A._ Certainly; an individual or a combination of men can advance - the price or more or less depress the price of any commodity. - - _Q._ But if you desire to increase—to put up the price of the - refined oil, or to put down the price of the crude oil, is it within - your power to do it, in the way I have indicated, by staying out of - the market or going into the market to purchase, controlling 75 per - cent. of the demand for the crude oil? - - _A._ It would be a temporary effect, but that is all.... - - _Q._ By stopping the manufacture of refined oil your refineries - representing so large a proportion would tend to raise the price? - - _A._ That is something we never do; our business is to increase all - the time, not to decrease. - - * * * * * - - _Q._ Really your notion is that the Standard Oil Trust is a - beneficial organisation to the public? - - _A._ I beg with all respect to present the record which shows that - it is.[156] - - -For many of the world it is a matter of little moment, no doubt, whether -oil sells for eight or twelve cents a gallon. It becomes a tragic matter -sometimes, however, as in 1902–1903 when, in the coal famine, the poor, -deprived of coal, depended on oil for heat. In January, 1903, oil was -sold to dealers from tank-wagons in New York City at eleven cents a -gallon. That oil cost the independent refiner, who paid full -transportation charges and marketed at the cost of a cent a gallon, not -over 6.4 cents. It cost the Standard Oil Company probably a cent less. -That such a price could prevail under free competition is, of course, -impossible. Throughout the hard winter of 1902–1903 the price of refined -oil advanced. It was claimed that this was due to the advance in crude, -but in every case it was considerably more than that of crude. Indeed, a -careful comparative study of oil prices shows that the Standard almost -always advances the refined market a good many more points than it does -the crude market. The chart shows this. While this has been the rule, -there are exceptions, of course, as when a rate war is on. Thus, in the -spring of 1904, the severe competition in England of the Shell -Transportation Company and of Russian oil caused the Standard to drop -export refined considerably more than crude. But, as the chart shows, -domestic oil has been kept up. - -As a result of the Standard’s power over prices, not only does the -consumer pay more for oil where competition has not reached or has been -killed, but this power is used steadily and with consummate skill to -make it hard for men to compete in any branch of the oil business. This -history has been but a rehearsal of the operations practised by the -Standard Oil Company to get rid of competition. It was to get rid of -competition that the South Improvement Company was formed. It was to get -rid of competition that the oil-carrying railroads were bullied or -persuaded or bribed into unjust discriminations. It was to get rid of -competition that the Empire Transportation Company, one of the finest -transportation companies ever built up in this country, was wrested from -the hands of the men who had developed it. It was to get rid of -competition that war was made on the Tidewater Pipe Line, the Crescent -Pipe Line, the United States Pipe Line, not to mention a number of -similar smaller enterprises. It was to get rid of competition that the -Standard’s spy system was built up, its oil wars instituted, all its -perfect methods for making it hard for rivals to do business developed. - -The most curious feature perhaps of this question of the Standard Oil -Company and the price of oil is that there are still people who believe -that the Standard has made oil cheap! Men look at this chart and recall -that back in the late sixties and seventies they paid fifty and sixty -cents a gallon for oil, which now they pay twelve and fifteen cents for. -This, then, they say, is the result of the combination. Mr. Rockefeller -himself pointed out this great difference in prices. “In 1861,” he told -the New York Senate Committee, “oil sold for sixty-four cents a gallon, -and now it is six and a quarter cents.” The comparison is as misleading -as it was meant to be. In 1861 there was not a railway into the Oil -Regions. It cost from three to ten dollars to get a barrel of oil to a -shipping point. None of the appliances of transportation or storage had -been devised. The process of refining was still crude, and there was -great waste in the oil. Besides, the markets were undeveloped. Mr. -Rockefeller should have noted that oil fell from 61½ in 1861 to 25⅝ in -the year he first took hold of it, and that by his first successful -manipulation it went up to 30! He should point out what the successive -declines in prices since that day are due to—to the seaboard pipe-lines, -to the development of by-products, to bulk instead of barrel -transportation, to innumerable small economies. People who point to the -differences in price, and call it combination, have never studied the -price-line history in hand. They do not know the meaning of the -variation of the line; that it was forced down from 1866 to 1876, when -Mr. Rockefeller’s first effective combination was secured by -competition, and driven up in 1876 and 1877 by the stopping of -competition; that it was driven down from 1877 to 1879 by the union of -all sorts of competitive forces—producers, independent refiners, the -developing of an independent seaboard pipe-line—to a point lower than it -had ever been before. They forget that when these opposing forces were -overcome, and the Standard Oil Company was at last supreme, for ten -years oil never fell a point below the margin reached by competition in -1879, though frequently it rose above that margin. They forget that in -1889, when for the first time in ten years the margin between crude and -refined oil began to fall, it was the competition coming from the rise -of American independent interests and the development of foreign oil -fields that did it. - -To believe that the Standard Oil Combination, or any other similar -aggregation, would lower prices except under the pressure of the -competition they were trying to kill, argues an amazing gullibility. -Human experience long ago taught us that if we allowed a man or a group -of men autocratic powers in government or church, they used that power -to oppress and defraud the public. For centuries the struggle of the -nations has been to obtain stable government, with fair play to the -masses. To obtain this we have hedged our kings and emperors and -presidents about with a thousand constitutional restrictions. It has not -been possible for us to allow even the church, inspired by religious -ideals, to have the full power it has demanded in society. And yet we -have here in the United States allowed men practically autocratic powers -in commerce. We have allowed them special privileges in transportation, -bound in no great length of time to kill their competitors, though the -spirit of our laws and of the charters of the transportation lines -forbade these privileges. We have allowed them to combine in great -interstate aggregations, for which we have provided no form of charter -or of publicity, although human experience long ago decided that men -united in partnerships, companies, or corporations for business purposes -must have their powers defined and be subject to a reasonable inspection -and publicity. As a natural result of these extraordinary powers, we -see, as in the case of the Standard Oil Company, the price of a -necessity of life within the control of a group of nine men, as able, as -energetic, and as ruthless in business operations as any nine men the -world has ever seen combined. They have exercised their power over -prices with almost preternatural skill. It has been their most cruel -weapon in stifling competition, a sure means of reaping usurious -dividends, and, at the same time, a most persuasive argument in -hoodwinking the public. - - - - - CHAPTER SEVENTEEN - THE LEGITIMATE GREATNESS OF THE STANDARD OIL COMPANY - - CENTRALISATION OF AUTHORITY—ROCKEFELLER AND EIGHT OTHER TRUSTEES - MANAGING THINGS LIKE PARTNERS IN A BUSINESS—NEWS-GATHERING - ORGANIZATION FOR COLLECTING ALL INFORMATION OF VALUE TO THE - TRUSTEES—ROCKEFELLER GETS PICKED MEN FOR EVERY POST AND CONTRIVES TO - MAKE THEM COMPETE WITH EACH OTHER—PLANTS WISELY LOCATED—THE SMALLEST - DETAILS IN EXPENSE LOOKED OUT FOR—QUICK ADAPTABILITY TO NEW - CONDITIONS AS THEY ARISE—ECONOMY INTRODUCED BY THE MANUFACTURE OF - SUPPLIES—A PROFIT PAID TO NOBODY—PROFITABLE EXTENSION OF PRODUCTS - AND BY-PRODUCTS—A GENERAL CAPACITY FOR SEEING BIG THINGS AND ENOUGH - DARING TO LAY HOLD OF THEM. - - -While there can be no doubt that the determining factor in the success -of the Standard Oil Company in securing a practical monopoly of the oil -industry has been the special privileges it has enjoyed since the -beginning of its career, it is equally true that those privileges alone -will not account for its success. Something besides illegal advantages -has gone into the making of the Standard Oil Trust. Had it possessed -only the qualities which the general public has always attributed to it, -its overthrow would have come before this. But this huge bulk, blackened -by commercial sin, has always been strong in all great business -qualities—in energy, in intelligence, in dauntlessness. It has always -been rich in youth as well as greed, in brains as well as -unscrupulousness. If it has played its great game with contemptuous -indifference to fair play, and to nice legal points of view, it has -played it with consummate ability, daring and address. The silent, -patient, all-seeing man who has led it in its transportation raids has -led it no less successfully in what may be called its legitimate work. -Nobody has appreciated more fully than he those qualities which alone -make for permanent stability and growth in commercial ventures. He has -insisted on these qualities, and it is because of this insistence that -the Standard Oil Trust has always been something besides a fine piece of -brigandage, with the fate of brigandage before it, that it has been a -thing with life and future. - -If one attempts to analyse what may be called the legitimate greatness -of Mr. Rockefeller’s creation in distinction to its illegitimate -greatness, he will find at the foundation the fact that it is as -perfectly centralised as the Catholic church or the Napoleonic -government. As was pointed out in a former chapter, the entire business -was placed in 1882 in the hands of nine trustees, of whom Mr. -Rockefeller was president. These trustees have always acted exactly as -if they were nine partners in a business, and the only persons concerned -in it. They met daily, giving their whole time to the management and -development of the concern, as the partners in a dry-goods house would. -Anything in the oil world might come under their ken, from a smoking -wick in Oshkosh to the competition of Russian oil in China. Everything; -but nothing came unless it was necessary; for below them, and sifting -things for their eyes, were committees which dealt with the various -departments of the business. There was a Crude Committee which -considered the subject of crude oil, the world over; a Manufacturing -Committee which studied the making of refined, the utilisation of waste, -the development of new products; a Marketing Committee which considered -the markets. Before each of these committees was laid daily all the -information to be found on earth concerning its particular field; not -only were there reports made to it of what was doing in its line in the -Standard Oil Trust, but information came of everything connected with -such work everywhere by everybody. These committees not only knew all -about their own business, they knew all about everybody else’s. The -Manufacturing Committee knew just what each of the feeble independent -refiners still existing was doing—what its resources and advantages -were; the Transportation Committee knew what rates it got; the Marketing -Committee knew its market. Thus the fullest information about new -developments of crude, new openings for refined, new processes of -manufacture, was always at the command of the nine trustees of the -trust. - -[Illustration: - - S. C. T. DODD - - Chief counsel of the Standard Oil Company. Framer of the Trust - agreement of 1882. -] - -[Illustration: - - JABEZ A. BOSTWICK - - From 1872 to 1892 the chief oil buyer of the Standard Oil Company. -] - -[Illustration: - - JOSEPH SEEP - - Head of the “Seep Agency,” through which all oil transported by the - Standard Oil Company goes. -] - -[Illustration: - - DANIEL O’DAY IN 1872 - - Vice-president of the National Transit Company, the pipe-line company - owned by the Standard Oil Company. -] - -How did they get this information? As the press does—by a wide-spreading -system of reporters. In 1882 the Standard had correspondents in every -town in the oil fields, and to-day it has them not only there but in -every capital of the globe. It is a common enough thing, indeed, in -European capitals to run across high-class newspaper correspondents, -consuls, or business men who add to their incomes by private reporting -to the Standard Oil Company. The people in their employ naturally report -all they learn. There are also outsiders who report what they pick -up—“occasional contributions.” There is more than one man in the Oil -Regions who has made his livelihood for years by picking up information -for the Standard. “Spies,” they are called there. They may deserve the -name sometimes, but the service may be perfectly legitimate. - -These trustees then “know everything” about the oil business and they -have used their information. Nobody ever used information more -profitably. What was learned was applied, and affected the whole great -structure, for by a marvellous genius in organisation Mr. Rockefeller -had devised a machine with a head whose thinking was felt from the seat -of power in New York City to the humblest pipe-line patrol on Oil Creek. -This head controlled each one of the scattered plants with absolute -precision. Take the refineries; they were individual plants, having a -manager and a board of directors like any outside plant, but these -plants were not free agents. According to J. J. Vandergrift’s testimony -in 1879, the Imperial Refinery, of which he was president, had no -control of its oil after it was made. The Standard Oil Company of -Cleveland took charge of it at Oil City, and arranged for transportation -and for marketing. The managers of the Central Association, into which -the allied refiners went in 1875 under Mr. Rockefeller’s presidency, had -“irrevocable authority to make all purchases of crude oil and sales of -refined oil,” as well as to “negotiate for all railroad and pipe-line -freights and transportation expenses” for each of the refineries. Each -plant, of course, was limited as to the amount of oil it could make. -Thus, in 1876, when the Cleveland firm of Scofield, Shurmer and Teagle -went into a running arrangement with Mr. Rockefeller on condition that -he get for them the same rebates he enjoyed, it was agreed that the firm -should manufacture only 85,000 barrels a year, though they had a -capacity of 180,000 barrels. - -One of Mr. Rockefeller’s greatest achievements has been to bring men who -had built up their own factories and managed them to suit themselves to -work harmoniously under such limitations. As this history has shown, the -first attempt to harness the refiners failed because they would not obey -the rules. No doubt the chief reason why they finally consented to them -was that only by so doing could they get transportation rates equally -advantageous to those of the Standard Oil Company; but, having consented -and finding it profitable, they were kept in line by an ingenious system -of competition which must have done much to satisfy their need of -individual effort and their pride in independent work. In the -investigation of 1879, when the producers were trying to find out the -real nature of the Standard alliance, they were much puzzled by the -sworn testimony of certain Standard men that the factories they -controlled were competing, and competing hard, with the Standard Oil -Company of Cleveland. How could this be? Being bitter in heart and -reckless in tongue, the oil men denounced the statements as perjury, but -they were the literal truth. Each refinery in the alliance was required -to make to Mr. Rockefeller each month a detailed statement of its -operations. These statements were compared and the results made known. -If the Acme at Titusville had refined cheaper that month than any other -member of the alliance, the fact was made known. If this cheapness -continued to show, the others were sent to study the Acme methods. -Whenever an improvement showed, that improvement received credit, and -the others were sent to find the secret. The keenest rivalry -resulted—every factory was on its mettle. - -This supervision took account of the least detail. There is a story -often told in the Oil Regions to illustrate the minuteness of the -supervision. In commenting as usual on the monthly “competitive -statements,” as they are called, Mr. Rockefeller called the attention of -a certain refiner to a discrepancy in his reports. It referred to -_bungs_—articles worth about as much in a refinery as pins are in a -household. “Last month,” the comment ran, “you reported on hand 1,119 -bungs. Ten thousand were sent you at the beginning of this month. You -have used 9,527 this month. You report 1,012 on hand. What has become of -the other five hundred and eighty?” The writer has it on high authority -that the current version of this story is not true, but it reflects very -well the impression the Oil Regions have of the thoroughness of Mr. -Rockefeller’s supervision. The Oil Regions, which were notoriously -extravagant in their business methods, resented this care and called it -meanness, but the Oil Regions were wrong and Mr. Rockefeller was right. -Take care of the bungs and the barrels will take care of themselves, is -as good a policy in a refinery as the old saw it paraphrases is in -financiering. - -There were other features of this revolutionary management which caused -deep resentment in the oil world. Chief among them was the dismantling -or abandoning of plants which the Standard had “acquired,” and which it -claimed were so badly placed or so equipped that it did not pay to run -them. There was reason enough in many cases for dissatisfaction with the -process of acquisition, but having acquired the refineries, the Standard -showed its wisdom in abandoning many of them. Take Pittsburg, for -instance. When Mr. Lockhart began to absorb his neighbours, in 1874, -there were some twenty-five plants in and around the town. They were of -varying capacity, from little ten-barrel stills of antiquated design and -out-of-the-way location, to complete plants like the Citizens’, which -Mr. Tack described in Chapter V. But how could Mr. Lockhart manage these -as they stood to good advantage? It might pay the owner of the little -refinery to run it, for he was his own stillman, his own pipe-fitter, -his own foreman, and did not expect large returns; but it would have -been absurd for Mr. Lockhart to try to run it. He simply carted away any -available machinery, sold what he could for junk, and left the _débris_. -Now, one of the most melancholy sights on earth is an abandoned oil -refinery; and it was the desolation of the picture, combined, as it -always was in the Oil Regions, with the history of the former owners, -that caused much of the outcry. It was a thing that the oil men could -not get over, largely because it was a sight always before their eyes. - -Bitter as this policy was for those who had suffered by the Standard’s -campaigns, it was, of course, the only thing for the trust to do—indeed, -that was what it had been waging war on the independents for: that it -might shut them down and dismantle them, that there might be less oil -made and higher prices for what it made. This wisdom in locating -factories has continued to characterise the Standard operations. It -works only plants which pay, and it places its plants where they can be -operated to the best advantage. Many fine examples of the relation of -location in manufacturing to crude supply and to markets are to be seen -in the Standard Oil Company plants to-day. For example, refined for -foreign shipments is made at the seaboard, and the vessels which carry -it are loaded at docks, as at the works at Bayonne, New Jersey. The cost -of transportation from factory to ship, a large item in the old days, is -eliminated entirely. The Middle West market is now supplied almost -entirely from the Standard factories at Whiting, Indiana, a town built -by the Standard Oil Company for refining Ohio oil. Here 25,000 barrels -of oil are refined daily, and from this central point distributed to the -Mississippi Valley. - -All of the industries which have been grafted on to the refineries have -always been run with the same exact regard to minute economies. These -industries were numerous because of Mr. Rockefeller’s great principle, -“pay a profit to nobody.” From his earliest ventures in combination he -had applied this principle. Mr. Blanchard’s explanation to the Hepburn -Commission in 1879 of why the Standard had controlled the Erie’s yards -at Weehawken since 1874, shows exactly Mr. Rockefeller’s point of -view.[157] This policy of paying nobody a profit took Mr. Rockefeller -into the barrel business. In 1872, when Mr. Rockefeller became master of -the Cleveland oil business, the purchase of barrels was one of a -refiner’s heaviest expenses. In an estimate of the cost of producing a -gallon of refined oil in 1873, made in the Oil City Derrick and accepted -as correct by that paper, the cost of the barrel is put at four cents a -gallon, which was more than the crude oil cost at that date. Even at -four cents a gallon barrels were hard to get, so great was the demand. -If a refiner could get his barrels back, of course there was a saving (a -returned barrel was estimated to be worth 2¾ cents), but the return -could not be counted on; empty barrels coming from Europe particularly, -and consigned to Western shippers, were frequently seized in New York by -Eastern refiners. The need was held to justify the deed, like thieving -in famine time. Fortunes were made in barrels, and dealers hearing of a -big supply in Europe have been known to charter a vessel and go for -them, and reap rich profits. In fact, a whole volume of commercial -tragedy and comedy hangs around the oil barrel. Now it was to the -barrel—the “holy blue barrel”—that Mr. Rockefeller gave early attention. -He determined to make it himself. One of the earliest outside ventures -of the Standard Oil Company in Cleveland was barrel works, and Mr. -Rockefeller was soon getting for two and a half cents what his rivals -paid four for, though he was by no means the only refiner who -manufactured barrels in the early days—each factory aimed to add barrel -works as soon as able. The amount the Standard Oil Company saved on this -one item is evident when the extent of its business is considered. The -year before the trust was formed (1881) they manufactured 4,500,000 -barrels, an average of about 15,000 a day. Since that time the barrel -has been gradually going out of the oil business, bulk transportation -taking its place very largely. Nevertheless, in 1901 the Standard Oil -Company manufactured about 3,000,000 new barrels. In the period since -they began the manufacture of barrels their factories have introduced -some small savings which in the aggregate amount to large sums. For -instance, they have improved the lap of the hoop—a small thing, but one -which amounted in 1901 to something like $15,000. Some $50,000 a year -was saved by a slight increase in the size of the tankage. The Standard -claims that these economies are so small in themselves that it only pays -to practise them where there is a large aggregate business. - -More important than the barrel to-day, however, is the tin can—for it is -in tin cans that all the enormous quantities of refined sent to tropical -and Oriental countries must go to prevent deterioration—and nowhere does -the policy of economy which Mr. Rockefeller has worked out show better -than in one of the Standard canning works. In 1902 the writer visited -the largest of the Standard can factories, the Devoe, on the East River, -Long Island City. It has a capacity of 70,000 five-gallon cans a day, -and is probably the largest can factory in the world. At the entrance of -the place a man was sweeping up carefully the dirt on the floor and -wheeling it away—not to be dumped in the river, however. The dirt was to -be sifted for tin filings and solder dust. At every step something was -saved. The Standard buys the tin for its cans in Wales, because it is -cheaper. It would not be cheaper if it were not for a vagary in -administering the tariff by which the duty on tin plate is refunded if -the tin is made into receptacles to be exported. This clause was -probably made for the benefit of the Standard, it being the largest -single consumer of tin plate in the United States. In 1901 the Standard -Oil Company imported over 60,000 tons of tin with a value of over -$1,000,000. This tin comes in sheets packed in flat boxes, which are -opened by throwing—it is quicker than opening by a hammer, and time is -considered as valuable as tin filings. The empty boxes are sold by the -hundred to the Long Island gardens for growing plants in, and the broken -covers are sold for kindling. The trimmings which result from shaping -the tin sheets for a can are gathered into bundles and sold to chemical -works or foundries. There is the same care taken with solder as with -tin, the amount each workman uses being carefully gauged. The canning -plants, like the refineries, compare their results monthly, and the -laurels go to the manager who has saved the most ounces of solder, the -most hours, the most footsteps. - -The five-gallon can turned out at the Devoe is a marvel of evolution. -The present methods of manufacture are almost entirely the work of -Herman Miller, known in Standard circles as the “father of the -five-gallon can”; and a fine type of the German inventor he is. The -machinery for making the can has been so developed that while, in 1865, -when Mr. Miller began his work under Charles Pratt, one man and a boy -soldered 850 cans in a day, in 1880 three men made 8,000, and since 1893 -three men have made 24,000. It is an actual fact that a tin can is made -by Miller in just about the time it takes to walk from the point in the -factory where the sheets of tin are unloaded to the point where the -finished article is filled with oil. - -And here is a nice point in combination. Not far away from the canning -works, on Newtown Creek, is an oil refinery. This oil runs to the -canning works, and, as the new-made cans come down by a chute from the -works above, where they have just been finished, they are filled, twelve -at a time, with the oil made a few miles away. The filling apparatus is -admirable. As the new-made cans come down the chute they are -distributed, twelve in a row, along one side of a turn-table. The -turn-table is revolved, and the cans come directly under twelve -measures, each holding five gallons of oil—a turn of a valve, and the -cans are full. The table is turned a quarter, and while twelve more cans -are filled and twelve fresh ones are distributed, four men with -soldering coppers put the caps on the first set. Another quarter turn, -and men stand ready to take the cans from the filler, and while they do -this, twelve more are having caps put on, twelve are filling, and twelve -are coming to their place from the chute. The cans are placed at once in -wooden boxes standing ready, and, after a twenty-four-hour wait for -discovering leaks, are nailed up and carted to a near-by door. This door -opens on the river, and there at anchor by the side of the factory is a -vessel chartered for South America or China or where not—waiting to -receive the cans which a little more than twenty-four hours before were -tin sheets lying in flat boxes. It is a marvellous example of economy -not only in materials, but in time and in footsteps. - -With Mr. Rockefeller’s genius for detail, there went a sense of the big -and vital factors in the oil business, and a daring in laying hold of -them which was very like military genius. He saw strategic points like a -Napoleon, and he swooped on them with the suddenness of a Napoleon. This -master ability has been fully illustrated already in this work. Mr. -Rockefeller’s capture of the Cleveland refineries in 1872 was as -dazzling an achievement as it was a hateful one. The campaign by which -the Empire Transportation Company was wrested from the Pennsylvania -Railroad, viewed simply as a piece of brigandage, was admirable. The man -saw what was necessary to his purpose, and he never hesitated before it. -His courage was steady—and his faith in his ideas unwavering. He simply -knew that was the thing to do, and he went ahead with the serenity of -the man who knows. - -After the formation of the trust the demand for these qualities was -constant. For instance, the contract which the Standard signed with the -producers in February, 1880, pledged them to take care of a production -of 65,000 barrels a day. When they signed this agreement there was above -ground nearly nine and one-half million barrels of oil. The production -increased at a frightful rate for four years. At the end of 1880 there -were stocks of over 17,000,000 above ground; in 1881, over 25,000,000; -1882, over 34,000,000; 1883, over 35,000,000; and 1884, over 36,000,000, -and the United Pipe Lines took care of this production—with the aid of -the producers, who built tanks neck and neck with them. In 1880 the -Standard people averaged over one iron tank a day, the tanks holding -from 25,000 to 35,000 barrels. There were not tank-builders enough in -the United States to do the work, and crews were brought from Canada and -England. This, of course, called for an enormous expenditure of money, -for tanks cost from $7,000 to $10,000 apiece. Rich as the United Pipe -Lines were they were forced to borrow money in these years of excessive -production, for they had to lay lines as well as build tanks. There were -nearly 4,000 miles of pipe-line laid in the Bradford region alone from -1878 to 1884, and these lines connected with upward of 20,000 wells. - -From the time it completed its pipe-line monopoly the Standard has -followed oil wherever found. It has had to do it to keep its hold on the -business, and its courage never yet has faltered, though it has demanded -some extraordinary efforts. In 1891 a great deposit of oil was tapped in -the McDonald field of Southwestern Pennsylvania. The monthly production -increased from 50,000 barrels in June to 1,600,000 in December. It is an -actual fact that in the McDonald field the United Pipe Lines increased -the daily capacity of 3,500 barrels, which they had at the beginning of -July, to one of 26,000 barrels by the first of September, and by the -first of December they could handle 90,000 barrels a day. If one -considers what this means one sees that it compares favourably with the -great ordnance and mobilising feats of the Civil War. To accomplish it, -rolling mills and boiler shops in various cities worked night and day to -turn out the pipe, the pumps, the engines, the boilers which were -needed. Transportation had to be arranged, crews of men obtained, a wild -country prepared, sawmills to cut the quantities of timber needed built, -and this vast amount of material placed and set to work. - -The same audacity and effectiveness are shown by the Standard in -attacking situations created by new developments in handling business. -The seaboard pipe-line is a notable example. When the Standard completed -its pipe-line monopoly at the end of 1877, the pipe-line was still -regarded as the feeder of the railroad. Naturally the railroads were -seriously opposed to its becoming anything more. In Pennsylvania -particularly the laws had been so manipulated by the Pennsylvania -Railroad as to prevent the pipe-line carrying oil even for short -distances in competition with them. Now, for many years it had been -believed that the pipe-line could carry oil long distances—many claimed -to the seaboard—and as soon as the independents found that the -oil-bearing roads were acting solely in the interest of the Standard -they began an agitation for a seaboard line which finally terminated in -the Tidewater Line, one hundred and four miles long, carrying oil from -the Bradford field to Williamsport on the Reading Railroad, and it was -certain that the Tidewater eventually would get to the seaboard. That -the day of the railroad as a carrier of crude oil was over when the -Tidewater began to pump oil was obvious both to Mr. Rockefeller and to -the railroad presidents, and without hesitation he seized the idea. By -1883 the Standard was pumping oil to New York, and the railroads that -had served so effectively in building up the trust were practically out -of the crude business. It was this audacious and splendid stroke, -practically freeing him from the railroads which had made him, which -made the passage of the Interstate Commerce Bill a matter of -comparatively small importance to Mr. Rockefeller. To be sure, he still -needed the railroads for refined, but he could so place his refineries -that this service would be greatly minimised. The legislation which the -Oil Regions of Pennsylvania demanded for fifteen years in hope of -securing an equal chance in transportation came too late. By the time -the bill was passed the pipe had replaced the rail as the great oil -carrier, and the pipes were not merely under Mr. Rockefeller’s control, -as the rails had been; they belonged to him. It was little wonder, then, -that the passage of the great bill did not ruffle his serenity. Little -wonder that the Oil Regions, realising the situation, so tragic in its -irony, as fully as Mr. Rockefeller did, felt an exasperation almost -uncontrolled over it. Yet the seaboard pipe-line was no development of -the Standard Oil Company. The idea had been conceived and the -practicability demonstrated by others, but it was seized by the Standard -as soon as it proved possible. This quick sense of the real value of new -developments, and this alertness in seizing them, have been among the -strongest elements in the Standard’s success. - -And every new line of action was developed to its utmost. Take the work -the Standard began in 1879 on the foreign market. Before the Standard -Oil Company was known, save as one of several prosperous Cleveland -refineries, the foreign trade had been developed until petroleum was -_fourth_ in our list of exports, and it went literally to every -civilised country on the globe. In 1874 Colonel Forney made a trip -through the Orient, and he wrote in one of his letters that he found -both Babylon and Nineveh to be lighted with American petroleum, and that -while he was in Damascus a census was taken to ascertain how much -petroleum was needed for each house in the place, and a proposition was -made for its entire use. “At present,” said the Derrick, in commenting -on this letter, “petroleum is the chief commercial representative of the -United States in the Levant and the Orient.” - -The same dithyrambic paragraphs were written by oil men then, as by the -Standard now, concerning foreign trade. For instance, compare the two -paragraphs below—the one found in 1874 in the Derrick, the second in a -defence of the Oil Trust published in 1900: - - - 1874—“It lights the dwellings, the temples, and the mosques amid the - ruins of ancient Babylon and Nineveh; it is the light of Bagdad, the - city of the Thousand and One Nights; of Orfa, birthplace of Abraham; - of Mardeen, the ancient _Macius_ of the Romans, and of Damascus, gem - of the Orient. It burns in the grotto of the Nativity at Bethlehem; - in the Church of the Holy Sepulchre in Jerusalem; amidst the - Pyramids of Egypt; on the Acropolis of Athens; on the plains of - Troy; and in cottage and palace on the banks of the Bosporus and the - Golden Horn.” - - 1900—“Petroleum to-day is the light of the world. It is carried - wherever a wheel can roll or a camel’s hoof be planted. The caravans - on the desert of Sahara go laden with Pratt’s Astral, and elephants - in India carry cases of ‘Standard-white,’ while ships are constantly - loading at our wharves for Japan, Java and the most distant isles of - the sea.” - - -Exports grew rapidly through the same machinery which had created the -foreign market. In 1870 there were something over one hundred and forty -million gallons of petroleum products going abroad, in 1873 nearly two -and one-half hundred million, in 1878 three and one-half hundred -million. In 1870 the Standard began its work on the foreign trade by -sending a representative abroad. Country after country seems to have -been taken up, the idea being that the daily Standard Oil meeting should -have the same full information before it concerning every place of -foreign trade as it had of the American trade, and that gradually the -company should control the foreign trade as it did the American -industry, doing away with middlemen, “paying nobody a profit.” This -work, begun in 1879, has been carried on steadily ever since. Through it -the Standard soon became largely its own exporter. It established -stations of its own in one port after another of Europe, Asia, South -America, and has built up a large oil fleet. It carried on an aggressive -campaign for developing markets; it looked after hostile legislation; it -studied the possible competition of native oils; it met every -difficulty—prejudice, ignorance, poverty. Little by little it has done -in foreign countries what it has done in the United States. To-day it -even carts oil from door to door in Germany and Portugal and other -countries, as it does in America, thus realising Mr. Rockefeller’s -vision of controlling the petroleum of America from the time it leaves -the ground until it is put into the lamp of the consumer. - -The same economy and alertness were applied to the matter of making -oils. In laying hands on the refineries of the country, Rockefeller had -acquired by 1882 about all the processes of manufacturing known, both -patented and free. These processes, including all the essential ones of -to-day, had been developed entirely outside of the Standard Oil Company. -As early as 1865, the year Mr. Rockefeller went into the business, -William Wright wrote an exhaustive book on the Oil Regions of -Pennsylvania. Among other things, he reported quite fully what was being -done in the refining of petroleum. He found that in several factories -they were making naphtha, gasoline and benzine; that three grades of -illuminating oils—“prime white,” “standard white” and “straw -colour”—were made everywhere; that paraffine, refined to a pure white -article like that of to-day, was manufactured in quantities by the -Downer works; and that lubricating oils were beginning to be made. - -[Illustration: - - PRODUCTS OBTAINED FROM THE DISTILLATION OF CRUDE OIL IN A REFINERY. -] - -In 1872, the year that Mr. Rockefeller took things in hand, all of these -original products had been greatly extended, as we have seen. Joshua -Merrill had succeeded in deodorising lubricating oil, making it possible -to put the petroleum lubricants on the foreign market, and in 1871 Mr. -Merrill’s factory sold 50,000 gallons in England alone. By 1872 -paraffine wax was being made in many factories, and one maker of chewing -gum in Maine used 70,000 pounds that year. The foreign trade in all the -products of petroleum outside of illuminating oil was already -considerable.[158] Many of the factories in making their oils gave them -names; thus, Pratt’s Astral was a name for a water-white oil made by the -Pratt works of Brooklyn. It was a high-grade oil, made exactly as the -oil made by many other refineries, but it had a name—a valuable one. - -[Illustration: - - PRODUCTS OBTAINED FROM THE DISTILLATION OF CRUDE OIL IN LUBRICATING - WORKS. -] - -The tables (pages 246–247) analysing the products of crude oil obtained -to-day at the Standard factories show the results tabulated. Now all of -the products in these groups could be made in 1872, but certainly there -were not forty-six distinct products under the naphthas as the table -shows—nor were there 174 refined distillates. In fact, these are not -really products; they are rather brands. Thus, though the table shows -twenty-nine different kinds of odorised or deodorised naphthas, the main -difference between them is their name. The 174 refined distillates are -really the different grades of illuminating oil which any factory can -get, given the proper crude base, with a multitude of different names -applied to catch the trade. Thus among these 174 “products” are -thirty-three kinds of “Standard-white”[159] oil and forty-one kinds of -“water-white”[160]—the principal difference between them being the -different fire tests at which they are put out. The real service of the -Standard has been not this multiplication of so-called products, but in -finding processes by which a poor oil like the famous Lima oil could be -refined. In the case of the Lima oil the Standard claims it spent -millions of dollars before it solved the problem of its usefulness. The -amount of sulphur in the Lima or Ohio oil prevented its use as an -illuminating oil, for the odour was intolerable, there was a -disagreeable smoke, and the wick charred rapidly. The problem of -deodorising it was attacked by many experimenters, and was finally -practically solved by the Frasch process, which the Standard acquired -after spending a large amount of money in testing its efficacy. Probably -sixty per cent. of the illuminating oil used in the United States now is -manufactured from an Ohio oil base. - -This multiplication of varieties is, of course, a perfectly legitimate -merchandising device, but it is not a development of products, properly -speaking. Nor indeed was it for discoveries and inventions that the -Standard Oil Trust was great in 1882, or that it is now—it is in the way -it adapts and handles the discoveries and inventions it acquires. Take -the matter of lubricating oils. After a long struggle it gathered to -itself the factories and the patents of lubricating oils, and it has -developed the trade amazingly; for, while in 1872 less than a half -million gallons of petroleum lubricants were going abroad, in 1897 over -50,000,000 gallons went. The extension of the lubricating trade was made -possible largely by the discovery of Mr. Merrill referred to above. In -1869 Mr. Merrill discovered a process by which a deodorised lubricating -oil could be made. He had both the apparatus for producing the oil and -for the oil itself patented. The oil was so favourably received that the -market sale was several hundred per cent. greater in a single year than -the firm had ever sold before. Naturally, an attempt was made by other -lubricating works to imitate Mr. Merrill’s new product. The most -successful imitation was made by Dr. S. D. Tweedle of Pittsburg. The oil -he put upon the market was considered an infringement by Mr. Merrill, -who commenced suit against the agents handling it. The case was before -the courts for some six years, and Mr. Merrill spent over $100,000 in -maintaining the patent. The case was finally decided in his favour by -the Supreme Court in Washington. During this suit the Standard Oil -Company stood behind Dr. Tweedle, furnishing the money to defend the -suit. When finally they were defeated they took a license under the new -patent which Mr. Merrill was obliged to get out, and paid him a royalty -on the oil until within about a year and a half before the end of the -life of the patent, when they bought it outright for a large sum, Mr. -Merrill reserving the right to manufacture and sell the oil without a -royalty. Most lubricating oils from petroleum are now made after Mr. -Merrill’s process. - -Having obtained control of the lubricating oils, the Standard showed the -greatest intelligence in studying the markets and in developing the -products. It makes lubricants for every machine that works. It offers -scores of cylinder oils, scores of spindle lubricants, of valve -lubricants, of gas-engine lubricants, special brands for sewing -machines, for looms, for sole leather, for dynamos, for marine engines, -for everything that runs and works by steam power, by air, by -electricity, by gas, by man, or by beast power. Now any lubricating -factory can produce the six or eight primary lubricants. Given these, -the varieties to be produced by skilful compounding are infinite. They -can be made more or less viscous, flowing, heavy, light, according to -the needs of the machines and the idiosyncrasies of individuals who run -them. The man who runs a machine soon knows what oil suits him, and if -his trade is big enough an oil is put up especially for him with a name -to tickle his vanity. It may be exactly like a dozen other oils on the -market, but having its own name it is reckoned a new product. Skilful -compounders insist that they can duplicate any of the 833 lubricating -oils of the Standard if they can have samples. Of course this close -study of the needs of a market, and this adaptation of one’s goods to -the requirements, are the highest sort of merchandising. - -Unquestionably the great strength of the Standard Trust in 1882, when it -was founded as it is to-day, was the men who formed it. However sweeping -Mr. Rockefeller’s commercial vision, however steady his purpose, however -remarkable his insight into what was essential to the realisation of his -ambition, he would have never gone far had he not drawn men into his -concern who understood what he was after and knew how to work for it. -His principle concerning men was laid down early. “We want only the big -ones, those who have already proved they can do a big business. As for -the others, unfortunately they will have to die.” The scheme had no -provision for mediocrity—nor for those who could not stomach his -methods. The men who in 1882 formed the Standard alliance were all from -the foremost rank in the petroleum trade, men who without question would -be among those at the top to-day if there had never been a Standard Oil -Company. In Pittsburg it was Charles Lockhart, a man interested in -petroleum before the Drake well was struck, who had begun oil operations -on Oil Creek in March, 1860, who had carried samples of crude and -refined to Europe as early as May, 1860, who had built one of the first -refineries in Pittsburg, and who was easily the largest refiner there in -1874 when Mr. Rockefeller bought him up. In Philadelphia, the largest -refiner in 1874 was W. G. Warden of the Atlantic Refining Company, and -it was he whom Mr. Rockefeller wanted. In New York it was the concern of -Charles Pratt and Company, one of the three largest concerns around -Manhattan—the concern to which H. H. Rogers belonged. Charles Pratt had -been in the oil and paint business since 1850, and he had become a -refiner of petroleum at Greenpoint, Long Island, in 1867. Before -Standard Oil was known outside of New York the fame of Pratt’s Astral -Oil had gone around the world. Mr. Pratt’s concern was rated at the same -daily capacity as Mr. Rockefeller’s (1,500 barrels) in the spring of -1872, when the latter wiped up the Cleveland refineries and grew in a -night to 10,000 barrels. Mr. Vandergrift, who united his interests with -Mr. Rockefeller’s in 1874 and 1875, had been a far better known man in -the oil business and controlled much greater and more varied interests -up to South Improvement times. When he went into the Standard he -controlled the largest refinery on Oil Creek, the Imperial, of about -1,400 barrels. He was president of a large system of pipe-lines, and he -was a member of one of the largest oil-producing concerns of the -time—the H. L. Taylor Company. - -There is no doubt but that Mr. Rockefeller had plenty of brains in his -great trust. It was those who had done business with him who were the -first to point this out when critics declared that the concern could -not—or must not—live. “There is no question about it,” W. H. Vanderbilt -told the Hepburn Commission in 1879, “but these men are smarter than I -am a great deal. They are very enterprising and smart men. I never came -in contact with any class of men as smart and able as they are in their -business. They would never have got into the position they now are -without a great deal of ability—and one man would hardly have been able -to do it; it is a combination of men.” - -It was not only that first-rate ability was demanded at the top; it was -required throughout the organisation. The very day-labourers were picked -men. It was the custom to offer a little better day wages for labourers -than was current and then to choose from these the most promising -specimens; those men were advanced as they showed ability. To-day the -very errand boys at 26 Broadway are chosen for the promise of -development they show, and if they do not develop they are discharged. -No dead wood is taken into the concern unless it is through the supposed -necessities of family or business relations, as probably occurs to a -degree in every human organisation. - -The efficiency of the working force of the Standard was greatly -increased when the trust was formed by the opportunity given to the -employees of taking stock. They were urged to do it, and where they had -no savings money was lent them on easy terms by the company. The result -is that a great number of the employees of the Standard Oil Company are -owners of stock which they bought at eighty, and on which for several -years they have received from thirty to forty-eight per cent. dividends. -It is only natural that under such circumstances the company has always -a remarkably loyal and interested working force. - -Mr. Rockefeller’s great creation has really been strong, then, in many -admirable qualities. The force of the combination has been greater -because of the business habits of the independent body which has opposed -it. To the Standard’s caution the Oil Regions opposed recklessness; to -its economy, extravagance; to its secretiveness, almost blatant -frankness; to its far-sightedness, little thought of the morrow; to its -close-fistedness, a spendthrift generosity; to its selfish -unscrupulousness, an almost quixotic love of fair play. The Oil Regions -had, besides, one fatal weakness—its passion for speculation. Now, Mr. -Rockefeller never speculates. He deals only in those things which other -people have proved sure! - -It is when one examines the inside of the Standard Oil Trust that one -sees how much reason there is for the opinion of those people who -declare that Mr. Rockefeller can always sustain the monopoly of the oil -business he has achieved. One begins to see what Mr. Vanderbilt meant in -1879 when he said: “I don’t believe that by any legislative enactment or -anything else, through any of the states or all of the states, you can -keep such men down. You can’t do it! They will be on top all the time, -you see if they are not.”[161] It is not surprising that those who -realise the compactness and harmony of the Standard organisation, the -ability of its members, the solidity of the qualities governing its -operations, are willing to forget its history. Such is the blinding -quality of success! “It has achieved this,” they say; “no matter what -helped to rear this structure, it is here, it is admirably managed. We -might as well accept it. We must do business.” They are weary of -contention, too—who so unwelcome as an agitator?