The History of the Standard Oil Company

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Title: The History of the Standard Oil Company
Author: Tarbell, Ida M. (Ida Minerva)
Language: English
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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

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

“_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

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

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

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.

_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

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.

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.

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.

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.

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.

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.

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.

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.

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.

Java Oil, II, 2271–2273.

Jenks, Professor, II, 2050.

Jennings, O. B., I, 1063, 1141.

Jennings, Walter, II, 2266.

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.

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.

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.

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’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.

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.

Quick, M. W., II, 2164.

Quinby, George, T., II, 2102, 2109.

_Quo Warranto_ Proceedings, I, 1225; II, 2143–2149.

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.

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.

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.

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.

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.

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.

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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. Enclosed italics font in _underscores_.

*** End of this LibraryBlog Digital Book "The History of the Standard Oil Company" ***

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