APPENDIX

1265

NUMBER 1 (See page 1007) PROFESSOR SILLIMAN’S REPORT ON PETROLEUM

[From “The Early and Later History of Petroleum,” by J. T. Henry, pages 38–54.]

Messrs. Eveleth, Bissell and Reed.

Gentlemen:—I herewith offer you the results of my somewhat extended researches upon the rock-oil, or petroleum, from Venango County, Pennsylvania, which you have requested me to examine with reference to its value for economical purposes.

Numerous localities, well known in different parts of the world, furnish an oily fluid exuding from the surface of the earth, sometimes alone in “tar springs,” as they are called in the Western United States; frequently it is found floating upon the surface of water in a thin film, with rainbow colours, or in dark globules, that may, by mechanical means, be separated from the fluid on which it swims.

In some places wells are sunk for the purpose of accumulating the product in a situation convenient for collection by pumping the water out. The oil exudes on the shores of lakes and lagoons, or rises from springs beneath the beds of rivers. Such are the springs of Baku, in Persia, and the wells of Amiano, in the duchy of Parma, in Italy. The usual geological position of the rocks furnishing this natural product is in the coal measures—but it is by no means confined to this group of rocks, since it has been found in deposits much more recent, and also in those that are older—but in whatever deposits it may occur, it is uniformly regarded as a product of vegetable decomposition. Whether this decomposition has been effected by fermentation only, or by the aid of an elevated temperature, and distilled by heated vapour, is perhaps hardly settled.

It is interesting, however, in this connection to remember that the distillation, at an elevated temperature, of certain black, bituminous shales in England and France has furnished large quantities of an oil having many points of resemblance with naphtha, the name given to this colourless oil, which is the usual product of distilling petroleum. The very high boiling point of most of the products of the distillation of the rockoil from Venango County, Pennsylvania, would seem to indicate that it was a pyrogenic (fire-produced) product.

1266Bitumen, asphaltum, mineral pitch, chapapote, etc., etc., are names variously given to the more or less hard, black, resinous substance which is produced usually from the exposure of petroleum to the air, and is found either with or without the fluid naphtha or petroleum. The most remarkable examples of the occurrence of these substances, so intimately connected with the history of rock-oil, are the Lake Asphaltites of the Dead Sea, so memorable in history, the well-known Bitumen Lake of Trinidad, and the deposits of mineral pitch or chapapote in Cuba. In one of the provinces of India, vast quantities of petroleum are annually produced, the chief consumption being local, for fuel and lights, but a portion is also exported to Europe for the production of naphtha. In the United States, many points on the Ohio and its tributaries are noted as producing this oil; nearly all of them within the coal measures. A detailed history of these various localities can be found recorded in books of science, and their repetition here would be out of place.

GENERAL CHARACTER OF THE CRUDE PRODUCT

The crude oil, as it is gathered on your lands, has a dark brown colour, which, by reflected light, is greenish or bluish. It is thick even in warm weather—about as thick as thin molasses. In very cold weather it is somewhat more stiff, but can always be poured from a bottle even at 15° below zero. Its odour is strong and peculiar, and recalls to those who are familiar with it the smell of bitumen and naphtha. Exposed for a long time to the air, it does not thicken or form a skin on its surface, and in no sense can it be called a drying oil. The density of the crude oil is .882, water being 1.000. It boils only at a very high temperature, and yet it begins to give off a vapour at a temperature not greatly above that of boiling water. It takes fire with some difficulty and burns with an abundant smoky flame. It stains paper with the appearance of ordinary fat oils, and feels smooth and greasy between the fingers. It is frequently used in its crude state to lubricate coarse machinery. In chemical characters, it is entirely unlike the fat oils. Most of these characters are common to petroleum from various places. In one important respect, however, the product of your lands differs from that obtained in other situations, that is, it does not, by continued exposure to the air, become hard and resinous like mineral pitch or bitumen. I have been informed by those who have visited the locality, that on the surface of the earth above the springs which furnish your oil there is no crust or deposit of this sort such as I have seen in other situations where petroleum or mineral tar is flowing. This difference will be seen to be of considerable importance, as it is understood and represented that this product exists in great abundance upon your property, that it can be gathered wherever a well is sunk in the soil, over a great number of acres, and that it is unfailing in its yield from year to year. The question naturally arises, Of what value is it in the arts, and for what uses can it be employed? These researches answer these inquiries.

1267

EXAMINATION OF THE OIL

To determine what products might be obtained in the oil, a portion of it was submitted to fractional distillation.^[82] The temperature of the fluid was constantly regulated by a thermometer, the heat being applied first by a water bath, and then by a bath of linseed oil. This experiment was founded upon the belief that the crude product contained several distinct oils, having different boiling points. The quantity of material used in this experiment was 304 grammes. The thermometer indicated the degrees of the Centigrade scale, but, for convenience, the corresponding degrees of Fahrenheit’s scale are added. The water bath failed to distil any portion of the oil at 100° C. (= 212° F.), only a small quantity of acid water came over. An oil bath, linseed oil, was then substituted, and the temperature was regularly raised by slow degrees until distillation commenced. From that point the heat was successively raised by stages of ten degrees, allowing full time at each stage for complete distillation of all that would rise at that temperature before advancing to the next stage. The results of this tedious process are given in the annexed table—304 grammes of crude oil, submitted to fractional distillation, gave

TEMPERATURE QUANTITY

1st Prod. at 100° C. = 213° F.(acid water) 5 gms.

2nd Prod. at 140° C. to 150° C.= 284° to 302° F. 26 gms.

3rd Prod. at 150° C. to 160° C.= 302° to 320° F. 29 gms.

4th Prod. at 160° C. to 170° C.= 320° to 388° F. 38 gms.

5th Prod. at 170° C. to 180° C.= 338° to 367° F. 17 gms.

6th Prod. at 180° C. to 200° C.= 356° to 392° F. 16 gms.

7th Prod. at 200° C. to 220° C.= 392° to 428° F. 17 gms.

8th Prod. at 220° C. to 270° C.= 428° to 518° F. 12 gms.

Whole quantity distilled by this method 160 gms.

Leaving residue in the retort 144 gms.

Original quantity 304 gms.

Product No. 1, as above remarked, was almost entirely water, with a few drops of colourless oil, having an odour similar to the original fluid, but less intense.

Product No. 2 was an oil perfectly colourless, very thin and limpid, and having an exceedingly persistent odour, similar to the crude oil, but less intense.

Product No. 3 was tinged slightly yellow, perfectly transparent, and apparently as limpid as the second product, with the same odour.

1268

Product No. 4 was more decidedly yellowish than the last, but was in no other respect distinguishable from it.

Product No. 5 was more highly coloured, thicker in consistence, and had a decided empyreumatic odour.

Product No. 6. This and the two subsequent products were each more highly coloured and denser than the preceding. The last product had the colour and consistency of honey, and the odour was less penetrating than that of the preceding oils. The mass of crude product remaining in the retort (equal 47.4 per cent.) was a dark, thick, resinous-looking varnish, which was so stiff when cold that it could be inverted without spilling. This showed no disposition to harden or skin over by exposure to the air. The distillation was arrested at this point in glass, by our having reached the limit of temperature for a bath of linseed oil. The density of the several products of this distillation shows a progressive increase, thus:

DENSITY

No. 2 733

No. 3 752

No. 4 766

No. 5 776

No. 6 800

No. 7 848

No. 8 854

To form an idea of the comparative density of these several products, it may be well to state that sulphuric ether, which is one of the lightest fluids known, has a density of .736, and alcohol, when absolutely pure, .800.

The boiling points of these several fluids present some anomalies, but are usually progressive, thus, No. 2 gave signs of boiling at 115° C. (= 239° F.), and boiled vigorously and remained constant at 225° C. to 228° C. (= 437° to 442° F.). No. 3 began to boil 120° (= 248° F.), rose to 270° (= 518° F.), where it remained constant. No. 4 began to vapourise at 140° (= 284° F.), rose to 290° (= 554° F.), where it remained constant. On a second heating the temperature continued to rise, and passed 305° (= 581° F.). No. 5 gave appearance of boiling at 160° (= 320° F.), boiling more vigorously as the heat was raised, and was still rising at 308° (= 581° F.). No. 6 commenced boiling at 135° (= 275° F.), boiled violently at 160° (= 320° F.), and continued rising above the range of the mercurial thermometer. No. 7 commenced ebullition at the same temperature as No. 6, and rose to 305° (= 581° F.), where the ebullition was not very active. Much time was consumed in obtaining these results. We infer from them that the rock-oil is a mixture of numerous compounds, all having essentially the same chemical constitution, but differing in density and boiling points, and capable of separation from each other, by a well-regulated heat.

The uncertainty of the boiling points indicates that the products obtained at the temperatures named above were still mixtures of others, and the question forces itself upon us, whether these several oils are to be regarded as educts (i. e., bodies 1269previously existing, and simply separated in the process of distillation), or whether they are not rather produced by the heat and chemical change in the process of distillation. The continued application of an elevated temperature alone is sufficient to effect changes in the constitution of many organic products, evolving new bodies not before existing in the original substance.

PROPERTIES OF THE DISTILLED OILS

Exposed to the severest cold of the past winter, all the oils obtained in this distillation remained fluid. Only the last two or three appeared at all stiffened by a cold of 15° below zero, while the first three or four products of distillation retained a perfect degree of fluidity. Exposed to air, as I have said, they suffer no change. The chemical examination of these oils showed that they were all composed of carbon and hydrogen, and probably have these elements in the same numerical relation. When first distilled they all had an acid reaction, due to the presence of a small quantity of free sulphuric acid, derived from the crude oil. This was entirely removed by a weak alkaline water, and even by boiling on pure water. Clean copper remained untarnished in the oil which had thus been prepared, showing its fitness for lubrication, so far as absence of corrosive quality is concerned. The oils contain no oxygen, as is clearly shown by the fact that clean potassium remains bright in them. Strong sulphuric acid decomposes and destroys the oil entirely. Nitric acid changes it to a yellow, oily fluid, similar to the changes produced by nitric acid on other oils. Hydrochloric, chromic, and acetic acids do not affect it. Litharge and other metallic oxyds do not change it, or convert it in any degree to a drying oil. Potassium remains in it unaffected, even at a high temperature. Hydrates of potash, soda, and lime are also without action upon it. Chloride of calcium and many other salts manifest an equal indifference to it. Distilled with bleaching powders (chloride of lime) and water in the manner of producing chloroform, the oil is changed into a product having an odour and taste resembling chloroform. Exposed for many days in an open vessel, at a regulated heat below 212°, the oil gradually rises in vapour, as may be seen by its staining the paper used to cover the vessel from dust, and also by its sensible diminution. Six or eight fluid ounces, exposed in this manner in a metallic vessel for six weeks or more, the heat never exceeding 200°, gradually and slowly diminished, grew yellow, and finally left a small residue of dark brown, lustrous-looking resin, or pitchy substance, which in the cold was hard and brittle. The samples of oil employed were very nearly colourless. This is remarkable when we remember that the temperature of the distillation was above 500° F. The oil is nearly insoluble in pure alcohol, not more than 4 or 5 per cent. being dissolved by this agent. In ether the oil dissolves completely, and on gentle heating is left unchanged by the evaporisation of the ether. India-rubber is dissolved by the distilled oil to a pasty mass, forming a thick, black fluid which, 1270after a short time, deposits the India-rubber. It dissolved a little amber, but only sufficient to colour the oil red. It also dissolves a small portion of copal in its natural state, but after roasting, the copal dissolves in it as it does in other oils.

USE FOR GAS-MAKING

The crude oil was tried as a means of illumination. For this purpose, a weighed quantity was decomposed, by passing it through a wrought-iron retort filled with carbon, and ignited to full redness. The products of this decomposition were received in a suitable apparatus. It produced nearly pure carburetted hydrogen gas, the most highly illuminating of all the carbon gases. In fact, the oil may be regarded as chemically identical with illuminating gas in a liquid form. The gas produced equalled ten cubic feet to the pound of oil. It burned with an intense flame, smoking in the ordinary gas jet, but furnishing the most perfect flame with the Argand burner.

These experiments were not prosecuted further, because it was assumed that other products, now known and in use, for gas-making, might be employed at less expense for this purpose, than your oil. Nevertheless, this branch of inquiry may be worthy of further attention.

DISTILLATION AT A HIGHER TEMPERATURE

The results of the distillation at a regulated temperature in glass led us to believe that in a metallic vessel, capable of enduring a high degree of heat, we might obtain a much larger proportion of valuable products. A copper still, holding five or six gallons, was therefore provided, and furnished with an opening, through which a thermometer could be introduced into the interior of the vessel. Fourteen imperial quarts (or, by weight, 560 ounces) of the crude product were placed in this vessel, and the heat raised rapidly to about 280° C. (= 536° F.), somewhat higher than the last temperature reached in the first distillation. At this high temperature the distillation was somewhat rapid, and the product was easily condensed without a worm. The product of the first stage was 130 ounces (or over 28 per cent.), of a very light-coloured thin oil, having a density of .792. This product was also acid, and as before, the acid was easily removed by boiling with fresh water. The temperature was now raised to somewhat above 300° C. (= 572° F.), and 123 ounces more distilled, of a more viscid and yellowish oil, having a density of .865. This accounts for over 43 per cent. of the whole quantity taken. The temperature being raised now above the boiling point of mercury, was continued at that until 170 ounces, or over 31 per cent., of a dark brown oil had been distilled, having a strong empyreumatic odor. Upon standing still for some time, a dark blackish sediment was seen to settle from this 1271portion, and on boiling it with water the unpleasant odour was in a great degree removed, and the fluid became more light-coloured and perfectly bright. (It was on a sample of this that the photometric experiments were made.) The next portion, distilled at about 700° F., gave but about 17 ounces, and this product was both lighter in colour and more fluid than the last. It now became necessary to employ dry hickory wood as a fuel, to obtain flame and sufficient heat to drive over any further portions of the residue remaining in the alembic.

It will be seen that we have already accounted for over 75 per cent. of the whole quantity taken. There was a loss on the whole process of about 10 per cent. made up, in part, of a coaly residue that remained in the alembic, and partly of the unavoidable loss resulting from the necessity of removing the oil twice from the alembic, during the process of distillation, in order to change the arrangements of the thermometer, and provide means of measuring a heat higher than that originally contemplated.

About 15 per cent. of a very thick, dark oil completed this experiment. This last product, which came off slowly at about 750° F., is thicker and darker than the original oil, and when cold, is filled with a dense mass of pearly crystals. These are paraffine, a peculiar product of the destructive distillation of many bodies in the organic kingdom. This substance may be separated, and obtained as a white body, resembling fine spermaceti, and from it beautiful candles have been made. The oil in which the crystals float is of a very dark colour, and by reflected light is blackish green, like the original crude product. Although it distills at so high a temperature, it boils at a point not very different from the denser products of the first distillation. The paraffine, with which this portion of the oil abounds, does not exist ready-formed in the original crude product; but it is a result of the high temperature employed in the process of distillation, by which the elements are newly arranged.

I am not prepared to say, without further investigation, that it would be desirable for the company to manufacture this product in a pure state, fit for producing candles (a somewhat elaborate chemical process); but I may add that, should it be desirable to do so, the quantity of this substance produced may probably be very largely increased by means which it is now unnecessary to mention.

Paraffine derives its name from the unalterable nature of the substance, under the most powerful chemical agents. It is white, in brilliant scales of a greasy lustre; it melts at about 116°, and boils at over 700° F.; it dissolves in boiling alcohol and ether, and burns in the air with a brilliant flame. Associated with paraffine are portions of a very volatile oil, eupione, which boils at a lower temperature, and by its presence renders the boiling point of the mixture difficult to determine. I consider this point worthy of further examination than I have been able at present to give it, i.e., whether the last third, and possibly the last half, of the petroleum, may not be advantageously so treated as to produce from it the largest amount of paraffine which it is able to produce.

1272The result of this graduated distillation, at a high temperature, is that we have obtained over 90 per cent. of the whole crude product in a series of oils, having valuable properties, although not all equally fitted for illumination and lubrication.

A second distillation of a portion of the product which came over in the later stages of the process (a portion distilled at about 650° F., and having a high colour), gave us a thin oil of density about .750, of light yellow colour and faint odour.

It is safe to add that, by the original distillation, about 50 per cent. of the crude oil is obtained in a state fit for use as an illuminator without further preparation than simple clarification by boiling a short time with water.

DISTILLATION BY HIGH STEAM

Bearing in mind that by aid of high steam, at an elevated temperature, many distillations in the arts are affected which cannot be so well accomplished by dry heat, I thought to apply this method in case of the present research. Instances of this mode of distillation are in the new process for Stearine candles, and in the preparation of rosin oil. I accordingly arranged my retort in such a manner that I could admit a jet of high steam into the boiler, and almost at the bottom of the contained petroleum. I was, however, unable to command a jet of steam above 275° to 290° F., and although this produced abundant distillation, it did not effect a separation of the several products, and the fluid distilled had much the same appearance as the petroleum itself, thick and turbid. As this trial was made late in the investigation, I have been unable to give it a satisfactory issue, chiefly for want of steam of a proper temperature. But I suggest, for the consideration of the company, the propriety of availing themselves of the experience already existing on this subject, and particularly among those who are concerned in the distillation of rosin oil—a product having many analogies with petroleum in respect to its manufacture.

USE OF THE NAPHTHA FOR ILLUMINATION

Many fruitless experiments have been made in the course of this investigation which it is needless to recount. I will, therefore, only state those results which are of value.

1. I have found that the only lamp in which this oil can be successfully burned is the camphene lamp, or one having a button to form the flame, and an external cone to direct the current of air, as is now usual in all lamps designed to burn either camphene, rosin oil, sylvic oil, or any other similar product.

2. As the distilled products of petroleum are nearly or quite insoluble in alcohol, burning fluid (i. e., a solution of the oil in alcohol) cannot be manufactured from it.

12733. As a consequence, the oil cannot be burned in a hand lamp, since, with an unprotected wick, it smokes badly. Neither can it be burned in a Carcel’s mechanical lamp, because a portion of the oil being more volatile than the rest, rises in vapour on the elevated wick required in that lamp, and so causes it to smoke.

I have found all the products of distillation from the copper still capable of burning well in the camphene lamp, except the last third or fourth part (i.e., that portion which came off at 700° F. and rising, and which was thick with the crystals of paraffine). Freed from acidity by boiling on water, the oils of this distillation burned for twelve hours without injuriously coating the wick, and without smoke. The wick may be elevated considerably above the level required for camphene, without any danger of smoking, and the oil shows no signs of crusting the wick tubes with a coating of rosin, such as happens in the case of camphene, and occasions so much inconvenience. The light from the rectified naphtha is pure and white, without odour. The rate of consumption is less than half that of camphene, or rosin oil. The Imperial pint, of 20 fluid ounces, was the one employed—a gallon contains 160 such ounces. A camphene lamp, with a wick one inch thick, consumed of rectified naphtha in one hour, 1¾ ounces of fluid. A Carcel’s mechanical lamp of ⅞–inch wick, consumed of best sperm oil, per hour, 2 ounces. A “Diamond Light” lamp, with “sylvic oil,” and a wick 1½–inch diameter, consumed, per hour, 4 ounces.

I have submitted the lamp burning petroleum to the inspection of the most experienced lampists who were accessible to me, and their testimony was, that the lamp burning this fluid gave as much light as any which they had seen, that the oil spent more economically, and the uniformity of the light was greater than in camphene, burning for twelve hours without a sensible diminution, and without smoke. I was, however, anxious to test the amount of light given, more accurately than could be done by a comparison of opinions. With your approbation I proceeded therefore to have constructed a photometer, or apparatus for the measurement of light, upon an improved plan. Messrs. Grunow, scientific artists of this city, undertook to construct this apparatus, and have done so to my entire satisfaction. This apparatus I shall describe elsewhere—its results only are interesting here. By its means I have brought the petroleum light into rigid comparison with the most important means of artificial illumination. Let us briefly recapitulate the results of these

PHOTOMETRIC EXPERIMENTS

The unit adopted for comparison of intensities of illumination is Judd’s Patent Sixes Sperm Candle.

The sperm oil used was from Edward Mott Robinson, of New Bedford—the best winter sperm remaining fluid at 32° F. The colza oil and Carcel’s lamps were furnished 1274by Dardonville, lampist, Broadway, New York. The gas used was that of the New Haven Gas Light Co., made from best Newcastle coal, and of fair average quality.

The distance between the standard candle, and the illuminator sought to be determined, was constantly 150 inches—the photometer traversed the graduated bar in such a manner as to read, at any point where equality of illumination was produced, the ratio between the two lights. I quote only single examples of the average results, and with as little detail as possible, but I should state that the operation of the photometer was so satisfactory that we obtained constantly the same figures when operating in the same way, evening after evening, and the sensitiveness of the instrument was such that a difference of one-half inch in its position was immediately detected in the comparative illumination of the two equal discs of light in the dark chamber. This is, I believe, a degree of accuracy not before obtained by a photometer.

Table of Illuminating Power of Various Artificial Lights Compared with Judd’s Patent Candles as a Unit

SOURCE OF LIGHT RATIO TO CANDLE—1

Gas burning in Scotch fish-tail tips, 4 feet to the hour 1 : 5.4

Gas burning in Scotch fish-tail tips, 6 feet to the hour 1 : 7.55

Gas burning in Cornelius fish-tail tips, 6 feet to the hour 1 : 6.3

Gas burning in English Argand burner, 10 feet to the hour 1 : 16

Rock-oil, burning in 1–inch wick camphene lamp, consuming 1¾ ounces of fluid to the hour 1 : 8.1

Carcel’s mechanical lamp, burning best sperm oil, 2 ounces of fluid to the hour, wick ⅞ of an inch 1 : 7.5

Carcel’s mechanical lamp, burning best sperm oil, 2 ounces of colza oil to the hour, wick of ⅞ an inch 1 : 7.5

Camphene lamp (same size as rock-oil above) burning best camphene, 4 fluid ounces per hour 1 : 11

“Diamond Light” by “sylvic oil,” in 1½–inch wick, 4 ounces per hour 1 : 8.1

From this table it will be seen that the rock-oil lamp was somewhat superior in illuminating power to Carcel’s lamp of the same size, burning the most costly of all oils. It was also equal to the “Diamond Light” from a lamp of one-half greater power, and consequently is superior to it in the same ratio in lamps of equal power. The camphene lamp appears to be about one-fifth superior to it, but, on the other hand, the rock-oil surpasses the camphene by more than one-half in economy of consumption (i.e., it does not consume one-half so much fluid by measure), and it burns more constantly. Compared with the sylvic oil and the sperm, the rock-oil gave on the ground glass diaphragm the whitest disc of illumination, while in turn the camphene was whiter than the rock-oil light. By the use of screens of different coloured glass, all inequalities of colour were compensated in the use of the photometer, so that the intensity of light could be more accurately compared. Compared with gas, the rock-oil 1275gave more light than any burner used except the costly Argand consuming ten feet of gas per hour. To compare the cost of these several fluids with each other, we know the price of the several articles, and this varies very much in different places. Thus, gas in New Haven costs $4 per 1,000 feet, and in New York $3.50 per 1,000, in Philadelphia $2.00 per 1,000, and in Boston about the same amount.

Such sperm oil as was used costs $2.50 per gallon, the colza about $2, the sylvic oil 50 cents, and the camphene 68 cents; no price has been fixed upon for the rectified rock-oil.

I cannot refrain from expressing my satisfaction at the results of these photometric experiments, since they have given the oil of your company a much higher value as an illuminator than I had dared to hope.

USE OF THE ROCK-OIL AS A LUBRICATOR FOR MACHINERY

A portion of the rectified oil was sent to Boston to be tested upon a trial apparatus there, but I regret to say that the results have not been communicated to me yet. As this oil does not gum or become acid or rancid by exposure, it possesses in that, as well as in its wonderful resistance to extreme cold, important qualities for a lubricator.

CONCLUSION

In conclusion, gentlemen, it appears to me that there is much ground for encouragement in the belief that your company have in their possession a raw material from which, by simple and not expensive process, they may manufacture very valuable products.

It is worthy of note that my experiments prove that nearly the whole of the raw product may be manufactured without waste, and this solely by a well-directed process which is in practice one of the most simple of all chemical processes.

There are suggestions of a practical nature, as to the economy of your manufacture, when you are ready to begin operations, which I shall be happy to make, should the company require it; meanwhile, I remain, gentlemen,

Your obedient servant,

B. Silliman, Jr.,

Professor of Chemistry in Yale College.

New Haven, April 16, 1855.

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NUMBER 2 (See page 1044) FIRST ACT OF INCORPORATION OF THE STANDARD OIL COMPANY

KNOW ALL MEN BY THESE PRESENTS: That we, John D. Rockefeller, Henry M. Flagler, Samuel Andrews, and Stephen V. