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.