—and they began to -accept the Standard’s explanation that the critics are indeed “people -with a private grievance,” “mossbacks left behind in the march of -progress.” Again and again in the history of the oil business it has -looked to the outsider as if henceforth Mr. Rockefeller would have to -have things his own way, for who was there to interfere with him, to -dispute his position? No one, save that back in Northwestern -Pennsylvania, in scrubby little oil towns, around greasy derricks, in -dingy shanties, by rusty, deserted oil stills, men have always talked of -the iniquity of the railroad rebate, the injustice of restraint of -trade, the dangers of monopoly, the right to do an independent business; -have always rehearsed with tiresome persistency the evidence by which it -has been proved that the Standard Oil Company is a revival of the South -Improvement Company. It has all seemed futile enough with the public -listening in wonder and awe to the splendid rehearsal of figures, and -the unctuous logic of the Mother of Trusts, and yet one can never tell. -It was the squawking of geese that saved the Capitol. - -Certain it is that many and great as are his business qualities, John D. -Rockefeller has never been allowed to enjoy the fruits of his victory in -that atmosphere of leisure and adulation which the victor naturally -craves. Certain it is that the incessant agitation of men with a -“private grievance” has ruined some of his fairest schemes, has hauled -him again and again before investigating committees, and has contributed -greatly to securing a federal law authorising so fundamental and obvious -a right as equal rates on common carriers. Certain it is that the -incessant efforts of those who believed they had a right to do an -independent business have resulted in the most important advances made -in the oil business since the beginning of Mr. Rockefeller’s -combination, namely, the seaboard pipe-line, for transporting crude oil, -due to the Tidewater Pipe Line, and later the use of the seaboard -pipe-line for transporting refined oil, due to the United States Pipe -Line. Certain it is, too, that all of competition which we have, with -its consequent lowering of prices, is due to independent efforts. - - - - - CHAPTER EIGHTEEN - CONCLUSION - - CONTEMPT PROCEEDINGS BEGUN AGAINST THE STANDARD IN OHIO IN 1897 FOR - NOT OBEYING THE COURT’S ORDER OF 1892 TO DISSOLVE THE TRUST—SUITS - BEGUN TO OUST FOUR OF THE STANDARD’S CONSTITUENT COMPANIES FOR - VIOLATION OF OHIO ANTI-TRUST LAWS—ALL SUITS DROPPED BECAUSE OF - EXPIRATION OF ATTORNEY-GENERAL MONNETT’S TERM—STANDARD PERSUADED - THAT ITS ONLY CORPORATE REFUGE IS NEW JERSEY—CAPITAL OF THE STANDARD - OIL COMPANY OF NEW JERSEY INCREASED, AND ALL STANDARD OIL BUSINESS - TAKEN INTO NEW ORGANISATION—RESTRICTION OF NEW JERSEY LAW - SMALL—PROFITS ARE GREAT AND STANDARD’S CONTROL OF OIL BUSINESS IS - ALMOST ABSOLUTE—STANDARD OIL COMPANY ESSENTIALLY A REALISATION OF - THE SOUTH IMPROVEMENT COMPANY’S PLANS—THE CRUCIAL QUESTION NOW, AS - ALWAYS, IS A TRANSPORTATION QUESTION—THE TRUST QUESTION WILL GO - UNSOLVED SO LONG AS THE TRANSPORTATION QUESTION GOES UNSOLVED—THE - ETHICAL QUESTIONS INVOLVED. - - -Few men in either the political or industrial life of this country can -point to an achievement carried out in more exact accord with its first -conception than John D. Rockefeller, for both in purpose and methods the -Standard Oil Company is and always has been a form of the South -Improvement Company, by which Mr. Rockefeller first attracted general -attention in the oil industry. The original scheme has suffered many -modifications. Its most offensive feature, the drawback on other -people’s shipments, has been cut off. Nevertheless, to-day, as at the -start, the purpose of the Standard Oil Company is the purpose of the -South Improvement Company—the regulation of the price of crude and -refined oil by the control of the output; and the chief means for -sustaining this purpose is still that of the original scheme—a control -of oil transportation giving special privileges in rates. - -[Illustration: - - JOHN D. ROCKEFELLER - - From a photograph by Allen Ayrault Green, taken about 1892. -] - -It is now thirty-two years since Mr. Rockefeller applied the fruitful -idea of the South Improvement Company to the Standard Oil Company of -Ohio, a prosperous oil refinery of Cleveland, with a capital of -$1,000,000 and a daily capacity for handling 1,500 barrels of crude oil. -And what have we as a result? What is the Standard Oil Company to-day? -First, what is its organisation? It is no longer a trust. As we have -seen, the trust was obliged to liquidate in 1892. It became a “trust in -liquidation,” and there it remained for some five years. It seemed to -have come into a state of stationary liquidation, for at the end of 1892 -477,881 shares were uncancelled; at the end of 1896 the same number were -out. The situation of the great corporation was indeed curious. There -began to be comments on it, for complications arose—one over taxes. In -1893 an auditor in Ohio tried to collect taxes on 225 shares of the -Standard Oil Trust. The owner refused to pay and took the case into -court. He won it. The Standard Oil Trust is an unlawful organisation, -said the court. Its certificates have no validity. It would seem strange -that a certificate which was void to all purpose would still be valid as -to taxable purposes.[162] Here was an anomaly indeed. The certificates -were drawing big quarterly dividends, had a big market value, but were -illegal. Owners of small certificates naturally refused to exchange. In -1897 it took 194½ shares in the Standard Oil Trust to bring back one -share in each of the twenty companies. Thus one share in the Standard -Oil Company of Ohio was worth twenty-seven shares in the Standard Oil -Trust. If a man owned twenty-five shares he got only fractional parts of -a share in each company. On these fractional parts he received no -dividends, it not being considered practical to consider such small -sums. To raise his twenty-five shares to 194, and so secure dividends, -took a good sum of money, since Standard Oil Trust shares were worth at -least 340 then. But why should he trouble? He received his quarterly -dividends promptly, and they were large! He paid no taxes, for his stock -was illegal! The trustees were not pushing him to liquidate. Besides, it -was doubtful if they could do anything. Joseph Choate said they could -not. On May 3, 1894, before the attorney-general of New York, in an -application for the forfeiture of the charter of the Standard Oil -Company of New York, Mr. Choate said: - -“I happen to own 100 shares in the Standard Oil Trust, and I have never -gone forward and claimed my aliquot share. Why not? Because I would get -ten in one company, and ten in another company, and two and three-fifths -in another company. - -“There is no power that this company can exercise to compel me and other -indifferent certificate holders, if you please, to come forward and -convert our trust certificates.” - -If there was a way, the trustees were indifferent to it. They evidently -were contented to let things alone. It is quite possible that they would -have been holding to-day 477,881 uncancelled shares of Standard Oil -Trust if it had not been for the irrepressible George Rice. Since -October, 1892, Mr. Rice had held a Standard Oil Trust certificate for -six shares. He had never cancelled it. He had received no invitation to -do so. He received his dividends regularly on it. Later, he purchased -one share, called “assignment of legal title”—the new form given the -trust certificate—and on this he received dividends, exactly as on the -original trust certificate. Finally Mr. Rice made up his mind, without -knowing any of the facts of the liquidation outlined above, that there -was no intention to carry out the dissolution, that some means of -evasion had been devised, and he proposed to find out what it was. - -To do this he transferred his assignment of legal title to an agent with -the order to liquidate it. A long correspondence followed between Mr. -Kemper, Mr. Rice’s agent, and Mr. Dodd, who objected to making the -transfer on the ground that it cut the share into a “multitude of almost -infinitesimal fractions of corporate shares.” They were obviating this -difficulty, Mr. Dodd said, by purchasing certificates calling for one or -a few shares and uniting them until sufficient were had by one party to -call for the issue of full corporate shares. Mr. Kemper insisted, -however, and finally received scrip for his share. “Infinitesimal” it -was, indeed, 5,000/972,500 of one share in one company, 10,000/972,500 -of one share in another, and so on through nineteen constituent -companies.[163] - -Arguing from these experiences and what else he could gather, Mr. Rice -decided that the trust was not dissolved and had no intention of doing -so. Furthermore, he argued that the scheme was one to entice the small -shareholders to sell their shares and thus enable the trustees to -increase their holdings! And he sought legal counsel in Ohio as to the -possibility of bringing suit against the Standard Oil Company of Ohio -for failing to obey the court’s orders in March, 1892. The attorneys, -one of whom was Mr. Watson, advised Mr. Rice to lay his facts before the -attorney-general of the state, Frank S. Monnett. Like Mr. Watson, when -he brought his suit, Mr. Monnett was young and held firmly to the belief -that the business of an attorney-general is to enforce the laws. The -facts Mr. Rice and his counsel laid before him seemed to him to indicate -that the Standard Oil Company of Ohio had taken advantage of the -leniency of the court in allowing it time to disentangle itself from the -trust, and had devised a skilful plan to evade the judgment pronounced -against it five years before. He asked Mr. Rice and his attorneys to go -with him and lay the case before the judges of the Supreme Court in -chambers, and ask if it did not justify proceedings against the company. -The judges agreed with the attorney-general and ordered him to bring the -company before the court for contempt. Information was filed in -November, 1897. The suit which followed proved one of the most -sensational ever instituted against the Standard Oil Combination. - -The first substantial point gained by the attorney-general in the -proceedings was securing answers to a long series of questions -concerning the history of the operations of the Standard Oil Company of -Ohio, both within and without the trust. These answers were made by the -president of that company, who was at the same time the president of the -trust, John D. Rockefeller. They furnish a mass of facts of value and -interest, and they include the minutes of the meeting at which the trust -was dissolved on March 11, 1892, as well as the minutes of all the -quarterly meetings the liquidating trustees held from 1892 to October, -1897. It was from the information obtained from this set of questions -that Mr. Monnett secured proof that the liquidation scheme had been held -up, as Mr. Rice claimed. The minutes showed, as related in Chapter XIV, -that from November, 1892, to March, 1896, 477,881 shares were reported -every three months to the trustees as uncancelled. In July, 1896, the -number fell suddenly to 477,880. George Rice had succeeded in having his -assignment of legal title liquidated! Mr. Monnett learned from the -result of this inquiry another suggestive fact, that while only one -share was cancelled in the five years _before_ the contempt proceedings -were brought, in the first three months _after_, 100,583 shares were -cancelled![164] - -It took Mr. Monnett some six months to secure the answers from Mr. -Rockefeller, but his information was still incomplete, and he asked the -court to appoint a master commissioner, with power to examine the -officers, affairs and books of the Standard, to take testimony within or -without the state, and to report. This was done, the commissioner -holding his first court at the New Amsterdam Hotel, in New York, on -October 11 and 12, 1898. Mr. Rockefeller was the only witness examined -at the sessions, and his deliberation and self-control, his almost -detached attitude as a witness, were the subject of remark by more than -one observer. He answered no question promptly. He had the air of -reflecting always before he spoke. He consulted frequently with his -counsel. His counsel, his colleagues who were present, the counsel of -the prosecution, were sometimes irate, never Mr. Rockefeller. From -beginning to end he was the soul of self-possession. His only sign of -impatience—if it was impatience—was an incessant slight tapping of the -arm of his chair with his white fingers. - -The outcome of this examination of Mr. Rockefeller was that Mr. Monnett -and his colleagues called for those books of the trust which would show -exactly how the original trust certificates had been liquidated. It was -then that the copies of the transfers of Mr. Rockefeller’s trust -certificates and of his assignments of legal title printed in the -Appendix, Number 54, were obtained. Although Mr. Monnett had added to -his knowledge of the Standard’s operations between 1892 and 1898, he was -not yet convinced that the Standard Oil Company of Ohio was conducting -its own business. He had found that, in spite of the order of the court -in 1892, 13,593 shares of that company’s stock were still outstanding in -trust certificates. He knew these certificates drew dividends. Was the -company paying money directly or indirectly to the liquidating trustees? -They said no, that they had been paying no dividends since 1892, that -the money paid the holders of trust certificates came from the other -nineteen companies, that all their earnings had been used in improving -their plant, or were invested in government bonds. Besides, said they, -we are not the thrifty concern we used to be. Mr. Monnett demanded proof -from their books. The secretary of the company, on advice of his -counsel, Virgil P. Kline, refused to produce the books asked for, on the -ground that they would incriminate the company. The court supported Mr. -Monnett, and ordered the company to produce those of their records -showing the gross earnings since 1892, and what had been done with them. -The order met with a second refusal. - -Such was the status of the proceedings when Mr. Monnett received an -anonymous communication stating that, about the time the company was -ordered by the court to produce its records, a great quantity of books -had been taken from the Standard’s office in Cleveland and burned. An -investigation was at once made by the attorney-general, and a number of -witnesses examined. The fact of the burning of sixteen boxes of books -from the Standard offices in Cleveland was established, but these books, -the officers of the company contended, were not the ones wanted by Mr. -Monnett. “Then produce the ones we want,” ordered the court. But, on the -ground that such records might incriminate them, the officers still -refused. - -The fact was, the Standard Oil Company of Ohio was in a very tight -place, and it is difficult to see how an examination of their books -could have failed to incriminate not only it, but three other of the -constituent companies of the trust which held charters from the same -state. These three companies were the Ohio Oil Company, which produced -oil; the Buckeye Pipe Line, which transported it; and the Solar Refining -Company, which refined it. Mr. Monnett had learned enough about these -organisations in the course of his investigations since November, 1897, -to convince him that these companies—all of them enormously -profitable—were, for all practical purposes, one and the same -combination, and that they were all working with the Standard Oil -Company of Ohio, and that their operations were in direct violation of a -state anti-trust law recently passed. As soon as he had sufficient -evidence he had filed petitions against all four of them. Now, these -petitions were filed about the time he demanded the books showing the -earnings of the Standard Oil Company of Ohio, for use in his contempt -case. It was the old story of one suit being used as a shield in -another. A witness cannot be made to incriminate himself. - -The reasons F. B. Squire, the secretary of the Standard Oil Company of -Ohio, gave for refusing to produce the books as ordered by the court -were as follows: - - - 1st. Because they are demanded in an action instituted against the - Standard Oil Company for contempt of court, and for the purpose of - proving said company guilty of contempt in order that the penalties - for contempt may be inflicted upon it and its officers; and I am - informed that, to enforce their production in such a case and for - such a purpose, is an unreasonable search and seizure. - - 2nd. Because the books disclose facts and circumstances which may be - used against the Standard Oil Company, tending to prove it guilty of - offences made criminal by an act of the Legislature of Ohio, passed - April 19, 1898, entitled “An Act to define trusts and to provide for - criminal penalties, civil damages, and the punishment of - corporations,” etc. - - 3rd. Because they disclose facts and circumstances which may be used - against myself personally as an officer of said company, tending to - prove me guilty of offences made criminal by the act aforesaid.[165] - - -All through the winter of 1898 and 1899, up to the end of March, when -the commission declared the taking of testimony closed, the wrangle over -the production of the books went on. Depositions had begun to be taken -at the same time in the cases against the constituent companies for -violation of the anti-trust laws, and by the time the contempt case was -closed in March, 1899, the exasperation of both sides had reached fever -pitch. Nor did the judgment of the court quiet it, for three judges -voted for finding the company guilty of contempt, and three for clearing -it. - -Unsatisfactory as this was, Mr. Monnett still had his anti-trust suits, -through which he expected and through which he did secure much further -evidence that the four Standard companies in Ohio were practically one -concern so shrewdly and secretly handled that they were evading not only -the laws of the state, but that policy of all states which decrees that -it is unsafe to allow men to work together in industrial combinations -without charters defining their privileges, and subjecting them to -reasonable examinations and publicity. Mr. Monnett’s work on these suits -came to an end with the expiration of his term in January, 1900, and the -suits were suppressed by his successor, John M. Sheets! Unfinished as -they were, they were of the greatest value in dragging into the light -information concerning the methods and operations of the Standard Oil -Combination to which the public has the right, and which it must digest -if it is to succeed in working out a legal harness for combinations -which, like the Standard, demand freedom to do what they like and do it -secretly. - -The only refuge offered in the United States for the Standard Oil Trust -in 1898, when the possibility arose by these suits of the state of Ohio -taking away the charters of four of its important constituent companies -for contempt of court and violation of the anti-trust laws of the state, -lay in the corporation law of the state of New Jersey, which had just -been amended, and here it settled. Among the twenty companies which -formed the trust was the Standard Oil Company of New Jersey, a -corporation for manufacturing and marketing petroleum products. Its -capital was $10,000,000. In June, 1899, this capital of $10,000,000 was -increased to one of $110,000,000, and into this new organisation was -dumped the entire Standard aggregation. The old trust certificates -outstanding and the assignments of legal title which had succeeded them -were called in, and for them were given common stock of the new Standard -Oil Company. The amount of this stock which had been issued, in January, -1904, when the last report was made, was $97,448,800. Its market value -at that date was $643,162,080. How it is divided is of course a matter -of private concern. The number of stockholders in 1899 was about 3,500, -according to Mr. Archbold’s testimony to the Interstate Commerce -Commission, but over one-half of the stock was owned by the directors, -and probably nearly one-third was owned by Mr. Rockefeller himself. - -The companies which this new Standard Oil Company has bought up with its -stock are numerous and scattered. They consist of oil-producing -companies like the South Penn Oil Company, the Ohio Oil Company, and the -Forest Oil Company; of transporting companies like the National Transit -Company, the Buckeye Pipe Line Company, the Indiana Pipe Line Company, -and the Eureka Pipe Line Company; of manufacturing and marketing -companies like the Atlantic Refining Company of Pennsylvania, and the -Standard Oil Companies of many states—New York, Indiana, Kentucky, Ohio, -Iowa; of foreign marketing concerns like the Anglo-American Company. In -1892 there were twenty of these constituent companies. There have been -many added since, in whole or part, like gas companies; new producing -concerns, made necessary by developments in California, Kansas and -Texas; new marketing concerns for handling oil directly in Germany, -Italy, Scandinavia and Portugal. What the total value of the companies -owned by the present Standard Oil Company is it is impossible to say. In -1892, when the trust was on trial in Ohio, it reported the aggregate -capital of its twenty companies as $102,233,700, and the appraised value -was given as $121,631,312.63; that is, there was an excess of about -$19,000,000. - -In 1898, when Attorney-General Monnett of Ohio had the Standard Oil -Company of the state on trial for contempt of court, he tried to find -out from Mr. Rockefeller what the surplus of each of the various -companies in the trust was at that date. Mr. Rockefeller answered: “I -have not in my possession or power data showing ... the amount of such -surplus money in their hands after the payment of the last dividends.” -Then Mr. Rockefeller proceeded to repeat as the last he knew of the -value of the holdings of the trust the list of values given six years -before.[166] This list has continued to be cited ever since as -authoritative. There is a later one, whether Mr. Rockefeller had it in -his “possession or power,” or not, in 1898. It is the last trustworthy -valuation of which the writer knows, and is found in testimony taken in -1899, in a private suit to which Mr. Rockefeller was party. It is for -the year 1896. This shows the “total capital and surplus” of the twenty -companies to have been, on December 31 of that year, something over one -hundred and forty-seven million dollars, nearly forty-nine millions of -which was scheduled as “undivided profits.”[167] Of course there has -been a constant increase in value since 1896. - -The new Standard Oil Company is managed by a board of fourteen -directors.[168] They probably collect the dividends of the constituent -companies and divide them among stockholders in exactly the same way the -trustees of 1882 and the liquidating trustees of 1892 did. As for the -charter under which they are operating, never since the days of the -South Improvement Company has Mr. Rockefeller held privileges so in -harmony with his ambition. By it he can do all kinds of mining, -manufacturing, and trading business; transport goods and merchandise by -land and water in any manner; buy, sell, lease, and improve lands; build -houses, structures, vessels, cars, wharves, docks, and piers; lay and -operate pipe-lines; erect and operate telegraph and telephone lines, and -lines for conducting electricity; enter into and carry out contracts of -every kind pertaining to his business; acquire, use, sell, and grant -licenses under patent rights; purchase, or otherwise acquire, hold, -sell, assign, and transfer shares of capital stock and bonds or other -evidences of indebtedness of corporations, and exercise all the -privileges of ownership, including voting upon the stocks so held; carry -on its business and have offices and agencies therefor in all parts of -the world, and hold, purchase, mortgage, and convey real estate and -personal property outside the state of New Jersey. These privileges are, -of course, subject to the laws of the state or country in which the -company operates. If it is contrary to the laws of a state for a foreign -corporation to hold real estate in its boundaries, a company must be -chartered in the state. Its stock, of course, is sold to the New Jersey -corporation, so that it amounts to the same thing as far as the ability -to do business is concerned. It will be seen that this really amounts to -a special charter allowing the holder not only to do all that is -specified, but to create whatever other power it desires, except -banking.[169] A comparison of this summary of powers with those granted -by the South Improvement Company shows that in sweep of charter, at -least, the Standard Oil Company of to-day has as great power as its -famous progenitor.[170] - -The profits of the present Standard Oil Company are enormous. For five -years the dividends have been averaging about forty-five million dollars -a year, or nearly fifty per cent. on its capitalisation, a sum which -capitalised at five per cent. would give $900,000,000. Of course this is -not all that the combination makes in a year. It allows an annual -average of 5.77 per cent. for deficit, and it carries always an ample -reserve fund. When we remember that probably one-third of this immense -annual revenue goes into the hands of John D. Rockefeller, that probably -ninety per cent. of it goes to the few men who make up the “Standard Oil -family,” and that it must every year be invested, the Standard Oil -Company becomes a much more serious public matter than it was in 1872, -when it stamped itself as willing to enter into a conspiracy to raid the -oil business—as a much more serious concern than in the years when it -openly made warfare of business, and drove from the oil industry by any -means it could invent all who had the hardihood to enter it. For, -consider what must be done with the greater part of this $45,000,000. It -must be invested. The oil business does not demand it. There is plenty -of reserve for all of its ventures. It must go into other industries. -Naturally, the interests sought will be allied to oil. They will be gas, -and we have the Standard Oil crowd steadily acquiring the gas interests -of the country. They will be railroads, for on transportation all -industries depend, and, besides, railroads are one of the great -consumers of oil products and must be kept in line as buyers. And we -have the directors of the Standard Oil Company acting as directors on -nearly all of the great railways of the country, the New York Central, -New York, New Haven and Hartford, Chicago, Milwaukee and St. Paul, Union -Pacific, Northern Pacific, Delaware, Lackawanna and Western, Missouri -Pacific, Missouri, Kansas and Texas, Boston and Maine, and other lesser -roads. They will go into copper, and we have the Amalgamated scheme. -They will go into steel, and we have Mr. Rockefeller’s enormous holdings -in the Steel Trust. They will go into banking, and we have the National -City Bank and its allied institutions in New York City and Boston, as -well as a long chain running over the country. No one who has followed -this history can expect these holdings will be acquired on a rising -market. Buy cheap and sell high is a rule of business, and when you -control enough money and enough banks you can always manage that a stock -you want shall be temporarily cheap. No value is destroyed for you—only -for the original owner. This has been one of Mr. Rockefeller’s most -successful manœuvres in doing business from the day he scared his twenty -Cleveland competitors until they sold to him at half price. You can also -sell high, if you have a reputation of a great financier, and control of -money and banks. Amalgamated Copper is an excellent example. The names -of certain Standard Oil officials would float the most worthless -property on earth a few years ago. It might be a little difficult for -them to do so to-day with Amalgamated so fresh in mind. Indeed, -Amalgamated seems to-day to be the worst “break,” as it certainly was -one of the most outrageous performances of the Standard Oil crowd. But -that will soon be forgotten! The result is that the Standard Oil Company -is probably in the strongest financial position of any aggregation in -the world. And every year its position grows stronger, for every year -there is pouring in another $45,000,000 to be used in wiping up the -property most essential to preserving and broadening its power. - -And now what does the law of New Jersey require the concern which it has -chartered, and which is so rapidly adding to its control of oil the -control of iron, steel, copper, banks, and railroads, to make known of -itself? It must each year report its name, the location of its -registration office, with name of agent, the character of its business, -the amount of capital stock issued, and the names and addresses of its -officers and directors! - -So much for present organisation, and now as to how far through this -organisation the Standard Oil Company is able to realise the purpose for -which it was organised—the control of the output, and, through that, the -price, of refined oil. That is, what per cent. of the whole oil business -does Mr. Rockefeller’s concern control. First as to oil production. In -1898 the Standard Oil Company reported to the Industrial Commission that -it produced 35.58 per cent. of Eastern crude—the production that year -was about 52,000,000 barrels.[171] (It should be remembered that it is -always to the Eastern oil fields—Pennsylvania, Ohio, Indiana, West -Virginia—that this narrative refers. Texas, Kansas, Colorado and -California are newer developments. These fields have not as yet been -determining factors in the business, though Texas particularly has been -a distributing factor.) But while Mr. Rockefeller produces only about a -third of the entire production, he controls all but about ten per cent. -of it; that is, all but about ten per cent. goes immediately into his -custody on coming from the wells. It passes entirely out of the hands of -the producers when the Standard pipe-line takes it. The oil is in Mr. -Rockefeller’s hands, and he, not the producer, can decide who is to have -it. The greater portion of it he takes himself, of course, for he is the -chief refiner of the country. In 1898 there were about twenty-four -million barrels of petroleum products made in this country.[172] Of this -amount about twenty million were made by the Standard Oil Company; fully -a third of the balance was produced by the Tidewater Company, of which -the Standard holds a large minority stock, and which for twenty years -has had a running arrangement with the Standard. Reckoning out the -Tidewater’s probable output, and we have an independent output of about -2,500,000 in twenty-four million. It is obvious that this great -percentage of the business gives the Standard the control of prices. -This control can be kept in the domestic markets so long as the Standard -can keep under competition as successfully as it has in the past. It can -be kept in the foreign market as long as American oils can be made and -sold in quantity cheaper than foreign oils. Until a decade ago the -foreign market of American oils was not seriously threatened. Since -1895, however, Russia, whose annual output of petroleum had been for a -number of years about equal in volume to the American output, learned to -make a fairly decent product; more dangerous, she had learned to market. -She first appeared in Europe in 1885. It took ten years to make her a -formidable rival, but she is so to-day, and, in spite of temporary -alliances and combinations, it is very doubtful whether the Standard -will ever permanently control Russian oil. - -In 1899 Mr. Archbold presented to the Industrial Commission a most -interesting list of foreign corporations and individuals doing an oil -business in various countries. According to this there were more than a -score of large concerns in Russia, and many small ones. The aggregate -capitalisation shown by Mr. Archbold’s list was over forty-six and a -half millions, and the capitalisation of a number of the concerns named -was not given. In Galicia, four companies, with an aggregate capital of -$3,775,100, and in Roumania six large companies, with an aggregate -capital of $12,500,000, were reported. Borneo was shown to have nearly -three millions invested in the oil fields; Sumatra and Java each over -twelve millions. Since this report was made these companies have grown, -particularly in marketing ability. In the East the oil market belonged -practically to the Standard Oil Company until recently. Last year -(1903), however, Sumatra imported more oil into China than America, and -Russia imported nearly half as much.[173] About 91,500,000 gallons of -kerosene went into Calcutta last year, and of this only about six -million gallons came from America. In Singapore representatives of -Sumatra oil claim that they have two-thirds of the trade. - -Combinations for offensive and defensive trade campaigns have also gone -on energetically among these various companies in the last few years. -One of the largest and most powerful of these aggregations now at work -is in connection with an English shipping concern, the Shell Transport -and Trading Company, the head of which is Sir Marcus Samuel, formerly -Lord Mayor of London. This company, which formerly traded almost -entirely in Russian oil, undertook a few years ago to develop the oil -fields in Borneo, and they built up a large Oriental trade. They soon -came into hot competition with the Royal Dutch Company, handling Sumatra -oil, and a war of prices ensued which lasted nearly two years. In 1903, -however, the two competitors, in connection with four other strong -Sumatra and European companies, drew up an agreement in regard to -markets which has put an end to their war. The “Shell” people have not -only these allies, but they have a contract with the Guffey Petroleum -Company, the largest Texas producing concern, to handle its output, and -they have gone into a German oil company, the Petroleum Produkten Aktien -Gesellschaft. Having thus provided themselves with a supply they have -begun developing a European trade on the same lines as their Oriental -trade, and they are making serious inroads on the Standard’s market. - -The naphthas made from the Borneo oil have largely taken the place of -American naphtha in many parts of Europe. One load of Borneo benzine -even made its appearance in the American market in 1904. It is a sign of -what well may happen in the future with an intelligent development of -these Russian and Oriental oils—the Standard’s domestic market invaded. -It will be interesting to see to what further extent the American -government will protect the Standard Oil Company by tariff on foreign -oils if such a time does come. It has done very well already. The -aggressive marketing of the “Shell” and its allies in Europe has led to -a recent Oil War of great magnitude. For several months in 1904 American -export oil was sold at a lower price in New York than the crude oil it -takes to make it costs there. For instance, on August 13, 1904, the New -York export price was 4.80 cents per gallon for Standard-white in bulk. -Crude sold at the well for $1.50 a barrel of forty-two gallons, and it -costs sixty cents to get it to seaboard by pipe-line; that is, forty-two -gallons of crude oil costs $2.10, or five cents a gallon in New -York—twenty points loss on a gallon of the raw material! But this low -price for export affects the local market little or none. The tank-wagon -price keeps up to ten and eleven cents in New York. Of course crude is -depressed as much as possible to help carry this competition. For many -months now there has been the abnormal situation of a declining crude -price in face of declining stocks. The truth is the Standard Oil Company -is trying to meet the competition of the low-grade Oriental and Russian -oils with high-grade American oil—the crude being kept as low as -possible, and the domestic market being made to pay for the foreign -cutting. It seems a lack of foresight surprising in the Standard to have -allowed itself to be found in such a dilemma. Certainly, for over two -years the company has been making every effort to escape by getting hold -of a supply of low-grade oil which would enable it to meet the -competition of the foreigner. There have been more or less short-lived -arrangements in Russia. An oil territory in Galicia was secured not long -ago by them, and an expert refiner with a full refining plant was sent -over. Various hindrances have been met in the undertaking, and the works -are not yet in operation. Two years ago the Standard attempted to get -hold of the rich Burma oil fields. The press of India fought them out of -the country, and their weapon was the Standard Oil Company’s own record -for hard dealings! The Burma fields are in the hands of a monopoly of -the closest sort which has never properly developed the territory, but -the people and government prefer their own monopoly to one of the -American type! - -Altogether the most important question concerning the Standard Oil -Company to-day is how far it is sustaining its power by the employment -of the peculiar methods of the South Improvement Company. It should -never be forgotten that Mr. Rockefeller never depended on these methods -alone for securing power in the oil trade. From the beginning the -Standard Oil Company has studied thoroughly everything connected with -the oil business. It has known, not guessed at conditions. It has had a -keen authoritative sight. It has applied itself to its tasks with -indefatigable zeal. It has been as courageous as it has been cautious. -Nothing has been too big to undertake, as nothing has been too small to -neglect. These facts have been repeatedly pointed out in this narrative. -But these are the American industrial qualities. They are common enough -in all sorts of business. They have made our railroads, built up our -great department stores, opened our mines. The Standard Oil Company has -no monopoly in business ability. It is the thing for which American men -are distinguished to-day in the world. - -These qualities alone would have made a great business, and -unquestionably it would have been along the line of combination, for -when Mr. Rockefeller undertook to work out the good of the oil business -the tendency to combination was marked throughout the industry, but it -would not have been the combination whose history we have traced. To the -help of these qualities Mr. Rockefeller proposed to bring the peculiar -aids of the South Improvement Company. He secured an alliance with the -railroads to drive out rivals. For fifteen years he received rebates of -varying amounts on at least the greater part of his shipments, and for -at least a portion of that time he collected drawbacks of the oil other -people shipped; at the same time he worked with the railroads to prevent -other people getting oil to manufacture, or if they got it he worked -with the railroads to prevent the shipment of the product. If it reached -a dealer, he did his utmost to bully or wheedle him to countermand his -order. If he failed in that, he undersold until the dealer, losing on -his purchase, was glad enough to buy thereafter of Mr. Rockefeller. How -much of this system remains in force to-day? The spying on independent -shipments, the effort to have orders countermanded, the predatory -competition prevailing, are well enough known. Contemporaneous -documents, showing how these practices have been worked into a very -perfect and practically universal system, have already been printed in -this work.[174] As for the rebates and drawbacks, if they do not exist -in the forms practised up to 1887, as the Standard officials have -repeatedly declared, it is not saying that the Standard enjoys no -special transportation privileges. As has been pointed out, it controls -the great pipe-line handling all but perhaps ten per cent. of the oil -produced in the Eastern fields. This system is fully 35,000 miles long. -It goes to the wells of every producer, gathers his oil into its storage -tanks, and from there transports it to Philadelphia, Baltimore, New -York, Chicago, Buffalo, Cleveland, or any other refining point where it -is needed. This pipe-line is a common carrier by virtue of its use of -the right of eminent domain, and, as a common carrier, is theoretically -obliged to carry and deliver the oil of all comers, but in practice this -does not always work. It has happened more than once in the history of -the Standard pipes that they have refused to gather or deliver oil. -Pipes have been taken up from wells belonging to individuals running or -working with independent refiners. Oil has been refused delivery at -points practical for independent refiners. For many years the supply of -oil has been so great that the Standard could not refuse oil to the -independent refiner on the ground of scarcity. However, a shortage in -Pennsylvania oil occurred in 1903. A very interesting situation arose as -a result. There are in Ohio and Pennsylvania several independent -refiners who, for a number of years, have depended on the Standard lines -(the National Transit Company) for their supply of crude. In the fall of -1903 these refiners were informed that thereafter the Standard could -furnish them with only fifty per cent. of their refining capacity. It -was a serious matter to the independents, who had their own markets, and -some of whom were increasing their plants. Supposing we buy oil directly -from the producers, they asked one another, must not the Standard as a -common carrier gather and deliver it? The experienced in the business -said: “Yes. But what will happen? The producer rash enough to sell you -oil may be cut off by the National Transit Company. Of course, if he -wants to fight in the courts he may eventually force the Standard to -reconnect, but they could delay the suit until he was ruined. Also, if -you go over Mr. Seep’s head”—Mr. Seep is the Standard Oil buyer, and all -oil going into the National Transit system goes through his hands—“you -will antagonise him.” Now, “antagonize” in Standard circles may mean a -variety of things. The independent refiners decided to compromise, and -an agreement terminable by either party at short notice was made between -them and the Standard, by which the members of the former were each to -have eighty per cent. of their capacity of crude oil, and were to give -to the Standard all of their export oil to market. As a matter of fact, -the Standard’s ability to cut off crude supplies from the outside -refiners is much greater than in the days before the Interstate Commerce -Bill, when it depended on its alliance with the railroads to prevent its -rival getting oil. It goes without saying that this is an absurd power -to allow in the hands of any manufacturer of a great necessity of life. -It is exactly as if one corporation aiming at manufacturing all the -flour of the country owned all but ten per cent. of the entire railroad -system collecting and transporting wheat. They could, of course, in time -of shortage, prevent any would-be competitor from getting grain to -grind, and they could and would make it difficult and expensive at all -times for him to get it. - -It is not only in the power of the Standard to cut off outsiders from -it, it is able to keep up transportation prices. Mr. Rockefeller owns -the pipe system—a common carrier—and the refineries of the Standard Oil -Company pay in the final accounting cost for transporting their oil, -while outsiders pay just what they paid twenty-five years ago. There are -lawyers who believe that if this condition were tested in the courts, -the National Transit Company would be obliged to give the same rates to -others as the Standard refineries ultimately pay. It would be -interesting to see the attempt made. - -Not only are outside refiners at just as great disadvantage in securing -crude supply to-day as before the Interstate Commerce Commission was -formed; they still suffer severe discrimination on the railroads in -marketing their product. There are many ways of doing things. What but -discrimination is the situation which exists in the comparative rates -for oil freight between Chicago and New Orleans, and Cleveland and New -Orleans? All, or nearly all, of the refined oil sold by the Standard Oil -Company through the Mississippi Valley and the West is manufactured at -Whiting, Indiana, close to Chicago, and is shipped on Chicago rates. -There are no important independent oil works at Chicago. Now at -Cleveland, Ohio, there are independent refiners and jobbers contending -for the market of the Mississippi Valley. See how prettily it is -managed. The rates between the two Northern cities and New Orleans in -the case of nearly all commodities is about two cents per hundred pounds -in favour of Chicago. For example, the rate on flour from Chicago is 23 -cents per 100 pounds; from Cleveland, 25 cents per 100 pounds; on canned -goods the rates are 33 and 35; on lumber, 31 and 33; on meats, 51 and -54; on all sorts of iron and steel, 26 and 29; but on petroleum and its -products they are 23 and 33! - -In the case of Atlanta, Georgia, a similar vagary of rates exists. Thus -Cleveland has, as a rule, about two cents advantage per 100 pounds over -Chicago. Flour is shipped from Chicago to Atlanta at 34 cents, and from -Cleveland at 32½; lumber at 32 and 28½; but Cleveland refiners actually -pay 48 cents to Atlanta, while the Standard only pays 45 from Whiting. - -There is a curious rule in the Boston and Maine Railroad in regard to -petroleum shipments. On all commodities except petroleum, what is known -as the Boston rate applies, but oil does not get this. For instance, the -Boston rate applies to Salem, Massachusetts, on all traffic except -petroleum, and that pays four cents more per 100 pounds to Salem than to -Boston. - -The New York, New Haven and Hartford Railroad gives no through rates on -petroleum from Western points, although it gives them on every other -commodity. It does not refuse to take oil, but it charges the Boston -rate plus the local rates. Thus, to use an illustration given by Mr. -Prouty, of the Interstate Commerce Commission, in a recent article, if a -Cleveland refiner sends into the New Haven territory, say to New Haven, -a car-load of oil, he pays 24 cents per 100 pounds to Boston and the -local rate of 12 cents from Boston to New Haven. On any other commodity -he would pay the Boston rate. Besides, the rates on petroleum have been -materially advanced over what they were when the Interstate Commerce -Bill was passed in 1887, although on other commodities they have fallen. -In 1887 grain was shipped from Cleveland to Boston for 22 cents, iron -for 22, petroleum for 22. In 1889 the rate on grain was 15 cents, on -iron 20 cents, and on petroleum 24. Of course it may be merely a -coincidence that the New Haven territory can be supplied by the Standard -Oil Company from its New York refineries by barge, and that William -Rockefeller is a director of the New York, New Haven and Hartford -Railroad. - -An independent refiner of Titusville, Pennsylvania, T. B. Westgate, told -the Industrial Commission in 1898 that his concern was barred from -shipping their products to nearly all New England and Canadian points by -the refusal of the roads to give the same advantages in tariff which -other freight was allowed. Mr. Westgate made the suggestive comment that -very few railroads ever solicited oil trade. He pointed out that when -the United States Pipe Line was building, agents of various roads were -after the oil men soliciting shipments of the pipe, etc., to be used. -“We could ship iron, but the oil—we must not handle. That is probably -the password that goes over.” - -Examples of this manipulation might be multiplied. There is no -independent refiner or jobber who tries to ship oil freight that does -not meet incessant discouragement and discrimination. Not only are rates -made to favour the Standard refining points and to protect their -markets, but switching charges and dock charges are multiplied. Loading -and unloading facilities are refused, payment of freights on small -quantities are demanded in advance, a score of different ways are found -to make hard the way of the outsider. “If I get a barrel of oil out of -Buffalo,” an independent dealer told the writer not long ago, “I have to -_sneak_ it out. There are no public docks; the railroads control most of -them, and they won’t let me out if they can help it. If I want to ship a -car-load they won’t take it if they can help it. They are all afraid of -offending the Standard Oil Company.” - -This may be a rather sweeping statement, but there is too much truth in -it. There is no doubt that to-day, as before the Interstate Commerce -Commission, a community of interests exists between railroads and the -Standard Oil Company sufficiently strong for the latter to get any help -it wants in making it hard for rivals to do business. The Standard owns -stock in most of the great systems. It is represented on the board of -directors of nearly all the great systems, and it has an immense freight -not only in oil products, but in timber, iron, acids, and all of the -necessities of its factories. It is allied with many other industries, -iron, steel, and copper, and can swing freight away from a road which -does not oblige it. It has great influence in the money market and can -help or hinder a road in securing money. It has great influence in the -stock market and can depress or inflate a stock if it sets about it. -Little wonder that the railroads, being what they are, are afraid to -“disturb their relations with the Standard Oil Company,” or that they -keep alive a system of discriminations the same in effect as those which -existed before 1887. - -Of course such cases as those cited above are fit for the Interstate -Commerce Commission, but the oil men as a body have no faith in the -effectiveness of an appeal to the Commission, and in this feeling they -do not reflect on the Commission, but rather on the ignorance and -timidity of the Congress which, after creating a body which the people -demanded, made it helpless. The case on which the Oil Regions rests its -reason for its opinion has already been referred to in the chapter on -the co-operative independent movement which finally resulted in the Pure -Oil Company. The case first came before the Commission in 1888. At that -time there was a small group of independent refiners in Oil City and -Titusville, who were the direct outgrowth of the compromise of 1880 -between the Producers’ Protective Association and the Pennsylvania -Railroad. The railroad, having promised open rates to all, urged the men -to go into business. Soon after came the great fight between the -railroads and the seaboard pipe-line, with the consequent low rates. -This warfare finally ended in 1884, after the Standard had brought the -Tidewater into line, in a pooling arrangement between the Standard, now -controlling all seaboard pipe-lines, and the Pennsylvania Railroad, by -which the latter was guaranteed twenty-six per cent. of all Eastern oil -shipments on condition that they keep up the rate to the seaboard to -fifty-two cents a barrel. - -[Illustration: - - A 25,000–BARREL TANK OF OIL IN FLAMES -] - -Now, most of the independents shipped by barrels loaded on rack cars. -The Standard shipped almost entirely by tank-cars. The custom had always -been in the Oil Regions to charge the same for shipments whether by tank -or barrel. Suddenly, in 1888, the rate of fifty-two cents on oil in -barrels was raised to one of sixty-six cents. The independents believed -that the raise was a manipulation of the Standard intended to kill their -export trade, and they appealed to the Commission. They pointed out that -the railroads and the pipe-lines had been keeping up rates for a long -time by a pooling arrangement, and that now the roads made an -unreasonable tariff on oil in barrels, at the same time refusing them -tank cars. The hearing took place in Titusville in May, 1889. The -railroads argued that they had advanced the rate on barrelled oil -because of a decision of the Commission itself—a case of very evident -discrimination in favour of barrels. The Commission, however, argued -that each case brought before it must stand on its own merits, so -different were conditions and practices, and in December, 1892, it gave -its decision. The pooling arrangement it did not touch, on the ground -that the Commission had authority only over railroads in competition, -not over railroads and pipe-lines in competition. The chief complaint, -that the new rate of sixty-six cents on oil in barrels and not on oil in -tanks was an injurious discrimination, the Commission found justified. -It ordered that the railroads make the rates the same on oil in both -tanks and barrels, and that they furnish shippers tanks whenever -reasonable notice was given. As the amounts wrongfully collected by the -railroads from the refiners could not be ascertained from the evidence -already taken, the Commission decided to hold another hearing and fix -the amounts. This was not done until May, 1894, five years after the -first hearing. Reparation was ordered to at least eleven different -firms, some of the sums amounting to several thousand dollars; the -entire award ordered amounted to nearly $100,000. - -In case the railroads failed to adjust the claims the refiners were -ordered to proceed to enforce them in the courts. The Commission found -at this hearing that none of their orders of 1892 had been followed by -the roads and they were all repeated. As was to be expected, the roads -refused to recognise the claims allowed by the Commission, and the case -was taken by the refiners into court. It has been heard three times. -Twice they have won, but each time an appeal of the roads has forced -them to appear again. The case was last heard at Philadelphia in -February, 1904, in the United States Circuit Court of Appeals. No -decision had been rendered at this writing. - -It would be impossible to offer direct and conclusive proof that the -Standard Oil Company persuaded or forced the roads to the change of -policy complained of in this case, but the presence of their leading -officials and counsel at the hearings, the number of witnesses furnished -from their employ, the statement of President Roberts of the -Pennsylvania Railroad that the raise on barrelled oil was insisted on by -the seaboard refiners (the Standard was then practically the only -seaboard refiner), as well as the perfectly well-known relations of the -railroad and the Standard, left no doubt in the minds of those who knew -the situation that the order originated with them, and that its sole -purpose was harassing their competitors. The Commission seems to have -had no doubt of this. But see the helplessness of the Commission. It -takes full testimony in 1889, digests it carefully, gives its orders in -1892, and they are not obeyed. More hearings follow, and in 1895 the -orders are repeated and reparation is allowed to the injured refiners. -From that time to this the case passes from court to court, the railroad -seeking to escape the Commission’s orders. The Interstate Commerce -Commission was instituted to facilitate justice in this matter of -transportation, and yet here we have still unsettled a case on which -they gave their judgment twelve years ago. The lawyer who took the first -appeal to the Commission, that of Rice, Robinson and Winthrop, of -Titusville, M. J. Heywang, of Titusville, has been continually engaged -in the case for sixteen years! - -In spite of the Interstate Commerce Commission, the crucial question is -still a transportation question. Until the people of the United States -have solved the question of free and equal transportation it is idle to -suppose that they will not have a trust question. So long as it is -possible for a company to own the exclusive carrier on which a great -natural product depends for transportation, and to use this carrier to -limit a competitor’s supply or to cut off that supply entirely if the -rival is offensive, and always to make him pay a higher rate than it -costs the owner, it is ignorance and folly to talk about constitutional -amendments limiting trusts. So long as the great manufacturing centres -of a monopolistic trust can get better rates than the centres of -independent effort, it is idle to talk about laws making it a crime to -undersell for the purpose of driving a competitor from a market. You -must get into markets before you can compete. So long as railroads can -be persuaded to interfere with independent pipe-lines, to refuse oil -freight, to refuse loading facilities, lest they disturb their relations -with the Standard Oil Company, it is idle to talk about investigations -or anti-trust legislation or application of the Sherman law. So long as -the Standard Oil Company can control transportation as it does to-day, -it will remain master of the oil industry, and the people of the United -States will pay for their indifference and folly in regard to -transportation a good sound tax on oil, and they will yearly see an -increasing concentration of natural resources and transportation systems -in the Standard Oil crowd. - -If all the country had suffered from these raids on competition, had -been the limiting of the business opportunity of a few hundred men and a -constant higher price for refined oil, the case would be serious enough, -but there is a more serious side to it. The ethical cost of all this is -the deep concern. We are a commercial people. We cannot boast of our -arts, our crafts, our cultivation; our boast is in the wealth we -produce. As a consequence business success is sanctified, and, -practically, any methods which achieve it are justified by a larger and -larger class. All sorts of subterfuges and sophistries and slurring over -of facts are employed to explain aggregations of capital whose -determining factor has been like that of the Standard Oil Company, -special privileges obtained by persistent secret effort in opposition to -the spirit of the law, the efforts of legislators, and the most -outspoken public opinion. How often does one hear it argued, the -Standard Oil Company is simply an inevitable result of economic -conditions; that is, given the practices of the oil-bearing railroads in -1872 and the elements of speculation and the over-refining in the oil -business, there was nothing for Mr. Rockefeller to do but secure special -privileges if he wished to save his business. - -Now in 1872 Mr. Rockefeller owned a successful refinery in Cleveland. He -had the advantage of water transportation a part of the year, access to -two great trunk lines the year around. Under such able management as he -could give it his concern was bound to go on, given the demand for -refined oil. It was bound to draw other firms to it. When he went into -the South Improvement Company it was not to save his own business, but -to destroy others. When he worked so persistently to secure rebates -after the breaking up of the South Improvement Company, it was in the -face of an industry united against them. It was not to save his business -that he compelled the Empire Transportation Company to go out of the oil -business in 1877. Nothing but grave mismanagement could have destroyed -his business at that moment; it was to get every refinery in the country -but his own out of the way. It was not the necessity to save his -business which compelled Mr. Rockefeller to make war on the Tidewater. -He and the Tidewater could both have lived. It was to prevent prices of -transportation and of refined oil going down under competition. What -necessity was there for Mr. Rockefeller trying to prevent the United -States Pipe Line doing business?—only the greed of power and money. -Every great campaign against rival interests which the Standard Oil -Company has carried on has been inaugurated, not to save its life, but -to build up and sustain a monopoly in the oil industry. These are not -mere affirmations of a hostile critic; they are facts proved by -documents and figures. - -Certain defenders go further and say that if some such combination had -not been formed the oil industry would have failed for lack of brains -and capital. Such a statement is puerile. Here was an industry for whose -output the whole world was crying. Petroleum came at the moment when the -value and necessity of a new, cheap light was recognised everywhere. -Before Mr. Rockefeller had ventured outside of Cleveland kerosene was -going in quantities to every civilised country. Nothing could stop it, -nothing check it, but the discovery of some cheaper light or the putting -up of its price. The real “good of the oil business” in 1872 lay in -making oil cheaper. It would flow all over the world on its own merit if -cheap enough. - -The claim that only by some such aggregation as Mr. Rockefeller formed -could enough capital have been obtained to develop the business falls -utterly in face of fact. Look at the enormous amounts of capital, a -large amount of it speculative, to be sure, which the oil men claim went -into their business in the first ten years. It was estimated that -Philadelphia alone put over $168,000,000 into the development of the Oil -Regions, and New York $134,000,000, in their first decade of the -business. How this estimate was reached the authority for it does not -say.[175] It may have been the total capitalisation of the various oil -companies launched in the two cities in that period. It shows very well, -however, in what sort of figures the oil men were dealing. When the -South Improvement Company trouble came in 1872, the producers launched a -statement in regard to the condition of their business in which they -claimed that they were using a capital of $200,000,000. Figures based on -the number of oil wells in operation or drilling at that time of course -represent only a portion of the capital in use. Wild-catting and -speculation have always demanded a large amount of the money that the -oil men handled. The almost conservative figures in regard to the -capital invested in the Oil Regions in the early years were those of H. -E. Wrigley, of the Geological Survey of Pennsylvania. Mr. Wrigley -estimates that in the first twelve years of the business $235,000,000 -was received from wells. This includes the cost of the land, of putting -down and operating the well, also the profit on the product. This -estimate, however, makes no allowance for the sums used in -speculation—an estimate, indeed, which it was impossible for one to make -with any accuracy. The figures, unsatisfactory as they are, are ample -proof, however, that there was plenty of money in the early days to -carry on the oil business. Indeed, there has always been plenty of money -for oil investment. It did not require Mr. Rockefeller’s capital to -develop the Bradford oil fields, build the first seaboard pipe-line, -open West Virginia, Texas, or Kansas. The oil business would no more -have suffered for lack of capital without the Standard combination than -the iron or wheat or railroad or cotton business. The claim is idle, -given the wealth and energy of the country in the forty-five years since -the discovery of oil. - -Equally well does both the history and the present condition of the oil -business show that it has not needed any such aggregation to give us -cheap oil. The margin between crude and refined was made low by -competition. It has rarely been as low as it would have been had there -been free competition. For five years even the small independent -refineries outside of the Pure Oil Company have been able to make a -profit on the prices set by the Standard, and this in spite of the -higher transportation they have paid on both crude and refined, and the -wall of seclusion the railroads build around domestic markets. - -Very often people who admit the facts, who are willing to see that Mr. -Rockefeller has employed force and fraud to secure his ends, justify him -by declaring, “It’s business.” That is, “it’s business” has to come to -be a legitimate excuse for hard dealing, sly tricks, special privileges. -It is a common enough thing to hear men arguing that the ordinary laws -of morality do not apply in business. Now, if the Standard Oil Company -were the only concern in the country guilty of the practices which have -given it monopolistic power, this story never would have been written. -Were it alone in these methods, public scorn would long ago have made -short work of the Standard Oil Company. But it is simply the most -conspicuous type of what can be done by these practices. The methods it -employs with such acumen, persistency, and secrecy are employed by all -sorts of business men, from corner grocers up to bankers. If exposed, -they are excused on the ground that this is business. If the point is -pushed, frequently the defender of the practice falls back on the -Christian doctrine of charity, and points that we are erring mortals and -must allow for each other’s weaknesses!—an excuse which, if carried to -its legitimate conclusion, would leave our business men weeping on one -another’s shoulders over human frailty, while they picked one another’s -pockets. - -One of the most depressing features of the ethical side of the matter is -that instead of such methods arousing contempt they are more or less -openly admired. And this is logical. Canonise “business success,” and -men who make a success like that of the Standard Oil Trust become -national heroes! The history of its organisation is studied as a -practical lesson in money-making. It is the most startling feature of -the case to one who would like to feel that it is possible to be a -commercial people and yet a race of gentlemen. Of course such practices -exclude men by all the codes from the rank of gentlemen, just as such -practices would exclude men from the sporting world or athletic field. -There is no gaming table in the world where loaded dice are tolerated, -no athletic field where men must not start fair. Yet Mr. Rockefeller has -systematically played with loaded dice, and it is doubtful if there has -ever been a time since 1872 when he has run a race with a competitor and -started fair. Business played in this way loses all its sportsmanlike -qualities. It is fit only for tricksters. - -The effects on the very men who fight these methods on the ground that -they are ethically wrong are deplorable. Brought into competition with -the trust, badgered, foiled, spied upon, they come to feel as if -anything is fair when the Standard is the opponent. The bitterness -against the Standard Oil Company in many parts of Pennsylvania and Ohio -is such that a verdict from a jury on the merits of the evidence is -almost impossible! A case in point occurred a few years ago in the -Bradford field. An oil producer was discovered stealing oil from the -National Transit Company. He had tapped the main line and for at least -two years had run a small but steady stream of Standard oil into his -private tank. Finally the thieving pipe was discovered, and the owner of -it, after acknowledging his guilt, was brought to trial. The jury gave a -verdict of Not guilty! They seemed to feel that though the guilt was -acknowledged, there probably was a Standard trick concealed somewhere. -Anyway it was the Standard Oil Company and it deserved to be stolen -from! The writer has frequently heard men, whose own business was -conducted with scrupulous fairness, say in cases of similar stealing -that they would never condemn a man who stole from the Standard! Of -course such a state of feeling undermines the whole moral nature of a -community. - -The blackmailing cases of which the Standard Oil Company complain are a -natural result of its own practices. Men going into an independent -refining business have for years been accustomed to say: “Well, if they -won’t let us alone, we’ll make them pay a good price.” The Standard -complains that such men build simply to sell out. There may be cases of -this. Probably there are, though the writer has no absolute proof of any -such. Certainly there is no satisfactory proof that the refinery in the -famous Buffalo case was built to sell, though that it was offered for -sale when the opposition of the Everests, the managers of the Standard -concern, had become so serious as later to be stamped as criminal by -judge and jury, there is no doubt. Certainly nothing was shown to have -been done or said by Mr. Matthews, the owner of the concern which the -Standard was fighting, which might not have been expected from a man who -had met the kind of opposition he had from the time he went into -business. - -The truth is, blackmail and every other business vice is the natural -result of the peculiar business practices of the Standard. If business -is to be treated as warfare and not as a peaceful pursuit, as they have -persisted in treating it, they cannot expect the men they are fighting -to lie down and die without a struggle. If they get special privileges -they must expect their competitors to struggle to get them. If they will -find it more profitable to buy out a refinery than to let it live, they -must expect the owner to get an extortionate price if he can. And when -they complain of these practices and call them blackmail, they show thin -sporting blood. They must not expect to monopolise hard dealings, if -they do oil. - -These are considerations of the ethical effect of such business -practices on those outside and in competition. As for those within the -organisation there is one obvious effect worth noting. The Standard men -as a body have nothing to do with public affairs, except as it is -necessary to manipulate them for the “good of the oil business.” The -notion that the business man must not appear in politics and religion -save as a “stand-patter”—not even as a thinking, aggressive force—is -demoralising, intellectually and morally. Ever since 1872 the -organisation has appeared in politics only to oppose legislation -obviously for the public good. At that time the oil industry was young, -only twelve years old, and it was suffering from too rapid growth, from -speculation, from rapacity of railroads, but it was struggling manfully -with all these questions. The question of railroad discriminations and -extortions was one of the “live questions” of the country. The oil men -as a mass were allied against it. The theory that the railroad was a -public servant bound by the spirit of its charter to treat all shippers -alike, that fair play demanded open equal rates to all, was generally -held in the oil country at the time Mr. Rockefeller and his friends -sprung the South Improvement Company. One has only to read the oil -journals at the time of the Oil War of 1872 to see how seriously all -phases of the transportation question were considered. The country was a -unit against the rebate system. Agreements were signed with the -railroads that all rates henceforth should be equal. The signatures were -not on before Mr. Rockefeller had a rebate, and gradually others got -them until the Standard had won the advantages it expected the South -Improvement Company to give it. From that time to this Mr. Rockefeller -has had to fight the best sentiment of the oil country and of the -country at large as to what is for the public good. He and his -colleagues kept a strong alliance in Washington fighting the Interstate -Commerce Bill from the time the first one was introduced in 1876 until -the final passage in 1887. Every measure looking to the freedom and -equalisation of transportation has met his opposition, as have bills for -giving greater publicity to the operations of corporations. In many of -the great state Legislatures one of the first persons to be pointed out -to a visitor is the Standard Oil lobbyist. Now, no one can dispute the -right of the Standard Oil Company to express its opinions on proposed -legislation. It has the same right to do this as all the rest of the -world. It is only the character of its opposition which is open to -criticism, the fact that it is always fighting measures which equalise -privileges and which make it more necessary for men to start fair and -play fair in doing business. - -Of course the effect of directly practising many of their methods is -obvious. For example, take the whole system of keeping track of -independent business. There are practices required which corrupt every -man who has a hand in them. One of the most deplorable things about it -is that most of the work is done by youngsters. The freight clerk who -reports the independent oil shipments for a fee of five or ten dollars a -month is probably a young man, learning his first lessons in corporate -morality. If he happens to sit in Mr. Rockefeller’s church on Sundays, -through what sort of a haze will he receive the teachings? There is -something alarming to those who believe that commerce should be a -peaceful pursuit, and who believe that the moral law holds good -throughout the entire range of human relations, in knowing that so large -a body of young men in this country are consciously or unconsciously -growing up with the idea that business is war and that morals have -nothing to do with its practice. - -And what are we going to do about it? for it is _our_ business. We, the -people of the United States, and nobody else, must cure whatever is -wrong in the industrial situation, typified by this narrative of the -growth of the Standard Oil Company. That our first task is to secure -free and equal transportation privileges by rail, pipe and waterway is -evident. It is not an easy matter. It is one which may require -operations which will seem severe; but the whole system of -discrimination has been nothing but violence, and those who have -profited by it cannot complain if the curing of the evils they have -wrought bring hardship in turn on them. At all events, until the -transportation matter is settled, and settled right, the monopolistic -trust will be with us, a leech on our pockets, a barrier to our free -efforts. - -As for the ethical side, there is no cure but in an increasing scorn of -unfair play—an increasing sense that a thing won by breaking the rules -of the game is not worth the winning. When the business man who fights -to secure special privileges, to crowd his competitor off the track by -other than fair competitive methods, receives the same summary -disdainful ostracism by his fellows that the doctor or lawyer who is -“unprofessional,” the athlete who abuses the rules, receives, we shall -have gone a long way toward making commerce a fit pursuit for our young -men. - - - THE END - - - - - APPENDIX - - - NUMBER 37 (See page 2004) - ARTICLES OF INCORPORATION OF THE TIDEWATER PIPE LINE - - - Incorporation Tidewater Pipe Company, Limited, of Titusville, - Pennsylvania. Recorded November 22, 1878. William F. Dickson, - Recorder. - - The undersigned persons, to wit: Byron David Benson, Robert Emmet - Hopkins, Andrew Worton Perrin, Alanson Ashford Sumner, David Boyd - Stewart, David McKelvy, Samuel Queen Brown, Adam Clark Hawkins, - Willis Booth Benedict, Marcus Brownson, William Henry Nicholson, - Calvin Nathaniel Payne, John Hahn Dilks, Hascal Ledger Taylor, - William Henry Conley, Thomas Benton Riter, Clark Isaac Hayes, - Gershom Hyde, James Henry Caldwell, George Lawrence Benton, George - Hill Graham, Elisha Gilbert Patterson, Benjamin Bakewell Campbell, - Delos Olcott Wickham, Joseph Henry Simmonds, Lewis Henry Smith, - desire to form a partnership association, pursuant to the provisions - of an act of the General Assembly of the Commonwealth of - Pennsylvania, entitled, “An Act, authorising the formation of - partnership association in which the capital subscribed shall alone - be responsible for the debts of the association except under certain - circumstances,” approved the second day of June, A.D. 1874, and the - several supplements thereto for the purpose of conducting a legal - business or occupation, within the United States or elsewhere, whose - principal office or place of business shall be established and - maintained within the state of Pennsylvania, by subscribing and - contributing capital thereto, which capital shall alone be liable - for the debts of such association, and to that end sign and - acknowledge the following statement: - - Full names of the persons desiring to form such association are: - Byron David Benson, Robert Emmet Hopkins, Andrew Worton Perrin, - Alanson Ashford Sumner, David Boyd Stewart, David McKelvy, Samuel - Queen Brown, Adam Clark Hawkins, Willis Booth Benedict, Marcus - Brownson, William Henry Nicholson, Calvin Nathaniel Payne, John Hahn - Dilks, Hascal Ledger Taylor, William Henry Conley, Thomas Benton - Riter, Clark Isaac Hayes, Gershom Clark Hyde, James Henry Caldwell, - George Lawrence Benton, George Hill Graham, Elisha Gilbert - Patterson, Benjamin Bakewell Campbell, Delos Olcott Wickham, Joseph - Henry Simmonds, Lewis Henry Smith. - - The amount of capital of said association subscribed for by each is - as follows, to wit: - - Said Byron David Benson has subscribed for $100,300 of the capital - of said association; the said Robert Emmet Hopkins has subscribed - for $72,400 of the capital of said association; said Andrew Worton - Perrin has subscribed for $24,700 of the capital of said - association; said David Boyd Stewart has subscribed for $16,800 of - the capital of said association; said David McKelvy has subscribed - for $72,500 of the capital of said association; said Samuel Queen - Brown has subscribed for $25,000 of the capital of said association; - said Adam Clark Hawkins has subscribed for $6,000 of the capital of - said association; said Willis Booth Benedict has subscribed for - $5,000 of the capital of said association; said Marcus Brownson has - subscribed for $10,000 of the capital of said association; said - William Henry Nicholson has subscribed for $5,000 of the capital of - said association; said Calvin Nathaniel Payne has subscribed for - $5,000 of the capital of said association; said John Hahn Dilks has - subscribed $82,300 of the capital of said association; said Hascal - Ledger Taylor has subscribed for $50,000 of the capital of said - association; said William Henry Conley has subscribed for $2,500 of - the capital of said association; said Thomas Benton Riter has - subscribed for $2,500 of the capital of said association; said Clark - Isaac Hayes has subscribed for $10,000 of the capital of said - association; said Gershom Clark Hyde has subscribed for $1,000 of - the capital of said association; said James Henry Caldwell has - subscribed for $2,500 of the capital of said association; said - George Lawrence Benton has subscribed for $1,000 of the capital of - said association; said George Hill Graham has subscribed for $1,000 - of the capital of said association; said Elisha Gilbert Patterson - has subscribed for $5,000 of the capital of said association; said - Benjamin Bakewell Campbell has subscribed for $10,000 of the capital - of said association; said Delos Olcott Wickham has subscribed for - $2,500 of the capital of said association; said Joseph Henry - Simmonds has subscribed for $1,000 of the capital of said - association; said Lewis Henry Smith has subscribed for $1,000 of the - capital of said association. - - _Second._—The total amount of the capital of the said association is - $625,000, and said capital shall be paid at the times and in the - manner following, to wit: Twenty-five per cent. thereof on the - second day of December, A.D. 1878; twenty-five per cent. thereof on - the second day of January, A.D. 1879; twenty-five per cent. thereof - on the first day of February, A.D. 1879, and the balance of - twenty-five per cent. thereof the third day of March, A.D. 1879. The - whole of said capital shall be paid in lawful money to the treasurer - of said association at the principal office or place of business of - said association at Titusville, Pennsylvania. - - _Third._—The character of the business to be conducted by said - association is the production, shipping, refining, storing, - insuring, buying and selling of petroleum and its products, and the - acquisitions, manufacture and management of such property, real, - personal and mixed, as may be deemed necessary or advisable to use - in such business or in connection therewith. The location of the - business to be conducted by said association is at the city of - Titusville, in the county of Crawford, and state of Pennsylvania, - where the principal office or place of business of said association - is established and shall be maintained. - - _Fourth._—The name of the said association is the Tidewater Pipe - Company (Limited). - - _Fifth._—The contemplated duration of said association is twenty - years from the date of this statement. - - _Sixth._—The names of the officers of said association selected in - conformity with the provisions of said act are as follows: - - The managers of said association so elected are: Byron David Benson, - Hascal Ledger Taylor, Alanson Ashford Sumner, Robert Emmet Hopkins, - and John Hahn Dilks, of whom said Byron David Benson is so selected - chairman of said association; said Robert Emmet Hopkins is so - selected treasurer of said association; and said Alanson Ashford - Sumner is so selected secretary of said association. - - _In Witness Whereof_, the persons named in this statement have - hereunto severally signed their names, this thirteenth day of - November, _Anno Domini_ one thousand eight hundred and - seventy-eight: - - ELISHA GILBERT PATTERSON, BYRON DAVID BENSON, MARCUS BROWNSON, - HASCAL LEDGER TAYLOR, GEORGE LAWRENCE BENTON, ALANSON ASHFORD - SUMNER, DELOS OLCOTT WICKHAM, DAVID MCKELVY, ADAM CLARK HAWKINS, - DAVID BOYD STEWART, JOHN HAHN DILKS, GEORGE HILL GRAHAM, WILLIAM - HENRY NICHOLSON, JOSEPH HENRY SIMMONDS, GERSHOM CLARK HYDE, LEWIS - HENRY SMITH, WILLIS BOOTH BENEDICT, BENJAMIN BAKEWELL CAMPBELL, - WILLIAM HENRY CONLEY, CALVIN NATHANIEL PAYNE, THOMAS BENTON RITER, - JAMES HENRY CALDWELL, CLARK ISAAC HAYES, ANDREW NORTON PERRIN, - SAMUEL QUEEN BROWN, ROBERT EMMET HOPKINS. - - - NUMBER 38 (See page 2015) - TESTIMONY OF HENRY M. FLAGLER IN REGARD TO THE TIDEWATER CONTEST - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3,112, page 783.] - - - _Q._ Now you can make your statement. - - _A._ I want to say this: The Tidewater Pipe Line was the first line - built to the seaboard, and it had a connection with the Reading - Railroad, by which the railroad and the line jointly undertook to do - business. We had several discussions of pipe-lines of the future - with the representatives of the Tidewater Pipe Line, and would have - had no difficulty whatever in making satisfactory arrangements with - them, which would have removed all unnecessary competition, but the - New York Central, the Erie road, and the Pennsylvania Central said - to us: “Gentlemen, we don’t want you to make any alliance of any - formal nature with the Tidewater Pipe Line.” They added: “We will - protect you in the matter of rates as against any competition - furnished by the Reading and Tidewater Pipe Line.” I replied to - that: “I have never seen a contest begun of this kind but what there - was an end to it. Now, we can make a satisfactory arrangement with - the Tidewater Pipe Line and avoid all this contest. It is not - necessary for you to throw away any money. We are not seekers after - low rates. We have done our business by you, and are willing to - continue, but only upon one single, solitary condition: we would - prefer not to have this contest; it is better that the Tidewater and - Reading Railroad should be recognised.” The reply was: “We never - will recognise them as carriers of oil.” - - _Q._ That was the reply of these three trunk lines? - - _A._ Yes, sir. I said: “Gentlemen, the other thing is of a great - deal more importance than the rates. The rates are short-lived - affairs.” Now, I will make this explanation in justice to ourselves, - in reply to the remark you made of our contest with the Tidewater - Line. We had no contest. It was simply a contest of the - transportation lines, and we, like fools, allowed ourselves, instead - of making arrangements with the Tidewater Line, to say to the trunk - lines: “Very well, then, we will stick to you and leave you to fight - out this battle.” They fought it for a year or two, and you know how - it ended. - - _Q._ Three or four years, was it not? - - _A._ I thought it was two years. - - _Q._ Then I understand you to say that all that struggle, and the - low rate that the trunk line charged at the time the competition - with the Tidewater and Reading came into existence, was brought - about by the trunk lines themselves? - - _A._ It was a struggle on the part of the trunk lines to hold the - entire oil business, and they avowed it to me not once, but many - times, that it was their firm intention never to recognise the - Tidewater to the seaboard. - - _Q._ And during that struggle they actually carried it at fifteen - cents a barrel? - - _A._ I should have said twenty or twenty-five cents. I knew it was a - ridiculously low rate. - - - NUMBER 39A (See page 2024) - AGREEMENT BETWEEN STANDARD AND TIDEWATER REFINERIES - - - [From manuscript presented to the Industrial Commission by Lewis - Emery, Jr.] - - - This agreement, made and entered into the ninth day of October, A.D. - 1883, by and between the Standard Oil Company, a corporation of - Ohio, the Standard Oil Company of New York, a corporation of New - York, and the Standard Oil Company of New Jersey, a corporation of - New Jersey, who collectively constitute the party of the first part, - and the Ocean Oil Company, a corporation of New Jersey, the Chester - Oil Company, a corporation of Pennsylvania, and Ayres, Lombard and - Company, a corporation of New York, who collectively constitute the - party of the second part. - - _Witnesseth_: That in consideration of the mutual covenants and - agreements hereby made and entered into, the said parties do hereby - covenant and agree to and with each other as follows: - - _First._—That for the purpose of this contract the business of - refining petroleum is defined to mean the distillation of crude - petroleum within the United States, without regard to where the - crude is obtained; the quantity of crude petroleum received at each - refinery, except for export in its crude state, shall be regarded as - the quantity refined by it. - - _Second._—That in said business the refineries named in schedule “A” - and schedule “B” (which schedules are hereto attached and made a - part of this agreement) shall respectively be entitled to have and - do the following percentage or proportionate part of the aggregate - business of all refineries named in both schedules, viz.: The - refineries named in Schedule “A,” eighty-eight and one-half (88½) - per cent. thereof, and the refineries named in Schedule “B” eleven - and one-half (11½) per cent. thereof. - - _Third._—The refineries named in Schedule “A” and the refineries - named in Schedule “B” shall respectively do as nearly as practicable - their said proportion or percentage of said business; and is agreed - that, - - _A._—If in any calendar month the refineries named in Schedule “A” - shall receive more than their said percentage of the said aggregate - of crude petroleum received except for export in its crude state, - the party of the first part hereto will pay to the party of the - second part hereto, twenty (20) cents per barrel on the quantity so - received in excess of their said percentage. - - _B._—If in any calendar month the refineries named in Schedule “B” - shall receive more than their said percentage of the said aggregate - of crude petroleum received except for export in its crude state, - the party of the second part hereto will pay to the party of the - first part hereto twenty (20) cents per barrel on the quantity so - received in excess of this said percentage. - - _C._—If in any year the refineries named in Schedule “A” shall - neglect or refuse to do eighty (80) per cent. of their said - percentage of said business, then the party of the first part shall - return and repay the party of the second part the sums received - under the provisions of this paragraph in excess of the sums paid - under the same provisions during the same year. - - _D._—If in any year the refineries named in Schedule “B” shall - neglect or refuse to do eighty (80) per cent. of their said - percentage of said business, then the party of the second part shall - return and repay to the party of the first part the sums received - under the provisions of this paragraph in excess of the sums paid - under the same provisions during the same year. - - _Fourth._—Each party hereto shall make to the other daily reports - showing all crude petroleum received at the refineries named in said - schedule, and when, where and from whom received, and all crude - petroleum exported therefrom, and when, where and to whom delivered. - The reports of the party of the first part shall show the crude - received at and exported from refineries named in Schedule “A,” and - the reports of the party of the second part shall show the crude - received at and exported from refineries named in Schedule “B.” The - correctness of such reports shall, if required of either party, be - verified by the party making them. - - _Fifth._—A settlement shall be made, on or before the fifteenth day - of each month, of all business done under this agreement during the - preceding month, and payments shall then be made of all such sums as - under the terms hereof shall be found payable by either party to the - other. - - _Sixth._—All refineries now owned or controlled by those owning or - controlling a majority of the refineries embraced in Schedule “A” - are or shall be included in Schedule “A,” and all refineries which - may hereafter be acquired or controlled in the same interest shall, - as acquired or controlled, be added to said Schedule “A,” and by - such addition be included in the terms of this agreement. All - refineries now owned or controlled by those owning or controlling a - majority of the refineries embraced in Schedule “B,” and all - refineries which may hereafter be acquired or controlled in the same - interest shall, as acquired or controlled, be added to said Schedule - “B,” and by such addition be included in the terms of the agreement. - - _Seventh._—It is understood that forty-two gallons constitute a - barrel. - - _Eighth._—A year, whenever used in this contract, is understood to - mean a calendar year. - - _Ninth._—This agreement shall take effect on the first day of - October, 1883, and remain in force for fifteen (15) years from said - date. - - _Provided_, however, and it is agreed that it shall not remain in - force longer than a certain other agreement of even date herewith - between the National Transit Company and the United Pipe Lines of - the first part, and the Tidewater Pipe Company, Limited, of the - second part, shall remain in force, and that a termination of said - other agreements shall at the same time terminate this one. - - _In Witness Whereof_, the said parties have caused their common and - corporate seals to be hereto attached and to be attested by the - signature of their proper officers the day and year first aforesaid. - - Standard Oil Company, by - O. H. PAYNE, _Vice-President_. - [S. O. C., Cleveland] Attest: W. P. THOMPSON, _Secretary_. - - Standard Oil Company of New York, by - WILLIAM ROCKEFELLER, _President_. - [S. O. C., New York] Attest: GEORGE H. VILAS, _Secretary_. - - Standard Oil Company of New Jersey, by - J. A. MCGEE, _President_. - [S. O. C., New Jersey] Attest: GEO. H. VILAS, _Secretary_. - - - NUMBER 39B (See page 2024) - AGREEMENT BETWEEN STANDARD AND TIDEWATER PIPE LINES - - - [From manuscript presented to the Industrial Commission by Lewis - Emery, Jr.] - - - This agreement, entered into the ninth day of October, A.D. 1883, by - and between the National Transit Company and the United Pipe Lines, - each being a corporation of the state of Pennsylvania, parties of - the first part, and the Tidewater Pipe Company, Limited, a limited - partnership association formed under the laws of the state of - Pennsylvania, party of the second part. - - _Witnesseth_: That in consideration of the mutual covenants and - agreements hereby made and entered into, the said parties do hereby - covenant and agree to and with each other as follows: - - _First._—That for the purposes of this contract the business - hereinafter referred to is divided into departments, one known as - the “Gathering Department,” one known as the “Transporting - Department,” one known as the “Interior Export Department,” and one - known as the “Seaboard Export Department.” - - All crude petroleum received directly or indirectly from wells - located in the state of New York or state of Pennsylvania, and into - the system of pipes and tanks now owned or controlled, or which may - hereafter be owned or controlled by any party hereto, either - directly or indirectly, shall constitute gathering, and the business - of so receiving crude petroleum is the business of said gathering - department. All deliveries from local lines of pipe of crude - petroleum gathered as aforesaid, to or for any of the refineries - then embraced in Schedule “A” or Schedule “B” (which schedules are - hereto attached and made part of this agreement), and also all - deliveries of crude petroleum from any of the trunk lines of pipe - now owned or controlled, or which may hereafter be owned or - controlled, by any party hereto, either directly or indirectly, and - the getting of such crude petroleum to the point of delivery shall - constitute transporting, and the business of so getting and - delivering crude petroleum is the business of said transporting - department, except, and it is agreed, that whatever petroleum - gathered as aforesaid shall be delivered to or for any party hereto, - or to or for any refinery or refining company then embraced in - either of said schedules, for export in its crude state, whether the - same shall be delivered from a local line of pipe or a trunk line of - pipe, shall not be included in transporting, nor in the business of - said transporting department. - - All petroleum gathered as aforesaid and delivered from local lines - of pipe for export in its crude state (other than deliveries to - trunk lines of pipe of such petroleum for export in its crude state) - by or for any party hereto or by or for any refinery or refining - company then embraced in either of said schedules, shall constitute - interior exporting and the business of receiving and exporting such - petroleum in its crude state shall be the business of said interior - export department. - - All petroleum gathered as aforesaid and delivered from trunk lines - of pipe for export in its crude state by or for any party hereto or - by or for any refinery or refining company then embraced in either - of said schedules shall constitute seaboard exporting, and the - business of receiving and exporting such petroleum in its crude - state shall be the business of said seaboard export department. - - All pipes used for gathering and delivering at points in the - oil-producing regions are herein called local lines. - - All lines of pipe used for transporting beyond the oil-producing - regions are herein called trunk lines. - - _Second._—That in each said department of the business the - respective parties hereto shall be entitled to do the following - percentage or proportionate part of the aggregate business done by - all parties hereto then in said department, viz.: The said parties - of the first part eighty-eight and one-half (88½) per centum - thereof, and the said party of the second part eleven and one-half - (11½) per centum thereof. - - _Third._—Each party hereto shall do as nearly as practicable its - said proportion or percentage of said business. And it is agreed - that: - - _A._—If in any calendar month either party shall gather more than - its said percentage of said aggregate of crude petroleum gathered, - as gathering is herein defined, it shall pay to the other party on - the quantity gathered in excess of its said percentage an amount per - barrel equal to three-fourths of the then current full rate per - barrel charged for collecting and delivering crude petroleum in the - oil-producing regions—commonly called local pipage; - - _Provided_, however, and it is hereby agreed that this clause shall - not be applicable to crude petroleum gathered as aforesaid prior to - September 1, 1884. - - _And provided, further_, That the excess over its said percentage - gathered prior to September 1, 1884, by either party shall on demand - of the other be delivered to the other party at some point or points - in the oil-producing regions convenient to both the party receiving - and the party delivering (the means and places to be mutually agreed - upon) when and as often as the said excess amounts to ten thousand - (10,000) barrels, upon legal orders or certificates with storage and - assessments thereon paid to date of delivery being presented - therefor, or upon the payment of the then market price of United - Pipe Line certificates for a like quantity. The party receiving - shall pay the party delivering the same a gathering charge of ten - (10) cents per barrel upon all petroleum so delivered. - - _B._—If in any calendar month either the parties of the first part - or the party of the second part shall transport and deliver more - than their or its said percentage of the said aggregate of crude - petroleum transported, as transporting is herein defined, they or it - shall pay to the other party twenty-five (25) cents per barrel upon - the quantity transported and delivered in excess of their or its - said percentage. - - _Provided_, That the amount payable under this clause shall not - exceed the amount it would cost to bring said excess from the mouth - of a local pipe in the oil-producing regions to either the port of - New York or the port of Philadelphia at the then current rate of - transportation by any route or method not owned or controlled - directly or indirectly by any party hereto. - - _C._—If in any calendar month either party shall do more than its - said percentage of business in either the exterior export department - or the seaboard export department, it shall pay to the other party - twenty-five (25) cents per barrel upon the quantity so exported in - excess of its said percentage. - - _Provided, however_, That the amount per barrel payable under this - clause shall not exceed the amount per barrel which would be payable - under Clause B and its proviso at the same time for excess in the - transporting department. - - _D._—If in any year either party shall neglect or refuse to do - eighty (80) per centum of its said proportion or percentage in any - department of said business, then the party so doing less than - eighty (80) per centum of its said proportion shall return or repay - to the other party the sums received in that department under the - provisions of this paragraph in excess of the sums paid in the same - department under the same provisions during the same year. - - _Fourth._—Each party shall make to the other daily reports showing: - - 1st. All crude petroleum gathered, as gathering is herein defined. - - 2nd. All crude petroleum delivered from local lines other than - deliveries to trunk lines, stating when, where and to whom - delivered. - - 3rd. All crude petroleum delivered from local lines to trunk lines, - stating when, where and to which line delivered. - - 4th. All crude petroleum delivered from trunk lines, stating when, - where and to whom delivered. - - 5th. All crude petroleum exported in the crude state, stating when, - where and from whom received, so as to distinguish between receipts - from local lines and receipts from trunk lines, and when, where and - to whom delivered for export. The correctness of such reports shall, - if required by either party, be verified by the party making them. - - _Fifth._—On all deliveries of crude petroleum from local lines made - by said parties of the first part or either of them, other than such - deliveries as constitute transporting, as transporting is - hereinbefore defined, the parties of the first part will account for - and pay to the party of the second part eleven and one-half (11½) - per centum of the then current full rate of local pipage, first - deducting from such full rate ten (10) cents per barrel for the work - of gathering and delivering such petroleum. - - On all deliveries of crude petroleum from local lines made by said - party of the second part other than such deliveries as constitute - transporting as hereinbefore defined, the party of the second part - will account for and pay to the parties of the first part - eighty-eight and one-half (88½) per centum of the then current full - rate of local pipage, first deducting from such full rate ten (10) - cents per barrel for the work of gathering and delivering such - petroleum. - - _Sixth._—It is agreed that in case of excess of deliveries over the - quantity gathered, as gathering is herein before defined, by all the - parties hereto, the stocks in custody of the respective parties - shall to the extent of such excess be diminished in the ratio of - eighty-eight and one-half (88½) per centum thereof from the stocks - in custody of said parties of the first part, and eleven and - one-half (11½) per centum thereof from the stocks in custody of said - party of the second part; and to this end it is agreed that whenever - and as often as under the working of this agreement the depletion of - the stocks in the custody of either of the respective parties shall - amount to ten thousand (10,000) barrels in excess of such party’s - percentage of depletion, then the other party shall and will on - demand deliver, and the party whose stocks are so depleted will when - tendered receive, said ten thousand (10,000) barrels at some point - or points in the oil-producing regions convenient to both the party - receiving and the party delivering (the means and place to be - mutually agreed upon), upon legal orders or certificates with - storage and assessments thereon paid to date of delivery being - presented therefor, or upon the payment of the then market price of - United Pipe Line certificates for a like quantity. The party - receiving shall pay to the party delivering a gathering charge of - ten (10) cents per barrel upon all petroleum gathered. - - _Seventh._—A settlement shall be made on or before the fifteenth day - of each month of all business done under this agreement during the - preceding month, and payment shall then be made of all such sums as - under the terms hereof shall be found payable by either party to the - other. - - _Eighth._—If in any year the profits of the party of the second part - added to the profits of the several refineries then embraced in - Schedule “B” shall in the aggregate amount to less than five hundred - thousand (500,000) dollars (excluding from the calculations all - profits realised and losses sustained from speculation and the value - of property destroyed by fire), then the said party of the second - part shall have the right within three months from the time the - profits of such year shall have been ascertained to cancel this - agreement. - - _Provided, however_, That the said right shall not exist or shall - not be exercised under the following circumstances, to wit: - - 1st. If the average of such profits during the said year and all - previous years from the beginning of this agreement shall equal five - hundred thousand (500,000) dollars per year. - - 2nd. If the said parties of the first part or either of them shall - contribute to the said party of the second part such sums of money - as together with the said profits for the said year will make the - average profit five hundred thousand (500,000) dollars per year. - - _And provided, further_, That in exercising the right of - cancellation the said party of the second part must give to one or - both of said parties of the first part three (3) months’ written - notice of said cancellation, which notice must be accompanied by a - statement of the said profits of the party of the second part, and - of said refineries then embraced in Schedule “B,” and any - contributions made as aforesaid must be made within the said three - (3) months. - - The party receiving said notice shall have the right to verify the - statement by an examination of the books of said party of the second - part, and books of said refineries. - - _Ninth._—All refineries now owned or controlled by those owning or - controlling a majority of the refineries embraced in Schedule “A” - are or shall be included in Schedule “A”; and all refineries which - may hereafter be acquired or controlled in the same interest shall, - as acquired or controlled, be added to said Schedule “A,” and by - such addition be included in the terms of this agreement. - - All refineries now owned or controlled by those owning or - controlling a majority of the refineries embraced in Schedule “B” - are or shall be included in Schedule “B”; and all refineries which - may hereafter be acquired or controlled in the same interest shall, - as acquired or controlled, be added to said Schedule “B,” and by - such addition be included in the terms of this agreement. - - _Tenth._—It is agreed that any business done in either the interior - export department or the seaboard export department by any of the - refineries or refining companies then embraced in Schedule “A” shall - be treated for the purpose of this agreement as if done by the - parties of the first part; and that any business done in either of - said export departments by any of the refineries or refining - companies then embraced in Schedule “B” shall be treated for the - purposes of this agreement as if done by the party of the second - part. - - _Eleventh._—It is understood that forty-two (42) gallons constitute - a barrel. - - _Twelfth._—A year, whenever used in this contract, is understood to - mean a calendar year. - - _Thirteenth._—This agreement shall take effect as of the first day - of October, 1883, and unless sooner cancelled, as provided in the - eighth paragraph, shall remain in force for fifteen (15) years from - said first day of October, 1883. - - _In Witness Whereof_, the said parties of the first part have caused - their common and corporate seals to be hereto attached and to be - attested by the signatures of their proper officers; and the said - party of the second part has caused the same to be signed in its - name and on its behalf by two of its managers, the day and year - first aforesaid. - - NATIONAL TRANSIT COMPANY, - [Nat. Tran. Co. Seal.] (Signed by) BENJAMIN BREWSTER, _Vice-President_. - Attest: JOHN BUSHNELL, _Secretary_. - - UNITED PIPE LINES, - [U. P. L. Seal.] (Signed by) J. J. VANDERGRIFT, _President_. - Attest: H. D. HANCOCK, _Secretary_. - - - SCHEDULE OF REFINERIES REFERRED TO IN THE ATTACHED AGREEMENT - - SCHEDULE “A” - - Atlas Refining Co. Works at Buffalo, N. Y. - Acme Oil Co. of Pennsylvania Works at Titusville, Pa. - Acme Oil Co. of New York Works at Olean, N. Y. - Atlantic Refining Co. Works at Philadelphia, Pa. - American Lubricating Oil Co. Works at Cleveland, Ohio. - Baltimore United Oil Co. Works at Canton, Md. - Bush Denslow Mfg. Co. Works at South Brooklyn, N. Y. - Camden Consolidated Oil Co. Works at Parkersburg, W. Va. - Camden Consolidated Oil Co. Works at Canton, Md. - Central Refining Co., Limited Works on Newtown Creek, L. I. - Empire Refining Co., Limited Works on Newtown Creek, L. I. - Eclipse Lubricating Co., Limited Works at Franklin, Pa. - Eclipse Lubricating Co., Limited Works at Olean, N. Y. - Eagle Oil Co. Works at Communipaw, N. J. - Galena Oil Works, Limited Works at Franklin, Pa. - Imperial Refining Co. Works at Oil City, Pa. - Pratt Mfg. Co. Works at Bushwick Creek, L. I. - Jenny & Son, S. Works at Wallabout Land. - Donald & Co., James Works at Newtown Creek, L. I. - Portland Kerosene Co. Works at Portland, Me. - Paine, Ablett & Co., Limited Works at Smith’s Ferry. - Paine, Ablett & Co., Limited Works at Freedom, Pa. - Sone Fleming Mfg. Co., Limited Works at Newtown Creek, L. I. - Standard Oil Co. of New York Works at Newtown Creek, L. I. - Standard Oil Co. of New York Works at Hunter’s Point, L. I. - Standard Oil Co. of New Jersey Works at Bayonne, N. J. - Standard Oil Co. of Pennsylvania Works at Pittsburg, Pa. - Standard Oil Co. of Ohio Works at Cleveland, Ohio. - Union Refining Co., Limited Works at Oil City, Pa. - Vacuum Oil Co. Works at Rochester, N. Y. - - SCHEDULE “B” - - Chester Oil Co. Works at Chester, Pa. - Ocean Oil Co. Works at Bayonne, N. J. - Seaboard Oil Co. Works at Bayonne, N. J. - Solar Oil Co. Works at Buffalo, N. Y. - - - NUMBER 40 (See page 2028) - TWO AGREEMENTS OF EVEN DATE, AUGUST 22, 1884, BETWEEN THE PENNSYLVANIA - RAILROAD COMPANY AND THE NATIONAL TRANSIT COMPANY - - - [Report of the Industrial Commission, 1900. Volume I, pages - 663–666.] - - - Memorandum of a traffic agreement, made this twenty-second day of - August, 1884, between the Pennsylvania Railroad Company, hereinafter - designated the railroad company, and the National Transit Company, - hereinafter designated the transit company, _Witnesseth_: - - That for consideration mutually interchanged, the parties hereto - agree, each with the other, as follows: - - _First._—The transit company owns an extended system of local pipes - in the Oil Regions of Pennsylvania and New York, which are grouped - into a separate division, known as the United Pipe Lines Division of - the National Transit Company. This division will be hereinafter - designated as the Transit Company’s Local Division. - - The business of this division is to collect oil from producer, store - it in tanks, and deliver it, as may be desired, to any through - carrier of petroleum, which will transport the same to where it is - to be refined or otherwise disposed of. - - The transit company also own certain through or trunk line pipes, - extending from several points of connection with the aforesaid local - pipe division to various refining and terminal points. - - With these latter pipes, which will be hereinafter entitled the - Transit Company’s Trunk Line Division, it competes in the through - carriage of petroleum with all other through carriers, whether pipe - or rail. - - The business of its local division is therefore entirely distinct - from the business of its through trunk line division. - - It undertakes and agrees that its local division will deliver into - cars furnished by the railroad company at any of its regular - delivery points and under its regular delivery rules whatever - petroleum the owners thereof may desire to have so delivered, and as - the railroad may furnish cars to transport, and will make no - discrimination in its local charges for carriage, storage, and other - services, or in the use of any of its local facilities, against such - oil, but will at all times treat it in the said respects as - favourably as it at the same time treats any other petroleum which - may be delivered to its own trunk line division or to any other - through carriers. - - _Second._—The transit company agrees that all petroleum brought to - the Atlantic seaboard by all existing carriers, whether rail or - pipe, now engaged in transporting such property, or which may - hereafter engage in such transportation in conjunction with the - transit company’s pipe-lines, shall be ascertained monthly, and so - much of it as shall have been shipped in the refined state shall be - reduced to its equivalent in crude oil by considering that one and - three-tenths (1–3/10) gallons of crude are required to make one (1) - gallon of refined oil. It further undertakes and agrees that if of - the total so transported the railroad company shall not have moved - in its cars twenty-six (26) per centum thereof, the transit company - shall cause to be delivered to cars furnished by the railroad - company at Milton, Pa., such quantity of crude petroleum as shall, - when added to the amount which has been actually transported by the - railroad company to the seaboard in said month, make the total - transported by the railroad company in said month equal to said - twenty-six (26) per centum. - - The railroad company agrees to furnish the needful cars and - facilities, and promptly transport the oil which the transit company - agrees in this contract to deliver to it at Milton: - - _Provided_, That if during any month the railroad company is not - able to assign from its oil equipments a sufficient number of cars - to the traffic of the transit company to move the proportion of oil - herein provided to be delivered at Milton, then during that month - the transit company shall only be required to so deliver to the - railroad company such quantity of oil as the railroad company shall - be able to transport, and shall not be required to make up any - deficiency that may occur during said month. - - Efforts shall be made by the transit company to deliver so much - during each month as will probably be necessary to make the total - carried by the railroad company equal to said percentage. - - Shortages, if not due to short supply of cars, and such excesses as - may be found to have occurred in any month, shall be adjusted in the - following month, or as soon afterwards as shall be possible. - - _Third._—It is agreed that the proportion of petroleum which the - transit company is to deliver under the second section of this - agreement shall be considered as petroleum transported from - Coalgrove, Pa., via Milton, Pa., to the Atlantic seaboard, and that - the railroad company shall be entitled to one-half of the current - through rates thereon. - - It is agreed that whenever the through rates shall be so low that - the railroad company shall suspend the movement of oil by its cars, - at other points than Milton, the transit company shall during such - suspension not be bound to deliver to the railroad company any oil - at Milton. - - _Fourth._—All joint rates for the joint transportation of oil from - any delivery point of the local pipe division aforesaid to any - refining or terminal point shall be fixed by the railroad company, - subject to the advice and concurrence of the transit company. - - It is agreed that said joint through rates shall be uniform to all - parties. The railroad company stipulates that it will make no - discrimination whatever, either in rates or facilities, against the - transit company or against the oil which the said transit company - herein covenants to deliver to it. - - It is agreed that the joint through rates to Philadelphia shall - always be five cents less per barrel on crude oil, or its refined - equivalent, than shall be currently charged to New York harbour. - - It is agreed that the joint through rates, which shall be so fixed - from time to time, shall be as low as shall be currently made - between same and similar points by rival carriers of petroleum, and - shall not be higher than an approximate mileage proportion of rates - current on petroleum produced south of Oil City, nor than rates from - Olean and similar points. - - It is also agreed that rates on refined oil and other products of - crude oil shall be fixed by the railroad company upon the following - basis, viz.: - - From railroad stations in the Oil Regions to which oil is delivered - by local pipes the rate to any point east thereof on a barrel of - refined oil or other products shall be one and three-tenths (1–3/10) - times the current rate on a barrel of crude oil to the same point. - - From Pittsburg the rate to any point east thereof on a barrel of - refined oil or other products shall be one and three-tenths (1–3/10) - the rate currently charged on crude oil to any such eastern point - from rail points south of Oil City: - - _Provided_, That one and three-tenths times the charges for moving a - barrel of crude oil by rail or through pipe from the local pipe to - Pittsburg shall first be deducted therefrom. - - From Cleveland and Buffalo the net rate on a barrel of refined oil - or other products to any point east thereof shall be not less than - is currently charged to the same point from Pittsburg. - - _Fifth._—Whenever the term barrel is used herein, unless otherwise - specified, it means forty-five gallons of crude petroleum; and - whenever the term oil is used herein, unless otherwise specified, it - means crude petroleum. - - _Sixth._—The transit company hereby agrees that it will not make any - more favourable terms with any other rail line connecting with any - of its pipes than the terms which under this agreement are given to - the railroad company; or if for any reason it should desire to do - so, it hereby agrees to modify this contract so as to give the said - “more favourable terms” to the railroad company. - - _Seventh._—All existing contracts between the parties hereto shall - be deemed to have been accomplished, and shall become void and of no - effect upon the day this contract goes into operation. - - _Eighth._—This contract shall take effect as of the first day of - August, 1884, and shall continue until terminated under the - provisions hereof. It may be terminated after August 1, 1889, by - either party hereto giving ninety days’ written notice to the other - of a desire that it shall end, at the expiration of which notice it - shall cease and determine. - - _In Witness Whereof_, the parties hereto have executed this - agreement under their corporate seals the day and date above - written. - - THE PENNSYLVANIA RAILROAD COMPANY, - [L.S.] By FRANK THOMSON, _Second Vice-President_. - Attest: JOHN C. SIMS, JR., _Secretary_. - - THE NATIONAL TRANSIT COMPANY, - [L.S.] By C. A. GRISCOM, _President_. - Attest: JOHN BUSHNELL, _Secretary_. - - * * * * * - - Memorandum of agreement, made this twenty-second day of August, - 1884, between the Pennsylvania Railroad Company, hereinafter - designated the railroad company, and the National Transit Company, - hereinafter designated the transit company. - - _Witnesseth_: That for considerations mutually interchanged the - parties hereto hereby agree with each other as follows: - - _Whereas_, The parties hereto have made an agreement of even date - herewith, in which, among other things, it is stipulated that under - certain circumstances the transit company shall deliver certain - crude petroleum into cars furnished by the railroad company at - Milton, Pa.; and - - _Whereas_, It has been proposed that the railroad company shall - contract with the transit company to the effect that the transit - company shall transport through its pipe-lines the aforesaid crude - oil, which, under the other contract aforesaid, it has undertaken to - deliver into the cars of the railroad company at Milton. - - _Now, therefore_, this agreement witnesseth: - - _First._—The railroad company agrees that instead of delivering said - crude oil to said cars at Milton, the transit company shall - transport the same through its pipes to destination, and the transit - company undertakes and agrees to do such transportation. It is - mutually agreed that the compensation to the transit company for - doing said work shall be as follows: - - Whenever the through rate for transporting a barrel of crude - petroleum from Olean to Philadelphia shall be forty cents, the - transit company shall receive eight cents per barrel as such - compensation for so much of said oil as under the provisions hereof - shall be considered as Philadelphia oil. - - For each five cents of increase or diminution in said rates from - Olean to Philadelphia the said compensation on Philadelphia oil - shall be increased or diminished one cent per barrel. - - _Provided, however_, That the transit company shall not be obliged - to accept less than six cents per barrel, and shall not receive more - than ten cents per barrel on such Philadelphia oil. - - It is agreed that the said compensation on the oil, which under the - provisions hereof is to be deemed New York oil, shall be one cent - per barrel greater than it currently shall be on Philadelphia oil. - - Whenever, and from time to time, as the said joint through rates - shall be so low that the said minimum compensation to the transit - company of six cents per barrel shall be as much or more than the - railroad company’s share of said joint through rates, this contract - may, at the option of either party hereto, be suspended during all - or any part of the time such low rates shall prevail. During such - suspension the aforesaid other contract shall alone remain in force; - but whenever, and from time to time, as said joint through rates - shall again be high enough to make the said minimum compensation, - under said sliding scale, less than the said share of said joint - through rates, this contract shall again resume its force and - effect. - - _Second._—The transit company agrees to account for, and pay to the - railroad company, on or before the twentieth of each month, the - latter’s share of the joint rates on joint business _via_ Milton (as - provided in said other contract) during the next preceding month, - first retaining, however, the proportion of such share which it is - hereinbefore agreed the transit company is to have for its services - in pumping said oil to the seaboard. - - It is agreed that all such joint business shall be considered as - having transported from Coalgrove _via_ Milton, Pa., to the Atlantic - seaboard, and that it shall be considered as having gone either to - Baltimore, Philadelphia, or New York, or partly to each. The - proportion thereof which has constructively gone to New York shall - be determined upon the following basis: - - The total amount of oil transported in any month by the railroad - company to New York shall be compared with fifty (50) per centum of - the total oil which the railroad company is entitled to carry in - said month under the aforesaid other agreement. If the amount which - has been in such month carried by cars to New York shall be less - than fifty (50) per centum, then the difference shall be considered - as having been moved by the pipe to New York, at New York rates, and - shall be accounted for accordingly. The remainder of the oil _via_ - Milton shall be accounted for at Philadelphia rates. - - This contract shall commence and terminate simultaneously with said - other contract. - - Witness the corporate seals of said parties duly attested the day - and date above written. - - THE PENNSYLVANIA RAILROAD COMPANY, - [L.S.] By FRANK THOMSON, _President_. - Attest: JOHN C. SIMS, _Secretary_. - - THE NATIONAL TRANSIT COMPANY, - [L.S.] By C. A. GRISCOM, _President_. - Attest: JOHN BUSHNELL, _Secretary_. - - - NUMBER 41 (See page 2060) -TABLE SHOWING PRICES OF OIL AT COMPETITIVE AND NON-COMPETITIVE POINTS IN - 1892 - - - [Trust Investigation of Ohio Senate, 1898. Appendix, pages 43–44.] - - - ───────────┬─────────────────────────────────────────┬──────────────────── - TERRITORIES│ │ - AND STATES.│ PRIME WHITE OIL. │ WATER-WHITE OIL. - ───────────┼────────────────────┬────────────────────┼──────────────────── - 〃 │Non-competitive per │ Competitive per │Non-competitive per - │ gallon. │ gallon. │ gallon. - ───────────┼────────┬─────┬─────┼────────┬─────┬─────┼────────┬─────┬───── - │ │ │ │ │ │ │ │ │ - 〃 │ │ │ │ │ │ │ │ │ - │ │ │ │ │ │ │ │ │ - │Barrels.│Case.│Bulk.│Barrels.│Case.│Bulk.│Barrels.│Case.│Bulk. - ───────────┼────────┼─────┼─────┼────────┼─────┼─────┼────────┼─────┼───── - Arizona │ │ │ │ │ │ │ │ 31 │ - Arkansas │ 14 │ │ 13 │ 8 │ │ 7½│ 16 │ │ 17 - Alabama │ 13 │ │ 8½│ 8¼│ │ 6½│ 17 │ │ 12 - California │ │ │ 16 │ 13 │ │ 12½│ │ 26½│ - Colorado │ │ 26 │ 21 │ 10 │ 15 │ 7 │ │ 31 │ 25 - Florida │ 13½│ 16 │ 12 │ │ │ │ 17 │ 18½│ - Georgia │ 14 │ │ 9½│ 9½│ │ 6½│ 17 │ │ 14 - Idaho │ 22½│ 29 │ │ │ │ │ 22½│ 30 │ 17 - Illinois │ 10 │ │ 8 │ 7½│ │ 5½│ 15 │ │ - Indiana │ │ │ │ 6¼│ │ 5 │ 12½│ │ - Iowa │ 9½│ │ 8 │ │ │ 7 │ 12 │ │ - Kansas │ 10½│ │ 9½│ 8½│ │ │ 16½│ │ - Kentucky │ 9½│ │ 8¾│ 7 │ │ 6½│ 12 │ │ - Louisiana │ 12 │ │ 10 │ 7¼│ │ 7 │ 16 │ │ 14 - Michigan │ 8½│ │ 6¾│ 6¾│ │ 3½│ 8½│ │ 7 - Minnesota │ │ │ 9 │ 7½│ │ 5 │ 13 │ │ 11 - Mississippi│ 13½│ │ │ 7¼│ │ │ 15½│ │ - Missouri │ 12 │ │ │ 6 │ │ 5½│ 17 │ │ - Montana │ │ │ 20 │ │ │ 13 │ 21 │ 33 │ 25 - Nebraska │ 18 │ │ │ 7½│ │ │ 27 │ │ - Nevada │ │ 37½│ │ │ │ │ │ │ - New Mexico │ │ 31 │ 26 │ │ │ │ │ 32 │ 28 - North │ │ │ │ │ │ │ │ │ - Dakota │ 15½│ │ │ 12½│ │ │ 18 │ │ 14 - Oregon │ │ 21 │ 14 │ │ 19 │ 13 │ │ 24 │ - Oklahoma │ │ │ 15 │ 9½│ │ │ │ │ 17 - South │ │ │ │ │ │ │ │ │ - Carolina │ 12½│ │ │ 8 │ │ │ 13½│ │ - South │ │ │ │ │ │ │ │ │ - Dakota │ 11½│ │ │ │ │ 8 │ │ │ 12 - Tennessee │ 11½│ │ 8½│ 7¾│ │ 6 │ 17 │ │ - Texas │ 25 │ 27½│ 19 │ 8 │ 14 │ 9 │ 30 │ 33½│ 24 - Utah │ 23 │ 28 │ 25 │ 13 │ │ │ │ │ - Washington │ 16 │ 20½│ 15 │ │ │ │ │ 25½│ - Wisconsin │ 9 │ │ │ 7½│ │ 6 │ 15¼│ │ - Wyoming │ 20 │ 25 │ 15 │ │ │ │ 21 │ 35 │ 29 - ───────────┴────────┴─────┴─────┴────────┴─────┴─────┴────────┴─────┴───── - - ───────────┬────────────────────┬─────────────────────────────────────── - TERRITORIES│ │ - AND STATES.│ WATER-WHITE OIL. │ PER GALLON. - ───────────┼────────────────────┼─────────────────────────────────────── - 〃 │ Competitive prices │ - │ per gallon. │ 〃 - ───────────┼────────┬─────┬─────┼────────┬───────┬───────────┬────────── - │ │ │ │ │ │ │Difference - 〃 │ │ │ │ │ │ │ per tank - │ │ │ │ │ │ │car 6,000 - │Barrels.│Case.│Bulk.│Highest.│Lowest.│Difference.│ gallons. - ───────────┼────────┼─────┼─────┼────────┼───────┼───────────┼────────── - Arizona │ │ │ │ 31 │ │ │ - Arkansas │ │ │ │ 17 │ 7½│ 9½│ $570 - Alabama │ 10¾│ │ │ 17 │ 6½│ 10½│ 630 - California │ 13 │ 17½│ 11½│ 26½│ 11½│ 15 │ 900 - Colorado │ │ │ │ 31 │ 7 │ 24 │ 1,440 - Florida │ │ │ │ 18½│ 12 │ 6½│ 390 - Georgia │ │ │ │ 17 │ 6½│ 10½│ 630 - Idaho │ │ │ │ 30 │ 17 │ 13 │ 780 - Illinois │ 7¾│ │ 3½│ 15 │ 5½│ 9½│ 570 - Indiana │ 6½│ │ │ 12½│ 5 │ 7½│ 450 - Iowa │ 10½│ │ 8 │ 12 │ 7 │ 5 │ 300 - Kansas │ 9½│ │ │ 16½│ 8½│ 8 │ 480 - Kentucky │ 8½│ │ │ 12 │ 6½│ 5½│ 330 - Louisiana │ 7¾│ │ 7½│ 16 │ 7 │ 9 │ 540 - Michigan │ 7½│ │ 3⅖│ 8½│ 3½│ 5 │ 300 - Minnesota │ 8 │ │ 5½│ 13 │ 5 │ 8 │ 480 - Mississippi│ 9½│ │ │ 15½│ 7¼│ 8¼│ 435 - Missouri │ 7¾│ │ 5½│ 17 │ 5½│ 11½│ 690 - Montana │ │ │ │ 33 │ 13 │ 20 │ 1,200 - Nebraska │ 8½│ │ │ 27 │ 7½│ 19½│ 1,170 - Nevada │ │ │ │ 37½│ │ │ - New Mexico │ │ │ │ 32 │ 26 │ 6 │ 360 - North │ │ │ │ │ │ │ - Dakota │ 12¼│ │ 11¼│ 18 │ 11¼│ 6¾│ 405 - Oregon │ │ 23 │ │ 24 │ 13 │ 11 │ 660 - Oklahoma │ │ │ │ 17 │ 9½│ 7½│ 450 - South │ │ │ │ │ │ │ - Carolina │ 9 │ │ │ 13½│ 8 │ 5½│ 330 - South │ │ │ │ │ │ │ - Dakota │ │ │ 8 │ 12 │ 8 │ 4 │ 240 - Tennessee │ 8½│ │ │ 17 │ 6 │ 11 │ 660 - Texas │ 12 │ 16½│ 8 │ 33½│ 8 │ 25½│ 1,530 - Utah │ │ │ │ 28 │ 13 │ 15 │ 900 - Washington │ │ │ │ 25½│ 15 │ 10½│ 630 - Wisconsin │ 7½│ │ 6 │ 15¼│ 6 │ 9¼│ 555 - Wyoming │ 8 │ 16 │ 15 │ 35 │ 8 │ 27 │ 1,620 - ───────────┴────────┴─────┴─────┴────────┴───────┴───────────┴────────── - - - PRIME WHITE OIL - -The table shows that this grade of oil ranges in price as follows: - - In barrels 6 to 25 cents per gallon - In cases 14 to 37½ cents per gallon - In bulk 3½ to 25 cents per gallon - - - WATER-WHITE OIL - -This table also shows that this grade of oil ranges in price as follows: - - In barrels 6½ to 30 cents per gallon - In cases 16 to 35 cents per gallon - In bulk 3½ to 29 cents per gallon - -A comparison of these two grades of oil shows: - - A difference of 24 cents per gallon on barrelled oil - A difference of 21 cents per gallon on case oil - A difference of 25½ cents per gallon on bulk oil - - - NUMBER 42 (See page 2069) - STANDARD OIL COMPANY’S PETITION FOR RELIEF AND INJUNCTION - - - [In the case of the Standard Oil Company _vs._ William C. Scofield - _et al._, in the Court of Common Pleas, Cuyahoga County, Ohio, - 1880.] - - - The said plaintiff, the Standard Oil Company, now comes and says - that on the twentieth day of July, A.D. 1876, it was and still is a - corporation organised and existing under and by virtue of the laws - of the state of Ohio, and that at the same time the said defendants, - William C. Scofield, Charles W. Scofield, Daniel Shurmer and John - Teagle, were and still are partners doing business in the firm name - of Scofield, Shurmer and Teagle, and the said plaintiff complains of - the said defendants, and says: That on the said twentieth day of - July, A.D. 1876, the said plaintiff and the said defendants as such - partners were each separately engaged in the business of refining - and dealing in crude petroleum and its products, said plaintiff - having a number of refining establishments at Cleveland, Ohio, and - the said defendants owning and operating one refinery only, also - located at Cleveland, Ohio, on the line of the Atlantic and Great - Western Railroad, and while so engaged and on the said twentieth day - of July, A.D. 1876, the said plaintiff and the said defendants as - such partners entered into a joint arrangement in writing in and by - which it was, amongst other things, agreed between the said - plaintiff and the said defendants individually and as such partners - that the said defendants would continue their then business in the - firm name of Scofield, Shurmer and Teagle of buying, refining and - selling crude petroleum and its products as theretofore carried on - by them, for a period of ten years from July 20, A.D. 1876, and - furnish for the conducting of said business their refinery aforesaid - with all tanks, fixtures, buildings, erections, tools, and all - mechanical appliances then or theretofore used by them in their said - business, together with the land on which the same are situated, and - also within five days from the date of said agreement furnish for - the use of said joint business adventure the sum of ten thousand - dollars in cash to be used continuously in said business until July - 20, A.D. 1886. That the said William C. Scofield, Charles W. - Scofield, Daniel Shurmer and John Teagle, in and by said agreement - for conducting said joint adventure, further covenanted and agreed - with the plaintiff to devote all their time and personal attention - necessary to conduct the said business for the period aforesaid, and - that during the existence of said adventure they would not nor would - either of them as a firm or as individuals directly or indirectly - engage or be concerned in any business connected with petroleum or - any of its products in Cuyahoga County or elsewhere, except in - connection with the parties of the first part under this agreement, - nor would they or either of them enter into any new business which - would interfere with the time necessary to be devoted to the full - and faithful conduct of the business of said adventure. - - That the said William C. Scofield, Charles W. Scofield, Daniel - Shurmer and John Teagle, in and by said agreement for conducting - said joint adventure, further covenanted and agreed with said - plaintiff that the amount of crude petroleum to be distilled by them - in the business of said adventure should not exceed annually - eighty-five thousand barrels of forty-two gallons each in any year, - but the same should be distributed as nearly as practicable in equal - quantities of 42,500 barrels of forty-two gallons each, each and - every six months from the twentieth day of July, A.D. 1876, but the - said 42,500 barrels might be run in a less period than six months. - - That in and by said agreement for conducting the business of said - joint adventure it was stipulated and agreed by both parties, - amongst other things, that from the net profits of the business of - said joint adventure the said defendants should first be entitled to - retain and be paid the sum of $35,000 per annum while the said - agreement was in force and operation, and in the case the net - profits should not amount to $35,000 for any year that said - agreement for conducting said joint adventure was in force and - operation, then at the expiration of any such year the plaintiff - should on demand pay to the said defendants a sum of money - sufficient to make that amount, viz., $35,000 for any year that said - agreement should be in force and operation. That all net profits - over the amount of $35,000 so stipulated to belong to said - defendants annually should belong and be paid to said plaintiff - until the plaintiff should receive therefrom as much as said - defendants had received from the net profits under the provisions of - said agreement, and all net profits in excess of $70,000 annually - should be divided equally between the parties thereto. - - That in consideration thereof and in and by said agreement for - conducting said joint adventure, the said plaintiff stipulated and - agreed with the said defendants, amongst other things, that on or - before the twenty-fifth day of July, A.D. 1876, it would furnish to - the said defendants for them to use in the business of said joint - adventure the sum of $10,000 in cash, which sum was so paid in as - agreed and still remains in the business. - - That the said plaintiff would receive, dock, and sell in the city of - New York all oil and the products of petroleum consigned to it for - sale at New York by said firm of Scofield, Shurmer and Teagle at - actual cost of brokerage and handling without commissions. - - That the said plaintiff would and did in said agreement guarantee to - the said defendants that their share of the net profits arising from - the business of said joint adventure should for ten years from July - 20, A.D. 1876, to July 20, A.D. 1886, amount to the sum of $35,000 - annually, during the operation of this contract, as hereinbefore - stated. The plaintiff further says that between July 20, 1876, and - the present time, the said defendants have repeatedly violated their - said agreement in this, to wit: that every year since the making of - said agreement the said defendants have distilled over 85,000 - barrels of crude petroleum; that during the year from July 20, 1876, - to July 20, 1877, they distilled 89,983.34–42 barrels; that during - the year from July 20, 1877, to July 20, 1878, they distilled - 87,754.4–42 barrels; that during the year from July 20, 1878, to - July 20, 1879, they distilled 100,246.25–42 barrels, and from July - 20, 1879, to July 20, 1880, they distilled 90,082.34–42 barrels. - - That up to the present time the defendants have distilled more than - by the terms of their said agreement they have a right to distil up - to January 20, 1881, and have purchased large quantities of crude - petroleum and are distilling portions thereof, and threaten to - distil the balance without regarding their said contract. That the - crude petroleum so as aforesaid distilled by the defendants has not - by them been distributed as nearly as practicable in equal - quantities of 42,500 barrels of forty-two gallons each, each and - every six months as they agreed to do, but in violation of their - said agreement they distilled from July 20, 1876, to January, 1, - 1877, 43,509.36–42 barrels; from January 1, 1877, to July 20, 1877, - 46,473.40–42 barrels; from July 20, 1877, to January 1, 1878, - 50,416.12–42 barrels; from January 1, 1878, to July 20, 1878, - 37,337.34–42 barrels; from July 20, 1878, to January 1, 1879, - 56,974.15–42 barrels; from January 1, 1879, to July 20, 1879, - 43,272.10–42 barrels; from July 20, 1879, to January 1, 1880, - 57,499.35–42 barrels; that on or about the twentieth day of July, - 1879, the plaintiff having discovered that the said defendants had - in violation of said agreement distilled about 22,984 barrels of oil - more than they were entitled to by the terms of said agreement, the - plaintiff objected and complained to the defendants in regard - thereto, and thereupon the defendants admitted the violation of the - contract in that respect, and it was agreed between the parties that - the defendants would and should during the then coming year diminish - their manufacture sufficiently to bring the entire amount of - manufacture under said contract within the terms of said agreement. - - That during the then coming year from July 20, 1879, to July 20, - 1880, the said defendants did not diminish their distillation below - the 85,000 barrels as they had agreed to do, but from July 20, 1879, - to January 1, 1880, they distilled 57,499.35–42 barrels, and from - January 1, 1880, to July 20, 1880, they distilled 32,582.41–42 - barrels, making a total of 90,082.34–42 barrels for the year, thus - increasing their distillation over the 85,000 barrels 5,082 barrels, - instead of diminishing it as they had agreed to do. - - That the defendants threaten to and have informed the plaintiff that - they will hereafter wholly disregard said contract and continue to - distil crude petroleum without regard to quantity. - - The plaintiff further says that since the making of said agreement - and within the past year the said Daniel Shurmer and John Teagle - have in violation of their said contract engaged and been connected - in constructing a refinery at Buffalo, New York, for the purpose of - distilling crude petroleum with others than the plaintiff under said - agreement and are now so engaged. - - That within the past year the said Daniel Shurmer and John Teagle - and each of them have invested money to the amount of $10,000, and - are now engaged and connected in constructing refineries for the - purpose of distilling crude petroleum and its products with others - in no way connected with the plaintiff or under said agreement, but - intending thereby to establish and prosecute with others the same - business as that contemplated and conducted under said agreement, - and thereby establishing and conducting a rival business to the - business of said adventure and tending to involve the plaintiff in - loss by reason of its guarantee that the profits of said adventure - should amount to the sum of $35,000 annually to defendants, and have - during the past year been at said Buffalo and other places giving - the said business their time and personal attention, and have done - so at times when their time and personal attention was needed and - was requisite to properly conduct the business of said adventure - under said agreement at Cleveland. - - The plaintiff further says that because of the said failures and - refusals of the defendants to carry out their said agreement it has - already sustained great damage and will sustain further damage if - the said defendants are permitted to continue their said violation - of said agreement. That the said plaintiff has no adequate remedy - therefor at law for the reason that the damages arising therefrom - are so remote and difficult of ascertainment, and constantly - recurring would necessitate a multiplicity of suits and would - involve the plaintiff in the increased hazards of losses arising - from such increased manufacture and deprive it of all the benefits - of said contract. - - The plaintiff therefore prays that the said William C. Scofield, - Charles W. Scofield, Daniel Shurmer and John Teagle may by proper - process be made defendants herein and compelled to answer this - petition; that a preliminary injunction and restraining order be - granted restraining the said William C. Scofield, Charles W. - Scofield, Daniel Shurmer and John Teagle, and each of them - individually and as partners in the name of Scofield, Shurmer and - Teagle, until the further order of the court, from distilling at - their said works at Cleveland, Ohio, more than 85,000 barrels of - crude petroleum of forty-two gallons each in every year, and also - from distilling more than 42,500 barrels of crude petroleum of - forty-two gallons each, each and every six months, and also from - distilling any more crude petroleum until the expiration of six - months from and after July 20, 1880, and also from directly or - indirectly engaging in or being concerned in any business connected - with petroleum or any of its products, except in connection with the - plaintiff under their said agreement, and that on the final hearing - of this case the said defendants may in like manner be restrained - and enjoined from doing any of said acts until the expiration of - said agreement, and for such other and further relief in the - premises as equity can give. - - M. R. KEITH, - R. P. RANNEY, - - _Attorneys for Plaintiff_. - - - NUMBER 43 (See page 2070) - ANSWER OF WILLIAM C. SCOFIELD _ET AL._ - - - [In the case of the Standard Oil Company _vs._ William C. Scofield - _et al._, in the Court of Common Pleas, Cuyahoga County, Ohio, - 1880.] - - - That the so-called agreement is and at all times has been utterly - void and of no effect, as being by its terms in restraint of trade - and against public policy. - - These defendants further say that they deny that through any action - of theirs said plaintiff has sustained or will sustain any damage - whatever, but these defendants say that their business of distilling - oil has been carried on at a large profit, and that the same is now - attended with large profits, and the price of refined oil is now so - high, and there is such a large margin between the price of crude - oil and refined, that the manufacture and sale of refined oil is - attended with large profit; that it is impossible to supply the - demand of the public for oil if the business and refineries of both - plaintiff and defendant are carried on and run to their full - capacity, and if the business of defendants were stopped as prayed - for by plaintiff it would result in a still higher price for refined - oil and the establishment of more perfect monopoly in the - manufacture and sale of the same by plaintiff. - - These defendants further say that said plaintiff has constantly and - persistently violated the terms of said so-called written agreement - in that it has intentionally failed to give and has withheld from - the defendants the benefits of the advantages therein agreed to be - given, and that it has not given to defendants the benefits of its - contracts relating to freight on crude and refined oil, but these - defendants have been constantly required to pay more and larger - freights than said plaintiff, and that said plaintiff has not - allowed to defendants the same rebate that it has received with - different carriers; and, further, that said plaintiff has recently - constructed a pipe-line to the Oil Regions of Pennsylvania through - which its oil has been pumped to Cleveland at an expense of about - twelve cents a barrel, but has charged defendants for pumping their - oil through the same pipe twenty cents per barrel. - - The defendants further say that at the time when said writing was - signed said plaintiff was endeavouring by contracts with divers - persons to establish a monopoly in the manufacture of refined oil in - the state of Ohio and in the United States, and that, for the - purpose of monopolising the trade in refined oil and enhancing the - price thereof, and maintaining an unnaturally high price, said - plaintiff entered into said so-called agreement under the form of a - joint arrangement or adventure, and for no other purpose, and - contributed to the capital of said so-called adventure the sum of - $10,000, whereas those defendants contributed thereto the sum of - $73,000 and their time and attention, and their refinery had the - capacity for refining 180,000 barrels of crude oil per year, as - plaintiff well knew, and said plaintiff thereby, and by said other - contracts made with the same design, succeeded in creating a - substantial monopoly and averting competition and maintaining an - unnaturally high price for refined oil, and that said so-called - agreement is therefore in restraint of trade and against public - policy, and void. - - These defendants further say that defendants have from time to time - paid to plaintiff their full share of the profits of said so-called - adventure, and at no time has plaintiff been required to pay any sum - whatever to defendants, but has realised large profits from said - business, and on the fourth day of March, 1880, with full knowledge - of how much oil in excess of 85,000 barrels per year had been - manufactured by defendants, demanded of said defendants that they - should pay to plaintiff the entire profits upon said excess, and - claimed that its monopoly was so perfect that it would have sold - said excess if defendants had not, and defendants did pay to - plaintiff the one-half of the profits on said excess. - - - NUMBER 44 (See page 2071) - AFFIDAVIT OF JOHN D. ROCKEFELLER - - - [In the case of the Standard Oil Company _vs._ William C. Scofield - _et al._, in the Court of Common Pleas, Cuyahoga County, Ohio, - 1880.] - - - John D. Rockefeller being duly sworn, says that for about eighteen - years past he has been engaged in the business of refining crude - petroleum; that from about the year 1863 to 1870 he was engaged as a - member of firms in such refining, and from January, 1870, he has - been and still is engaged in such refining business as president of - said plaintiff, the Standard Oil Company; that during said time he - has given the business personal attention and has thereby become - familiar with the general business of refining crude petroleum, with - the amount of crude petroleum produced, with the amount of crude - petroleum refined, so far as the same can be ascertained, and - especially with the business of the Standard Oil Company. - - Affiant says the said Standard Oil Company owns and operates its - refineries at Cleveland, Ohio, and its refinery at Bayonne, New - Jersey; that it has no other refineries nor any interest in any - other refineries, nor does the Standard Oil Company operate or - control in the United States any other refineries of crude - petroleum; that there are in Ohio, West Virginia, Pennsylvania, New - York, and New Jersey a large number of refineries of crude petroleum - that are not owned or controlled by said Standard Oil Company, and - in which the said Standard Oil Company has no interest whatever, - directly or indirectly, which are now and for years past have been - refining crude petroleum and selling it in the open market; that the - amount of crude petroleum refined by the said Standard Oil Company - does not exceed thirty-three per cent. of the total amount refined - in the United States. - - Affiant further says that the capacity of all the refineries in the - United States is more than sufficient to supply the markets of the - world, and in the judgment of affiant if all the refineries were run - to their full capacity they would refine at least twice as much oil - as the markets of the world require; that this difference between - the capacity of refineries and the demands of the market has existed - for at least seven years past, and during that period the refineries - of the Standard Oil Company have not been run to their full - capacity, and in the judgment of affiant not to exceed one-half of - their capacity. - - Affiant further says that during all the period of time that he has - been engaged in the business of refining oil he has been familiar - with the price of crude oil and with the price of refined oil and - with the profits to be derived therefrom, and from such experience - he states that the average price of refined oil and the average - profits to the manufacturer per gallon on same since 1876 have been - much less than the average profit for several years previous to - 1876; that said Standard Oil Company has no means now and never has - had any of influencing the price of refined oil, save by the sale of - its product in the open market. - - Affiant further says that the Standard Oil Company has not nor did - it ever have any interest in any oil property or any control over - the production of crude petroleum; that it does not own any oil - wells or land producing oil, and never did; nor has it any control - over the price of crude petroleum, but relies upon obtaining its - supplies, as all others do, by purchase in the open market and at - the prices paid by others at the same time; that the said Standard - Oil Company is not now nor has it ever been a stockholder in any - railroad, pipe-line, or other common carrier for the transportation - of oil, but within the year past it has for its own convenience - constructed, and owns and is now operating, a pipe-line from - Cleveland to the western line of the state of Pennsylvania for the - purpose of bringing oil to its refineries at Cleveland; that said - pipe-line is now insufficient to supply the demands of the Standard - Oil Company for crude oil for its own refineries, and for that - reason it has been and is now compelled to bring crude oil to - Cleveland in cars to supply its wants. - - That from the deponent’s experience in business he knows it to be - true that a large manufacturer always has an advantage in cheapness - of manufacture over a small manufacturer; that all the advantages - derived by the Standard Oil Company are legitimate business - advantages, due to the very large volume of supplies which it - purchases, its long continuance in the business, the experience it - has thereby acquired, the knowledge of all the avenues of trade, the - skill of experienced employees, the possession and use of all the - latest and most valuable mechanical improvements, appliances and - processes for the distillation of crude oil, and in the manufacture - of its own barrels, glue, etc., etc., by reason of which it is - enabled to put the oil on the market at a cost of manufacture much - less than by others not having equal advantages. These advantages, - by reason of which the Standard Oil Company is enabled to refine oil - cheaper than smaller manufacturers, are not exclusive to the - Standard Oil Company, but are open to every person doing business - under similar circumstances. That this state of facts has been - detrimental to smaller refineries and has prevented them from making - as much profit as they desired, and in some cases compelled them to - suspend refining, and this constitutes the only foundation for the - oft-repeated expressions “crushed out,” “squeezed out,” and - “bulldozing.” - - Affiant says he has examined the answer of the defendants, Shurmer - and Teagle, and his attention has been called to various statements - contained in it. In regard to the statement made therein that “if - the business of the defendants were stopped as prayed for by - plaintiff, it would result in a still higher price for refined oil - and the establishment of a more perfect monopoly in the manufacture - and sale of the same by plaintiff.” The same is untrue, as there is - not, never has been, and never can be a monopoly in the manufacture - of refined oil, nor has the limitation in said agreement as to - quantity to be manufactured affected, nor will the stoppage by the - defendants of their manufacture, as prayed for in plaintiff’s - petition, in the least affect the price of refined oil, for the - reason that leaving out the entire capacity of the refinery of - defendants there would still remain a large excess of capacity for - supplying all the demands of the public, and hence there would be no - opportunity for advancing the price, nor would it tend to create a - monopoly of the business by the plaintiff. - - Affiant further says that it is not true that the said plaintiff has - at any time or in any manner violated the terms of said agreement as - alleged in said answer or in any other manner. That it is not true - that plaintiff has intentionally or otherwise withheld from the - defendants the benefit of the advantages agreed upon in said - contract to be given them, nor is it true that the plaintiff has not - given to defendants the benefit of its contracts relating to freight - on crude and refined oil, but the plaintiff has given to the - defendants privileges not required by the agreement. That it is not - true that the defendants have ever been required to pay larger rates - of freight than were paid by the plaintiff when the defendants made - any shipments of oil in accordance with the terms of the contract; - nor is it true that the plaintiff has not allowed to defendants the - same rebates that it has received from different carriers upon any - shipments of oil made in accordance with the terms of the contract. - - That it is true that the plaintiff has recently constructed a - pipe-line from Cleveland to the western line of the state of - Pennsylvania, through which its oil has been pumped to Cleveland - since the spring of 1880, but it is not true that it is the owner of - the said pipe-line from the western line of the state of - Pennsylvania to the Oil Regions. That it is true that to promote the - interest of the defendants, the plaintiff has furnished to - defendants crude oil through said pipe-line and charged them twenty - cents per barrel for the transportation of same; but it is not true - that said pipe-line was constructed for the purpose of transporting - oil for others than the plaintiff, nor is it true that under the - terms of said agreement the defendants are entitled to the - transportation of oil through said pipe-line, nor is it true that - the charge of twenty cents per barrel is an unreasonable price for - transporting oil through said pipe-line from the Oil Regions to - Cleveland; but affiant avers it to be true that during the time it - so furnished the oil through the pipe-line at twenty cents per - barrel, of forty-two gallons each, the railroads were charging - freight at the rate of from thirty-five to fifty cents per barrel, - of forty-five gallons each. - - Plaintiff continued to deliver defendants through the pipe-line, and - at twenty cents per barrel, until they had received all they were - entitled to manufacture under the contract dated July 20, 1876. - - Affiant says that it is not true that “at the time when said - agreement was signed, said plaintiff was endeavouring by contracts - with divers persons to establish a monopoly in the manufacture of - refined oil in the state of Ohio and in the United States.” Affiant - avers that it has made but one other contract with other persons - like the one made with defendants, and that was a contract made at - the same date, viz., July 20, 1876, with the Pioneer Oil Company of - the City of Cleveland, of which the defendants had full knowledge. - Affiant further says that he was present and participated in the - negotiations which resulted in the formation of the contract with - these defendants, and that it is not true that said contract was - entered into for the purpose of monopolising the trade in refined - oil or for the purpose of enhancing the price thereof and - maintaining an unnaturally high price for the same; and affiant says - that it is not true that plaintiff by said contract, and by the said - other contract made with the same design, succeeded in creating a - substantial monopoly and averting competition, and maintaining an - unnaturally high price for refined oil; but said contract was made, - as is therein stated, for the purpose of equalising the business of - manufacturing oil and giving to each of said contracting parties - their due proportion thereof, and that the amount of 85,000 barrels - per annum to which the distillation of defendants is by said - contract limited is, as agreed, a relative proportion to their full - capacity, as is the amount distilled by plaintiff per annum since - said contract was entered into to its total capacity for refining - oil; and it is not true that said agreement is in restraint of trade - and against public policy, as alleged in the said answer of - defendants, Shurmer and Teagle. Affiant says that on or about the - first day of October, 1879, it came to his knowledge that the - defendants had, in violation of said agreement, distilled about - 22,984 barrels of oil more than they were entitled to by the terms - of said agreement, and thereupon he had an interview with - defendants, W. C. Scofield and John Teagle, who admitted the - defendants had distilled in excess of the quantity stipulated in the - contract, and agreed to reduce the quantity distilled during the - year following, July 20, 1879, by the amount they had already - distilled in excess up to that date, but requested they might be - allowed to distribute said reduction equally over each six months of - the year instead of wholly in either the first or last six months of - the year following July 20, 1879, to which request affiant assented. - - Affiant says that it is not true that “the plaintiff, on the fourth - day of March, 1880, with full knowledge of how much oil in excess of - 85,000 barrels per year had been manufactured by defendants and - plaintiff, demanded of said defendants that they should pay to - plaintiff the entire profits upon said excess,” other than as is - hereinafter stated; and it is not true that plaintiff, at the time - it demanded said profits, claimed that it had any monopoly, or that - its monopoly was so perfect that it would have sold said excess if - defendants had not, or that it was entitled to said profits in - consequence of any monopoly; but affiant says that it did claim the - profits upon the oil sold in excess of said 85,000 barrels, because - defendants had broken their agreement with said plaintiff, and the - profits on such excess the plaintiff at that time was willing to - accept as compensation for such breach of said contract. - - Affiant says that he does not know what contracts for the sale of - oil defendants may have made, or what contracts for the manufacture - or for the construction of barrels they may have entered into, or - what obligations they may be under to their customers; but he says - that for a long time past the defendants have had notice that - plaintiff would insist upon the performance by them of their - obligations under their said contract, and that if they have entered - into contracts for the sale of oil as alleged by them and entered - into other obligations, they have done so with the full knowledge - that they were thereby violating and continuing the violation of - said agreement of July 20, 1876. - - I have read the affidavit of H. L. Taylor, filed in this case - October 18, 1880, in which he says “that he has been for some six or - eight years last past acquainted with Mr. Rockefeller, Mr. Flagler, - Mr. Payne, and others; that he has had conversations with some of - these parties with regard to the control by the Standard Oil Company - of the distilling and refining business in the state of Ohio and in - the United States, and that he has heard them say in substance that - the Standard Oil Company intended to wipe out all the refineries in - the country except theirs, and to control the entire refining - business in the United States.” Affiant says that he has been - acquainted with H. L. Taylor for several years past, that all the - foregoing statements so far as they relate to him are false, and - that he never made to said Taylor or to any person in his hearing - any such statement, nor statements in substance to that effect. - Affiant further says that he never in company with said Taylor - visited any of the cities or places mentioned in his affidavit for - the purpose of inspecting or examining refineries, though he may - have met said Taylor incidentally at various places, but that he - never showed him refineries that were formerly under the control of - others and running independently and stated that the same had passed - under the control of the Standard Oil Company, nor did anybody else - make such statements to Taylor in his hearing. - - Affiant says that it has not come to pass, as sworn to by said - Taylor, that said Standard Oil Company has “wiped out” the refining - business of the United States or that it to-day controls it, but - affiant believes that at the time said Taylor made his affidavit he - knew there were very many refineries running independently of and in - no way connected with the Standard Oil Company, and that said Taylor - was himself then interested in the profits of a large refining - business represented by a number of refiners who were large - competitors of the Standard Oil Company. - - With respect to the assertion of said Taylor that “in many instances - to his knowledge the Standard Oil Company has bought refineries and - taken them down,” affiant says that several years ago when the - business was very much scattered, in several instances and for - greater economy in manufacturing, the Standard Oil Company - dismantled refineries unfavourably located and utilised the - construction, machinery, and appliances of the same to increase its - manufactory at Cleveland. - - It is true that in many cases persons who had been unsuccessfully - engaged in refining, but had experience, were to some extent - employed by the Standard Oil Company in its business of refining, - but that with respect to the averment in said Taylor’s affidavit - that “in other cases said company employed men who had refineries, - at large salaries and at the same time gave them no absolute - employment,” the same is untrue. But it is true that it has - restricted its employees from entering the business of refining and - distilling oil except under said company’s direction. - - But none of these things were done by the plaintiff for the purpose - of creating and maintaining a monopoly of the business of refining, - but were done for the purpose of conducting its business more - efficiently. - - And affiant says that it is not true, as sworn to by said Taylor, - that the Standard Oil Company during a large portion of the time - that he refers to, to wit, six or eight years past, or for any - length of time, has substantially controlled the transportation of - oil; that it is not true that said Standard Oil Company ever had, or - that it now has, any contract with any lines of transportation in - which it was stipulated that it should have a lower rate of freight - than other shippers undertaking the same obligations and furnishing - equal terminal facilities; that in all the contracts ever had with - the railroads, the railroad companies have reserved the right to - charge others the same rate of freight as that paid by the Standard - Oil Company; and affiant further says that even those contracts with - the railroad companies which gave the Standard Oil Company a - commission for facilities furnished have long been abrogated and - abandoned. - - Affiant says that with respect to the statement in said Taylor’s - affidavit that “other language has been used to him—said Taylor—by - the officers of said Standard Oil Company to the effect that the - said company intended to have all the refineries and aimed at having - entire control of the oil market,” the same, so far as it related to - him, is wholly untrue. - - Affiant says that it is not true that the plaintiff got control of - the refineries of the firm of Logan Brothers of Philadelphia, Octave - Oil Company, Easterly and Davis, and Bennett, Warner and Company of - Titusville, Pennsylvania; R. S. Waring and Citizens’ Oil Works of - Pittsburg, or of either of them. The statement of H. L. Taylor that - “the principal way by which these independent refineries came under - the control of the Standard Oil Company was from the fact that said - company had such rates of transportation that the small companies - could not compete with it, and when said company had such in its - power it would make such arrangements with parties engaged in these - refineries as would prevent them from thereafter competing with the - Standard Oil Company,” is false in its facts and its inferences. - Affiant has already correctly stated the facts as to the purchase of - refineries by the Standard Oil Company of Cleveland, what led to - such purchases, and that persons engaged in such refineries were in - some cases employed by said company; and any statement or inference - to the effect that by illegal means or unfair influences the - plaintiff “squeezed out” or “crushed out” small refiners and - prevented them from again entering into the business of refining, is - untrue. - - Affiant further responding to the affidavit of said Taylor, says - that with reference to the statement therein contained that “the - effect of the control of the refining business by the Standard Oil - Company upon the oil market is to largely increase the price to - consumers beyond what they ought to pay,” the same is untrue, and he - avers again that since the date of the contract with defendants the - average price to consumers of refined oil has been lower than for - years previous. - - As to the allegation of said Taylor that “if the business was - distributed among the independent refineries it would furnish - employment to a much larger number of persons than at present, and - the interests of the country would be decidedly promoted by having - the refining business in the hands of competent parties,” in so far - as the same implies that there are not independent competing - refineries outside of the works of said plaintiff, the same is - untrue, and that it is a fact that a larger number of persons are - now employed in connection with the business of refining oil than - ever before. - - Affiant says that with reference to the language used by the said - Heisel in his affidavit that he, Heisel, was not afraid, to which - Mr. Rockefeller replied, “You may not be afraid to have your head - cut off, but your body will suffer,” “and that this was said by - affiant prior to the time that he sold his interest in the refining - business to Bishop and was said for the purpose of inducing affiant - to sell out to the Standard Oil Company,” that affiant has no - recollection of ever using any such language to said Heisel, and so - far as said statement implies threats or inducements held out to - said Heisel to procure the control of the works of Bishop and Heisel - by the Standard Oil Company, the same is wholly false in spirit and - effect. - - Affiant says respecting the statement in said Heisel’s affidavit, - that “the effect resulting from the control by this one company—the - Standard Oil Company—of the entire refining business in Cleveland - has been to largely increase the price of refined oil to consumers, - to lessen its production, to reduce the number of hands employed in - the refining business, and to reduce the price paid labourers for - their work, and thereby to largely injure the public,” the same, so - far as it alleges that there is a control by the Standard Oil - Company of the entire refining business, is false; and that so far - as it undertakes to state consequences of said alleged control by - the Standard Oil Company, it is also false. - - I have read the affidavit of Mrs. B. filed in this case on October - 18, 1880. Said affidavit is incorrect, erroneous and in many - respects false. - - The first interview that I ever had with Mrs. B. was at her house, - when she sent for Mr. Flagler and myself to consult with her in - reference to selling out her establishment to one of her employees. - This occurred during the year 1876. She stated to us the terms of an - offer that she had received from the said employee, and expressed an - earnest desire to dispose of the business and to be free from its - perplexities and annoyances, and evinced a disposition to accept the - offer, and we advised her to accept providing the payments were made - secure. I did not see her again until the fall of 1878, more than - two years later. Then at her urgent request I met her at her house, - at which time she made reference to the conversation she had had - with Mr. Jennings, and desired me to pursue negotiations with her - with reference to the sale of her property, which I positively - declined, stating to her that I knew nothing about her business or - the mechanical appliances used in the same, and that I could not - pursue any negotiations with her with reference to the same, but - that if, after reflection, she yet desired to do so, some of our - people familiar with the lubricating oil business would take up the - question with her. She was very desirous to begin negotiations, but - I declined to negotiate and advised her not to take any hasty - action, as from her own statements there was no such change in the - condition of the business as to discourage the expectation that she - could do as well in the future as she had in the past. When she - responded expressing her fears about the future of the business, - stating that she could not get cars to transport sufficient oil, and - other similar remarks, I stated to her that though we were using our - cars and required them in our own business, yet we would loan her - any number she required or do anything else in reason to assist her, - and I saw no reason why she could not prosecute her business just as - successfully in the future as in the past. This is the last - interview I had with her. - - Affiant thinks it is true that Mrs. B. stated in the course of the - conversation in substance that “the B. Oil Company was entirely in - the power of the Standard Oil Company, and that all she could do - would be to appeal to affiant’s honour as a gentleman and to his - sympathy to do with her the best that he could do.” To the statement - that she was in the power of the Standard Oil Company, affiant made - a positive denial, and stated to her there was no foundation for the - fears she expressed, and in this connection made the offer to her to - furnish her with cars. He cannot remember what was said by Mrs. B. - at this interview in relation to an agreement upon the part of the - Standard Oil Company not to touch the lubricating branch of the - trade. It is true that the Standard Oil Company had a contract with - the B. Oil Company, made early in 1873, terminable on sixty days’ - notice by either party, in reference to carbon oil only—which - contract had been voluntarily assumed by the B. Oil Company—and it - was entirely optional with the said B. Oil Company to discontinue - said contract upon a notice of sixty days and thereby relieve itself - from its obligations if it so desired; but said contract was - continued in full force and effect up to the time of the sale by - Mrs. B. of her interest in said B. Oil Company; but the Standard Oil - Company had no contract with B. Oil Company by which it “agreed not - to touch the lubricating branch of the trade,” nor did it have any - contract with the said B. Oil Company having reference in any - particular to the lubricating oil business, nor did affiant have any - such contract. While affiant declined to enter into a negotiation - with the said Mrs. B., it may be true that during the interview - alluded to he said to her that in case a sale were made she could - retain whatever stock in the B. Oil Company she desired. As a result - of the negotiations, in which affiant took no part, the construction - and good-will of the B. Oil Company was purchased for sixty thousand - dollars, which was at least twenty thousand dollars in excess of its - value, and largely in excess of the value placed upon it by Mrs. B. - in the interview above referred to between Mr. Flagler and affiant - with her in 1876. In addition to the construction and good-will - which was purchased for the sum of sixty thousand dollars, there was - purchased of the B. Oil Company its entire stock of oils on hand at - the full market value, and the sum paid for same amounted to - $19,144.49, making an aggregate of $79,144.49, and did not include - any other assets of the company, such as cash, accounts receivable - and accrued dividends. - - With respect to the allegation in said affidavit that “Mrs. B., - seeing that the property had to go, asked that she might, according - to the understanding with the president of the company, retain - fifteen thousand dollars of her stock,” so far as said statement - implies that she was parting with her property under any duress, - restraint, or undue influence, or was forced thereto by any acts of - the Standard Oil Company, the same is absolutely false; and it is - also false that she ever had any understanding with the president of - the Standard Oil Company that she should retain fifteen thousand - dollars of the stock of the B. Oil Company, nor was there any - reference to that subject save as is hereinbefore stated; and if the - said Mrs. B. refers to this affiant in that connection wherein she - says that “to this request the reply was, ‘No outsider can have any - interest in this concern’ and ‘that said Standard Oil Company had - dallied as long as it would over this matter, that it must be - settled up that day or go, and insisted upon her signing the bond - above referred to,’” the same is also false; nor has he any - knowledge that during said negotiation any such language was ever - used, or that the negotiations were ever carried on or closed in any - such spirit. - - Affiant says that it is not true that he made any promises that he - did not keep in the letter and spirit; and it is not true that he - was instrumental to any degree in her being obliged to sell the - property much below its true value; and he avers that she was not - obliged to sell out, and that such sale was a voluntary one upon her - part and for a sum far in excess of its value, and that the - construction which was purchased of her could be replaced for a sum - not exceeding twenty thousand dollars. - - On Saturday, the ninth day of November, 1878, the negotiations were - closed and payments made to Mrs. B. Affiant had no knowledge of - dissatisfaction upon her part until the receipt of a letter dated - Monday, November 11, which reached him on the 12th, and on November - 13 the reply thereto was made, copy of which is as follows: - - - November 13, 1878. - - _Dear Madam_: I have held your note of 11th inst., received - yesterday, until to-day, as I wished to thoroughly review every - point connected with the negotiation for the purchase of the - stock of the B. Oil Company, to satisfy myself as to whether I - had unwittingly done anything whereby you would have any right - to feel injured. It is true that in the interview I had with you - I suggested that if you desired to do so you could retain an - interest in the business of the B. Oil Company by keeping some - number of its shares, and I then understood you to say that if - you sold out you wished to go entirely out of the business. That - being my understanding, our arrangements were made in case you - concluded to make the sale, that precluded any other interests - being represented, and therefore when you did make the inquiry - as to your taking some of the stock our answer was given in - accordance with the facts noted above, but not at all in the - spirit in which you refer to the refusal in your note. In regard - to the reference that you make as to my permitting the business - of the B. Oil Company to _be taken_ from you, I say that in - this, as in all else that you have written in your letter of - 11th inst., you do me most grievous wrong. It was of but little - moment to the interests represented by me whether the business - of the B. Oil Company was purchased or not. I believe that it - was for your interest to make the sale, and am entirely candid - in this statement, and beg to call your attention to the time, - some two years ago, when you consulted Mr. Flagler and myself as - to selling out your interests to Mr. Rose, at which time you - were desirous of selling at _considerably less price_, and upon - time, than you have now received in cash, and which sale you - would have been glad to have closed if you could have obtained - satisfactory security for the deferred payments. As to the price - paid for the property, it is certainly three times greater than - the cost at which we could now construct equal or better - facilities; but wishing to take a liberal view of it, I urged - the proposal of paying the sixty thousand dollars, which was - thought much too high by some of our parties. I believe that if - you would reconsider what you have written in your letter, to - which this is a reply, you must admit having done me great - injustice, and I am satisfied to await upon your innate sense of - right for such admission. However, in view of what seems your - present feelings, I now offer to restore to you the purchase - made by us, you simply returning the amount of money which we - have invested and leaving us as though no purchase had been - made. Should you not desire to accept this proposal, I offer to - you one hundred, two hundred, or three hundred shares of the - stock at the same price that we paid for the same with, this - addition that if we keep the property we are under engagement to - pay into the treasury of the B. Oil Company an amount which, - added to the amount already paid, would make a total of - $100,000, and thereby make the shares one hundred dollars each. - - That you may not be compelled to hastily come to conclusion, I - will leave open for three days these propositions for your - acceptance or declination, and in the meantime, believe me, - - Yours very truly, - JOHN D. ROCKEFELLER. - - - To which letter no reply was ever received, and since which time - affiant has had no communication with Mrs. B. upon any subject. - - Affiant says that he has had his attention called to the affidavit - of Daniel Shurmer, filed in this case October 18, 1880, and to the - language as follows: “That the Standard Oil Company had already - squeezed out one refining concern with which he was connected, - whereby he had lost over twenty thousand dollars.” Affiant says that - the same is false, as nothing of the kind ever occurred. - - Affiant says that he conducted most of the negotiations which led to - the making of the contract with defendants, and that at no time - previous or during the same were any threats made by him or any - officer of the Standard Oil Company or agent to his knowledge to the - effect that the firm of Scofield, Shurmer and Teagle would be ruined - if they did not make such a contract, and no promises were made by - him nor anybody else in behalf of said Standard Oil Company to said - Shurmer or any of the defendants, that if said contract was signed - the Standard Oil Company and defendants would control and monopolise - the whole refining business in Cleveland; nor is it true, as alleged - by said Shurmer, that he was reluctant to enter into said agreement, - but, so far as affiant knows, the said Shurmer was anxious to make - the arrangement, believing it to be a profitable one for the - defendants. That some time in the year 1872, when the refining - business of the City of Cleveland was in the hands of a number of - small refineries and was unproductive of profit, it was deemed - advisable by many of the persons engaged therein, for the sake of - economy, to concentrate the business and associate their joint - capital therein. The state of the business was such at that time - that it could not be retained profitably at the City of Cleveland by - reason of the fact that points nearer the Oil Regions were enjoying - privileges not shared by refiners at Cleveland, and could produce - refined oil at a much less rate than could be made at this point. - That it was a well-understood fact at that time among refiners that - some arrangement would have to be made to economise and concentrate - the business or ruinous losses would not only occur to the refiners - themselves, but ultimately Cleveland as a point of refining oil - would have to be abandoned. At that time those most prominently - engaged in the business here consulted together, and as a result - thereof several of the refiners conveyed to the plaintiff their - refineries and had the option in pay therefor to take stock in the - Standard Oil Company at par or to take cash. That at this time the - Standard Oil Company, by reason of its facilities and large cash - capital, was agreed upon as the one best adapted to concentrate the - business, and for no other reason whatsoever. That said Standard Oil - Company had no agency in creating this state of things which made - that change in the refining business necessary at that time, but the - same was the natural result of the trade; nor did it in the - negotiations which followed use any undue or unfair means, but in - all cases, to the general satisfaction of those whose refineries - were acquired, the full value thereof either in stock or cash was - paid, as the parties preferred. - - Since that time the Standard Oil Company, by diligent and faithful - attention to its business, by the exercise of the most rigid - economy, by promptly taking advantage of all legitimate business - opportunities, has acquired large and valuable property at Cleveland - with a capacity to refine oil largely in excess of any local - refinery, but he denies that from 1872 to the present time, by any - conclusion, conspiracy, or undue means from first to last, the - present standing and capacity of the Standard Oil Company has been - acquired, or that it seeks to maintain its hold upon business - through any purpose to create or maintain a monopoly. - - JOHN D. ROCKEFELLER. - - - NUMBER 45 (See page 2072) - FINDINGS OF FACT - - - [Transcript of record, Supreme Court of the United States, October - term, 1886. Number 1,290. The Lake Shore and Michigan Southern - Railway Company, plaintiff in error, _vs._ Scofield, Shurmer and - Teagle, in error to the Supreme Court of the state of Ohio, pages - 14–21.] - - - This cause came on to be heard upon the pleadings, exhibits, and - testimony, and was argued by counsel; in consideration whereof the - plaintiffs, having moved for a reservation to the Supreme Court, the - judges are unanimously of opinion that important and difficult - questions exist in the case, making it proper that the same should - be reserved to the Supreme Court for decision, which questions - embrace the following propositions: - - 1st. Is this a case upon the face of the petition and under the laws - of the state in which the court ought to interfere by injunction? - - 2nd. Whether such remedy by injunction will apply as well to the - case of shipments over the defendants’ road alone, as to cases of - through shipments over such road and connecting roads? - - 3rd. What are the duties and obligations of common carriers at - common law as distinguished from the statutory provisions of this - and other states and countries? - - 4th. Are the defendants at common law obliged to carry freight at - the same price for all parties or members of the public, without - regard to quantity or circumstances connected with the - transportation? - - 5th. May the defendant, as a common carrier and a corporation - organised for that purpose, contract with a party controlling 90/100 - or more of all the freight of a particular class, at a given city or - point, to carry the same for less than general tariff rates, in - consideration that it shall receive all the freight thus controlled - by such party? - - 6th. May the defendant, as a common carrier, in consideration of - receiving all the freight of such party, that the quantity shall not - be diminished, and that terminal facilities as to loading, - unloading, and delivering the freight shall be furnished different - from regular or usual freight and with less expense and risk to the - carrier, contract to carry such freight, with such convenience and - benefits, for less than general tariff rates to the public? - - 7th. May the defendant, as common carrier, transport over its road - large quantities of oil, amounting to many full car-loads per day, - for a less price per car-load than it charges the public generally - per barrel or for single car-loads or less, provided all persons are - charged like prices for like quantities? - - 8th. May defendant, as common carrier, make any distinction in - prices for carrying like freight on the ground of quantity and - covenants to continue the same if thereby it can make a greater - profit than to charge the same prices for quantities small and - great? Is defendant, under all circumstances, obliged to charge the - same prices per ton or other quantity, for the same distance, to all - persons tendering freight of the same class, or may it, in good - faith and without intention to injure other producers or patrons, - contract to carry for one party at a less price than general rates - if thereby it can secure a large and profitable business which would - otherwise be diverted from it, in whole or part? - - 8½. Should decree be rendered for plaintiffs; and, if so, to what - extent should it be enforced—only within the bounds of the state or - to all parts of the country within or without the state, to all - points reached by defendant and connecting lines? - - 9th. Was section 3373 of the Revised Statutes intended to apply to - cases like the present, and under it is there any authority for the - injunction relief prayed for in this action? - - 10th. Whether upon such shipments so made by the defendant’s cars by - the barrel, either in car-load lots or in less amounts, the - plaintiffs are, either by common law or by the Ohio statutes on the - subjects, entitled to have their said products carried at the same - rate of charge between like points of shipment as are allowed to - said Standard Oil Company or other shippers, either to points on its - line or branches of said road beyond? - - 11th. Whether the defendant, as a common carrier, may exact from the - plaintiffs upon such shipments in barrels any amount greater than - the amount charged to said Standard Oil Company upon shipment of - like amounts by such tank-cars so long as the plaintiffs offer to - ship by their own tank-cars on substantially like terms? - - 12th. Whether, if such defendant can be required to give to said - plaintiffs equal rates of freight upon its shipments with those - allowed said Standard Oil Company to points upon its line and - branches, it can be required to give as low a rate to terminal - points as the rate it receives for its proportion of the service to - such points, on shipments to points beyond, and on its connecting - lines on a through rate fixed by it, and such connecting line or - lines for the through shipment? - - 13th. Whether the fact of the existence of such arrangement, and the - fact of the said Standard Oil Company being a shipper in amounts - larger than the plaintiffs, is any justification for the making of - such charges to the plaintiffs in excess of such charges made to - said Standard Oil Company? And in order that the same may be legally - presented to said Supreme Court, the District Court do find the - facts as follows: - - 1st. The court find the plaintiffs are, and since 1875 have been, - partners, carrying on, in a large way, at Cleveland, Ohio, where - this refinery is situated, the business of refining petroleum and - selling the refined product mainly throughout the territory west and - northwest of Cleveland, and extending throughout the Western and - Northwestern states, this business being one in which they have - invested a large amount of capital, and in which they have - established a large and profitable trade throughout such territory, - which constitutes the natural market for the sale of such products - manufactured at Cleveland, the cost of plaintiffs’ refining being - about $70,000, with a refining capacity of about 150,000 barrels per - year. - - 2nd. That the defendant is a consolidated railroad company, owning - and operating a railroad extending from Buffalo, in the state of New - York, to Chicago, in the state of Illinois, and passing through - parts of the states of New York, Pennsylvania, Ohio, Indiana, - Michigan, and Illinois, and also owning and operating branches from - Toledo, in the state of Ohio, to Detroit, in the state of Michigan, - and also from White Pigeon, in the state of Michigan, to Grand - Rapids, in the state of Michigan. - - 3rd. That said railroad, so far as the same is constructed and - operated in the state of Ohio, extends from the Easterly line of - Ashtabula County to the Westerly line of Williams County; that it is - a corporation engaged as common carrier in the business of - transporting persons and property for hire and reward over its said - line of road and branches. - - 4th. That it crosses and connects with other lines of railroads at - Toledo, Coldwater, and Chicago, over which it can and does forward - passengers and freight to their destination and consignment points - as requested and directed; that it holds itself out as ready to make - and does make the rates to points reached by connecting roads; that - defendant, as such common carrier, has been accustomed to receive - for transportation property over its line and branches to points - beyond the termini of the same by delivering the same at such - termini to connecting roads for carriage to the points of - consignment. - - 5th. That the rates for such through freights are fixed by agreement - between the different companies owning the lines over which such - freights are carried, and not by the defendant alone, and are - charged by like agreement, from time to time. - - 6th. That what are termed local rates, being for property received - and delivered at points on the line of defendant’s road, are fixed - exclusively by the defendant. - - 7th. That some of the towns and cities on the main line and branches - of the defendant’s road can only be reached by shippers from - Cleveland over its said road and branches; and all of them, as well - as the towns on most of its connecting branches, can be most - directly reached by means of its line from Cleveland. - - 8th. That the defendant is sufficiently supplied with cars and - engines and appliances for transportation necessary to enable it, in - the ordinary course of its business, to receive and carry for the - plaintiffs such products from Cleveland to such markets. - - 9th. That for a period of time extending back beyond the time when - plaintiffs commenced the manufacture of oil in the City of - Cleveland, the defendant has published for the benefit of the - public, tariff rates for local and through freights, which have been - frequently changed, and including rates for the carriage of oil in - barrels. - - 10th. The plaintiffs commenced and established their present - business in Cleveland in the spring or summer of 1875, and - subsequently, in July, 1876, became engaged in the same by - arrangement with the Standard Oil Company to the partial extent of - their own manufacturing establishment. - - 10½. That during the time in the petition named the Standard Oil - Company, the plaintiffs’ principal competitor in business, has also - been and still is engaged in a like business with them, it having at - Cleveland a large refinery from which it sells like products in same - markets; that the refineries of both are situate on the line of - railroads other than that of the defendant, but having like - connection with it; that each has switch tracks extending to their - refineries from the main lines of its roads on which they are - situate, by means of which shipments from them are made, the course - of business in making shipments by defendant’s road by the car-load - (which is the manner in which nearly all the business is done) being - for the defendant, on request of either, to furnish its cars, which - are switched from its connecting track by the road on which the - refineries are situate to the refineries, then loaded by the - shippers, and by said road drawn out and placed on the defendant’s - tracks for shipment by its road. By some traffic arrangement between - the roads a switching charge per car for such service is charged by - the local road against the defendant, which is by it at its - discretion charged against the shippers with its general freight - charge. Upon shipments in less than car-load lots delivery is made - to the defendant’s freight depot. - - 11th. That the Standard Oil Company was then, and ever since has - been, engaged in the same business at Cleveland and elsewhere, and - did then and ever since has manufactured and shipped more than - ninety one-hundredths of all the illuminating oil and products of - petroleum manufactured and shipped at and from the City of - Cleveland. - - 12th. The court further find that prior to 1875 it was a question - whether the Standard Oil Company would remain in Cleveland or remove - its works to the oil-producing country, and such question depended - mainly upon rates of transportation from Cleveland to market; that - prior thereto said Standard Company did ship large quantities of its - products by water to Chicago and other lake points, and from thence - distributed the same by rail to inland markets; that it then - represented to defendant the probability of such removal; that water - transportation was very low during the season of navigation; that - unless some arrangement was made for rates at which it could ship - the year round as an inducement, it would ship by water and store - for winter distribution; that it owned its tank-cars and had - tank-stations and switches or would have at Chicago, Toledo, - Detroit, and Grand Rapids, on and into which the cars and oil in - bulk could be delivered and unloaded without expense and annoyance - to defendant; that it had switches at Cleveland leading to its works - at which to load cars, and would load and unload all cars; that the - quantity of oil to be shipped by the company was very large, and - amounted to 90 per cent. or more of all the oil manufactured or - shipped from Cleveland, and that if satisfactory rates could be - agreed upon it would ship over defendant’s road all its oil products - for territory and markets west and northwest of Cleveland, and agree - that the quantity for each year should be equal to the amount - shipped the preceding year; that upon the faith of these - representations the defendant did enter into the contract and - arrangement substantially as set forth in defendant’s answer; that - the rates were not fixed rates, but depended upon the general card - tariff rates as charged from time to time, but substantially to be - carried from time to time for about ten cents per barrel less than - tariff rates, and, in consideration of such reduced rates as to bulk - oil, the Standard Company agreed to furnish its own cars and tanks, - load them on switches at distributing points, and unload them into - distributing tanks, and was also to load and unload oil shipped in - barrels, and without expense to defendant, and with, by reason - thereof, less risk to defendant, which entered into the - consideration, and was also to ship all its freight to points west - and northwest of Cleveland, except small quantities, to lake ports - not reached by rail, and to so manage the shipments, as to cars and - times, as would be most favourable to defendant; that defendant then - agreed to said terms; that said agreement so made in 1875 has - remained in force ever since. - - 13th. That at a cost exceeding $100,000 said Standard Company had - and constructed the terminal facilities promised and herein found; - that, in fact, the risk of danger from fire to defendant, the - expense of handling, in loading and unloading, and in the use of the - standard tank-cars is less (but how much the testimony does not - show) than upon oil shipped without the use of such or similar - terminal facilities; that said Standard Company commenced by - shipping about 450,000 barrels a year over defendant’s road, which - increased from year to year until, in 1882, the year before the - filing the petition in this action, the quantity so shipped on - defendant’s road amounted to 742,000 barrels, equal to 2,000 barrels - or one full train-load per day. - - 14th. That said arrangement was not exclusive, but was at all times - open to others shipping a like quantity and furnishing like service - and facilities; that it was not made or continued with any intention - on the part of the defendant to injure the plaintiffs in any manner; - that plaintiffs knew of an arrangement between defendant and - Standard Oil Company years before January 1, 1880, and on or about - July 20, 1876, contracted with the Standard Company to give it the - control of the shipments of plaintiffs’ oil and the plaintiffs the - benefit, if any, of any arrangements then existing or that might - thereafter exist with the Standard Oil Company upon shipment of oil, - and which plaintiffs received until about January 1, 1880, when they - ceased operating with the Standard Oil Company, and thereafter were - charged and paid the regular tariff rates published by defendant and - by it charged and collected from all the public except the Standard - Oil Company under the arrangement aforesaid. - - 15th. That the testimony on behalf of the plaintiffs fails to show - the quantity manufactured or shipped by them, and how much they - could or would ship by defendant’s road if the Standard Company were - charged tariff rates, does not appear in the testimony, although the - testimony does show that plaintiffs shipped many car-loads, but the - court find that the Standard Company have shipped and do ship over - defendant’s road more than 90/100 of all the oil manufactured at and - shipped from Cleveland. - - 16th. The court further find that at the time of filing the - petition, and at all times after November 29, 1882, the prices - charged the Standard Company from Cleveland to Chicago was fifty - cents per barrel on oil in barrels, and forty dollars for each - tank-car; that at the time of filing the petition, and from and - after May 19, 1883, the tariff rate between the points aforesaid was - sixty cents per barrel, while from November 20, 1882, to May 19, - 1883, the tariff was seventy cents per barrel; that prior to the - dates aforesaid the tariff rates and rates to the Standard - frequently changed, and the difference was frequently greater than - after said dates; that sixty-one barrels constitute a car-load and - eighty barrels are estimated to the tank, but that some tanks hold - one hundred and some one hundred and twenty barrels, and that at no - time were tariff rates made or published for tank-cars carried by - defendant with refined oil except when furnished by said Standard - Company. - - 17th. That after said May 19th, 1883, about the same difference of - ten cents per barrel existed between tariff rates and the prices - charged to the Standard Oil Company to the different points along - the line and consignment points beyond the termini of defendant’s - road; that five barrels of oil make a ton, and that the prices - charged the Standard after November, 1882, from Cleveland to - Chicago, amounted to 70/100 of one cent per ton, per mile, and - tariff rates to 83/100 of one cent per ton per mile; that the - contract of arrangement made with defendant has been largely - profitable to defendant; that during the season of water navigation - the Standard Company could have shipped to said distributing points - on vessels by the lakes and river barreled oil for a less sum than - the rates charged to it by defendant—to plaintiffs and the public - were reasonable rates in themselves. - - 18th. That the defendant from time to time published and still does - publish and hold forth to the public a certain printed tariff of - rates of charge for the shipment and delivery of all classes of - freight, including the products of the plaintiffs’ refinery, between - Cleveland aforesaid and the various towns and cities upon its said - line, branches, and connecting lines, and has refused and still does - refuse to ship such products for the plaintiffs to any of such - points named in its tariff or schedule except for the prices therein - named; and that such schedule fixes the prices for oil shipment at - so much per barrel to the public, irrespective of their being - shipped in barrels by ordinary freight cars or in bulk by means of - tank-cars. - - 19th. That the plaintiffs have since December, 1879, frequently - applied to the defendant both for reduced rates upon such tariff - rates and for like rates with those made to such Standard Oil - Company, both upon their general shipments by the ordinary freight - cars of the defendant and also upon shipments to be by them made in - bulk by means of tank-cars owned by them, they proposing to load and - unload the same at terminal points, and to assume all risks by fire - or leakage; but that the defendant has and still does refuse to - allow them by either course of shipment rates less than such tariff - rates, the tariff charged and demanded upon such shipments in bulk - being on the basis of eighty barrels allowed to be shipped by each - tank-car. - - 20th. The defendant has received ever since the first day of - December, 1879, and still does receive from said Standard Oil - Company at Cleveland and ship for _him_, like products to those of - the plaintiffs at rates much less than such schedule rates, and - receives and ships for said Standard Oil Company oil for shipment in - bulk to such points by means of tank-cars of said Standard Company - at rates much less than said schedule rates and much less than the - rates allowed to said company for the shipment of oil by barrels in - ordinary freight cars, and that such reduced rates to said Standard - Oil Company by means of such tank-cars are allowed both by the - making to it a lower rate upon its shipments by the defendant’s cars - in barrels, and also by means of its being allowed to ship by means - of its said tank-cars to their full capacity, running from 80 to 120 - barrels each, and averaging over 100 barrels each, and the reduced - rate being charged on a basis of 80 barrels per car. The defendant - charged the plaintiffs the switching charge, and omitted to charge - the same to the Standard Oil Company; that it was a further part of - such understanding, that should the defendant give to other shippers - like rates, said Standard Oil Company would as far as possible - withdraw from it its shipments; and that for the purpose of - effectually securing at least the greater part of said trade, the - defendant, on the completion of the New York, Cleveland and St. - Louis Railway, a competing line from Cleveland to the West, in the - year 1883 entered into a traffic arrangement with it, giving to it a - portion of the shipments of said Standard Oil Company west, on a - condition of its uniting with it in the carrying out of such - understanding as to reduced rates to said Standard Company, which - arrangements still exist. - - 21st. That upon the shipment made by the defendant for said Standard - Oil Company of such products the rates paid for shipment to points - of delivery upon the defendant’s connecting lines and beyond its - line have been and are less for the rateable amount of carriage - charged for the distance transported over its own line, than said - schedule rates or than the lower rates charged to said Standard Oil - Company for shipments to the terminal points at which said shipments - went from said road to its connecting line; how much less the - defendant has refused to state. - - 22nd. That the reduced rates charged to said Standard Oil Company - upon its shipments are arrived at by charging upon such shipments - full tariff rates, and afterward, in accordance with some - prearranged method agreed on with said Standard Oil Company, - refunding to it a portion of the freight so charged and collected, - the amount refunded being known as a “drawback” or “rebate.” - - 23rd. That the evidence does not establish the fact whether or not - all the various advantages claimed as secured to defendant by its - contract with the Standard Oil Company are the equivalent for the - discrimination made to it in freights. - - - NUMBER 46 (See page 2080) -LETTER OF EDWARD S. RAPALLO TO GENERAL PHINEAS PEASE, RECEIVER CLEVELAND - AND MARIETTA RAILROAD COMPANY - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3,112, pages 576–577.] - - - 32 NASSAU STREET, NEW YORK, March 2, 1885. - - GENERAL PHINEAS PEASE, - Receiver Cleveland and Marietta Railroad Company. - - _Dear Sir_: My opinion is asked as to the legality of your making - such an arrangement with the Standard Oil Company as set forth - below. - - The facts, as I understand them, are as follows: - - The Standard Oil Company proposes to ship or control the shipping of - a large amount of oil over your road, say a quantity sufficient to - yield to you $3,000 freight per month. That company also owns the - pipes through which oil is conveyed from the wells owned by - individuals to your railroad, except those pipes leading from the - wells of George Rice, which pipes are his own. The company has, or - can acquire, facilities for storing all its oil until such time as - it can lay pipes to Marietta, and thus deprive your company of the - carriage of all its oil. - - The amount of oil shipped by Mr. Rice is comparatively small, say a - quantity sufficient to yield $300 per month for freight. - - The Standard Oil Company threatens to store, and afterward pipe all - oil under its control unless you make the following arrangements, - viz.: You shall make a uniform rate of thirty-five cents per barrel - for all persons excepting the Standard Oil Company; you shall charge - them ten cents per barrel for oil and also pay them twenty-five - cents per barrel out of the thirty-five cents collected from other - shippers. - - It may render the subject less difficult of consideration to - determine, first, those acts which you cannot with propriety do as - receiver. - - You are by the decree vested with all the powers of receiver, - according to the rules and practice of the court; are directed to - continue the operations of the railroad and can safely make - disbursements from such moneys as come into your hands for such - purposes only as the decree directs, viz.: wages, interest, taxes, - rents, freights, mileage on rolling stock, traffic balances and - certain debts for supplies. - - In my opinion this would not protect you in collecting freight from - one shipper and paying it over to another. - - All moneys received, therefore, from any person for freight over - your road, must pass into your hands and there remain to be - disbursed by proper authority. After an examination of your statute, - however, I find no prohibition against your allowing a discount, or - charging a rate less than a schedule rate to a shipper on account of - the large amount shipped by him. - - As you are acting, therefore, in the interest of the company, and - endeavouring to increase its legitimate earnings as much as - possible, I find nothing in the statutes to prevent your making a - discrimination, especially where the circumstances are such that a - large shipper declines to give your road his freight unless you - allow him to ship at less than the schedule rates. Therefore, there - is no legal objection to the making of an arrangement which in - practical effect may be the same as that proposed, provided the - objections pointed out above are obviated. - - You may with propriety allow the Standard Oil Company to charge - twenty-five cents per barrel for all oil transported through their - pipes to your road, and I understand from Mr. Terry that it is - practicable to so arrange the details that the company can, in - effect, collect this direct, without its passing through your hands. - You may agree to carry all such oil of the Standard Oil Company or - of others delivered to your road through their pipes, at ten cents - per barrel. You may also charge all other shippers thirty-five cents - per barrel freight, even though they delivered oil to your road - through their own pipes, and this I gather from your letter and from - Mr. Terry would include Mr. Rice. - - You are at liberty, also, to arrange for the payment of a freight by - the Standard Oil Company calculated upon the following basis, viz.: - - Such company to be charged an amount equal to ten cents per barrel, - less an amount equivalent to twenty-five cents per barrel upon all - oil shipped by Rice, the agreement between you and the company thus - being that the charge to be paid by them is a certain sum - ascertained by such a calculation. If it is impracticable so to - arrange the business that the Standard Oil Company shall, in effect, - collect the twenty-five cents per barrel from those persons using - the company’s pipes from the wells to the railroad without its - passing into your hands, you may properly also deduct from the price - to be paid by this company an amount equal to twenty-five cents per - barrel upon the oil shipped by such persons provided your accounts, - bills, vouchers, etc., are consistent with the real arrangement - actually made, you will incur no personal responsibility by carrying - out such an arrangement as I suggest. It is possible that by a - proper application to the court, some person may prevent you in the - future from permitting any discrimination. Even if Mr. Rice should - compel you, subsequently, to refund to him the excess charged over - the Standard Oil Company, the result would not be a loss to your - road, taking into consideration the receipts from the Standard Oil - Company, if I understand correctly the figures. There is no theory, - however, in my opinion under the decisions of the courts, relating - to this subject, upon which, for the purpose, an action could be - successfully maintained in this instance. - - Yours truly, - EDWARD S. RAPALLO. - - - NUMBER 47 (See page 2084) - TESTIMONY OF F. G. CARREL, FREIGHT AGENT OF THE CLEVELAND AND MARIETTA - RAILROAD COMPANY - - - [In the case of Parker Handy and John Paton, Trustees, _vs._ The - Cleveland and Marietta Railroad Company _et al._, Circuit Court of - the United States, Southern District of Ohio, Eastern Division.] - - - _Q._ The auditor reports it (the $340) remitted on October 29, 1885. - Please state by whom it was held from the first of May to that time. - - _A._ We might as well go back of that, and I will make a clean - sweep, so far as I am concerned. This overcharge of twenty-five - cents was held by the Macksburg Pipe Line Company. Whether this was - my fault or the fault of the general agent I am not able to say. I - know no difference between Mr. Rice’s oil and the Pipe Line - Company’s. - - _Q._ The books of the company show from the 26th of March, 1885, - until April 28, 1885, Mr. Rice shipped from Macksburg to Marietta - 1,360 barrels; that upon these shipments $340, or twenty-five cents - per barrel, were reported to the auditor of the Cleveland and - Marietta Railway upon the 29th of October. Who sent the - money—$340—to the railroad company, and who reported the amount of - money to the auditor? - - _A._ If I understand correctly, if it is the amount I think it is, - that is the amount for overcharge. It came through my office. - - _Q._ In whose hands had the $340 been from the time paid by Mr. Rice - until it was sent by you to the bank at Cambridge? - - _A._ I received check from Pipe Line. - - _Q._ How soon did you send money to Cambridge after receiving check? - - _A._ I think the next day. - - _Q._ How did you come to get that check? - - _A._ I don’t understand. - - _Q._ Did you go after it? - - _A._ No, sir; it was sent to me by mail. - - _Q._ Where was it mailed? - - _A._ Oil City, I think. - - _Q._ By whom was the check signed? - - _A._ By the treasurer, J. R. Campbell, I think. - - * * * * * - - _Q._ If I understand the arrangement during the month of April, - 1885, you collected thirty-five cents per barrel for all oil shipped - by George Rice, and paid ten cents to the receiver of the railroad - company and twenty-five cents to the Macksburg Pipe Line? - - _A._ Yes, sir; as long as Mr. Rice shipped. - - _Q._ Afterwards the Macksburg Pipe Line Company sent the money thus - paid to it to you, and you paid the money into the depository of the - railroad company on the 29th of October, 1885? - - _A._ Yes, sir. - - - NUMBER 48 (See page 2084) -REPORT OF THE SPECIAL MASTER COMMISSIONER GEORGE K. NASH TO THE CIRCUIT - COURT - - - [In the case of Parker Handy and John Paton, Trustees, _vs._ The - Cleveland and Marietta Railroad Company _et al._, Circuit Court of - the United States, Southern District of Ohio, Eastern Division.] - - - TO THE HONOURED THE CIRCUIT COURT OF THE UNITED STATES, - Southern District of Ohio, Eastern Division. - - By an order of your court made on the 18th day of December, 1885, in - the case of Parker Handy and John Paton, Trustees, _vs._ The - Cleveland and Marietta Railroad Company _et al._, I was appointed a - special master commissioner to investigate and report to the court - for its action what discriminations have been made in freights by - Receiver Pease, or during his administration by those under him, and - to this end I was authorised to summon and examine witnesses and to - cause their testimony to be reduced to writing so far as in my - discretion it might be necessary. I was also required to inquire - fully and particularly into the facts and report to the court what - discriminations had been made, under what arrangements and to what - extent, and to report fully all the facts and show to what extent - and under what circumstances discriminations have been made against - shippers as well as in favour of shippers, and by whom such - discriminations were authorised and by whom made. In compliance with - this order I proceeded to examine the matters therein referred to, - and in the course of such examination called the following-named - persons as witnesses: - - T. D. Dale, C. C. Pickering (auditor of the Cleveland and Marietta - Railroad Company under Receiver Pease), F. G. Carrel, J. E. Terry, - Daniel O’Day, George Rice, H. L. Wilgus, W. H. Slack, W. J. Cramm, - George Best, Jr., and J. C. McCarty, whose evidence I caused to be - reduced to writing by A. C. Armstrong, a stenographer, and is - herewith submitted. - - I find from the evidence that soon after General Pease was appointed - receiver of the Cleveland and Marietta Railroad, an arrangement was - entered into with Daniel O’Day and W. T. Scheide, by which it was - agreed that the rate to be charged by Receiver Pease and his - subordinates upon all crude oil shipped from Macksburg and vicinity - upon the line of the Cleveland and Marietta Railroad Company to - Marietta should be thirty-five cents per barrel; that the agent of - the receiver at Marietta should also pay the agent of the parties - represented by O’Day and Scheide; that his compensation was to be - $85 per month, $60 of which was to be paid by Receiver Pease and $25 - by the parties represented by O’Day and Scheide; that it was the - duty of this joint agent (one F. G. Carrel) to collect from all - shippers the sum of thirty-five cents per barrel, and to account to - Receiver Pease for ten cents of this sum, and to the parties - represented by O’Day and Scheide for the balance. This arrangement - went into force on the 20th day of March, 1885, and continued in - force until September, 1885, at which time one George Rice made - complaint to your court that discriminations were being made by the - receiver against oil shippers. - - Negotiations for this arrangement were opened in the City of Toledo - on the 8th day of February, 1885, at a meeting which was attended by - Daniel O’Day, W. T. Scheide, A. G. Blair (acting general freight and - passenger agent of the receiver of the Wheeling and Lake Erie - Railroad Company), and J. E. Terry (general freight and passenger - agent of Pease, the receiver of the Cleveland and Marietta Railroad - Company). The agreement above referred to was substantially reached - at this meeting. Mr. Terry reported the same to General Pease, - receiver of the Cleveland and Marietta Railroad Company, who - thereupon wrote a letter to his general counsel in New York, asking - advice in regard thereto, which letter was transmitted to said - counsel by J. E. Terry in person. E. S. Rapallo, an attorney in New - York City, replied to the letter of General Pease, and a copy of his - letter is now on file in your court and is a part of a report filed - by General Pease in November, 1885. This arrangement seems to have - been entered into with full knowledge of General Pease, the - receiver, and after consultation with his counsel, and with the full - knowledge of his general freight and passenger agent, J. E. Terry. - - George Rice was the owner of certain oil wells in the Macksburg Oil - Region and he also purchased some oil from the owners of certain - other wells in the same district. The oil which he produced and also - the oil which he purchased he was in the habit of transporting to - his refinery at Marietta, Ohio, by means of the Cleveland and - Marietta Railroad. Before the arrangements to which I have referred - went into effect he had been charged upon the shipment made by him - the sum of seventeen and one-half cents per barrel. After the 20th - of March, 1885, he was charged thirty-five cents per barrel upon all - oil shipped by him. Between the 20th of March and the 30th of April - following, Mr. Rice shipped from Macksburg to Marietta over the - Cleveland and Marietta Railroad, 1,360 barrels of oil. Upon this oil - he was charged thirty-five cents per barrel, or the sum of $476. - This money was collected by F. G. Carrel, the agent of the receiver - and also the agent of the parties represented at Toledo by O’Day and - Scheide. This money was divided according to the agreement, and $136 - was sent by Carrel to the bank of the receiver at Cambridge, Ohio, - and the remaining $340, or twenty-five cents for each barrel of oil - shipped by Rice, was sent by Carrel to the oil parties who had their - headquarters at Oil City, Pennsylvania. On or about the 29th of - October, 1885, this $340 was returned to Mr. Carrel at Marietta, by - a check from Oil City, which check was signed by one J. R. Campbell, - treasurer. This money was sent by Carrel to the bank in Cambridge in - which the receiver made his deposits. It will be observed that this - money was returned from Oil City some ten or twelve days after Judge - Baxter made his order directing the receiver to make a report - showing what discriminations, if any, had been made by him in the - shipments of oil, which order had been obtained upon the complaint - of George Rice. It was also returned after a consultation had by J. - E. Terry with Daniel O’Day in the City of Cleveland. Mr. Terry - states that the receiver was made acquainted with the steps taken by - him in connection with this transaction. The receiver did not submit - himself to an examination in regard to this matter, but filed an - affidavit with me which I attach to this report, in which he states - in substance that he did not know at the time he filed his reports - with your court that that part of the agreement between himself and - the oil parties which required that twenty-five cents per barrel of - the moneys collected by him should be paid to the oil parties had - been carried out, or that the money thus paid by Rice, and by Carrel - paid over to the oil parties, had been returned. The reason given by - Receiver Pease and by Mr. Terry for entering into this agreement was - that the parties represented by O’Day and Scheide were threatening - to put down a pipe-line from Macksburg to Parkersburg, through which - to transport the oil produced by them in this region to the latter - city, and that if this threat was carried out, the Railroad Company - would be prevented from carrying oil produced by them to Marietta. - They further stated that in consideration of the arrangement to - which I have referred, the parties represented by O’Day and Scheide - agreed not to put down a pipe-line, but to ship their oil over the - Cleveland and Marietta Railroad. - - As soon as George Rice found that the rates on oil had been raised - from seventeen and one-half to thirty-five cents per barrel, and - that he could not get any better terms for his shipment from the - railroad, he commenced to lay a pipe-line from his wells in the - Macksburg field to Lowell, on the Muskingum River. This line was - completed about the first of May, 1885, and from that time he - transported all his oil through this pipe to Lowell, and thence - shipped it to Marietta by boat on the Muskingum River. As soon as - the parties represented by O’Day and Scheide ascertained that Rice - was putting down a pipe-line, they proceeded also to lay a pipe-line - from the Macksburg oil field to Parkersburg, in West Virginia. Since - the completion of their pipe-line all the oil sent to Parkersburg - and Marietta has been sent through this pipe-line. For several - months they continued to ship some of their oil North over the - Cleveland and Marietta Railroad to Cleveland, but during the last - two months these shipments have ceased, and all the oils now - produced by the parties represented by O’Day and Scheide are sent by - them through their pipe-line to Parkersburg. - - Mr. Rice, since the completion of his pipe-line, has shipped through - it to Marietta more than forty-five thousand barrels of oil. The - shipments by Mr. Rice might have been retained for the benefit of - the railroad had the rate of seventeen and one-half cents per barrel - been continued. It is probable that had not the arrangement which we - have been considering been entered into, a line would have been put - down by the parties represented by O’Day and Scheide, but without - the arrangement the patronage of Mr. Rice could have been retained. - The result of the arrangement seems to be that the railroad has lost - the patronage not only of the parties represented by O’Day and - Scheide, but also of Mr. Rice, and it is not to-day carrying a - barrel of oil. - - The Argand Oil Works and the Argand Refining Company, two - corporations located at Marietta, Ohio, have made complaint that - from the eighteenth day of February until the fourteenth day of - October, 1885, they were shippers of oil from the Macksburg Oil - Region, over the Cleveland and Marietta Railroad, and that they were - discriminated against by the receiver and his agents. I conceived - that the order of your court referring this subject to me was broad - enough to cover the complaint made by these corporations and I - accordingly called W. H. Slack, W. J. Cramm, C. C. Pickering, and F. - G. Carrel as witnesses in regard to this complaint, and their - testimony is herewith submitted, together with the account presented - by these two corporations and the receipted bills taken by them in - payment of freight. From the evidence of these witnesses it appears - that these corporations, during the time covered by the complaint, - were engaged in refining oil at Marietta, Ohio. They purchased their - crude oil of the parties represented by O’Day and Scheide at - Macksburg. Their purchases were made by ordering their oil when - needed by telegraph from a man by the name of Seep, located at Oil - City, Pennsylvania, and they were charged therefor the market price - of oil at Oil City on the day when the telegraphic order was given. - The oil was then shipped to them over the Cleveland and Marietta - Railroad and a bill for freight presented to them in the form - following: “The Argand Oil Works, Marietta, Ohio, To the Cleveland - and Marietta Railroad Company, Dr.” - - In these bills they were charged for all oil shipped at the rate of - thirty-five cents per barrel. This amount was paid by them to - Carrel, the agent of the receiver, at Marietta, Ohio. Of this amount - Carrel paid to the receiver ten cents, and to the parties - represented by O’Day and Scheide, twenty-five cents. I am of the - opinion that these parties were in the same position as George Rice, - with the exception that Mr. Rice produced his oil from the ground - and shipped it over the Cleveland and Marietta Railroad, and these - parties bought their oil instead of producing it from the ground. I - cannot see as this difference modifies in any way the discrimination - made against them. They claim that from February 18, 1885, until - October 14, 1885, they shipped 3,679–6/10 barrels of oil, for which - they were charged $1,232.06 as freight, and that the discriminations - against them amounted to $888.70. From their bill certain reduction - should be made. All shipments made prior to March 20, 1885, should - be excluded for the reason that the discriminating arrangement - entered into between the receiver and the parties represented by - O’Day and Scheide did not go into effect until the 20th of March, - 1885. Two shipments, one made on the 7th of August, and the other - made on the 21st of September, from Dexter City, should also be - excluded for the reason that all oils shipped from Dexter City were - charged for at the same rates as these complainants were taxed. - After making these deductions, I find that under the contract - complained of, the Argand Oil Works and the Argand Refining Company - shipped from the 20th of March until the 14th of October, 2,695 - barrels of oil; that they were required to pay upon these shipments - the sum of $894.59, and that of this sum Carrel, the agent of the - receiver at Marietta, paid to the receiver the sum of $245.44, and - to the parties in Pennsylvania represented by O’Day and Scheide the - sum of $649.15. - - A complaint of a similar character is made by the Marietta Oil - Works, a partnership engaged in the business of refining oils at - Marietta, Ohio. Upon their complaint, I examined George C. Best, - Jr., J. C. McCarty, W. H. Slack, C. C. Pickering, and F. G. Carrel - as witnesses, and their evidence is submitted herewith in full, - together with the account presented by this partnership and the - receipted bills presented by the Cleveland and Marietta Railroad and - paid by them. Their case in all respects seems to be precisely like - that of the Argand Oil Works and the Argand Refining Company. They - claim that from the 1st day of April until the 31st day of August, - 1885, inclusive, they shipped 2,717 barrels of oil, for which they - were charged as freight $950.95, and that they were discriminated - against to the extent of $679.25. From their bill I think that there - should be excluded two shipments from Dexter City, one made on the - 12th day of June, and the other on the 18th day of June, for the - reason that no discriminations were made in freights, by the - receiver, of oils shipped from Dexter City. After taking into - account these two shipments, I find that the Marietta Oil Works - shipped from Macksburg and Elba on their account 2,547 barrels of - oil; that the freights paid by them upon these shipments amounted to - the sum of $891.45, and that out of this sum Carrel, the agent at - Marietta, paid to the receiver the sum of $251.70, and to the - parties represented by O’Day and Scheide the sum of $639.75. - - I find that during the receivership of General Pease, no oils were - shipped from Macksburg North over the Cleveland and Marietta - Railroad except such as were shipped by the parties represented by - Messrs. O’Day and Scheide. - - I have purposely referred to the parties who entered into this - arrangement with Receiver Pease and his freight agent, J. E. Terry, - as “the parties represented by O’Day and Scheide,” for the reason - that I have not been able to ascertain who or what the parties are. - It appears from the evidence that during the time that M. D. - Woodford had control as manager of the Cleveland and Marietta - Railroad, one W. J. Brundred and T. D. Dale conceived the idea of - running pipes to all the wells in the Macksburg Oil Regions, and - then by concentrating them together convey all the oils thus - gathered through the main line to the Cleveland and Marietta - Railroad and deposit it in tanks, and with this end in view entered - into a contract in writing with said Woodford, a copy of which - contract is attached to the report of Receiver Pease, filed in your - court in November, 1885. After this contract was entered into, they - organised a corporation known as the Ohio Transit Company, with T. - D. Dale as president and W. J. Brundred as vice-president, to which - corporation this contract was assigned. This company continued in - the business until January, 1885. Mr. Dale, the president, states - that “We said we could not compete with the Standard Oil Company, - and for that reason we sold out at a fair price.” When asked to whom - his company sold their property, Mr. Dale answered, “I don’t know - what company, but my recollection is that it might have been the - National Transit Company.” “It was done in their office. I don’t - know whether the bill of sale was made to Mr. O’Day or to Mr. - Scheide.” Mr. Dale further states that “Mr. O’Day was vice-president - of the National Transit Company, and that Mr. Scheide was its - general manager; it, however, is conjecture on my part.” In another - place Mr. Dale states that the gentleman managing the National - Transit Company bought the property of the Ohio Transit Company, and - gives as their names Daniel O’Day, W. T. Scheide, and J. R. - Campbell. The corporation or partnership, or whatever it is which - now manages the pipe-line system in Macksburg oil fields, and - extending from there to Parkersburg, is known as the Macksburg Pipe - Line. One Daniel O’Day, now having his headquarters at Macksburg, is - the manager of this pipe-line. When O’Day was asked, “To whom does - the Macksburg Pipe Line belong?” he answered, “I do not believe I - can answer that; I do not know.” When asked, “Who has general - control of it?” he answered, “Mr. Scheide, Mr. O’Day, and J. R. - Campbell.” He stated that “Mr. Scheide lives in Titusville, Mr. - Campbell at Oil City, and Mr. O’Day at Buffalo.” He also stated that - these gentlemen were officers of the National Transit Company and - the United Pipe Line, a division of the National Transit Company; - that Mr. O’Day is general manager of the National Transit Company, - and when asked whether the Macksburg Pipe Line is also a branch of - the same system, he answered, “Really, I am not well enough posted - to know, but I presume it is.” Daniel O’Day also stated that the - National Transit Company is a corporation organised under the laws - of New York, and that its principal office is located in New York - City. He also stated that “its property is located throughout the - state of New York and the state of Pennsylvania, and some in Ohio.” - The line located in Ohio he described as running from Parker’s - Landing, in Pennsylvania, to Cleveland. He also stated that the - United Pipe Line is a division of the National Transit Company which - runs from wells to railroad points or pumping stations, and that the - wells to which he referred are located in Alleghany County, New - York, and throughout a large portion of Pennsylvania. He also stated - that the Macksburg Pipe Line controls, by lease and deed, sixty or - seventy acres of land in this state of the line of the Cleveland and - Marietta Railroad Company, and that the lease and deeds for this - land are in the name of one Benjamin Brewster, of New York City, and - that said Brewster is the vice-president of the National Transit - Company. When Mr. O’Day was asked, “What relation does the National - Transit Company and the United Pipe Line Company sustain to the - Standard Oil Company?” he answered, “I believe that people having - stock in the National Transit Company or the United Pipe Line can - hold stock, and do hold stock, in the Standard Oil Company, but I do - not know what further relations they have.” - - * * * * * - - I have attempted to summarise in a very brief manner the evidence - which has been taken by me under the order of your court, but in - order to obtain a full understanding of the situation, it will - perhaps be necessary to read all the evidence which is herewith - submitted in full, in connection with the reports and exhibits filed - by General Pease, in November, 1885. - - Respectfully submitted, - (Signed) GEORGE K. NASH, - _Special Master Commissioner_. - - - NUMBER 49 (See page 2120) - A STATEMENT FROM AN OIL-PRODUCER’S STAND-POINT FOR 1886 - - - [Circular used in the campaign against the Billingsley Bill.] - - - Total production for the year, 25,145,088 barrels. - - Average price per barrel, .71½. - - The gross income from the entire Oil Regions, based on these - figures, $17,978,237. - - The cost of producing the above amount of oil was as follows: - - Wells drilled, 3,525—at an average cost of - $3,000 each $10,575,000 - Cost of pumping and raising the oil to the - surface and keeping rigs and wells in repair, - estimated at .25 per barrel of production 6,286,272 - Add estimated cost of royalty, one-eighth 2,247,342 - ——————————— - Total expenditures $19,108,614 - Deduct total income of the entire Oil Regions 17,978,737 - ——————————— - Net loss to oil producers during the year $1,129,877 - - If the estimated value of the one-eighth royalty be not added, then - the value of five acres of land should be added to the cost of each - well and the result would be practically the same. - - The daily production January 1, 1886, was - 59,603 barrels, valued at $750 per barrel $44,702,250 - - The daily production January 1, 1887, was - 66,383 barrels, valued at $500 per barrel 33,191,500 - ——————————— - Showing a shrinkage in value of the producing - territory for the year 1886 to be $11,510,750 - - NOTE.—To make it more clear to the uninitiated, the foregoing means - that producing territory was bought and sold in 1885 on the basis of - $750 to each barrel of production, and in 1886 on the basis of $500. - It is on this basis that the value of oil-producing territory is - estimated. A well producing one barrel a day at the present time is - valued at $500; one year ago it was worth $750. - - The valuation of the stock of the Standard Oil Company at the - present time is $150,000,000, or nearly five times as great as the - entire Oil Region country valuation. The profits of the Standard Oil - Company for the year 1886 were over $26,000,000. - - Strangers may ask, Why is there no competition in pipage and storage - of oil if the profits are so great? We answer, that with rebates, - drawbacks, discrimination, and conspiracies the Standard Oil Company - has been able to freeze out and suppress nearly every attempt at - competition. - - Does not the foregoing array of figures, showing as it does the - terrible shrinkage which the property of the oil producers has - sustained, amounting to nearly twenty-five per cent. in one year, - demand such relief in pipage, storage, and shrinkage, as is - contemplated by the Billingsley Bill, now before the Senate of - Pennsylvania? - - - NUMBER 50 (See page 2121) - THE BILLINGSLEY BILL - - - [Legislature of Pennsylvania. File of the House of Representatives. - Number 104, session of 1887.] - - - An act to punish corporations, companies, firms, associations and - persons and each of them engaged in business of transporting by - pipe-lines or lines or storing petroleum in tank or tanks, under - certain restrictions and penalties from charging in excess of - certain fixed rates for receiving, transporting, storing, and - delivering petroleum, and to regulate deductions for losses caused - to petroleum in pipe-lines and storage tanks by lightning, fire, - storm, or other unavoidable causes. - - SEC. 1. Be it enacted by the Senate and House of Representatives of - the Commonwealth of Pennsylvania in general assembly met, and it is - hereby enacted by authority of the same: That no corporation, - company, firm, association, person or persons who are now, or shall - hereafter engage in the business of transporting or storing crude or - refined petroleum by means of pipe-line or pipe-lines, or storage by - tank or tanks, shall demand or receive any rate of charge in excess - of ten cents per barrel, reckoning forty-two gallons for each - barrel, for all services performed within this commonwealth in - receiving petroleum from tank or tanks or other receptacle on the - lease or farm at the place of its production and transporting and - delivering the same, or petroleum of like kind and quantity in every - essential particular in the division of such pipe-line within which - the same shall have been received at any shipping point in said - division which may be designated by the holder, owner, or purchaser - of said petroleum, whether said petroleum is held by certificate, - voucher, receipt, credit balance, accepted order or otherwise. And - such corporation, company, firm, association, person or persons, and - each of them are hereby required immediately upon this act becoming - a law to erect and establish, if not already established, and - maintain thereafter at least one shipping point within each - pipe-line division within this commonwealth of sufficient - dimensions, capacity and equipment to accommodate the entire trade - within each such pipe-line division. - - SEC. 2. No such corporation, company, firm, association, person or - persons shall demand or receive from any person or persons, firms, - association, company or corporation owning or holding a credit - balance for petroleum in line or tank within this commonwealth, any - rate of charge whatever for the tankage or storage of petroleum - owned or so held by credit balance for the first thirty days from - the date of said credit balance. And no corporation, company, firm, - association, person or persons who are now engaged or shall - hereafter engage in the business of transporting or storing crude or - refined petroleum by means of pipe-line or pipe-lines, or storage - tank or tanks, shall demand or receive, from any source whatever, - for the tankage of crude or refined petroleum within this - commonwealth any rate of charge in excess of one-sixtieth of one - cent per barrel of forty-two gallons a day or fractional part - thereof so long as said petroleum shall thereafter be held and - stored in tank. - - SEC. 3. Such corporation, company, firm, association, person or - persons are hereby obliged and required, and it is hereby made the - duty of such corporation, company, firm, association, person or - persons, and each of them, to hold and store in tank any and all - petroleum offered for storage or transportation, or any and all - petroleum received and transported by them or either of them for the - owner thereof; or for the person or persons holding certificate, - voucher, receipt, credit balance or accepted order thereof, for a - period of one year or for any shorter period than one year from the - time when said petroleum was first received by such corporation, - company, firm, association, person or persons for storage, if - requested so to do by the owner thereof, or by the person or persons - holding certificate, voucher, receipt, credit balance or accepted - order therefor, at and for the rate of charge of one-sixtieth of one - cent per barrel of forty-two gallons for each day, or fractional - part thereof thereafter. Except that when said petroleum is held by - credit balance, no rate of charge whatever shall be made or charged - on said credit balance for the first thirty days from the date of - said credit balance. - - SEC. 4. Such corporation, company, firm, association, person or - persons shall be allowed to make a deduction from the crude - petroleum received, transported or stored, not to exceed one-half of - one per cent. of said petroleum so received, transported or stored, - on account of water, sediment, evaporation, waste, and the like. The - deduction mentioned in this section shall be made when the petroleum - is first run or transported by such corporation, company, firm, - association, person or persons, from the tank or receptacle on the - lease or farm where produced, and it is hereby declared to be - unlawful for such corporation, company, firm, association, person or - persons to make the reduction in this section provided for at any - other time or place than as above provided. - - SEC. 5. Any corporation, company, firm, association, officer or - officers, agent or agents, person or persons, engaged in the - business of transporting or storing crude or refined petroleum - within this commonwealth by means of pipe-line or pipe-lines or - storage tank or tanks shall, upon application of the owner of any - well or wells, lay pipe or pipes to any well or wells on any lease - or leases in any locality where there is any oil on any farm or - farms in this commonwealth, and receive the oil therefrom and - transport the same through their pipe-line or pipe-lines and store - the same in their storage tank or tanks, in any division or in any - place in any division designated by the owner or purchaser of said - petroleum, and hold the same subject to the owner or purchaser at - the rate or charge prescribed in the preceding sections. - - SEC. 6. Such corporation, company, firm, association, person or - persons shall be liable for all loss caused by lightning, fire, - storm, or other unavoidable cause to the petroleum received, - transported or stored by them, and in the event of any such loss the - same shall be charged by said corporation, company, firm, - association, person or persons, _pro rata_, upon and deducted from - all petroleum in the custody of such corporation, company, firm, - association, person or persons, at the date of such loss. - - SEC. 7. Any corporation, company, firm, association, officer or - officers, agent or agents thereof, person or persons engaged in the - business of transporting or storing crude or refined petroleum - within this commonwealth by means of pipe-line or pipe-lines or - storage tank or tanks, who shall demand or receive any rate of - charge in excess of ten cents per barrel, reckoning forty-two - gallons for each barrel, for all services performed within this - commonwealth for receiving petroleum from tank or tanks or other - receptacle on the lease or farm at the place of its production and - transporting and delivering the same or petroleum of like kind and - quality in every essential particular in the division of the - pipe-line within which the same shall have been received at the - shipping points designated by the holder, owner or purchaser of said - petroleum, or who shall fail or neglect to erect and establish - immediately upon this act becoming a law—if not already - established—and maintain thereafter at least one shipping point - within each pipe-line division within this commonwealth of - sufficient dimensions and capacity and properly equip the same to - accommodate the entire trade within each such district, or who shall - demand or receive for the storage of petroleum within this - commonwealth any rate of charge in excess of one-sixtieth of one - cent a barrel of forty-two gallons a day or a fractional part - thereof so long as said petroleum shall thereafter be held and - stored in tank, or who shall demand or receive from any person or - persons, firm, association, company, or corporation owning or - holding a credit balance for petroleum in line or tank within this - commonwealth, any rate of charge whatsoever for the tankage or - storage of petroleum so owned or held by credit balance for the - first thirty days commencing from the date of said credit balance, - or who shall refuse to hold and store in tank any and all petroleum - received and transported by them or either of them for the owner - thereof, or for the person or persons holding certificate, voucher, - receipt, credit balance or accepted order therefor for the period of - one year, or for any shorter period than one year from the time when - said petroleum was first received, by such corporation, company, - firm, association, person or persons for storage if requested so to - do by the owner thereof, or by the person or persons holding - certificate, voucher, receipt, credit balance or accepted order - therefor, at and for the rate of charge of one-sixtieth of one cent - per barrel of forty-two gallons for each day or fractional part - thereof thereafter—but no rate of charge whatever shall be had or - made for the first thirty days from date of credit balance when oil - is held by credit balance—or who shall make any deduction on account - of water, sediment, evaporation, waste, or the like, in excess of - one-half of one per cent. of the petroleum received, transported, - and stored, or who shall violate any or either of the provisions or - requirements of any or either of the first sections of this act, - shall be deemed guilty of a misdemeanour, and on conviction thereof - shall be sentenced to pay a fine of not less than one thousand - dollars nor more than two thousand dollars for the first offense, - and for the second and any subsequent offenses to pay a fine of not - less than two thousand dollars nor more than five thousand dollars, - and to undergo an imprisonment of not less than sixty days and not - exceeding one year, one-half of any such fine or fines to be paid to - the prosecutor and the other one-half to be for the use of the - county in which such offence or offences shall have been committed, - and in addition to the penalties hereinbefore provided shall be - liable in any action of debt to any person or persons, firm, - company, association, or corporation thereby aggrieved for double - the amount of the damage sustained by reason of the violation of any - of the provisions of this act. - - SEC. 8. No contract heretofore made or now existing for receiving, - transporting, or storing petroleum within this commonwealth shall be - in any manner impaired or affected by the provisions of this act. - - SEC. 9. All acts and parts of acts inconsistent herewith are hereby - repealed. - - SEC. 10. This act shall take effect immediately upon its becoming a - law. - - - NUMBER 51 (See page 2130) - EXTRACTS FROM TESTIMONY OF H. H. ROGERS - - - [Report of Special Committee on Railroads, New York Assembly, 1879. - Volume III, pages 2613–2618.] - - - _Q._ Was your firm’s business sold out to the Standard Oil Company? - - _A._ I would like to have the question explained. - - _Q._ Was there a sale or transfer made of your business to the - Standard Oil Company, by which practically the Standard Oil Company - really controlled your business? - - _A._ I will answer this much of the question, by saying that the - Standard Oil Company does not practically control our business. - - _Q._ Do they control the rates at which your business gets the - transportation of oil? - - _A._ That I don’t know anything about; I don’t know anything about - the rates of transportation. - - By the Chairman. - - _Q._ Was not your firm taken in with the Standard Oil Company upon - some agreed basis or arrangement, whether you regard it as a - purchase or transfer or not? - - _A._ We worked in harmony with the Standard Oil Company for a number - of years. - - _Q._ Upon an agreed basis of general business? - - _A._ Our interest was in common, to a certain extent. - - * * * * * - - _Q._ Has your firm any contract with the Standard Oil Company? - - _A._ That I cannot answer. - - _Q._ What member of your firm would be able to answer that? - - _A._ I think Mr. Pratt would, if he were here. - - _Q._ When was it that your firm began to work in harmony with the - Standard Oil Company? - - _A._ I cannot say exactly how long ago; seven or eight years ago we - got up a refining association here; that was the first, and then we - got up another, and we got up another, and we have always been - trying to get into some relations with all the refiners, so that we - might make some money out of the business. - - _Q._ Had you difficulty before you entered into relations with the - Standard Oil Company to make money out of the business? - - _A._ The competition was always very sharp, and there was always - some one that was willing to sell goods for less than they cost, and - that made the market price for everything; we got up an association, - and took in all the refiners until some of them went back on us, and - that would break up the association; we tried that two or three - times. - - _Q._ Then finally you entered the Standard Oil arrangement? - - _A._ Then we made an alliance or association with some of the - refiners about here, and it was more successful. - - _Q._ What are the refiners about here with whom that alliance was - made, and are they or are they not all of them covered by the - Standard Oil arrangement? - - _A._ They would come in and then they would go out; there is no - refiner that I know of, with one exception, about New York but what - has been in the association. - - _Q._ What are the refiners that are now in association of the - Standard Oil? - - _A._ The people that are working in harmony with us comprise about, - I should think, 90 or 95 per cent. of the refiners. - - _Q._ Now tell us their names, the leading ones. - - _A._ Some of the leading ones? The Standard Oil Company; Charles - Pratt and Company; the Sone and Fleming Manufacturing Company; - Warden, Frew and Company of Philadelphia; the Standard Oil Company - of Pittsburg; the Acme Oil Refining Company of Titusville; the - Imperial Refining Company of Oil City; the Baltimore United Oil - Company of Baltimore. - - * * * * * - - _Q._ You said that substantially 95 per cent. of the refiners were - in the Standard arrangement? - - _A._ I said 90 to 95 per cent. I thought were in harmony. - - _Q._ When you speak of their being in harmony with the Standard, - what do you mean by that? - - _A._ I mean just what harmony implies. - - _Q._ Do you mean that they have an arrangement with the Standard? - - _A._ If I am in harmony with my wife, I presume I am at peace with - her, and am working with her. - - _Q._ You are married to her, and you have a contract with her? - - _A._ Yes, sir. - - _Q._ Is that what you mean? - - _A._ Well, some people live in harmony without being married. - - _Q._ Without having a contract? - - _A._ Yes; I have heard so. - - _Q._ Now, which do you mean? Do you mean the people who are in the - Standard arrangement, and are in harmony with it, are married to the - Standard or in a state of freedom—celibacy? - - _A._ Not necessarily, so long as they are happy. - - _Q._ Is it the harmony that arises from a marriage contract? - - _A._ Not necessarily, so long as they are happy. - - _Q._ When you speak of their harmony, is it a relation of contract? - - _A._ I mean by harmony that if you and I agree to go on Wall Street - and buy a hundred shares of Erie at 33, and we agree to sell it out - together at 40, that is harmony. I mean just the same that way—if I - go into the Standard Oil office and conclude to buy some oil of them - and agree on a fair price to sell it out at, that is harmony. - - _Q._ Is that the harmony that you mean—that you gentlemen have - agreed between each other the rate at which you will buy and the - rate at which you will sell? - - _A._ Well, not going too far into detail, I would say that the - relations are very pleasant. - - _Q._ But we want the detail; we want precisely what that harmony is, - what it consists of, and what produces it. - - _A._ Well, is it a railroad abuse, or is it an abuse to be in - harmony with people? - - _Q._ No; it is not abuse to be in harmony; there are some kinds of - harmony that the law considers conspiracy. - - _A._ Well, I have heard so. - - By the Chairman. - - _Q._ What we want to know is this: This Standard Oil Company in - itself is, as we understand it, a large organisation, not very - extensive, but is made so by contracts with various other - organisations, that are not a part of it, by their written contract - or verbal contract or understanding, or whatever you term it; we - want to know whether that is not the fact, and if that is not what - you refer to when you speak about working in harmony. - - _A._ Mr. Chairman, I want to give you all the information that is - necessary in this matter for your purposes, but it is a question in - my mind whether it is a proper thing for me, even if there is no - harm done by it, to divulge my business secrets. - - _Q._ We do not ask you for your secrets; we simply ask you the - general nature of this organisation. - - _A._ I have explained it, I think, to you quite as fully as I can. - - - NUMBER 52 (See page 2136) - THE TRUST AGREEMENT OF 1882 - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3,112, pages 307–313.] - - - This agreement, made and entered upon this second day of January, - A.D. 1882, by and between all the persons who shall now or may - hereafter execute the same as parties thereto: - - _Witnesseth_: I. It is intended that the parties to this agreement - shall embrace three classes, to wit: - - 1st. All the stockholders and members of the following corporations - and limited partnerships, to wit: - - Acme Oil Company, New York; Acme Oil Company, Pennsylvania; Atlantic - Refining Company of Philadelphia; Bush and Company (limited); Camden - Consolidated Oil Company; Elizabethport Acid Works; Imperial - Refining Company (limited); Charles Pratt and Company; Paine, Abbett - and Company; Standard Oil Company, Ohio; Standard Oil Company, - Pittsburg; Smith’s Ferry Oil Transportation Company; Solar Oil - Company (limited); Sone and Fleming Manufacturing Company (limited). - - Also, all the stockholders and members of such other corporations - and limited partnerships as may hereafter join in this agreement, at - the request of the trustees herein provided for. - - 2d. The following individuals, to wit: - - W. C. Andrews, John D. Archbold, Lide K. Arter, J. A. Bostwick, - Benjamin Brewster, D. Bushnell, Thomas C. Bushnell, J. N. Camden, - Henry L. Davis, H. M. Flagler, Mrs. H. M. Flagler, John Huntington, - H. A. Hutchins, Charles F. G. Heye, A. B. Jennings, Charles - Lockhart, A. M. McGregor, William H. Macy, William H. Macy, Jr., - estate of Josiah Macy, William H. Macy, Jr., executor, O. H. Payne, - A. J. Pouch, John D. Rockefeller, William Rockefeller, Henry H. - Rogers, W. P. Thompson, J. J. Vandergrift, William T. Wardwell, W. - G. Warden, Joseph L. Warden, Warden, Frew and Company, Louise C. - Wheaton, H. M. Hanna and George W. Chapin, D. M. Harkness, D. M. - Harkness, trustee, S. V. Harkness, O. H. Payne, trustee; Charles - Pratt, Horace A. Pratt, C. M. Pratt, Julia H. York, George H. Vilas, - M. R. Keith, trustees, George F. Chester. - - Also, all such individuals as may hereafter join in the agreement at - the request of the trustees herein provided for. - - 3d. A portion of the stockholders and members of the following - corporations and limited partnerships, to wit: - - American Lubricating Oil Company; Baltimore United Oil Company; - Beacon Oil Company; Bush and Denslow Manufacturing Company; Central - Refining Company of Pittsburg; Cheesborough Manufacturing Company; - Chess, Carley Company; Consolidated Tank Line Company; Inland Oil - Company; Keystone Refining Company; Maverick Oil Company; National - Transit Company; Portland Kerosene Oil Company; Producers’ - Consolidated Land and Petroleum Company; Signal Oil Works (limited); - Thompson and Bedford Company (limited); Devoe Manufacturing Company; - Eclipse Lubricating Oil Company (limited); Empire Refining Company - (limited); Franklin Pipe Company (limited); Galena Oil Works - (limited); Galena Farm Oil Company (limited); Germania Mining - Company; Vacuum Oil Company; H. C. Van Tine and Company (limited); - Waters-Pierce Oil Company. - - Also, stockholders and members (not being all thereof) of other - corporations and limited partnerships who may hereafter join in this - agreement at the request of the trustees herein provided for. - - II. The parties hereto do covenant and agree to and with each other, - each in consideration of the mutual covenants and agreements of the - others, as follows: - - 1st. As soon as practicable a corporation shall be formed in each of - the following states, under the laws thereof, to wit, Ohio, New - York, Pennsylvania, New Jersey; provided, however, that instead of - organising a new corporation any existing charter and organisation - may be used for the purpose when it can advantageously be done. - - 2d. The purposes and powers of said corporations shall be to mine - for, produce, manufacture, refine, and deal in petroleum and all its - products, and all the materials used in such businesses, and - transact other business collateral thereto. But other purposes and - powers shall be embraced in the several charters such as shall seem - expedient to the parties procuring the charter, or, if necessary to - comply with the law, the powers aforesaid may be restricted and - reduced. - - 3d. At any time hereafter, when it may seem advisable to the - trustees herein provided for, similar corporations may be formed in - other states and territories. - - 4th. Each of said corporations shall be known as the Standard Oil - Company of (and here shall follow the name of the state or territory - by virtue of the laws of which said corporation is organised). - - 5th. The capital stock of each of said corporations shall be fixed - at such an amount as may seem necessary and advisable to the parties - organising the same, in view of the purpose to be accomplished. - - 6th. The shares of stock of each of said corporations shall be - issued only for money, property, or assets equal at a fair valuation - to the par value of the stock delivered therefor. - - 7th. All of the property, real and personal, assets and business of - each and all of the corporations and limited partnerships mentioned - or embraced in class first, shall be transferred to and vested in - the said several Standard Oil companies. All of the property, - assets, and business in or of each particular state shall be - transferred to and vested in the Standard Oil Company of that - particular state, and in order to accomplish such purpose the - directors and managers of each and all of the several corporations - and limited partnerships mentioned in class first are hereby - authorised and directed by the stockholders and members thereof (all - of them being parties to this agreement) to sell, assign, transfer, - convey, and make over, for the consideration hereinafter mentioned, - to the Standard Oil Company or companies of the proper state or - states, as soon as said corporations are organised and ready to - receive the same, all the property, real and personal, assets and - business of said corporations and limited partnerships. Correct - schedules of such property, assets, and business shall accompany - each transfer. - - 8th. The individuals embraced in class second of this agreement do, - each for himself, agree for the consideration hereinafter mentioned - to sell, assign, transfer, convey, and set over all the property, - real and personal, assets and business mentioned and embraced in - schedules accompanying such sale, and transfer to the Standard Oil - Company or companies of the proper state or states, as soon as the - said corporations are organised and ready to receive the same. - - 9th. The parties embraced in class third of this agreement do - covenant and agree to assign and transfer all of the stock held by - them in the corporations or limited partnerships herein named, to - the trustees herein provided for, for the consideration and upon the - terms hereinafter set forth. It is understood and agreed that the - said trustees and their successors may hereafter take the assignment - of stocks in the same or similar companies upon the terms herein - provided, and that whenever and as often as all the stocks of any - corporations or limited partnerships are vested in said trustees, - the proper steps may then be taken to have all the moneys, property, - real and personal, of such corporation or partnership assigned or - conveyed to the Standard Oil Company, of the proper state, on the - terms and in the mode herein set forth, in which event the trustees - shall receive stocks of the Standard Oil companies, equal to the - value of the money, property, and business assigned, to be held in - place of the stocks of the company or companies assigning such - property. - - 10th. The consideration for the transfer and conveyance of the - money, property, and business aforesaid to each or any of the - Standard Oil companies shall be stock of the respective Standard Oil - Company to which said transfer or conveyance is made, equal at par - value to the appraised value of the money, property, and business so - transferred. Said stock shall be delivered to the trustees - hereinafter provided for, and their successors, and no stock of any - of said companies shall ever be issued except for money, property, - or business, equal, at least, to the par value of the stock so - issued, nor shall any stock be issued by any of said companies for - any purpose, except to the trustees herein provided for, to be held - subject to the trusts hereinafter specified. It is understood, - however, that this provision is not intended to restrict the - purchase, sale, and exchange of property by said Standard Oil - companies as fully as they may be authorised to do by their - respective charters; provided only that no stock be issued therefor - except to said trustees. - - 11th. The consideration for any stocks delivered to said trustees, - as above provided for, as well as for stocks delivered to said - trustees by persons mentioned or included in class third of this - agreement, shall be the delivery by said trustees, to the persons - entitled thereto, of trust certificates hereinafter provided for, - equal at par value to the par value of the stocks of the said - several Standard Oil companies so received by said trustees and - equal to the appraised value of the stocks of other companies or - partnerships delivered to said trustees. - - The said appraised value shall be determined in a manner agreed upon - by the parties in interest and said trustees. - - It is understood and agreed, however, that the said trustees may, - with any trust funds in their hands, in addition to the mode above - provided, purchase the bonds and stocks of other companies engaged - in business similar or collateral to the business of said Standard - Oil companies on such terms and in such mode as they may deem - advisable, and shall hold the same for the benefit of the owners of - said trust certificates, and may sell, assign, transfer, and pledge - such bonds and stocks whenever they may deem it advantageous to said - trust so to do. - - III. The trusts upon which said stock shall be held, and the number, - powers, and duties of said trustees shall be as follows: - - 1st. The number of trustees shall be nine. - - 2d. J. D. Rockefeller, O. H. Payne and William Rockefeller are - hereby appointed trustees, to hold their office until the first - Wednesday of April, A.D. 1885. - - 3d. J. A. Bostwick, H. M. Flagler and W. G. Warden are hereby - appointed trustees, to hold their office until the first Wednesday - of April, A.D. 1884. - - 4th. Charles Pratt, Benjamin Brewster and John Archbold are hereby - appointed trustees, to hold their office until the first Wednesday - of April, A.D. 1883. - - 5th. Elections for trustees to succeed those herein appointed shall - be held annually, at which election a sufficient number of trustees - shall be elected to fill all vacancies occurring either from - expiration of the term of the office of trustee or from any other - cause. All trustees shall be elected to hold their office for three - years, except those elected to fill a vacancy arising from any cause - except expiration of term, who shall be elected for the balance of - the term of the trustee whose place they are elected to fill. Every - trustee shall hold his office until his successor is elected. - - 6th. Trustees shall be elected by ballot by the owners of trust - certificates or their proxies. At all meetings the owners of trust - certificates, who may be registered as such on the books of the - trustees, may vote in person or by proxy, and shall have one vote - for each and every share of trust certificates standing in their - names, but no such owner shall be entitled to vote upon any share - which has not stood in his name thirty days prior to the day - appointed for the election. The transfer books may be closed for - thirty days immediately preceding the annual election. A majority of - the shares represented at such election shall elect. - - 7th. The annual meeting of the owners of said trust certificates for - the election of trustees, and for other business, shall be held at - the office of the trustees in the City of New York, on the first - Wednesday of April of each year, unless the place of meeting be - changed by the trustees, and said meeting may be adjourned from day - to day until its business is completed. Special meetings of the - owners of said trust certificates may be called by a majority of the - trustees, at such times and places as they may appoint. It shall - also be the duty of the trustees to call a special meeting of - holders of trust certificates whenever requested to do so by a - petition signed by the holders of ten per cent. in value of such - certificates. The business of such special meetings shall be - confined to the object specified in the notice given therefor. - Notice of the time and place of all meetings of the owners of trust - certificates shall be given by personal notice so far as possible, - and by public notice in one of the principal newspapers of each - state in which a Standard Oil Company exists, at least ten days - before such meeting. At any meeting, a majority in value of the - holders of trust certificates represented consenting thereto, - by-laws may be made, amended, and repealed relative to the mode of - the election of trustees, and other business of the holders of trust - certificates; provided, however, that said by-laws shall be in - conformity with this agreement. By-laws may also be made, amended, - and repealed at any meeting, by and with the consent of a majority - in value of the holders of trust certificates, which alter this - agreement relative to the number, powers, and duties of the - trustees, and to other matters tending to the more efficient - accomplishment of the objects for which the trust is created; - provided only, that the essential intents and purposes of this - agreement be not thereby changed. - - 8th. Whenever a vacancy occurs in the board of trustees, more than - sixty days prior to the annual meeting for the election of trustees, - it shall be the duty of the remaining trustees to call a meeting of - the owners of Standard Oil Trust certificates for the purpose of - electing a trustee or trustees to fill the vacancy or vacancies. If - any vacancy occurs in the board of trustees, from any cause, within - sixty days of the date of the annual meeting for the election of - trustees, the vacancy may be filled by a majority of the remaining - trustees, or, at their option, may remain vacant until the annual - election. - - 9th. If for any reason at any time a trustee or trustees shall be - appointed by any court to fill any vacancy or vacancies in said - board of trustees, the trustee or trustees so appointed shall hold - his or their respective office or offices only until a successor or - successors shall be elected in the manner above provided for. - - 10th. Whenever any change shall occur in the board of trustees, the - legal title to the stock and other property held in trust shall pass - to and vest in the successors of said trustees without any formal - transfer thereof. But if at any such time formal transfer shall be - deemed necessary or advisable, it shall be the duty of the board of - trustees to obtain the same, and it shall be the duty of any - retiring trustee, or the administrator or executor of any deceased - trustee, to make said transfer. - - 11th. The trustees shall prepare certificates which shall show the - interest of each beneficiary in said trust and deliver them to the - persons properly entitled thereto. They shall be divided into shares - of the par value of $100 each, and shall be known as the Standard - Oil Trust certificates, and shall be issued subject to all the terms - and conditions of this agreement. The trustees shall have power to - agree upon and direct the form and contents of said certificates and - the mode in which they shall be signed, attested, and transferred. - The certificates shall contain an express stipulation that the - holders thereof shall be bound by the terms of this agreement and by - the by-laws herein provided for. - - 12th. No certificates shall be issued except for stocks and bonds - held in trust as herein provided for, and the par value of - certificates issued by said trustees shall be equal to the par value - of the stocks of said Standard Oil Company and the appraised value - of other bonds and stocks held in trust. The various bonds, stocks, - and moneys held under said trust shall be held for all parties in - interest jointly, and the trust certificates so issued shall be the - evidence of the interest held by the several parties in this trust. - No duplicate certificates shall be issued by the trustees, except - upon surrender of the original certificate or certificates for - cancellation, or upon satisfactory proof of the loss thereof, and in - the latter case they shall require a sufficient bond of indemnity. - - 13th. The stocks of the various Standard Oil companies, held in - trust by said trustees, shall not be sold, assigned, or transferred - by said trustees, or by the beneficiaries, or by both combined, so - long as this trust endures. The stocks and bonds of other - corporations held by said trustees may be by them exchanged or sold - and the proceeds thereof distributed _pro rata_ to the holders of - trust certificates, or said proceeds may be held and reinvested by - said trustees for the purposes and uses of the trust; provided, - however, that said trustees may, from time to time, assign such - shares of stock of said Standard Oil Company as may be necessary to - qualify any person or persons chosen or to be chosen as directors - and officers of any of said Standard Oil companies. - - 14th. It shall be the duty of said trustees to receive and safely to - keep all interest and dividends declared and paid upon any of the - said bonds, stocks, and moneys held by them in trust, and to - distribute all moneys received from such sources or from sales of - trust property or otherwise by declaring and paying dividends upon - the Standard Trust certificates as funds accumulate which in their - judgment are not needed for the use and expenses of said trust. The - trustees shall, however, keep separate accounts of receipts from - interest and dividends, and of receipts from sales or transfers of - trust property, and in making any distribution of trust funds, in - which moneys derived from sales or transfers shall be included, - shall render the holders of trust certificates a statement showing - what amount of the fund distributed has been derived from such sales - or transfers. The said trustees may be also authorised and empowered - by a vote of a majority in value of holders of trust certificates, - whenever stocks or bonds have accumulated in their hands from moneys - purchases thereof, or the stocks or bonds held by them have - increased in value, or stock dividends shall have been declared by - any of the companies whose stocks are held by said trustees, or - whenever, from any such cause, it is deemed advisable so to do, to - increase the amount of trust certificates to the extent of such - increase or accumulation of values and to divide the same among the - persons then owning trust certificates _pro rata_. - - 15th. It shall be the duty of said trustees to exercise general - supervision over the affairs of said several Standard Oil companies, - and, as far as practicable, over the other companies or - partnerships, any portion of whose stock is held in said trust. It - shall be their duty, as stockholders of said companies, to elect as - directors and officers thereof faithful and competent men. They may - elect themselves to such positions when they see fit so to do, and - shall endeavour to have the affairs of all of said companies managed - and directed in the manner they may deem most conducive to the best - interests of the holders of said trust certificates. - - 16th. All the powers of the trustees may be exercised by a majority - of their number. They may appoint from their own number an executive - and other committees. A majority of each committee shall exercise - all the powers which the trustees may confer upon such committee. - - 17th. The trustees may employ and pay all such agents and attorneys - as they deem necessary in the management of said trust. - - 18th. Each trustee shall be entitled to a salary for his services - not exceeding $25,000 per annum, except the president of the board, - who may be voted a salary not exceeding $30,000 per annum, which - salaries shall be fixed by said board of trustees. All salaries and - expenses connected with or growing out of the trust shall be paid by - the trustees from the trust fund. - - 19th. The board of trustees shall have its principal office in the - City of New York, unless changed by a vote of the trustees, at which - office, or in some place of safe deposit in said city, the bonds and - stocks shall be kept. The trustees shall have power to adopt rules - and regulations pertaining to the meetings of the board, the - election of officers, and the management of the trust. - - 20th. The trustees shall render at each annual meeting a statement - of the affairs of the trust. If a termination of the trust be agreed - upon, as hereinafter provided, or within a reasonable time prior to - its termination by a lapse of time, the trustees shall furnish to - the holders of trust certificates a true and perfect inventory and - appraisement of all stocks and other property held in trust, and a - statement of the financial affairs of the various companies whose - stocks are held in trust. - - 21st. This trust shall continue during the lives of the survivors - and survivor of the trustees in this agreement named, and for - twenty-one years thereafter: provided, however, that if, at anytime - after the expiration of ten years, two-thirds of all the holders in - value, or if, after the expiration of one year, ninety per cent. of - all the holders in value of trust certificates, shall, at a meeting - of holders of trust certificates called for that purpose, vote to - terminate this trust at some time to be by them then and there - fixed, the said trust shall terminate at the date so fixed. If the - holders of trust certificates shall vote to terminate the trust as - aforesaid, they may, at the same meeting, or at a subsequent meeting - called for that purpose, decide by a vote of two-thirds in value of - their number the mode in which the affairs of the trust shall be - wound up, and whether the trust property shall be distributed, or - whether it shall be sold and the values thereof distributed; or - whether part, and, if so, what part, shall be divided and what part - shall be sold, and whether such sales shall be public or private. - - The trustees, who shall continue to hold their offices for that - purpose, shall make the distribution in the mode directed; or, if no - mode be agreed upon by two-thirds in value, as aforesaid, the - trustees shall make distribution of the trust property according to - law. But said distribution, however made, and whether it be of - property or values, or of both, shall be just and equitable, and - such as to insure to each owner of a trust certificate his due - proportion of the trust property, or the value thereof. - - 22d. If the trust shall be terminated by expiration of the time for - which it is created, the distribution of the trust property shall be - directed and made in the mode above provided. - - 23d. This agreement, together with the registry of certificates, - books of accounts, and other books and papers connected with the - business of said trust, shall be safely kept at the principal office - of said trustees. - - BENJ. BREWSTER; JNO. D. ARCHBOLD; J. A. BOSTWICK; CHAS. PRATT; - HENRY H. ROGERS; H. A. PRATT; C. M. PRATT; D. M. HARKNESS, - _Trustee_, by H. M. FLAGLER, _Attorney_; THOMAS C. BUSHNELL; W. - C. ANDREWS; CHAS. F. G. HEYE; WILLIAM T. WARDWELL; WM. H. MACY; - Estate of JOSIAH MACY, JR., WM. H. MACY, JR., _Executor_; WM. H. - MACY, JR.; A. M. MCGREGOR; J. N. CAMDEN, by H. M. FLAGLER, - _Attorney_; O. H. PAYNE, by H. M. FLAGLER, _Attorney_; GEO. F. - CHESTER, _Trustee_; GEO. H. VILAS, _Trustee_; W. G. WARDEN; H. - M. FLAGLER; JOHN D. ROCKEFELLER; WM. ROCKEFELLER; J. J. - VANDERGRIFT; Mrs. H. M. FLAGLER, by H. M. FLAGLER; A. J. POUCH; - O. B. JENNINGS; D. M. HARKNESS, by H. M. FLAGLER, _Attorney_; W. - P. THOMPSON, by H. M. FLAGLER, _Attorney_; S. V. HARKNESS, by H. - M. FLAGLER, _Attorney_; JOHN HUNTINGTON, by H. M. FLAGLER, - _Attorney_; LIDE K. ARTER, by H. M. FLAGLER, _Attorney_; H. M. - HANNA and GEO. W. CHAPIN, by H. M. FLAGLER, _Attorney_; LOUISE - C. WHEATON, by H. M. FLAGLER, _Attorney_; O. H. PAYNE, - _Trustee_, by H. M. FLAGLER, _Attorney_; CHAS. LOCKHART; JOS. L. - WARDEN, by HENRY L. DAVIS, _Attorney_; JULIA H. YORK, by H. M. - FLAGLER, _Attorney_; H. A. HUTCHINS, by H. M. FLAGLER, - _Attorney_; M. R. KEITH, _Trustee_; D. BUSHNELL; WARDEN, FREW - and COMPANY; HENRY L. DAVIS. - - - _Whereas_, in and by an agreement dated January 2, 1882, and known - as the Standard Trust agreement, the parties thereto did mutually - covenant and agree _inter alia_ as follows, to wit: That - corporations to be known as Standard Oil companies of various states - should be formed, and that all of the property, real and personal, - assets, and business of each and all of the corporations and limited - partnerships mentioned or embraced in class first of said agreement - should be transferred to and vested in the said several Standard Oil - companies; that all of the property, assets, and business in or of - each particular state should be transferred to and vested in the - Standard Oil company of that particular state, and the directors and - managers of each and all of the several corporations and - associations mentioned in class first were authorised and directed - to sell, assign, transfer, and convey, and make over to the Standard - Oil Company or companies of the proper state or states, as soon as - said corporations were organised and ready to receive the same, all - the property, real and personal, assets, and business of said - corporations or associations; and - - _Whereas_, it is not deemed expedient that all of the companies and - associations mentioned should transfer their property to the said - Standard Oil companies at the present time, and in case of some - companies and associations it may never be deemed expedient that the - said transfers should be made and said companies and associations go - out of existence; and - - _Whereas_, it is deemed advisable that a discretionary power should - be vested in the trustees as to when such transfer or transfers - should take place, if at all. Now, it is hereby mutually agreed - between the parties to the said trust agreement, and as - supplementary thereto, that the trustees named in the said agreement - and their successors shall have the power and authority to decide - what companies shall convey their said property as in said agreement - contemplated, and when the said sales and transfers shall take - place, if at all; and until said trustees shall so decide, each of - said companies shall remain in existence and retain its property and - business, and the trustees shall hold the stocks thereof in trust as - in said agreement provided. In the exercise of said discretion, the - trustees shall act by a majority of their number as provided in said - trust agreement. All portions of said trust agreement relating to - this subject shall be considered so changed as to be in harmony with - this supplemental agreement. - - _In Witness Whereof_, the said parties have subscribed this - agreement, this fourth day of January, 1882. - - BENJAMIN BREWSTER; JOHN D. ARCHBOLD; J. A. BOSTWICK; CHARLES - PRATT; HENRY H. ROGERS; H. A. PRATT; C. M. PRATT; D. M. - HARKNESS, _Trustee_; D. M. HARKNESS; T. C. BUSHNELL; W. C. - ANDREWS; CHARLES F. G. HEYE; WILLIAM T. WARDWELL; WILLIAM H. - MACY; Estate of JOSIAH MACY, JR., WILLIAM H. MACY, JR., - _Executor_; WILLIAM H. MACY, JR.; A. M. MCGREGOR; J. N. CAMDEN; - JULIA H. YORK, by B. H. Y.; O. H. PAYNE; GEORGE F. CHESTER, - _Trustee_; M. R. KEITH, _Trustee_; H. M. FLAGLER; JOHN D. - ROCKEFELLER; WILLIAM ROCKEFELLER; J. J. VANDERGRIFT; Mrs. H. M. - FLAGLER, by H. M. FLAGLER; A. J. POUCH; O. B. JENNINGS; W. O. - THOMPSON; S. V. HARKNESS; JOHN HUNTINGTON; LIDE K. ARTER; H. M. - HANNA; GEORGE W. CHAPIN, H. M. HANNA, _Attorney in Fact_; LOUISE - C. WHEATON, by H. M. FLAGLER; O. H. PAYNE, _Trustee_; CHARLES - LOCKHART; JOSEPH L. WARDEN; HENRY L. DAVIS; W. G. WARDEN; - WARDEN, FREW and COMPANY; D. BUSHNELL; H. A. HUTCHINS; GEORGE H. - VILAS, _Trustee_. - - - NUMBER 53 (See page 2153) -LIST OF CONSTITUENT COMPANIES OF THE STANDARD OIL TRUST, WITH ASSETS AND - CAPITALISATION IN 1892 - - - [From History of Standard Oil Case in the Supreme Court of Ohio, - 1897–1898. Part I, page 112.] - - - ASSETS CAPITALISATION - Anglo-American Oil Co., Limited $6,913,639.49 $5,000,000 - Atlantic Refining Co. 8,631,376.67 5,000,000 - Buckeye Pipe Line Co. 7,941,038.15 10,000,000 - Eureka Pipe Line Co. 1,547,055.16 5,000,000 - Forest Oil Co. 3,528,813.11 5,500,000 - Indiana Pipe Line Co. 2,014,053.91 1,000,000 - National Transit Co. 25,796,712.97 25,455,200 - New York Transit Co. 4,999,300.00 5,000,000 - Northern Pipe Line Co. 707,067.00 1,000,000 - Northwestern Ohio Natural Gas Co. 1,396,760.00 3,278,500 - Ohio Oil Co. 8,260,378.04 2,000,000 - Solar Refining Co. 711,793.87 500,000 - Southern Pipe Line Co. 3,279,018.28 5,000,000 - South Penn. Oil Co. 3,021,654.87 2,500,000 - Standard Oil Co., Indiana 1,038,518.61 1,000,000 - Standard Oil Co., Kentucky 3,604,800.78 1,000,000 - Standard Oil Co., New Jersey 14,983,943.30 10,000,000 - Standard Oil Co., New York 16,772,186.29 7,000,000 - Standard Oil Co., Ohio 3,426,014.72 3,500,000 - Union Tank Line Co. 3,057,187.41 3,500,000 - ——————————————— - $121,631,312.63 - Capitalisation twenty corporations 102,233,700.00 - ——————————————— - Excess of assets over capitalisation $19,397,612.63 - - - NUMBER 54 (See page 2154) - FORMS OF MR. ROCKEFELLER’S CERTIFICATE OF HOLDINGS IN THE STANDARD OIL - TRUST, WITH ASSIGNMENT OF LEGAL TITLE WHICH TOOK ITS PLACE IN 1892 - - - [From History of Standard Oil Case in the Supreme Court of Ohio, - 1897–1898. Part II, pages 53–56.] - - - KNOW ALL MEN BY THESE PRESENTS - - That we, John D. Rockefeller, Henry M. Flagler, William Rockefeller, - John D. Archbold, Benjamin Brewster, Henry H. Rogers, Wesley H. - Tilford, and O. B. Jennings, Trustees, for winding up the Standard - Oil Trust, by W. H. Tilford, our Attorney in Fact, and John D. - Rockefeller, of ...., do hereby constitute and appoint John - Bensinger, of New York City, our true and lawful attorney for the - purposes following, to wit: - - _Whereas_, John D. Rockefeller has placed in the hands of said - attorney assignment Number A 365 for 256,854/972,500 of the amount - of corporate shares held by said trustees on the first day of July, - 1892, in each of the companies whose stocks were so held. - - Now the said attorney is hereby authorised to secure from each of - said companies transfer upon their corporate books of said stock and - stock certificates for whole shares, and scrip for fractional shares - thereof, and when the said certificates and scrip are received from - all the companies referred to, the said attorney shall deliver the - same to John D. Rockefeller, and the said assignment Number A 365 - shall at the same time be delivered to the said trustees. - - And the said attorney hereby agrees to obtain the said certificates - and scrip and to deliver the same and the said assignment as above - specified. - - (Signed in print) JOHN D. ROCKEFELLER, - HENRY M. FLAGLER, - WILLIAM ROCKEFELLER, - JOHN D. ARCHBOLD, - BENJAMIN BREWSTER, - HENRY H. ROGERS, - O. B. JENNINGS, - WESLEY H. TILFORD. - - (Signed in ink) W. H. TILFORD, _Attorney in Fact_, - JOHN D. ROCKEFELLER, _per_ GEO. D. ROGERS, - JOHN BENSINGER. - - Received from John Bensinger, Attorney aforesaid, stock certificates - and scrip as follows, being in full satisfaction of Assignment - Certificate No. A 365 aforesaid: - - NAMES OF COMPANIES SHARES SCRIP - Anglo-American Oil Co., Limited 6867 465–9725 - The Atlantic Refining Co. 13205 8375–9725 - The Buckeye Pipe Line Co. 52823 4325–9725 - The Eureka Pipe Line Co. 13205 8375–9725 - Forest Oil Co. 14526 4350–9725 - Indiana Pipe Line Co. 5282 3350–9725 - National Transit Co. 134463 131316–9725 - New York Transit Co. 13205 8375–9725 - Northern Pipe Line Co. 2641 1675–9725 - Northwestern Ohio Natural Gas Co. 8659 80890–9725 - The Ohio Oil Co. 21129 3675–9725 - The Solar Refining Co. 1320 5700–9725 - Southern Pipe Line Co. 13205 8375–9725 - South Penn. Oil Co. 6602 9056–9725 - Standard Oil Co., Indiana 2641 1675–9725 - Standard Oil Co., Kentucky 2641 1675–9725 - Standard Oil Co., New Jersey 26411 7025–9725 - Standard Oil Co., New York 18488 2000–9725 - Standard Oil Co., Ohio 9244 1000–9725 - Union Tank Line Co. 9244 1000–9725 - - (Signed in ink) JOHN D. ROCKEFELLER, - _Per_ GEO. D. ROGERS. - - Received of John Bensinger, Attorney, Assignment - Certificate, Number.... - - (Signed in ink) JOHN D. ROCKEFELLER, - WILLIAM ROCKEFELLER, - BENJAMIN BREWSTER, - WESLEY H. TILFORD, - HENRY M. FLAGLER, - JOHN D. ARCHBOLD, - HENRY H. ROGERS, - O. B. JENNINGS. - - By ..., _Attorney in Fact_. - - 11–3–92. - - Number A 365. JOHN D. ROCKEFELLER. - - Received from trustees to liquidate the Standard Oil Trust - assignment of legal title to 256,854/972,500 of the amount of - corporate stocks held by them in each of the corporations whose - stocks were so held on July 1, 1892, and I do hereby authorise and - direct the said trustees, or the survivor or survivors of them, to - receive from the respective companies and to pay over to me or my - assigns the dividends upon the stocks so assigned, and actual - transfer thereof is recorded upon the books of the respective - corporations. - - (Signed) JOHN D. ROCKEFELLER, - _Per_ GEO. D. ROGERS. - - There is pasted to this stub the original assignment of legal title - for the transfer of Mr. Rockefeller’s trust certificates into - corporate stock of the respective companies. This has been returned - and marked “cancelled” and attached to the original stub, and is as - follows: - - - Number A 365. - - STANDARD OIL TRUST COMPANY - - Assignment of Legal Title to Stocks Heretofore Represented by - 256,854 shares. - - _Whereas_, John D. Rockefeller is the owner of the equitable - title to 256,854/972,500 of the amount of corporate stocks held - by the trustees of the Standard Oil Trust in each of the several - corporations whose stocks were held by said trust on the first - day of July, A.D. 1892, which equitable ownership was - represented by 256,854 shares of Standard Oil Trust surrendered - for cancellation. Now, we, the trustees in whose names the legal - title to said stock stands, do hereby assign and transfer to - John D. Rockefeller and his assigns the legal title to the - aforesaid amount of the said stocks and authorise the proper - officers of the several corporations to transfer upon their - books and to issue corporate certificates for the required - amount of their respective capital stocks upon presentation and - cancellation of this assignment. The several corporations will - issue stock certificates for whole shares and scrip for - fractions of shares and upon presentation of fractional share - scrip sufficient for the purpose, certificates for whole shares - will be issued. When transfer of stock upon the corporate books - is desired by virtue of this assignment, it must be placed in - the hands of an attorney in fact, both for the assignee and the - undersigned trustees, and said attorney shall first obtain the - proper certificates and scrip from all the several companies, - and thereupon shall deliver the certificates to the trustees and - the stock certificates and scrip to the party or parties - entitled thereto. - - (Signed in print) JOHN D. ROCKEFELLER, - WILLIAM ROCKEFELLER, - HENRY M. FLAGLER, - JOHN D. ARCHBOLD, - BENJAMIN BREWSTER, - HENRY H. ROGERS, - WESLEY H. TILFORD, - O. B. JENNINGS, _Trustees_. - (Signed in writing) H. M. FLAGLER, _Secretary_. - W. H. TILFORD, _Attorney in Fact_. - - - On the left-hand corner of this same certificate this indorsement - appears: - - Cancelled November 7, 1892. Transfer Number 4833. Certificate - issued. - - There appears on the back of this assignment of legal title the - following: - - For value received, I hereby assign the corporate stocks mentioned - or referred to in the within assignment, and authorise their - transfer upon the respective corporate books to myself or my heirs. - - (Signed in writing) JOHN D. ROCKEFELLER. - - - NUMBER 55 (See page 2160) - AGREEMENT OF 1887 BETWEEN THE STANDARD OIL COMPANY AND PRODUCERS - - - [Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3,112, pages 69–70.] - - - Memorandum of agreement, made this first day of November, 1887, - between the Standard Oil Company of New York and the following-named - persons, partnerships, and corporations, producers of crude - petroleum, Thomas W. Phillips and others, whose names will be found - in the schedule hereto attached and made part of this agreement, as - follows: - - _Whereas_, there has accumulated in past years an excessive stock of - crude petroleum, which is deteriorating in quality, and a portion of - which each year becomes sediment, valueless for any purpose, and the - carrying of which excessive stock requires the expenditure of vast - sums annually; and - - _Whereas_, in consequence of the existence of said stock the price - of crude petroleum has for the past year been largely below the cost - at which the same was produced; now, in order as far as possible to - preserve the said stock from further waste, and to conserve the - public interest and our own, this agreement _witnesseth_: - - That the Standard Oil Company of New York will set apart at - sixty-two cents per barrel, and hold for the use of the above-named - producers and those who shall hereafter become parties to this - agreement, as hereinafter provided, 5,000,000 barrels of - merchantable crude petroleum, of forty-two gallons each, to be sold - and disposed of in the manner hereinafter provided. The said - 5,000,000 barrels of petroleum to be subject, until sold by the said - producers, to the usual assessments, storage charges, and interest - upon the same, as also interest on the price of said petroleum, at - sixty-two cents per barrel; said assessments, charges, and interest - to be added to the price aforesaid. - - In consideration of which the above-named producers agree to limit - their production of petroleum, that for the year next ensuing from - this date, they or any number of them shall, for said year, - collectively produce at least 17,500 barrels of crude petroleum less - per day than they or any number of them collectively produced per - day for the months of July and August, 1887, and that they will use - every reasonable endeavour to control their production so that the - same shall be in the aggregate 30,000 barrels less per day than it - was during the said period of July and August, 1887. - - If at the end of three months from the date hereof the said - reduction of 17,500 barrels per day shall be attained, to be - measured by taking the average production of the above-named - producers for the months of December and January next, and comparing - the same with their average production for the months of July and - August, 1887, a statement of the same being hereto attached and made - part of this agreement, then the said 5,000,000 barrels of petroleum - shall be delivered as fast as the same shall be sold by, upon the - order, and for the account of said producers through their executive - committee appointed by agreement between themselves, and hereinafter - named, to be paid for with interest and storage as delivered; that - the profits aforesaid upon said 5,000,000 barrels of petroleum as - sold, in accordance with the provisions of this agreement, shall, by - said Standard Oil Company and said producers’ executive committee, - be deposited with the United States Trust Company in New York City, - until the expiration of one year from the date hereof, in trust, in - accordance with and subject to the provisions of this agreement; and - in case the above-named producers or any number of them shall not - have lessened their production 17,500 barrels per day for said year - as aforesaid, then all of said profits upon said 5,000,000 barrels - of petroleum shall belong and be paid to the Standard Oil Company of - New York; and in case the said above-named producers or any number - of them collectively shall have lessened their production 17,500 - barrels per day for the said year as aforesaid, then the entire - profits aforesaid upon the 5,000,000 barrels of petroleum shall be - paid to said producers’ executive committee, to be by it distributed - in accordance with agreements between themselves to such of said - producers as have fulfilled the terms of this agreement, and all - agreements between themselves relating to such distributions. - - The said producers are guaranteed by said Standard Oil Company of - New York against loss within said year upon said 5,000,000 barrels - of petroleum. The lessening of 17,500 barrels per day above provided - shall embrace and include any reduction or lessening of production - by producers who shall sign contracts not to use means to increase - their production by drilling or otherwise. - - Producers may become parties to this agreement within the year the - contract is to operate by signing the agreement between producers - authorising the executive committee to sign this contract on their - behalf, and having their names added hereto as parties by said - executive committee. - - The following-named persons constitute the executive committee above - referred to, to wit: - - (Names omitted by consent of the chairman.) - - - NUMBER 56 (See page 2187) -JOHN D. ARCHBOLD’S STATEMENT TO THE INDUSTRIAL COMMISSION CONCERNING THE - STANDARD’S OPPOSITION TO THE BUILDING OF THE UNITED STATES PIPE LINE - - - [Report of the Industrial Commission, 1900. Volume I, page 529.] - - - Mr. Lee makes a statement regarding the difficulty of his pipe-line, - the United States Pipe Line, in crossing railroads and securing - right of way to the seaboard, and makes a general statement implying - that we have instituted and carried out great obstruction to their - progress. I want to make general denial of this statement. We have - not at any time had any different relations with reference to any - obstruction or effort at obstruction of their line than would attach - to any competitor in a line of business engaging against another. - With reference to the special features referred to by Mr. Lee, and - which he attempts, by implication at any rate, to connect us with, - in the crossing of the Delaware and Lackawanna Railroad in New - Jersey, I want to say that the contention in that respect was - entirely at the hands of the railroad, and not at our hands in any - possible respect. They went there surreptitiously and endeavoured to - force their way, on a Sunday, over a line where they had no right, - either by private purchase or by public franchise. Having - accomplished the crossing of the road in that surreptitious way, - they stationed there an armed force to prevent the railroad company - from asserting its rights and taking out their lines, and kept that - force there for a long period. The railroad went about it in a - peaceful way, in the courts, and the final result is that the - decision is against the line, after the case has been carried up - finally to the supreme court of the state, and they must, of course, - remove their line. But any statement on Mr. Lee’s part, or any other - witness, that we had anything to do with that matter, or with - reference to any of the difficulties interposed in their progress to - the seaboard, is absolutely false. - - By Mr. Phillips. - - _Q._ Did your company own in fee simple the tract of ground, and was - a roadway reserved by the landholder? Was that purchased by them? - - _A._ It was not my case, and I am not conversant with the details - regarding it. The fact that, after having been fought in the - newspapers and in the courts for a term of years, seeking the - sympathy of the judges as well as the public, the supreme court of - the state has ruled against them, is the best evidence, I think, - that the right was against them. I want to say with reference to our - pipe lines, that we never endeavoured to cross any man’s right of - way without first seeing him about it. - - _Q._ Still, did they not go through the railroad on their own - ground, and was not this the final decision, that they had not the - right to lay a pipe line where a man had reserved a right of way - under the ground? - - _A._ It was not only decided that they had no right there, but they - were ordered to remove. - - - NUMBER 57 (See page 2194) - TABLES OF YEARLY AVERAGE PRICES OF CRUDE AND REFINED - - - [All quotations up to 1899 are from the Oil City Derrick; all - quotations for 1900–1903 are from the New York Commercial.] - - - TABLE OF YEARLY AVERAGE PRICE OF CRUDE - - In the following table is presented the highest and lowest price of - oil, the months in which these quotations occurred, and the general - average for each year. The “average” as estimated is usually the - mean price between the highest and lowest quotation of a given time. - It is sufficiently accurate for general purposes of comparison. It - would be an almost impossible task to determine a “true average” - from the reports of the daily sales that are now on record. Previous - to 1875 the quotations are given for points along Oil Creek, and - they hardly represent what the producer actually realised for oil at - the wells. From 1875 onward the trading in oil was placed on a more - satisfactory basis by the general adoption of pipe-line - certificates, and the exchange quotations show very closely the - value of the oil at the wells. When the certificate was finally - purchased by the refiner, it was subject to a uniform charge for - pipage of the oil from the wells to the nearest shipping point. - - ─────────┬─────────┬─────────┬─────────┬─────────┬───────── - YEAR │ Highest │ Price │ Lowest │ Price │ Average - │ Month │ │ Month │ │ - ─────────┼─────────┼─────────┼─────────┼─────────┼───────── - 1859 │Sept. │ $20.00 │Dec. │ $20.00 │ $20.00 - 1860 │Jan. │ 20.00 │Dec. │ 2.00 │ 9.60 - 1861 │Jan. │ 1.75 │Dec. │ .10 │ .52 - 1862 │Dec. │ 2.50 │Jan. │ .10 │ 1.05 - 1863 │Dec. │ 4.00 │Jan. │ 2.00 │ 3.15 - 1864 │July │ 14.00 │Feb. │ 3.75 │ 8.15 - 1865 │Jan. │ 10.00 │Aug. │ 4.00 │ 6.59 - 1866 │Jan. │ 5.50 │Dec. │ 1.35 │ 3.75 - 1867 │Oct. │ 4.00 │June │ 1.50 │ 2.40 - 1868 │July │ 5.75 │Jan. │ 1.70 │ 3.62½ - 1869 │Jan. │ 7.00 │Dec. │ 4.25 │ 5.60 - 1870 │Jan. │ 4.90 │Aug. │ 2.75 │ 3.90 - 1871 │June │ 5.25 │Jan. │ 3.25 │ 4.40 - 1872 │Oct. │ 4.55 │Dec. │ 2.67½│ 3.75 - 1873 │Jan. │ 2.75 │Nov. │ .82½│ 1.80 - 1874 │Feb. │ 2.25 │Nov. │ .62½│ 1.15 - 1875 │Feb. │ 1.82½│Jan. │ .75 │ 1.24¾ - 1876 │Dec. │ 4.23¾│Jan. │ 1.47½│ 2.57⅝ - 1877 │Jan. │ 3.69⅜│June │ 1.53¾│ 2.39⅜ - 1878 │Feb. │ 1.87½│Sept. │ .78¾│ 1.17⅛ - 1879 │Dec. │ 1.28¾│June │ .63⅛│ .85⅝ - 1880 │June │ 1.24¾│April │ .71¼│ .94⅛ - 1881 │Sept. │ 1.01¼│July │ .72½│ .85¾ - 1882 │Nov. │ 1.37 │July │ 0.49¼│ 0.78½ - 1883 │June │ 1.24¾│Jan. │ .83¼│ 1.05⅞ - 1884 │Jan. │ 1.15⅝│June │ .51¼│ .83⅝ - 1885 │Oct. │ 1.12⅝│Jan. │ .68 │ .88⅜ - 1886 │Jan. │ .92¼│Aug. │ .59¾│ .71⅜ - 1887 │Dec. │ .90 │July │ .54 │ .66⅝ - 1888 │Mar. │ 1.00 │June │ .71⅜│ .87 - 1889 │Nov. │ 1.12½│April │ .79½│ .94⅛ - 1890 │Jan. │ 1.07⅝│Dec. │ .60¾│ .86⅝ - 1891 │Feb. │ .81⅜│Aug. │ .50 │ .66⅞ - 1892 │Jan. │ .64⅛│Oct. │ .50 │ .55½ - 1893 │Dec. │ .80 │Jan. │ .52⅞│ .64 - 1894 │Dec. │ .95¾│Jan. │ .78½│ .83¾ - 1895 │April │ 2.60 │Jan. │ .95¼│ 1.35¼ - 1896 │Jan. │ 1.50 │Dec. │ .90 │ 1.19 - 1897 │Mar. │ .96 │Oct. │ .65 │ .78⅜ - 1898 │Dec. │ 1.19 │Jan. │ .65 │ .91⅛ - 1899 │Dec. │ 1.66 │Feb. │ 1.13 │ 1.29⅜ - 1900 │Mar. │ 1.68 │Nov. │ 1.07 │ 1.35¼ - 1901 │Nov. │ 1.30 │June │ 1.05 │ 1.21½ - 1902 │Dec. │ 1.44½│Mar. │ 1.15 │ 1.23 - 1903 │Dec. │ 1.88 │Mar. │ 1.50 │ 1.58¾ - ─────────┴─────────┴─────────┴─────────┴─────────┴───────── - - - TABLE OF YEARLY AND MONTHLY AVERAGE PRICE OF REFINED - - In the following table is given the average monthly and yearly - prices of refined oil per gallon, in barrels, in New York, from - January, 1863, to December, 1903. During the years when a tax was - levied on this article of domestic production the quotations do not - include the tax: - - ─────────┬────┬────┬────┬────┬────┬────┬────┬────┬────┬──── - │1863│1864│1865│1866│1867│1868│1869│1870│1871│1872 - ─────────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼──── - Jan. │.40 │.46⅝│.70 │.57⅞│.31 │.24¾│.34⅛│.31⅜│.24⅝│.22⅝ - Feb. │.38¼│.47⅛│.67¼│.48⅝│.28¼│.25 │.36⅜│.29⅞│.25⅛│.21¾ - March │.34¾│.49⅛│.58¾│.41⅞│.27½│.25¾│.32⅛│.27 │.24⅛│.22⅝ - April │.33¼│.54⅛│.52⅞│.40⅛│.27 │.26¼│.32¼│.26½│.23¼│.21¾ - May │.39½│.59½│.51⅛│.43 │.26¾│.29⅝│.31½│.27½│.24⅝│.23⅜ - June │.44½│.72 │.51½│.41⅞│.24¾│.31⅜│.31 │.27 │.25¾│.23 - July │.49 │.86⅛│.52⅛│.39½│.30⅞│.34¼│.32¼│.26 │.25¾│.22⅜ - Aug. │.53½│.84⅞│.52 │.44⅜│.29¼│.33 │.32½│.25 │.24⅜│.22⅜ - Sept. │.58 │.75 │.58¼│.44⅝│.31¾│.31 │.32¼│.26⅛│.24⅛│.24⅛ - Oct. │.52½│.63¾│.61¾│.40⅝│.34½│.30 │.32⅞│.24⅝│.23¾│.26 - Nov. │.41½│.70 │.62⅝│.35¾│.27½│.30⅞│.34 │.23 │.22⅜│.27 - Dec. │.46½│.72¾│.65¼│.31¼│.24¾│.32¼│.31⅛│.23 │.23 │.26 - ─────────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼──── - Yearly │ │ │ │ │ │ │ │ │ │ - average│.44¾│.64¾│.58¾│.42½│.28⅜│.29⅛│.32¾│.26⅜│.24¼│.23⅝ - ─────────┴────┴────┴────┴────┴────┴────┴────┴────┴────┴──── - - ─────────┬────┬────┬────┬────┬────┬────┬────┬────┬────┬──── - │1873│1874│1875│1876│1877│1878│1879│1880│1881│1882 - ─────────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼──── - Jan. │.22⅛│.13½│.12⅜│.14⅛│.24 │.12⅛│ 9 │ 7⅞│ 9¼│ 7 - Feb. │.19⅝│.15 │.14 │.14¼│.18⅝│ 12¼│ 9⅜│ 7⅞│ 9¼│ 7⅜ - March │.19 │.14⅞│.15 │.14½│.16 │.11⅝│ 9¼│ 7¾│ 8½│ 7⅜ - April │.20 │.15⅝│.13⅞│.14 │.15¾│.11⅜│ 9⅛│ 7⅝│ 7¾│ 7⅜ - May │.19¾│.13⅞│.12¾│.14⅞│.14½│.11¼│ 8½│ 7⅝│ 8 │ 7½ - June │.19 │.12⅞│.12⅝│.14¾│.13¾│.11¼│ 7½│ 9⅝│ 8⅛│ 7½ - July │.18⅛│.12⅛│.11½│.16⅞│.13⅜│.10¾│ 6¾│ 9⅞│ 7⅞│ 6¾ - Aug. │.16½│.11¾│.11¼│.19⅞│.13⅝│.10⅞│ 6⅝│ 9 │ 7¾│ 6⅞ - Sept. │.16½│.12⅛│.12¾│.26 │.14½│.10¼│ 6⅞│ 10⅝│ 8 │ 7½ - Oct. │.16¼│.11⅞│.14⅛│.26 │.14⅝│ 9⅝│ 7½│ 12 │ 7¾│ 8 - Nov. │.14⅛│.10¾│.13 │.26¼│.13¼│ 9⅛│ 8 │ 10½│ 7½│ 8¼ - Dec. │.13½│.11¼│.12¾│.29⅜│.13⅛│ 8⅝│ 8⅝│ 9½│ 7⅛│ 7⅝ - ─────────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼──── - Yearly │ │ │ │ │ │ │ │ │ │ - average│.18¼│.13 │.13 │.19⅛│.15¾│.10¾│ 8⅛│ 9⅛│ 8 │ 7⅜ - ─────────┴────┴────┴────┴────┴────┴────┴────┴────┴────┴──── - - - APPENDIX, NUMBER LVII - - ─────────┬────┬────┬────┬────┬────┬────┬────┬────┬────┬────┬──── - │1883│1884│1885│1886│1887│1888│1889│1890│1891│1892│ - ─────────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼──── - Jan. │ 7¾│ 9⅜│ 7¾│ 7¾│ 6¾│ 7¾│ 7 │ 7½│7.42│6.45│ - Feb. │ 7⅞│ 9⅛│ 7¾│ 7⅝│ 6⅝│ 7¾│ 7⅛│ 7½│7.48│6.42│ - March │ 8 │ 8½│ 8 │ 7⅜│ 6⅝│ 7¾│ 7 │ 7¼│7.31│6.32│ - April │ 8¼│ 8⅝│ 7⅞│ 7⅜│ 6⅝│ 7⅜│ 6⅞│ 7⅛│7.18│6.10│ - May │ 7⅞│ 8½│ 7¾│ 7¼│ 6¾│ 7½│ 6⅞│ 7¼│7.20│6.06│ - June │ 8 │ 8⅛│ 8 │ 7⅛│ 6⅝│ 7⅛│ 6⅞│ 7⅛│7.13│6.00│ - July │ 7⅝│ 7⅞│ 8¼│ 7 │ 6½│ 7¼│ 7¼│ 7⅛│7.02│6.00│ - Aug. │ 7⅞│ 8 │ 8⅜│ 6¾│ 6½│ 7⅝│ 7¼│ 7¼│6.70│6.08│ - Sept. │ 8⅛│ 7⅞│ 8⅜│ 6⅝│ 6¾│ 7¾│ 7⅛│ 7⅜│6.42│6.10│ - Oct. │ 8⅜│ 7⅞│ 8½│ 6¾│ 6¾│ 7⅝│ 7⅛│ 7½│6.45│6.03│ - Nov. │ 8¾│ 7⅞│ 8½│ 6⅞│ 7 │ 7¼│ 7½│ 7½│6.40│5.80│ - Dec. │ 9⅛│ 7¾│ 8 │ 6⅞│ 7¼│ 7¼│ 7½│ 7¼│6.44│5.45│ - ─────────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼──── - Yearly │ │ │ │ │ │ │ │ │ │ │ - average│ 8⅛│ 8¼│ 8⅛│ 7⅛│ 6¾│ 7½│ 7⅛│ 7⅜│6.93│6.07│ - ─────────┴────┴────┴────┴────┴────┴────┴────┴────┴────┴────┴──── - - ─────────┬────┬────┬────┬────┬────┬────┬────┬────┬────┬────┬──── - │1893│1894│1895│1896│1897│1898│1899│1900│1901│1902│1903 - ─────────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼──── - Jan. │5.33│5.15│5.87│7.85│6.13│5.40│7.43│9.90│7.58│7.20│8.27 - Feb. │5.30│5.15│6.00│7.35│6.26│5.48│7.40│9.90│7.81│7.20│8.20 - March │5.34│5.15│6.75│7.40│6.36│5.82│7.33│9.90│8.00│7.20│8.21 - April │5.52│5.15│9.12│7.00│6.13│5.67│7.05│9.51│7.68│7.30│8.35 - May │5.20│5.15│8.20│6.75│6.23│6.00│7.01│8.98│7.04│7.40│8.47 - June │5.21│5.15│7.83│6.85│6.14│6.16│7.20│7.88│6.90│7.40│8.55 - July │5.15│5.15│7.65│6.55│5.87│6.27│7.61│7.90│7.15│7.40│8.55 - Aug. │5.18│5.15│7.10│6.65│5.75│6.44│7.82│8.05│7.50│7.21│8.55 - Sept. │5.15│5.15│7.10│6.85│5.74│6.60│8.63│7.98│7.50│7.20│8.55 - Oct. │5.15│5.15│7.10│6.90│5.55│7.21│9.00│7.48│7.65│7.26│9.01 - Nov. │5.15│5.15│7.88│7.15│5.40│7.35│9.40│7.33│7.65│7.71│9.36 - Dec. │5.15│5.61│7.77│6.35│5.40│7.40│9.85│7.28│7.43│8.12│9.45 - ─────────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼────┼──── - Yearly │ │ │ │ │ │ │ │ │ │ │ - average│5.24│5.19│7.36│6.98│5.91│6.32│7.98│8.50│7.49│7.38│8.62 - ─────────┴────┴────┴────┴────┴────┴────┴────┴────┴────┴────┴──── - - - NOTE.—In the above tables the quotations down to 1890, inclusive, - are noted in cents and fractional parts of a cent; from 1891 to 1903 - the prices are given in cents and decimal parts of a cent, _i.e._, - 7.42 signifies seven and forty-two hundredths cents, and 9⅜ means - nine and three eighths cents per gallon. The above are New York - quotations in barrels; bulk oil is generally 2.50c. below these - prices. Philadelphia and Baltimore quotations are five points below - New York; for instance, if New York price was 5.75c., the - Philadelphia and Baltimore price would be 5.70c. - - - NUMBER 58 (See page 2225) - JOHN D. ARCHBOLD’S STATEMENT ON THE PRICES THE STANDARD RECEIVES FOR - REFINED OIL - - - [Report of the Industrial Commission, 1900. Volume I, pages - 569–570.] - - - _Q._ Now, the general result then is this: By virtue of your greater - power you are enabled to secure prices that on the whole could be - considered steadily somewhat above competitive rates? - - _A._ Well, I hope so. I think we have better merchandising - facilities, better marketing facilities, better distributing - facilities, and better talent than a competitor can have. - - _Q._ I am not asking with reference to your power of making profits, - but it is with reference to getting the prices from the consumer. - - _A._ Prices are what make the profit. If we had a better average - price, we could get a better profit. - - _Q._ You think, generally speaking, that you get prices for oil - slightly above competitive prices? - - _A._ Well, I should think so; I could not answer—that is a very - general question, and very difficult to answer. I could not answer - that specifically. I hope that we do. - - _Q._ Of course, in this investigation, we are seeing if we can get - some general principles on which legislation might be based, and - these questions are to bring out, if we can, the power that so great - an organisation has in fixing prices. Would you say, then, that in - the case of an organisation that controls perhaps eighty per cent. - of the markets of the country, there is a monopolistic element that - enters in which enables them to hold prices above the regular rate? - Is there a monopolistic power that comes merely from the power of - capital itself? - - _A._ Undoubtedly, there is an ability, and when that ability, as I - have said, is unwisely used, it is sure to bring its own defeat. - - _Q._ If that ability goes to get an exorbitant price, of course it - will invite competition, but when that ability is kept within modest - limits, would you still say that it was in the power of such an - organisation to get the benefit of the monopolistic power that comes - merely from the power of capital itself? - - _A._ Well, I should say that that would be a very restricted power, - a very restricted limit. The competitors in this country are very - active. - - _Q._ What? - - _A._ The competitors are very active; they are alert at all points - with their small offerings in the hope to find just such a condition - as you describe. - - _Q._ Certainly. - - _A._ But as I say, as business is and as it has been for many years, - we could not have that ability to any considerable extent as - merchants. - - _Q._ If the ability were operative only to a slight extent, would it - still be enough, do you think, to make a difference between what we - may call a moderate dividend, say 6 or 7 per cent., and a pretty - high dividend of between 15 and 20 per cent.? - - _A._ Well, that involves so nice a question that I could hardly - undertake to answer it; but generally as to the effect on the - community, I should say—— - - _Q._ Generally on the prices in the United States? - - _A._ I should say that the lessened cost incident to doing business - in a large volume would more than compensate the consumer for any - ability in getting higher prices. - - _Q._ Then that leads to this point, whether the large capital does - itself give an organisation the power to get a somewhat higher price - than it could in the market provided the competitors were - substantially equal in power? - - _A._ Oh, it may be so, but that is a difficult question to answer. - - - NUMBER 59 (See page 2254) - W. H. VANDERBILT’S CHARACTERISATION OF STANDARD OIL MEN - - - [Report of the Special Committee on Railroads, New York Assembly, - 1879. Volume II, pages 1668–1669.] - - - _Q._ Can you attribute, or do you attribute, in your own mind, the - fact of there being one refiner instead of fifty, now, to any other - cause except the larger capital of the Standard Oil Company? - - _A._ There are a great many causes; it is not from their capital - alone that they have built up this business; there is no question - about it but that these men—and if you come in contact with them I - guess you will come to the same conclusion I have long ago—I think - they are smarter fellows than I am, a good deal; they are very - enterprising and smart men; never came in contact with any class of - men as smart and able as they are in their business, and I think a - great deal is to be attributed to that. - - _Q._ Would that alone monopolise a business of that sort? - - _A._ It would go a great way toward building it up; they never could - have got in the position they are in now without a great deal of - ability, and one man would hardly have been able to do it; it is a - combination of men. - - _Q._ Wasn’t it a combination that embraced the smart men in the - railways, as well as the smart men in the Standard Company? - - _A._ I think these gentlemen from their shrewdness have been able to - take advantage of the competition that existed between the railroads - for their business, as it grew, and that they have availed - themselves of that there is not a question of doubt. - - _Q._ Don’t you think they have also been able to make their - affiliations with railroad companies and railroad officers? - - _A._ I have not heard it charged that any railway official has any - interest in any of their companies, only what I used to see in the - papers some years ago, that I had an interest in it. - - _Q._ Your interest in your railway is so large a one that nobody - would conceive, as a matter of personal interest, that you would - have an interest antagonistic to your road? - - _A._ When they came to do business with us in any magnitude; that is - the reason I disposed of my interest. - - _Q._ And that is the only way you can account for the enormous - monopoly that has thus grown up? - - _A._ Yes; they are very shrewd men; I don’t believe that by any - legislative enactment or anything else through any of the states or - all of the states, you can keep such men as them down; you can’t do - it; they will be on top all the time; you see if they are not. - - _Q._ You think they get on top of the railways? - - _A._ Yes; and on top of everybody that comes in contact with them; - too smart for me. - - - NUMBER 60 (See page 2259) - FAC-SIMILE OF ONE OF MR. KEMPER’S SHARES - - - [From History of Standard Oil Case in Supreme Court of Ohio, - 1897–1898. Part II, page 271.] - - - No. S. 11 - - 509,104/972,500 Incorporated under the Whole Shares - of one share. laws of the State of $50 each. - Pennsylvania. - - - NATIONAL TRANSIT COMPANY - - This certifies that J. L. Kemper is the owner of Five Hundred Nine - Thousand One Hundred and Four 972,500ths of one share of stock in - the National Transit Company. The holder or assignee of this Scrip - will be entitled to a Certificate of Stock, and to have his name - entered on the corporate books as a stockholder, on presentation of - sufficient fractional Scrip to entitle him to one full share. - - _Witness_ the corporate seal of said Company, attested by the - signatures of its President and Treasurer at Philadelphia, Pa., this - 20th day of February, 1896. - - H. H. ROGERS, - _President_. - - GEO. W. COLTON - _Treasurer_. - [Seal] - - [On the reverse side.] - - _For value received_ .... hereby sell, assign, and transfer - unto .... 972,500ths of one share of the Capital Stock represented - by the within Certificate of Scrip, and do hereby irrevocably - constitute and appoint .... Attorney to transfer the said Scrip on - the books of the within named company, with full power of - substitution in the premises. - - Dated, ...... - - J. L. KEMPER. - - In the presence of HARWOOD R. POOL. - - NOTICE.—The signatures to this assignment must correspond with the - name as written upon the face of the certificate in every - particular, without alteration or enlargement or any change - whatever. - - - NUMBER 61 - GENERAL BALANCE SHEET, STANDARD OIL INTERESTS, DECEMBER 31, 1896 - - - [In the case of James Corrigan _vs._ John D. Rockefeller in the - Court of Common Pleas, Cuyahoga County, Ohio, 1897.] - - - ─────────────────┬──────────────────────────────────────────────┬────────────── - │ ASSETS │ NOMINAL - │ │ LIABILITIES - ─────────────────┼──────────────┬───────────────┬───────────────┼────────────── - │ │ │ │ - │ Plant │ Other Assets │ Total │ Liabilities - ─────────────────┼──────────────┼───────────────┼───────────────┼────────────── - Anglo-American │ │ │ │ - Oil Co., Lim. │ $6,111,436.75│ $10,877,942.53│ $16,989,379.28│ $8,997,759.61 - Atlantic Refining│ │ │ │ - Co. │ 4,879,636.08│ 6,637,750.39│ 11,517,386.47│ 357,691.56 - Buckeye Pipe Line│ │ │ │ - Co. │ 4,559,213.27│ 8,593,413.44│ 13,152,626.71│ 302,998.58 - Eureka Pipe Line │ │ │ │ - Co. │ 1,489,533.37│ 5,050,615.30│ 6,540,148.67│ 352,320.90 - Forest Oil │ │ │ │ - Company │ 4,236,370.10│ 800,482.59│ 5,036,852.69│ 198,645.38 - Indiana Pipe Line│ │ │ │ - Co. │ 992,426.01│ 2,222,381.90│ 3,214,807.91│ 7,821.80 - National Transit │ │ │ │ - Co. │ 6,800,056.66│ 42,529,353.39│ 49,329,410.05│ 23,296,866.66 - New York Transit │ │ │ │ - Co. │ 1,860,334.55│ 5,171,303.80│ 7,031,638.35│ 202,139.33 - Northern Pipe │ │ │ │ - Line Co. │ 639,001.65│ 583,766.46│ 1,222,768.11│ 44,161.69 - N. W. Ohio Nat. │ │ │ │ - Gas. Co. │ 118,679.71│ 204,480.33│ 323,160.04│ 11,384.76 - │ │ │ │ - Ohio Oil Co., The│ 4,832,307.19│ 310,705.42│ 5,143,012.61│ 326,923.43 - Solar Refining │ │ │ │ - Co., The │ 537,797.54│ 1,323,374.92│ 1,861,172.46│ 298,137.91 - Southern Pipe │ │ │ │ - Line Co. │ 1,527,175.80│ 2,074,374.05│ 3,601,549.85│ 66,929.31 - South Penn Oil │ │ │ │ - Co. │ 11,300,603.72│ 1,735,979.54│ 13,036,583.26│ 1,278,580.96 - Standard Oil Co.,│ │ │ │ - Indiana │ 3,105,001.95│ 4,918,025.18│ 8,023,027.13│ 3,372,518.91 - Standard Oil Co.,│ │ │ │ - Kentucky │ 474,352.83│ 4,236,638.24│ 4,710,991.07│ 49,835.90 - Standard Oil Co.,│ │ │ │ - New Jersey │ 5,469,277.44│ 13,864,446.39│ 19,333,723.83│ 2,396,607.81 - Standard Oil Co.,│ │ │ │ - New York │ 4,957,545.26│ 56,822,284.95│ 61,779,830.21│ 48,919,899.34 - Standard Oil Co.,│ │ │ │ - Ohio │ 1,166,013.90│ 2,752,274.01│ 3,918,287.91│ 1,013,373.13 - Union Tank Line │ │ │ │ - Co. │ 2,615,594.64│ 340,563.75│ 2,956,158.39│ 11,653.38 - ─────────────────┼──────────────┼───────────────┼───────────────┼────────────── - Total Plant │$67,672,358.42│ │ │ - Other Assets │ │$171,050,156.58│ │ - Total Assets │ │ │$238,722,515.00│ - Less Actual │ │ │ │ - Liabilities │ │ │ │$91,506,250.35 - Total Net Value │ │ │ │ - Capital Stock │ │ │ │ - Total Undivided │ │ │ │ - Profits │ │ │ │ - Total Capital and│ │ │ │ - Surplus │ │ │ │ - Other Assets S. │ │ │ │ - O. Trust │ │ │ │ - │ │ │ │ - │ │ │ │ - ─────────────────┴──────────────┴───────────────┴───────────────┴────────────── - - ─────────────────┬───────────────────────────────────────────────────────────── - │ NOMINAL LIABILITIES - ─────────────────┼───────────────┬──────────────┬──────────────┬─────────────── - │ │ │ Surplus or │ - │ Net Value │Capital Stock │ Impairment. │ Net Value - ─────────────────┼───────────────┼──────────────┼──────────────┼─────────────── - Anglo-American │ │ │ │ - Oil Co., Lim. │ $7,991,619.67│ $2,530,666.66│ $5,460,953.01│ - Atlantic Refining│ │ │ │ - Co. │ 11,159,694.91│ 5,000,000.00│ 6,159,694.91│ - Buckeye Pipe Line│ │ │ │ - Co. │ 12,849,628.13│ 10,000,000.00│ 2,849,628.13│ - Eureka Pipe Line │ │ │ │ - Co. │ 6,187,827.77│ 5,000,000.00│ 1,187,827.77│ - Forest Oil │ │ │ │ - Company │ 4,838,207.31│ 5,500,000.00│ 661,792.69│ - Indiana Pipe Line│ │ │ │ - Co. │ 3,206,986.11│ 1,000,000.00│ 2,206,986.11│ - National Transit │ │ │ │ - Co. │ 26,032,543.39│ 25,455,200.00│ 577,343.39│ - New York Transit │ │ │ │ - Co. │ 6,829,499.02│ 5,000,000.00│ 1,829,499.02│ - Northern Pipe │ │ │ │ - Line Co. │ 1,178,606.42│ 1,000,000.00│ 178,606.42│ - N. W. Ohio Nat. │ │ │ │ - Gas. Co. │ 311,775.28│ 1,967,100.00│ 1,655,324.72│ - │ │ │ │ - Ohio Oil Co., The│ 4,816,089.18│ 2,000,000.00│ 2,816,089.18│ - Solar Refining │ │ │ │ - Co., The │ 1,563,034.55│ 500,000.00│ 1,063,034.55│ - Southern Pipe │ │ │ │ - Line Co. │ 3,534,620.54│ 5,000,000.00│ 1,465,379.46│ - South Penn Oil │ │ │ │ - Co. │ 11,758,002.30│ 2,500,000.00│ 9,258,002.30│ - Standard Oil Co.,│ │ │ │ - Indiana │ 4,650,508.22│ 1,000,000.00│ 3,650,508.22│ - Standard Oil Co.,│ │ │ │ - Kentucky │ 4,661,155.17│ 1,000,000.00│ 3,661,155.17│ - Standard Oil Co.,│ │ │ │ - New Jersey │ 16,937,116.02│ 10,000,000.00│ 6,937,116.02│ - Standard Oil Co.,│ │ │ │ - New York │ 12,859,930.87│ 7,000,000.00│ 5,859,930.87│ - Standard Oil Co.,│ │ │ │ - Ohio │ 2,904,914.78│ 3,500,000.00│ 595,085.22│ - Union Tank Line │ │ │ │ - Co. │ 2,944,505.01│ 3,500,000.00│ 555,494.99│ - ─────────────────┼───────────────┼──────────────┼──────────────┼─────────────── - Total Plant │ │ │ │ - Other Assets │ │ │ │ - Total Assets │ │ │ │ - Less Actual │ │ │ │ - Liabilities │ │ │ │ - Total Net Value │$147,216,264.65│ │ │ - Capital Stock │ │$98,452,966.66│ │ - Total Undivided │ │ │ │ - Profits │ │ │$48,763,297.99│ - Total Capital and│ │ │ │ - Surplus │ │ │ │$147,216,264.65 - Other Assets S. │ │ │ │ - O. Trust │ │ │ │ 4,135.25 - │ │ │ │——————————————— - │ │ │ │$147,220,399.90 - ─────────────────┴───────────────┴──────────────┴──────────────┴─────────────── - - - NUMBER 62 (See page 2267) -AMENDED CERTIFICATE OF INCORPORATION OF THE STANDARD OIL COMPANY OF NEW - JERSEY - - - _Resolved_, That it is advisable to alter the charter of this - company to read as below stated, and that a meeting of the - stockholders be called to meet at the principal office of the - company in Bayonne, N. J., on the fourteenth day of June, 1899, at - 11 A.M., to take action hereon, notice of such meeting to be signed - by the president and secretary and given to each stockholder in - person or mailed to his proper post-office address at least ten days - previous to the time of meeting as provided by the by-law. - - _First._—The name of the corporation is STANDARD OIL COMPANY. - - _Second._—The location of the principal office in the State of New - Jersey is at the company’s refinery, in the City of Bayonne, County - of Hudson. The name of the agent therein and in charge thereof, and - upon whom process against this company may be served, is J. H. - Alexander. - - _Third._—The objects for which this company is formed are: To do all - kinds of mining, manufacturing, and trading business; transporting - goods and merchandise by land or water in any manner; to buy, sell, - lease, and improve lands; build houses, structures, vessels, cars, - wharves, docks, and piers; to lay and operate pipe-lines; to erect - and operate telegraph and telephone lines and lines for conducting - electricity; to enter into and carry out contracts of every kind - pertaining to its business; to acquire, use, sell, and grant - licenses under patent rights; to purchase or otherwise acquire, - hold, sell, assign and transfer shares of capital stock and bonds or - other evidences of indebtedness of corporations, and to exercise all - the privileges of ownership including voting upon the stocks so - held; to carry on its business and have offices and agencies - therefor in all parts of the world, and to hold, purchase, mortgage, - and convey real estate and personal property outside the State of - New Jersey. - - _Fourth._—The total authorised stock of the corporation is One - Hundred and Ten Million Dollars, divided into One Million and One - Hundred Thousand shares of the par value of One Hundred Dollars - each. Of said stock the One Hundred Thousand shares now issued and - existing shall be preferred stock, and the increase of One Million - shares shall be common stock. Said preferred stock shall entitle the - holder thereof to receive out of the net earnings a dividend of and - not exceeding one and one-half per cent. quarterly before any - dividend shall be paid on the common stock. Common stock may at the - discretion of the company be issued in exchange for preferred stock, - and all preferred stock so received by the company shall be - cancelled. Common stock may also be issued in payment for such - property as the company has authority to purchase. Holders of - preferred and of common stocks shall have like voting power. - - _Fifth._—The names and post-office addresses of the incorporators - and the number of shares subscribed for by each shall remain as set - forth in the original certificate of incorporation. - - _Sixth._—The duration of the corporation shall be unlimited. - - _Seventh._—The corporation may use and apply its surplus earnings, - or accumulated profits authorised by law to be reserved, to the - purchase or acquisition of property, and to the purchase or - acquisition of its own capital stock from time to time, to such - extent and in such manner and upon such terms as its Board of - Directors shall determine; and neither the property nor the capital - stock so purchased or acquired, nor any of its capital stock taken - in payment or satisfaction of any debt due to the corporation, shall - be regarded as profits for the purpose of declaration or payment of - dividends, unless otherwise determined by a majority of the Board of - Directors, or a majority of the stockholders. - - The corporation, in its by-laws, may prescribe the number necessary - to constitute a quorum of the Board of Directors which may be less - than a majority of the whole number. - - The number of directors at any time may be increased or diminished - by vote of the Board of Directors, and in case of any such increase - the Board of Directors shall have power to elect such additional - directors, to hold office until the next meeting of stockholders, or - until their successors shall be elected. - - The Board of Directors shall have power to make, alter, amend, and - rescind the by-laws of the corporation, to fix the amount to be - reserved as working capital, to authorise and to cause to be - executed mortgages and liens upon the real and personal property of - the corporation, and from time to time to sell, assign, transfer or - otherwise dispose of any or all of the property of the corporation; - but no such sale of all of the property shall be made except - pursuant to the votes of at least two-thirds of the Board of - Directors. - - The Board of Directors, by resolution passed by a majority of the - whole Board, may designate three or more directors to constitute an - executive committee, which committee, to the extent provided in said - resolution or in the by-laws of the corporation, shall have, and may - exercise, the power of the Board of Directors in the management of - the business and affairs of the corporation, and shall have power to - authorise the seal of the corporation to be affixed to all papers - which may require it. - - The Board of Directors from time to time shall determine whether and - to what extent, and at what times and places, and under what - conditions and regulations, the accounts and books of the - corporation, or any of them, shall be open to the inspection of the - stockholders; and no stockholder shall have any right of inspecting - any account or book or document of the corporation, except as - conferred by statute or authorised by the Board of Directors, or by - a resolution of the stockholders. - - The Board of Directors shall have power to hold its meetings, to - have one or more offices, and to keep the books of the corporation - (except the stock and transfer books) outside of the state, at such - places as may be from time to time designated by them. - - I CERTIFY that the above resolution was adopted by the Board of - Directors of the STANDARD OIL COMPANY, at a meeting held on the - twenty-sixth day of May, A.D. 1899, a majority of directors being - present and voting in favour thereof. Witness the seal of said - corporation. - - L. D. CLARKE, - _Secretary_. - - - NUMBER 63 (See page 2270) - PRODUCTION OF PENNSYLVANIA AND LIMA CRUDE OIL BY STANDARD OIL COMPANY - 1890–1898 - (Expressed in barrels of forty-two gallons.) - - - [Report of Industrial Commission, 1900. Volume I, page 561.] - - - ─────┬──────────────────────────────┬─────────────────────────────── - YEAR │ PENNSYLVANIA OIL │ LIMA OIL - ─────┼──────────┬──────────┬────────┼───────────┬──────────┬──────── - │ Total │ Standard │Standard│ Total │ Standard │Standard - │production│ Oil Co. │Oil per │production │ Oil Co. │Oil per - │ │production│cent. of│ │production│cent. of - │ │ │ total │ │ │ total - ─────┼──────────┼──────────┼────────┼───────────┼──────────┼──────── - 1890│30,065,867│ 2,618,637│ 8.71│ 15,014,882│ 8,400,568│ 55.95 - 1891│35,742,127│ 4,913,775│ 13.74│ 17,381,923│ 9,319,156│ 53.61 - 1892│33,332,306│ 4,338,822│ 13.02│ 16,685,193│ 7,843,324│ 47.01 - 1893│31,256,283│ 6,705,276│ 21.45│ 17,823,255│ 7,260,899│ 40.74 - 1894│30,696,716│ 7,210,345│ 23.49│ 18,575,603│ 6,690,951│ 36.02 - 1895│30,891,868│ 9,119,920│ 29.52│ 21,719,250│ 6,808,876│ 31.35 - 1896│33,908,041│ 9,380,654│ 27.66│ 25,222,091│ 8,031,793│ 31.84 - 1897│35,170,367│ 9,787,353│ 27.83│ 22,793,033│ 7,497,349│ 32.89 - 1898│31,645,151│11,248,443│ 35.55│ 20,266,328│ 7,220,606│ 35.63 - ─────┼──────────┼──────────┼────────┼───────────┼──────────┼──────── - Total│92,708,726│65,323,225│ 22.32│175,481,558│69,073,522│ 39.36 - ─────┴──────────┴──────────┴────────┴───────────┴──────────┴──────── - - ─────┬───────────────────────────────── - YEAR │ GRAND TOTAL - ─────┼────────────┬───────────┬──────── - │Pennsylvania│ Standard │Standard - │ and Lima │ Oil Co. │Oil per - │ production │production │cent. of - │ │ │ total - ─────┼────────────┼───────────┼──────── - 1890│ 45,080,749│ 11,019,205│ 24.44 - 1891│ 53,124,050│ 14,232,931│ 26.79 - 1892│ 50,017,499│ 12,182,146│ 24.36 - 1893│ 49,079,538│ 13,966,175│ 28.46 - 1894│ 49,272,319│ 13,901,296│ 28.21 - 1895│ 52,611,118│ 15,928,796│ 30.28 - 1896│ 59,130,132│ 17,412,447│ 29.45 - 1897│ 57,963,400│ 17,284,702│ 29.82 - 1898│ 51,911,479│ 18,469,049│ 35.58 - ─────┼────────────┼───────────┼──────── - Total│ 468,190,284│134,396,747│ 28.70 - ─────┴────────────┴───────────┴──────── - - - NUMBER 64 (See page 2270) - BUSINESS OF STANDARD OIL COMPANY AND OTHER REFINERS 1894–1898 - - - (Barrels of fifty gallons. All products, domestic trade.) - - [Report of Industrial Commission, 1900. Volume 1, page 560.] - - - ───────────┬───────────────────────┬───────────────────────┬─────────── - YEAR │ STANDARD OIL COMPANY │ OTHERS │ TOTAL - ───────────┼───────────┬───────────┼───────────┬───────────┼─────────── - 〃 │ Barrels │ Per cent. │ Barrels │ Per cent. │ Barrels - │ │ of total │ │ of total │ - ───────────┼───────────┼───────────┼───────────┼───────────┼─────────── - 1894│ 18,118,933│ 81.4│ 4,145,232│ 18.6│ 22,264,165 - 1895│ 18,348,051│ 81.8│ 4,084,720│ 18.2│ 22,432,771 - 1896│ 16,341,161│ 82.1│ 3,569,719│ 17.9│ 19,910,880 - 1897│ 18,141,479│ 82.4│ 3,876,706│ 17.6│ 22,018,185 - 1898│ 19,999,939│ 83.7│ 3,914,999│ 16.3│ 23,914,938 - ───────────┼───────────┼───────────┼───────────┼───────────┼─────────── - Total│ 90,949,563│ 82.3│ 19,591,376│ 17.7│110,540,939 - ───────────┴───────────┴───────────┴───────────┴───────────┴─────────── - - - - - INDEX - - - A - - Acme Oil Company, I, 1159; II, 2100–2101. - - Aiken, J. R., II, 2164. - - Alexander, Scofield and Company, I, 1046, 1049, 1065. - - Allegheny River as a means of transportation, I, 1015–1016. - - Allen, M. N., I, 1108, 1141–1143. - - Amalgamated Copper, II, 2269. - - American Oil Company, II, 2050. - - American Transfer Company, I, 1223–1224. - - Andrews, Samuel, partner of John D. Rockefeller, I, 1042–1043, 1044; - II, 2201. - - Archbold, John D., opposes South Improvement Company, I, 1073–1074; - gained over by Rockefeller, 1107; - practises rebate system, 1132; - affiliate with the Standard Oil Company, 1159; - before the Pennsylvania courts, 1227, 1228, 1229; - in the fight for the Tidewater Pipe Line, II, 2021–2022; - testimony on underselling, 1050; - testimony in Buffalo Conspiracy case, 1089; - indicted in Buffalo conspiracy case, 1100–1104; - negotiates control of Producers’ Oil Company, 1179; - denies illegal methods of competition, 1187; - before Industrial Commission, 1190; - on Standard Oil prices, 1224–1225; - director Standard Oil, 1266; - on foreign competition, 1271. - - Atherton, Judge, II, 2074–2075, 2076. - - Atlantic and Great Western R. R., I, 1016, 1046, 1089, 1091. - - - B - - Baltimore and Ohio R. R., I, 1195–1196. - - Barrel Industry, II, 2237–2238. - - Barstow, Frank Q., I, 1159; II, 2266. - - Bedford, E. T., II, 2266. - - Benson, B. D., I, 1172, 1214; II, 2003, 2005, 2021–2022. - - Billingsley Bill, The, II, 2121–2124. - - Bissell, George H., I, 1007. - - Blackmail, II, 2289–2290. - - Blanchard, G. R., I, 1132, 1136–1137, 1139, 1162, 1228. - - Bogus Oil Companies, II, 2050–2051. - - Borneo Oil, II, 2271–2273. - - Boston and Maine R. R., II, 2268, 2278. - - Bostwick, Jabez A., in South Improvement Company, I, 1058; - joins Standard Oil Company, 1179–1181; - in negotiations for sale of Empire Transportation Company, 1194; - Standard Oil buyer in oil fields, 1217; - introduces “immediate shipment” order, 1217–1220; - before the Hepburn Commission, 1228; - indicted for conspiracy in Pennsylvania, 1239; - a typical Standard Oil witness, 1243; - extradition from New York demanded by oil producers, 1247; - charged with oppression, II, 2008. - - Boyle, Patrick, I, 1187–1188; II, 2171–2172. - - Bradford Oil Fields, I, 1215–1219. - - Brands, II, 2216–2217. - - Brewster, Benjamin, I, 1063; II, 2206. - - Bribery, II, 2056–2059, 2114–2119, 2145–2146. - - Brown, S. Q., II, 2015. - - Buffalo Lubricating Company, II, 2092, 2095, 2096, 2097, 2098, 2100. - - Burwald, H. P., II, 2174, 2176. - - Butts, Mrs. G. C., II, 2039–2041. - - By-products, utilization of, II, 2246–2251. - - - C - - Camden, J. N., I, 1169, 1171, 1197; II, 2112. - - Campbell, B. B., ally of Empire Transportation Company, I, 1189–1190; - in the struggle against railway discrimination, 1221; - causes indictment of Standard Oil officials, 1238; - fights for extradition of Standard Oil officials, 1247–1248; - effects compromise with Standard Oil, 1251–1255. - - Carter, John J., II, 2178–2181. - - Cassatt, A. J., denies railway discrimination, I, 1144; - defends discrimination, 1153; - before Congressional Committee on Commerce, 1169; - supports Empire Transportation Company in contest with Standard Oil, - 1186–1188; - yields to Standard Oil, 1190–1191; - ally of Standard Oil in rebate system, 1200; - startling testimony in Pennsylvania courts, 1227; - submits to Standard Oil drawback system, 1233; - aids in the war on the independents, II, 2008–2010. - - Central Association, I, 1148–1149. - - Chess, Carley and Company, II, 2033, 2044–2046, 2048, 2149, 2222. - - Chicago, Milwaukee and St. Paul R. R., II, 2268. - - Choate, Joseph H., Standard Oil counsel before New York Senate - investigating committee, II, 2132, 2135–2136; - in Ohio dissolution proceedings, 1145; - in New York liquidation proceedings, 1258. - - Church, Judge Pierson, II, 2019–2022. - - Cincinnati and Marietta R. R., II, 2078, 2081. - - Clark, Horace F., I, 1059, 1061, 1092, 1093. - - Clark, M. B., I, 1041–1042. - - Cleveland, as a refining centre, I, 1038–1039, 1051–1052. - - Collins, C. P., II, 2165. - - Columbia Oil Company, 1165. - - Committee System, in Standard Oil Company, II, 2232–2233. - - Common Carriers, II, 2082–2083; - see also DRAWBACK, REBATE. - - Competition, see PREDATORY COMPETITION; - UNDERSELLING; - PRICES; - STANDARD OIL COMPANY. - - Congressional Investigating Committee, I, 1169–1171; II, 2137–2141. - - Constituent Companies, in Standard Oil Company, II, 2265. - - Corlett, Thomas, II, 2106–2107. - - Crescent Pipe Line, II, 2213. - - Cunneen, John, II, 2186. - - - D - - Delemater, Wallace, II, 2122. - - Delaware, Lackawanna and Western R. R., II, 2182–2183, 2268. - - Denslow and Bush, I, 1199–1201. - - Devereux, J. H., I, 1047–1048, 1067, 1133, 1170. - - Directorate of the Standard Oil Company, II, 2266. - - Discrimination; see REBATE; - DRAWBACK; - OPPRESSION. - - Dividends, magnificent, II, 2200–2201, 2208, 2267–2268. - - Doane, W. H., I, 1046, 1047, 1064, 1065, 1070–1071. - - Dodd, S. C. T., counsel for Standard Oil Company before New York Senate - investigating committee, II, 2132; - in Ohio dissolution proceedings, 1145; - carries out liquidation of Standard Oil Trust, 1152–1154; - defends liquidation methods, 1259. - - Downer, Samuel, pioneer oil refiner, I, 1019–1020. - - Drake, Edwin L., strikes oil, I, 1009–1010. - - Drawback, I, 1061, 1196–1197, 1232–1233, 1253–1254; II, 2077–2084; - see also REBATE. - - “Dry-Hole,” I, 1022. - - Dudley, J. P., II, 2102. - - - E - - Emery, Lewis, founds Equitable Petroleum Company, I, 1214; - testifies to spy system of Standard Oil Company, II, 2039; - employees corrupted by Standard Oil Company, 1057–1058; - supports Billingsley Bill, 1123; - charges Standard Oil Company with legislative bribery, 1124; - in Producers’ Protective Association, 1164; - leads fight for independent pipe-line, 1167–1169; - establishes independent foreign markets, 1175, 1177; - in the struggle for independent seaboard pipe-line, 1182–1187; - retires from contest, 1188; - see also UNITED STATES PIPE LINE. - - Empire Transportation Company, origin, I, 1023–1024; - in railway pool, 1136; - organization, 1178–1179; - invades refining field, 1183–1185; - contest with Standard Oil Company, 1185–1191; - sells out to Standard Oil Company, 1192–1193; - formally dissolved, 1194; - an important factor in competition, II, 2202; - see also POTTS, JOSEPH D. - - Equitable Petroleum Company, I, 1214, 1222–1223. - - Erie R. R., I, 1033–1034, 1059, 1061, 1062, 1091, 1093, 1132–1133, - 1134–1140, 1151–1152, 1185, 1186, 1187, 1195–1196; II, 2006–2007, - 2168, 2169. - - Espionage system, II, 2038–2041, 2052–2055, 2057–2058. - - Ethics of Standard Oil methods, II, 2056–2057, 2288–2291. - - Everest, H. B. and C. M., II, 2089, 2091–2110. - - - F - - Fertig, John, II, 2174, 2176. - - Flagler, Henry M., partner in Standard Oil Company of Cleveland, I, - 1044; - denies existence of rebate system, 1049; - character, 1050–1051; - in South Improvement Company, 1055; - in the Oil Regions, 1105, 1107; - takes part in organization of Central Association, 1146–1147; - negotiates with Empire Transportation Company, 1191, 1194; - before Ohio investigating committee, 1228; - indicted for conspiracy in Pennsylvania, 1239; - extradition demanded by oil producers, 1247; - testimony on Tidewater Pipe Line contest, II, 2015; - testimony in the Scofield contest, 1071; - before Congressional investigating committee, 1138–1140; - director Standard Oil, 1266. - - Foreign competition, II, 2210–2211, 2213–2214, 2271–2274; - see also RUSSIAN OIL, SUMATRA OIL, JAVA OIL, BORNEO OIL. - - Foreign markets, I, 1021; II, 2244–2245. - - Frew, William, I, 1057, 1160, 1161, 1227. - - Frye, Senator, II, 2115–2116. - - - G - - Gas _versus_ Oil, II, 2201. - - Girty, G. W., I, 1239, 1247. - - Goldsborough, J. R., II, 2165. - - Gould, Jay, I, 1027, 1033, 1059, 1061, 1089, 1179–1180. - - Gowen, F. B., II, 2014–2015, 2016–2017, 2020. - - Guffey Petroleum Company, II, 2272. - - - H - - Haight, Judge, II, 2103–2104, 2110. - - Handy, Truman P., I, 1063. - - Hanna, Marcus A., II, 2146–2148. - - Hanna, Robert, II, 2066–2067. - - Harkness, C. W., II, 2266. - - Harkness, Stephen V., I, 1044. - - Harkness, William W., I, 1157, 1202. - - Harley, Henry, I, 1027–1028, 1138–1139, 1177–1178; II, 2006–2007; - see also PENNSYLVANIA TRANSPORTATION COMPANY. - - Hartranft, John F., I, 1225. - - Hasson, William, I, 1110–1111, 1116–1117, 1123. - - Hatch, C. P., I, 1025–1026. - - Hatch, Edward W., II, 2106–2109. - - Haupt, Herman, I, 1174–1176, 1214; II, 2003. - - Hepburn Commission, I, 1228. - - Hoar, George F., II, 2115, 2117–2119. - - Hopkins, R. E., I, 1172–1173, 1214; II, 2003. - - Hostetter, David, I, 1072, 1194–1195. - - Hoyt, Henry M., I, 1244–1249. - - Humboldt Refining Works, I, 1020. - - Hunt, Mrs. Sylvia C., I, 1198–1199. - - - I - - Immediate shipment, I, 1215–1219, 1251; - see also OPPRESSION. - - Independents, I, 1156–1161, 1171–1173, 1174–1178, 1214; II, 2023, 2190; - see also PREDATORY COMPETITION and STANDARD OIL COMPANY. - - Industrial Commission, II, 2050, 2086, 2183, 2187, 2190, 2218, 2220, - 2224, 2225, 2271. - - Interstate Commerce Bill, I, 1168, 1171, 1218; II, 2125, 2291. - - Interstate Commerce Commission, II, 2166, 2280–2283. - - Intimidation and force, II, 2041, 2202–2207; - see also PREDATORY COMPETITION and ESPIONAGE. - - Investigation, I, 1077–1083, 1169–1171, 1225, 1228–1229; II, 2131–2134; - see also CONGRESSIONAL INVESTIGATING COMMITTEE and HEPBURN - COMMISSION. - - - J - - Java Oil, II, 2271–2273. - - Jenks, Professor, II, 2050. - - Jennings, O. B., I, 1063, 1141. - - Jennings, Walter, II, 2266. - - - K - - Keene, James R., II, 2020–2021. - - Kier, Samuel M., I, 1005–1006. - - King, Hugh, II, 2183. - - Kirk, David, II, 2164, 2176. - - Kline, Virgil P., II, 2145, 2150–2151, 2262. - - - L - - Lake Shore R. R., I, 1016, 1047, 1048, 1052; II, 2071–2074, 2075–2076; - see also NEW YORK CENTRAL R. R. - - Lee, J. W., in Producers’ Protective Association, II, 2164; - organizes Producers’ Oil Company, 1165; - a leader in the struggle against the Standard Oil Company, 1174–1175; - contest with J. J. Carter, 1180; - in the fight for a free pipe-line bill, 1183. - - Legislative Corruption, I, 1215; - see also LOBBYING and BRIBERY. - - Lobbying, II, 2183–2184. - - Lockhart, Charles, in South Improvement Company, I, 1057; - absorbs Pittsburg refineries, 1068; - in the Central Association, 1146–1147; - takes part in the negotiations with the Empire Transportation - Company, 1194; - before the Pennsylvania courts, 1227; - indicted for conspiracy, 1239; - leading position in Standard Oil Company, II, 2252. - - Logan, John P., I, 1057. - - Logan, W. P., I, 1057. - - Lombard, Ayres and Company, II, 2006–2011, 2014. - - Lombard, Josiah, I, 1071; II, 2196–2197. - - - M - - McCandless, William, I, 1225–1226. - - McClellan, George B., General, I, 1059, 1061, 1089, 1092. - - McDonald Oil Field, II, 2242. - - McDowell, J. C., II, 2181. - - McGregor, Ambrose, II, 2089, 2100–2104. - - McKelvy, David, I, 1172, 1214; II, 2003, 2021–2022. - - Malicious Litigation, II, 2183–2187. - - Matthews, C. B., 1011, 1090–1109. - - Merrill, Joshua, I, 1021–1022; II, 2250. - - Miller, Albert, II, 2091–2093, 2094–2096, 2099–2100, 2102. - - Miller, Herman, II, 2240. - - Missouri, Kansas and Texas R. R., II, 2268. - - Moffett, James A., II, 2266. - - Monnett, Frank S., II, 2259–2264. - - Morehouse and Freeman, I, 1163–1164. - - Murphy, Michael, II, 2164, 2177, 2181, 2187. - - - N - - Nash, George K., II, 2083–2084. - - National City Bank, II, 2268. - - National Transit Company, II, 2012–2013, 2026–2027, 2120, 2276–2277; - see also UNITED PIPE LINES. - - National Refiners’ Association, I, 1109, 1126. - - New Jersey Central R. R., II, 2169. - - New York Central R. R., I, 1033–1034, 1052, 1053, 1059, 1061, 1062, - 1093, 1130, 1134–1140, 1165, 1185–1187, 1195–1196; II, 2007, 2268; - see also LAKE SHORE R. R. - - New York, New Haven and Hartford R. R., II, 2268, 2278–2279. - - New York, Ontario and Western R. R., II, 2168. - - Northern Pacific R. R., II, 2268. - - - O - - O’Day, Daniel, enters service of Erie R. R., I, 1179–1180; - passes to Standard Oil Company, 1181; - in negotiations with Empire Transportation Company, 1194; - enforces drawback system on Pennsylvania R. R., 1196; - indicted for conspiracy, 1239; - extradition demanded by oil producers, 1247; - enforces drawback system on Cleveland and Marietta R. R., II, 2079; - compelled to return drawbacks collected, 1081; - at the Buffalo conspiracy trial, 1102. - - Ohlen, H. C., I, 1233–1234. - - Oil, found on Oil Creek, I, 1010–1012; - at Pithole, 1024–1025; - at Bradford, 1215. - - _Oil City Derrick_, I, 1074, 1081, 1122; II, 2107, 2109, 2122, 2171, - 2244. - - Oil Creek, I, 1010. - - Oil Exchange, I, 1028. - - Oil Regions, rush to, I, 1012; - plentiful capital, 1032; - social conditions, 1034–1037; - rise against South Improvement Company, 1072–1075; - wasteful methods, 1112–1113; - lose advantage of geographical position, 1137–1138; - hostility towards Central Association, 1150–1151; - yield to Central Association, 1158–1159; - resentment against Standard Oil Company, 1220–1227; - lack of effective opposition, 1258259; - support the Billingsley Bill, II, 2119–2121, 2123; - renewed hostility towards Standard Oil Company, 1124–1125, 1156–1158. - - Oil wars; see PREDATORY COMPETITION. - - Oppression, by overcharges, I, 1220; - by refusing shipping facilities, 1220–1222; - by discrimination in freight charges, 1227–1229; - see also IMMEDIATE SHIPMENT, DRAWBACK and REBATE. - - - P - - Page, Howard, II, 2036–2037. - - Patterson, E. G., I, 1169, 1189–1190, 1256; II, 2017–2019. - - Payne, H. B., II, 2112–2113, 2114–2119. - - Payne, Oliver H., I, 1056, 1058, 1070–1071; II, 2113, 2266. - - Pease, Phineas, II, 2078–2079, 2080–2084. - - Pennsylvania R. R., I, 1033–1034, 1048, 1052, 1059–1062, 1093, - 1134–1140, 1144, 1183–1188, 1190–1191, 1195–1197, 1199–1201, 1223, - 1225, 1227, 1233, 1239, 1244, 1254; II, 2008, 2027–2029, 2166. - - Pennsylvania Transit Company, I, 1027–1028, 1138, 1174, 1176. - - Petroleum, I, 1004–1006. - - Petroleum Congress, I, 1213. - - Philadelphia and Erie R. R., I, 1016. - - Phillips, Thomas W., II, 2159–2160. - - Pipe Lines, see EMPIRE TRANSPORTATION COMPANY, PENNSYLVANIA - TRANSPORTATION COMPANY; - UNITED PIPE LINES NATIONAL TRANSIT COMPANY; - UNITED STATES PIPE LINE; - TIDEWATER PIPE LINE. - - Pithole, oil struck at, I, 1024–1025. - - Politics, Standard Oil Company in, II, 2111–2128. - - Poth, Herr, 1173, 1175, 1177. - - Potts, Joseph D., organizes Empire Transportation Company, I, 1024; - begins purchase of pipe lines, 1025; - opposes South Improvement Company, 1060; - organizes railway pool, 1136; - opposes rebates to Central Association, 1152–1153; - opposes Standard acquisition of pipe lines, 1181–1183; - invades refining field, 1183, 1187; - allies himself with independent producers, 1189; - abandoned by the Pennsylvania R. R., 1191; - sells to the Standard Oil Company, 1192–1193; - see also EMPIRE TRANSPORTATION COMPANY. - - Pratt, Charles, enters Standard Oil Company, 1148; - stockholder in Acme Oil Company, 1159; - in negotiations with Empire Transportation Company, 1194; - extradition demanded by Pennsylvania oil men, 1247; - leading power in Standard Oil Company, 1252. - - Predatory competition, I, 1156–1159, 1163–1166, 1188–1189, 1199–1202; - II, 2041–2043, 2088–2110, 2172–2174. - - Prices, fluctuation, I, 1031–1032; - exorbitant, 1190, 1210–1212; II, 2059; - high prices aim of Standard Oil Company, 1192–1193; - decline after 1866, 1194–1197; - prices dictated by Standard Oil Company, 1197–1198; - Standard coup of 1876, 1200–1201; - high prices reduce exports, 1201; - increase of refining, 1201–1202; - competition enters, 1202–1203; - arbitrary prices, 1204–1206; - enormous Standard profits, 1208–1209; - underselling, 1211–1213; - manipulating price quotations, 1215–1216; - fancy brands and high prices, 1216–1217; - great variations in local prices, 1217–1221; - reasonable prices due to competition, 1221–1228. - - Producers’ Agency, I, 1117–1118. - - Producers’ and Refiners’ Company, II, 2167. - - Producers’ Oil Company, II, 2165–2167, 2178. - - Producers’ Protective Association, II, 2159–2160, 2161–2165. - - Producers’ Union (Association), organized, I, 1072; - refuses terms to South Improvement Company, 1076–1077; - arouses popular sympathy, 1083–1084; - destroys alliance between South Improvement Company and railways, - 1090–1094; - renews contest, 1110; - restricts production, 1113–1116; - alliance with Refiners’ Association, 1123–1124; - alliance dissolved, 1125; - union dissolved, 1126; - reorganized, 1213; - plans independent pipe line, 1214; - brings suits against Pennsylvania R. R., 1225; - forces indictment of Standard officials, 1239; - presses suits in court, 1242–1245; - rejects overtures of the Standard Oil Company, 1249–1251; - effects compromise, 1255–1258, 1260. - - Production of oil, I, 1010–1012, 1021, 1029–1030, 1036, 1113–1115, - 1121, 1154, 1209–1210; II, 2157–2158, 2194–2195. - - Profits, from Standard Oil, II, 2200–2201, 2208, 2267–2268; - see also PRICES. - - Pure Oil Company, II, 2176–2177, 2189–2190. - - - Q - - Quick, M. W., II, 2164. - - Quinby, George, T., II, 2102, 2109. - - _Quo Warranto_ Proceedings, I, 1225; II, 2143–2149. - - - R - - Ramage, S. W., II, 2174–2176. - - Rapallo, Edward S., II, 2079–2080. - - Reading R. R., II, 2004, 2168. - - Rebates, I, 1033–1034, 1047–1049, 1052, 1084–1085, 1093, 1100, - 1129–1130, 1131–1133, 1136–1138, 1151–1153, 1232–1233, 1253–1254; - II, 2066–2087. - - Refined Oil Pipe Line, II, 2170. - - Refiners’ Association, I, 1109, 1126. - - Rice, George, assails Standard system of underselling, II, 2044–2049; - attacks rebate system, 1077–1084; - seeks liquidation of Standard Oil Trust, 1258–1259. - - Rogers, H. H., opposes South Improvement Company, I, 1089; - defends Standard Oil combination, 1149–1150; - before Hepburn Commission, 1228–1229; - purchases Vacuum Oil Works at Rochester, II, 2089, 2096, 2097; - indicted for conspiracy, 1100–1104, 1130; - negotiates for control of Producers’ Oil Company, 1179; - on the aims of the Standard Oil Company, 1193; - before Industrial Commission, 1225, 1252; - director Standard Oil, 1266. - - Rockefeller, Frank, I, 1064, 1169–1170. - - Rockefeller, John D., childhood and youth, I, 1041; - enters produce business, 1042; - enters oil business, 1043; - organizes Standard Oil Company, 1044; - plans combination of Cleveland refiners, 1051; - in the South Improvement Company, 1055–1056; - bears chief obloquy of scheme, 1092, 1097; - makes secret terms for rebate with railways, 1100; - persists in attempts at oil combination, 1104; - in the Oil Regions, 1104–1109; - president National Refiners’ Association, 1109; - effects combination with producers, 1119–1124; - breaks alliance, 1125; - life threatened, 1128; - begins campaign for refining monopoly, 1144–1147; - organizes Central Association of Refiners, 1148–1149; - war against outside refiners, 1154–1161; - attacks Empire Transportation Company, 1183–1186; - initiates system of drawbacks, 1196–1197; - methods of absorption, 1202–1207; - denies existence of Standard combination, 1230–1231; - indicted for conspiracy, 1239–1240; - extradition demanded by Pennsylvania producers, 1247; - makes overtures to producers, 1249–1251, 1253–1254; - conspiracy suit withdrawn, 1254; - campaign for the seaboard pipe-line, II, 2012–2029; - campaign for the world’s markets, 1035–1062; - fear of his secret methods, 1063–1066; - his contest with Scofield, Shurmer and Teagle, 1068–1071; - his system of drawbacks, 1077–1084; - denies existence of such system, 1085–1086; - at the Buffalo conspiracy trial, 1102; - his methods perfected, 1125–1126; - enemy of publicity, 1127–1131; - before the New York Senate committee, 1132–1135; - before Congressional committee, 1138; - his connection with Marcus A. Hanna, 1146–1147; - makes peace with Producers’ Protective Association, 1160–1161; - his theory of high prices, 1192–1193; - his control of the refining industry, 1197; - on Standard Oil policy, 1226; - his attention to details, 1235; - his genius for essentials, 1241; - his skill on the witness-stand, 1260–1261, 1266; - his profits, 1268. - - Rockefeller, John D., Jr., II, 2266. - - Rockefeller, William A., in the Standard Oil Company, I, 1044; - attractive personality, 1050; - in South Improvement Company, 1058; - in Acme Oil Company, 1159; - in negotiations with the Empire Transportation Company, 1194; - indicted for conspiracy, 1239; - extradition demanded 247; - at Buffalo conspiracy trial, II, 2102; - director Standard Oil, 1266; - railway director, 1279. - - Russian oil, II, 2210–2211, 2213, 2214, 2271–2273. - - Rutter circular, the, I, 1141–1144. - - - S - - Satterfield, John, II, 2019–2020, 2162. - - Scheide, W. T., testimony on rebate system, I, 1131–1133; - testimony on underselling, 1161–1163; - before the Hepburn Commission, 1228; - supports Billingsley Bill, II, 2122. - - Scofield, Shurmer and Teagle, II, 2067–2076. - - Scott, Rufus, II, 2164. - - Scott, Thomas A., makes secret contracts with South Improvement - Company, I, 1059–1061; - abandons South Improvement Company, 1090, 1092; - denies rebate agreement with Standard Oil Company, 1170; - supports Standard Oil against independents, 1200–1201. - - Seaboard Pipe Line, projected, I, 1174–1176; - opposed by Standard Oil Company, 1223; - completed, II, 2003–2006; - captured by Standard Oil Company, 1011–1024. - - Secret bureau of information; see ESPIONAGE SYSTEM. - - Secret contracts with railroads, I, 1059–1062, 1079–1080; - see also REBATE. - - Seep, Joseph, I, 1150. - - Seneca oil, I, 1005. - - Shell Transport and Trading Company, II, 2272–2273. - - Sherman, John, II, 2145, 2147. - - Sherman, Roger, counsel for Producers’ Union, I, 1251, 1252; - in Producers’ Protective Association, II, 2164; - charges Standard Oil with conspiracy, 1186; - death, 1188. - - Shull, Peter, II, 2042–2043. - - Silliman, Professor, I, 1007. - - South Improvement Company, organized monopoly, I, 1055–1059; - secret contracts with railroads, 1061–1062; - absorption by intimidation, 1064–1068; - boycotted by producers, 1072–1076; - a generous charter, 1078–1079; - investigated by Congressional Committee, 1079–1083; - charter repealed, 1094; - boycott lifted, 1095–1097. - - Speculation, I, 1031–1033. - - Spring pole, method of drilling wells by, I, 1010. - - Squire, F. B., II, 2263. - - Standard Oil Company, organized, I, 1044; - absorbs independent refineries, 1063–1068; - held responsible for South Improvement scheme, 1097–1098; - enormous profits, 1127–1128; - favoured shipper on N. Y. Central R. R., 1129–1130; - favoured shipper on Erie R. R., 1134–1135; - absorbs Philadelphia, Pittsburg and New York refineries, 1147–1148; - obtains rebates from railroads, 1151–1153; - absorbs Oil Regions refineries, 1158–1160; - invades oil-shipping business, 1161–1163; - enters pipe-line field, 1179, 1181; - monopolizes pipe-line traffic, 1194–1195; - absorbs Baltimore refineries, 1197; - enters Bradford oil fields, 1216; - investigated in various states, 1227–1229; - secret methods, 1229–1231; - monopolistic character, 1231–1232; - rebate and drawback system, 1232–1235; - increases prices, 1235–1238; - indicted for conspiracy in Pennsylvania, 1239–1240; - charges evaded, 1242–1243; - seeks compromise with producers, 1249–1251; - compromise effected, 1253–1254; - conspiracy charge withdrawn, 1254; - hinders Tidewater pipe-line, II, 2004–2005; - builds rival lines, 1012; - absorbs independent refineries, 1013–1014; - seeks to ruin Tidewater’s credit, 1016–1017; - seeks to dissolve it by legal process, 1017–1019; - attempts to seize control, 1019–1021; - forms alliance with Tidewater, 1023–1024; - extensive pipe-line development, 1025–1027; - alliance with Pennsylvania R. R., 1028–1029; - monopoly of oil transportation, 1029; - contest for world’s markets, 1031–1032; - efficient selling organization, 1032–1034; - secret bureau of information, 1035–1041; - intimidation and underselling, 1041–1051; - summary of competitive methods, 1060–1062; - rebate system, 1063–1087; - sued for conspiracy in Buffalo, 1100–1110; - its political rôle, 1111–1124; - investigated by N. Y. Senate committee, 1131–1135; - its operating constitution revealed, 1136–1137; - charter assailed in Ohio, 1142–1150; - Standard Trust formally dissolved, 1152–1154; - alliance with Producers’ Association, 1160–1161; - enters producing field, 1162–1163; - hinders independent oil movement, 1168–1169; - attacks credit of United States Pipe Line Company, 1170–1172; - undersells it, 1173–1174; - buys up rival’s stock, 1177–1181; - fights independent seaboard pipe-line, 1181–1187; - its control of prices, 1192–1227; - destruction of competition its object, 1227–1229; - merits of the Standard system, 1231–1232; - centralized authority, 1232; - committee system, 1233; - internal emulation, 1234–1235; - minute supervision, 1235; - dismantling of unprofitable plants, 1236; - wise location of industries, 1236–1237; - side-industries, 1237–1240; - economy of time, 1240–1241; - initiative, 1241–1251; - high-grade personnel, 1251–1253; - the Standard Trust after formal dissolution in 1892, 1257–1258; - contempt proceedings in Ohio, 1259–1264; - reorganized as Standard Oil Company of New Jersey, 1265–1265; - its constituent companies, 1265; - capital and surplus, 1265–1266; - its directorate, 1266; - its charter, 1266–1267; - profits, 1267–1268; - invasion of other industrial fields, 1268–1269; - its foreign competitors, 1271–1274; - present practices, 1274–1283; - transportation the basis of its supremacy, 1283–1284; - defence of Standard methods, 1284–1288; - political and ethical influence, 1288–1292. - - Stewart, D. B., II, 2019. - - Stokes, Edward, II, 2006–2007. - - Stone, Amasa, I, 1047, 1048, 1063. - - Straight, R. J., II, 2164. - - Subsidiary industries, II, 2237–2240. - - Sumatra oil, II, 2271–2273. - - Sumner, A. A., II, 2004. - - - T - - Tack, A. H., I, 1154–1155; II, 2197. - - Tankage charges; see OPPRESSION. - - Tank building begun, I, 1013. - - Tariff, the, and the Standard Oil Company, II, 2272–2273. - - Taylor, H. L., II, 2018–2020, 2161–2162. - - Teagle, John, II, 2038, 2042. - - Teaming industry, I, 1013–1015, 1017–1018. - - Tidewater Pipe Company, organized, II, 2004; - line built under difficulties, 1004–1005; - completed, 1006; - supported by independent producers, 1011; - builds independent refineries, 1014; - prospers, 1015; - credit assailed by Standard Oil Company, 1016–1017; - legal dissolution attempted, 1017–1019; - control seized by Standard Oil Company, 1019–1021; - forms alliance with Standard Oil, 1023–1024. - - Tilford, W. H., II, 2141–2266. - - Tinning industry, II, 2238–2240. - - Truesdale, George, II, 2093–2095, 2100. - - Trust investigations, II, 2131. - - Tweedle, S. D., II, 2250. - - - U - - Underselling, I, 1156; II, 2041–2051, 2211–2213, 2221–2224; - see also PREDATORY COMPETITION. - - Union Oil Company, II, 2161–2163. - - Union Pacific R. R., 1268. - - United Pipe Lines, I, 1139, 1181, 1216–1217, 1218, 1224–1225, 1227; II, - 2025. - - United States Pipe Line, II, 2169, 2170, 2174, 2182–2187. - - - V - - Vacuum Oil Works of Rochester, II, 2088–2089, 2091, 2096–2097, 2098, - 2100. - - Vanderbilt, W. H., I, 1059, 1061, 1092–1093, 1228. - - Vandergrift, J. J., organizes bulk transportation in oil, I, 1016; - builds pipe-lines 30; - affiliates with Rockefeller, 1107; - vice-president National Refiners’ Association, 1109; - president United Pipe Lines, 1181; - in negotiations with Empire Transportation Company, 1194; - before Pennsylvania courts, 1227; - leading man in Standard councils, 1229; - indicted for conspiracy, 1239; - seeks compromise with producers, 1249; - testimony on prices, II, 2193; - testimony on trust methods, 1234. - - Van Syckel, Samuel, pioneer pipe-line builder, I, 1017–1018. - - - W - - Warden, W. G., I, 1056–1057, 1068, 1077, 1080, 1082, 1146–1147, 1159, - 1194, 1239; II, 2252. - - Waring, O. F., I, 1058. - - Waring, R. S., I, 1057, 1105. - - Warrington, John W., II, 2145, 2148. - - War tactics, II, 2182–2183. - - Waste assessments, I, 1026–1027; - see also OPPRESSION. - - Waters-Pierce Oil Company, II, 2033, 2037, 2041, 2046–2048, 2221. - - Watson, David K., II, 2142–2150, 2259. - - Watson, Jonathan, I, 1011. - - Watson, Peter H., aids Rockefeller in establishing rebate system, I, - 1053; - favours combination of refiners, 1055; - in South Improvement Company, 1056–1068; - in the raid on independent refiners, 1066–1067; - leading spirit of South Improvement scheme, 1075–1076; - before Congressional committee, 1077–1078, 1080, 1082; - disregarded by producers, 1092; - president Erie R. R., 1133–1134. - - Welch, John C., II, 2204, 2205. - - Well-drilling, I, 1022. - - Westgate, Theodore B., II, 2039, 2279. - - “Wild-catting,” I, 1022. - - Wilson, J. Scott, II, 2090, 2096–2097. - - Witt, Stillman, I, 1063. - - Wood, A. D., II, 2164, 2188. - - Wright, William, I, 1020. - ------ - -Footnote 1: - - See Appendix, Number 1. Professor Silliman’s report on petroleum. - -Footnote 2: - - An elastic pole of ash or hickory, twelve to twenty feet long, was - fastened at one end to work over a fulcrum. To the other end stirrups - were attached, or a tilting platform was secured, by which two or - three men produced a jerking motion that drew down the pole, its - elasticity pulling it back with sufficient force, when the men - slackened their hold, to raise the tools a few inches. The principle - resembled that of the treadle-board of a sewing machine, operating - which moves the needle up and down. The tools were swung in the - driving pipe, or the “conductor”—a wooden tube eight or ten inches - square, placed endwise in a hole dug to the rock—and fixed by a rope - to the spring pole, two or three feet from the workmen. The strokes - were rapid, and a sand pump—a spout three inches in diameter, with a - hinged bottom opening inward and a valve working on a sliding rod, - somewhat in the manner of a syringe—removed the borings mainly by - sucking them into the spout as it was drawn out quickly. _McLaurin’s - “History of Petroleum.”_ - -Footnote 3: - - In 1871 the petroleum exports were 152,195,167 gallons. The production - was 5,795,000 barrels, or 243,390,000 gallons. - -Footnote 4: - - Estimate of J. T. Henry in his “Early and Later History of Petroleum,” - 1873. The “Petroleum Monthly” in 1873 estimated the cost to be from - $2,725 to $4,416. - -Footnote 5: - - See Appendix, Number 2. First act of incorporation of the Standard Oil - Company. - -Footnote 6: - - Testimony of Mr. Alexander before the Committee of Commerce of the - United States House of Representatives, April, 1872. - -Footnote 7: - - See Appendix, Number 3. Affidavit of James H. Devereux. At the time - General Devereux made this affidavit, 1880, he was president of the - New York, Pennsylvania and Ohio Railroad. - -Footnote 8: - - Report for 1871 of the Cleveland Board of Trade. - -Footnote 9: - - See Appendix, Number 4. Testimony of Henry M. Flagler on the South - Improvement Company. - -Footnote 10: - - List of stockholders given by W. G. Warden, secretary of the South - Improvement Company, to a Congressional Investigating Committee which - examined Mr. Warden and Mr. Watson in March and April, 1872. - -Footnote 11: - - Article Fourth: Contract between the South Improvement Company and the - Pennsylvania Railroad Company, January 18, 1872. - -Footnote 12: - - See Appendix, Number 5. Contract between the South Improvement Company - and the Pennsylvania Railroad Company. Dated January 18, 1872. - -Footnote 13: - - See Appendix, Number 6. Standard Oil Company’s application for - increase of capital stock to $2,500,000 in 1872. - -Footnote 14: - - See Appendix, Number 7. Affidavits of George O. Baslington. - -Footnote 15: - - In 1872 the refining capacity of the United States was as follows, - according to Henry’s “Early and Later History of Petroleum”: - - Barrels - Oil Regions 9,231 - New York 9,790 - Cleveland 12,732 - Pittsburg 6,090 - Philadelphia 2,061 - Baltimore 1,098 - Boston 3,500 - Erie 1,168 - Other Points 901 - —————— - Total 46,571 - -Footnote 16: - - A History of the Rise and Fall of the South Improvement Company. - Testimony of W. H. Doane, page 45. - -Footnote 17: - - A History of the Rise and Fall of the South Improvement Company. - Testimony of Josiah Lombard, page 57. - -Footnote 18: - - See Appendix, Number 8. Organisation of the Petroleum Producers’ Union - of 1872. - -Footnote 19: - - See page 1056. - -Footnote 20: - - See Appendix, Number 9. Charter of the South Improvement Company. - -Footnote 21: - - See Appendix, Number 10. Draft of contract between the South - Improvement Company and producers of petroleum in the valley of the - Allegheny and its tributaries. Dated January, 1872. - -Footnote 22: - - See Appendix, Number 11. Extracts from the testimony of W. G. Warden. - -Footnote 23: - - See Appendix, Number 12. Extracts from the testimony of Peter H. - Watson. - -Footnote 24: - - See Appendix, Number 13. Contract of March 25, 1872. - -Footnote 25: - - See Appendix, Number 14. Testimony of Henry M. Flagler. - -Footnote 26: - - The report of the committee of Congress which investigated the South - Improvement Company was not made until May 7, over a month after the - organisation was destroyed by the cancelling of the contracts with the - railroads. - -Footnote 27: - - See Appendix, Number 15. The Pittsburg Plan. - -Footnote 28: - - Estimate given in the Oil City Derrick for September 10, 1872. - -Footnote 29: - - See Appendix, Number 16. “The Agency.” - -Footnote 30: - - The amount of production was computed from the oil run through the - pipe-lines, all of which had their gaugers and were supposed to report - their runs at regular intervals. - -Footnote 31: - - See Appendix, Number 17. Contract between Petroleum Producers’ - Association and Petroleum Refiners’ Association. - -Footnote 32: - - The agency was pledged by its constitution to limit the supply of - crude, but this stipulation did not appear in the contract signed by - the two associations. It was a verbal understanding. - -Footnote 33: - - Testimony of H. M. Flagler before the Ohio State Commission for - investigating railroad freight discrimination, March, 1879. See - Appendix, Number 14. - -Footnote 34: - - See Appendix, Number 3. - -Footnote 35: - - See Appendix, Number 14. - -Footnote 36: - - See Appendix, Number 18. Testimony of George R. Blanchard on rebates - granted by the Erie Railroad. - -Footnote 37: - - See Appendix, Number 19. Testimony of W. T. Scheide. - -Footnote 38: - - See Appendix, Number 20. Statements of amounts paid for overcharges - and rebates on oil during the year 1873 by the New York, Lake Erie and - Western Railroad. - -Footnote 39: - - See Appendix, Number 21. Agreement of 1874 between the Erie Railroad - system and the Standard Oil Company. - -Footnote 40: - - See Appendix, Number 22. Agreement of 1874 between the railroads and - pipe-lines. - -Footnote 41: - - See Appendix, Number 23. The Rutter circular. - -Footnote 42: - - These figures are from Henry’s “Early and Later History of Petroleum,” - published in 1873. - -Footnote 43: - - The barrels of the Standard Oil Company are painted blue. - -Footnote 44: - - This account of the meeting at Saratoga was given to the writer by - Charles Lockhart, of Pittsburg. - -Footnote 45: - - See Appendix, Number 24. Standard Oil Company’s application for - increase of capital stock to $3,500,000 in 1875. - -Footnote 46: - - See Appendix, Number 25. Henry M. Flagler’s testimony on the union of - the Standard Oil Company with outside refiners in 1874. - -Footnote 47: - - Mr. Rogers is mistaken here. The production in 1874 was 10,926,945 - barrels, the shipments 8,821,500, the stocks at the end of the year - 3,705,639. In 1875, the year in which he is speaking, more oil was - consumed than produced. - -Footnote 48: - - See Appendix, Number 26. George R. Blanchard’s testimony on the - breaking up of the Pipe Pool of 1874. - -Footnote 49: - - Condensed from Mr. Tack’s testimony. - -Footnote 50: - - Condensed from Mr. Harkness’s testimony. - -Footnote 51: - - J. T. Henry, in his “Early and Later History of Petroleum,” gives - twenty-two; E. G. Patterson, in a list presented in court in 1880, - gives the number at the beginning of this combination as thirty. - -Footnote 52: - - Condensed from testimony of Mr. Morehouse before the special committee - on railroads, New York Assembly, 1879. - -Footnote 53: - - Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3112. - -Footnote 54: - - Report of the Special Committee on Railroads, New York Assembly, 1879. - -Footnote 55: - - The Standard Oil Company were extensive oil transporters at that time, - as has been shown. - -Footnote 56: - - See Appendix, Number 27. Mr. Flagler’s explanation of the commission - of ten per cent. allowed the Standard Oil Company in 1877. - -Footnote 57: - - See Appendix, Number 28. Correspondence between William Rockefeller - and Mr. Scott in October, 1877. - -Footnote 58: - - See Appendix, Number 29. Correspondence between Mr. O’Day and Mr. - Cassatt. - -Footnote 59: - - See Appendix, Number 30. Henry M. Flagler’s testimony on the rebate - paid to American Transfer Company. - -Footnote 60: - - See Appendix, Number 31. Letter to President Scott of the Pennsylvania - Railroad from B. B. Campbell and E. G. Patterson. - -Footnote 61: - - Commonwealth of Pennsylvania _vs._ Pennsylvania Railroad, United Pipe - Lines, etc. - -Footnote 62: - - Testimony of Charles T. Morehouse before the Special Committee on - Railroads, New York Assembly, 1879. - -Footnote 63: - - In the case of the Standard Oil Company _vs._ William C. Scofield, _et - al._, in the Court of Common Pleas, Cuyahoga County, Ohio. - -Footnote 64: - - Coupled with Mrs. B——’s affidavit was one of the company’s - bookkeeper’s testifying that the business had been paying an annual - net income of $30,000 to $40,000 when the sale to the Standard was - made for $79,000, and another from the cashier, who had been present - at most of the interviews between Mrs. B—— and the Standard agents, - and who corroborates her statements in every particular. - -Footnote 65: - - Mr. Rockefeller’s statements are supported by affidavits from several - members of the firm. - -Footnote 66: - - Oil City Derrick, January 5, 1878. - -Footnote 67: - - Derrick Handbook, Vol. II. - -Footnote 68: - - The stocks on hand at the end of this month were 4,221,769 barrels. On - November 25, 1878, the Derrick published tables showing 4,576,500 - barrels of tankage up and building in the Bradford field. Connected - with the United Lines were 1,774,500 barrels already in use and - 1,347,000 building. - -Footnote 69: - - Investigation ordered by the secretary of internal affairs of the - Commonwealth of Pennsylvania, 1878. - -Footnote 70: - - Abridged from Mr. Campbell’s testimony. - -Footnote 71: - - See Appendix, Number 32. Producers’ Appeal of 1878 to Governor John F. - Hartranft of Pennsylvania. - -Footnote 72: - - The story of the Empire Transportation Company, told in the last - chapter, was brought out in this testimony of Mr. Cassatt’s. - -Footnote 73: - - The testimony taken before the Hepburn Committee has never been - printed in the series of Assembly documents. An edition of 100 copies - was printed during the session for the use of the committee. It is - usually bound in five volumes, and is, of course, very rare. - -Footnote 74: - - 300 copies of the report of the testimony taken were printed. No copy - is to be found in any library of the state of Ohio. The writer has - never seen but one copy of this report. - -Footnote 75: - - In the case of the Standard Oil Company _vs._ William C. Scofield _et - al._, in the Court of Common Pleas, Cuyahoga County, Ohio, 1880. - -Footnote 76: - - Ohio State Investigation of freight discrimination, 1879. - -Footnote 77: - - See Appendix, Number 33. Statement of crude oil shipments by Green - Line during the months of February and March, 1878, to New York, - Philadelphia and Baltimore: showing drawbacks allowed to American - Transfer Company. - -Footnote 78: - - See Appendix, Number 34. Bill of particulars of evidence to be offered - by the commonwealth. - -Footnote 79: - - “A History of the Organisation, Purposes and Transactions of the - General Council of the Petroleum Producers’ Unions,” 1880. - -Footnote 80: - - See Appendix, Number 35. Contract of Petroleum Producers’ Union with - Standard Combination. - -Footnote 81: - - See Appendix, Number 36. Agreement between B. B. Campbell and the - Pennsylvania Railroad Company. - -Footnote 82: - - Fractional distillation is a process intended to separate various - products in mixture, and having unlike boiling points, by keeping the - mixture contained in an alembic at regulated successive stages of - temperature as long as there is any distillate at a given point, and - then raising the heat to another degree, etc. - -Footnote 83: - - This must have been in 1872, not 1870. Up to 1872 the capacity of the - Standard was but 1,500 barrels of crude a day. - -Footnote 84: - - This draft was presented to the committee in lead pencil. It was never - presented to the producers. See P. H. Watson’s testimony, Appendix, - Number 12. - -Footnote 85: - - It was 1874. - -Footnote 86: - - See Appendix, Number 37. Articles of incorporation of the Tidewater - Pipe Line. - -Footnote 87: - - See Appendix, Number 38. Testimony of Henry M. Flagler in regard to - the Tidewater contest. - -Footnote 88: - - Court of Common Pleas, Crawford County, Pennsylvania. Patterson _vs._ - Tidewater Pipe Company, Limited. Testimony of E. G. Patterson, - December, 1882. - -Footnote 89: - - See Appendix, Number 39 A. Agreement between Standard and Tidewater - refineries. - - See Appendix, Number 39 B. Agreement between Standard and Tidewater - Pipe Lines. - -Footnote 90: - - See Appendix, Number 40. Two agreements of even date, August 22, 1884, - between the Pennsylvania Railroad Company and the National Transit - Company. - -Footnote 91: - - The Eighth Section of Article Second of this contract, defining the - duties of the railroads reads: “To make manifests or way-bills of all - petroleum or its products transported over any portion of the - railroads of the party of the second part or its connections, which - manifests shall state the name of the consignor, the place of - shipment, the kind and actual quantity of the article shipped, the - name of the consignee, and the place of destination, with the rate and - gross amount of freight and charges, and to send daily to the - principal office of the party of the first part duplicates of all such - manifests or way-bills.”—Proceedings in Relation to Trusts, House of - Representatives, 1888. Report Number 3,112, page 360. - -Footnote 92: - - Record of pleadings and testimony in Standard Oil Trust quo warranto - cases in the Supreme Court of Ohio, 1899, page 681. - -Footnote 93: - - Trust Investigation of Ohio Senate, 1898, page 370. - -Footnote 94: - - Trust Investigation of Ohio Senate, 1898, page 370. - -Footnote 95: - - Trust Investigation of Ohio Senate, 1898, page 371. - -Footnote 96: - - See Appendix, Number 41. Table showing prices of oil at competitive - and non-competitive points in 1892. - -Footnote 97: - - See Chapter V, page 165. - -Footnote 98: - - See Appendix, Number 42. Standard Oil Company’s petition for relief - and injunction. - -Footnote 99: - - See Appendix, Number 43. Answer of William C. Scofield _et al._ - -Footnote 100: - - See Appendix, Number 44. Affidavit of John D. Rockefeller. - -Footnote 101: - - See Appendix, Number 45, Findings of Fact. - -Footnote 102: - - See Appendix, Number 45. - -Footnote 103: - - Number 20, Findings of Facts. See Appendix, Number 45. - -Footnote 104: - - Ohio State Reports, 43, pages 571–623. - -Footnote 105: - - Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3,112, pages 575–576. - -Footnote 106: - - See Appendix, Number 46. Letter of Edward S. Rapallo to General - Phineas Pease, receiver Cleveland and Marietta Railroad Company. - -Footnote 107: - - Proceedings in Relation to Trusts, House of Representatives, 1880. - Report Number 3,112, pages 577–578. - -Footnote 108: - - See Appendix, Number 47. Testimony of F. G. Carrel, freight agent of - the Cleveland and Marietta Railroad Company. - -Footnote 109: - - See Appendix, Number 48. Report of the Special Master Commissioner - George K. Nash to the Circuit Court. - -Footnote 110: - - The documents from which the statements are drawn are all on file in - the office of the Clerk of the United States Circuit Court for the - Southern District of Ohio, Eastern Division. - -Footnote 111: - - Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3,112, page 864. - -Footnote 112: - - Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3,112, page 864. - -Footnote 113: - - The Derrick published in a four-page supplement to the issue of April - 23, 1904, the full text of both statements under the title “More of - Tarbell’s Tergiversations.” - -Footnote 114: - - Congressional Globe, September 12, 1888, pages 8520–8604. - -Footnote 115: - - Report Number 1490, United States Senate, Forty-ninth Congress. This - report, and Miscellaneous Documents Number 106, United States Senate, - Forty-ninth Congress, 1886, contain the evidence of bribery collected - by the Ohio Legislature and the majority and minority reports of the - committee. - -Footnote 116: - - Congressional Globe, July, 1886. - -Footnote 117: - - Congressional Globe, September, 1886, pages 8520–8604. - -Footnote 118: - - See Appendix, Number 49. A statement from an oil-producer’s - stand-point for 1886. - -Footnote 119: - - See Appendix, Number 50. The Billingsley Bill. - -Footnote 120: - - See Appendix, Number 44. - -Footnote 121: - - See Appendix, Number 51. Extracts from testimony of H. H. Rogers. - -Footnote 122: - - See Appendix, Number 48. - -Footnote 123: - - Report on Investigation Relative to Trusts, New York Senate, 1888 - pages 419–420. - -Footnote 124: - - Report on Investigation Relative to Trusts, New York Senate, 1888, - pages 420–421. - -Footnote 125: - - See Appendix, Number 52. The Trust Agreement of 1882. - -Footnote 126: - - Report on Investigation Relative to Trusts, New York Senate, 1888, - pages 9–10. - -Footnote 127: - - Affidavit of Henry M. Flagler in the case of the Standard Oil Company - _vs._ William C. Scofield _et al._, in the Court of Common Pleas, - Cuyahoga County, Ohio, 1880. - -Footnote 128: - - Proceedings in Relation to Trusts, House of Representatives, 1888. - Report Number 3,112, page 770. - -Footnote 129: - - The full style of the case was: The State of Ohio on the Relation of - David K. Watson, Attorney-general, Plaintiff, against the Standard Oil - Company, Defendant. - -Footnote 130: - - See annual report of the attorney-general to the governor of the state - of Ohio, 1899. - -Footnote 131: - - History of Standard Oil Case in the Supreme Court of Ohio, 1897–1898. - Part I, pages 27–28. Original opinion of the court. - -Footnote 132: - - Proceedings of meeting dissolving trust. History of Standard Oil Case - in the Supreme Court of Ohio, 1897–1898. Part 1, pages 80–81. - -Footnote 133: - - See Appendix, Number 53. List of constituent companies of the Standard - Oil Trust, with assets and capitalisation in 1892. - -Footnote 134: - - See Appendix, Number 54. Forms of Mr. Rockefeller’s certificate of - holdings in the Standard Oil Trust, with assignment of legal title - which took its place in 1892. - -Footnote 135: - - Report on Investigation Relative to Trusts, New York Senate, 1888, - page 445. - -Footnote 136: - - See Appendix, Number 55. Agreement of 1887 between the Standard Oil - Company and producers. - -Footnote 137: - - Report on Investigation Relative to Trusts, New York Senate, 1888, - page 449. - -Footnote 138: - - See Chapter IX. - -Footnote 139: - - Plaintiff’s Exhibit Number 52 in the case of James Corrigan _vs._ John - D. Rockefeller in the Court of Common Pleas, Cuyahoga County, Ohio, - 1897. - -Footnote 140: - - The following table shows the variation from 1890 to 1897 in price of - crude oil per barrel of 42 gallons, and the price of refined oil per - gallon in barrels in New York: - - Crude Refined - 1890 - Jan 1.05⅛ 7½ - Dec 67½ 7¼ - - 1891 - Jan 74⅛ 7.42 - Dec 59¼ 6.44 - - 1892 - Jan 62½ 6.45 - Dec 53¼ 5.45 - - 1893 - Jan 53½ 5.33 - Dec 78⅜ 5.15 - - 1894 - Jan 80 5.15 - Dec 91⅜ 5.61 - - 1895 - Jan 98⅝ 5.87 - Dec 1.43⅝ 7.77 - - 1896 - Jan 1.45¾ 7.85 - Dec 97⅞ 6.35 - - 1897 - Jan 88⅛ 6.13 - Dec 65 5.40 - -Footnote 141: - - See Appendix, Number 56. John D. Archbold’s statement to the - Industrial Commission concerning the Standard’s opposition to the - building of the United States Pipe Line. - -Footnote 142: - - Adapted from chart printed in Volume I of Report of Industrial - Commission, and brought up to date. - -Footnote 143: - - See Appendix, Number 57. Tables of yearly average prices of crude and - refined. - -Footnote 144: - - Figures used in computing this profit are from the Oil City Derrick of - the period, and from practical oil refiners of that day. - -Footnote 145: - - See Chapter IV. - -Footnote 146: - - See Chapter V. - -Footnote 147: - - In 1871 there was something over 132,000,000 gallons of illuminating - oil exported. In 1872 it fell to about 118,000,000 gallons. - -Footnote 148: - - According to the statement of the Standard Oil Company, made in a suit - for taxes brought by the state of Pennsylvania in 1881, it declared - dividends as follows: In 1873, year ending the first Monday in - November, $347,610; in 1874, $358,605; in 1875 (the capital stock was - raised from $2,500,000 to $3,500,000 in 1875), $514,230; in 1876, - $501,285; in 1877, $3,248,650.01; in 1878, $875,000; in 1879, - $3,150,000; in 1880, $1,050,000. - -Footnote 149: - - See Chapter VII. - -Footnote 150: - - Report of the Special Committee on Railroads, New York Assembly, 1879. - Volume IV, page 3680. - -Footnote 151: - - Plaintiff’s Exhibit, Number 51, in the case of James Corrigan _vs._ - John D. Rockefeller in the Court of Common Pleas, Cuyahoga County, - Ohio, 1897. - -Footnote 152: - - It costs the Cleveland refiner .64 of a cent a gallon to bring oil in - bulk from the Oil Regions to his refinery, and 1.44 cents per gallon - to send it refined in bulk to New York. - -Footnote 153: - - Trustworthy and regular quotations are not to be obtained earlier than - 1881. - -Footnote 154: - - Report of the Industrial Commission, 1900. Volume 1, page 365. - -Footnote 155: - - See Appendix, Number 58. John D. Archbold’s statement on the prices - the Standard receives for refined oil. - -Footnote 156: - - Report on Investigation Relative to Trusts, New York Senate, 1888, - pages 434–435 and 396–398. - -Footnote 157: - - See Chapter V. - -Footnote 158: - - In 1872 there were exported as follows: - - Crude 16,363,975 gallons. - Naphtha, benzine, gasoline, etc. 8,688,257 gallons. - Lubricating, heavy paraffine, etc. 438,425 gallons. - Residuum, pitch and tar 568,218 gallons. - Illuminating 118,259,832 gallons. - - —_Derrick Handbook._ - -Footnote 159: - - The “Standard-whites” are as follows: - - S. W. 100 (fl). - S. W. 110. - S. W. 112. - S. W. 115. - S. W. 120. - S. W. 130 Dia. H. L. - S. W. 130. - S. W. 130 P. W. H. L. - S. W. 73 Abel. - S. W. 150. - S. W. 160. - S. W. Canadian Legal Test. - S. W. Georgia P. W. H. L. - S. W. Georgia Dia. H. L. - S. W. Indiana P. W. H. L. - S. W. Indiana S. T. - S. W. Indiana Dia. H. L. - S. W. Iowa S. T. - S. W. Louisiana P. W. H. L. - S. W. Louisiana Dia. H. L. - S. W. Massachusetts S. T. - S. W. Michigan S. T. - S. W. Minnesota S. T. - S. W. Montana S. T. - S. W. Nebraska S. T. - S. W. New York S. T. - S. W. North Dakota S. T. - S. W. Ohio S. T. - S. W. South Dakota S. T. - S. W. Tennessee Dia. H. L. - S. W. Tennessee P. W. H. L. - S. W. Tennessee S. T. - S. W. Wisconsin S. T. - -Footnote 160: - - The “water-whites” are as follows: - - W. W. 110. - W. W. 112. - W. W. 115. - W. W. 120. - W. W. 120 Eupion. - W. W. 130 Sunlight. - W. W. 130. - W. W. 130 Eupion. - W. W. 130 Fireproof. - W. W. 150. - W. W. 150 Headlight. - W. W. 150 for extra Star. - W. W. 150 forty-nine grav. - W. W. 160. - W. W. 165. - W. W. Canadian Legal Test. - W. W. Electric. - W. W. Georgia Sunlight. - W. W. Georgia S. T. - W. W. Indiana Perfection. - W. W. Indiana S. T. - W. W. Iowa Perfection. - W. W. Iowa S. T. - W. W. Kansas Perfection. - W. W. Kansas S. T. - W. W. Louisiana S. T. - W. W. Louisiana Sunlight. - W. W. Massachusetts S. T. - W. W. Michigan S. T. - W. W. Minnesota S. T. - W. W. Nebraska S. T. - W. W. Nebraska Perfection. - W. W. New York S. T. - W. W. North Dakota S. T. - W. W. Ohio Perfection. - W. W. Ohio S. T. - W. W. South Dakota S. T. - W. W. South Dakota Perfection. - W. W. Tennessee S. T. - W. W. Tennessee Sunlight. - W. W. Wisconsin S. T. - -Footnote 161: - - See Appendix, Number 59. W. H. Vanderbilt’s characterisation of - Standard Oil men. - -Footnote 162: - - Ohio Circuit Court Reports, Volume VII, 1893, page 508. - -Footnote 163: - - See Appendix, Number 60. Facsimile of one of Mr. Kemper’s shares. - -Footnote 164: - - History of Standard Oil Case in Supreme Court of Ohio, 1897–1898. Part - II, page 39. - -Footnote 165: - - History of Standard Oil Case in Supreme Court of Ohio, 1897–1898. Part - II, page 248. - -Footnote 166: - - See Appendix, Number 53. - -Footnote 167: - - See Appendix, Number 61. General balance sheet, Standard Oil - interests, December 31, 1896. - -Footnote 168: - - The present directors are John D. Rockefeller, William Rockefeller, - Henry M. Flagler, John D. Archbold, Henry H. Rogers, W. H. Tilford, - Frank Q. Barstow, Charles M. Pratt, E. T. Bedford, Walter Jennings, - James A. Moffett, C. W. Harkness, John D. Rockefeller, Jr., Oliver H. - Payne. - -Footnote 169: - - See Appendix, Number 62. Amended certificate of incorporation of the - Standard Oil Company of New Jersey. - -Footnote 170: - - See Appendix, Number 9. - -Footnote 171: - - See Appendix, Number 63. Production of Pennsylvania and Lima crude oil - by Standard Oil Company, 1890–1898. - -Footnote 172: - - See Appendix, Number 64. Business of Standard Oil Company and other - refiners, 1894–1898. - -Footnote 173: - - America imported into China, 1893 31,060,527 gallons - Borneo imported into China, 1893 574,615 gallons - Russia imported into China, 1893 13,503,685 gallons - Sumatra imported into China, 1893 39,859,508 gallons - -Footnote 174: - - See Chapter X. - -Footnote 175: - - The Petroleum Age, Volume I, page 35. - ------------------------------------------------------------------------- - - - - - TRANSCRIBER’S NOTES - - - 1. Combined Volume I and Volume II. - 2. Renumbered the pages in Volume I by adding 1,000 and the pages in - Volume II by adding 2,000. - 3. Silently corrected typographical errors and variations in spelling. - 4. Anachronistic, non-standard, and uncertain spellings retained as - printed. - 5. Footnotes have been re-indexed using numbers and collected together - at the end of the last chapter. - 6. 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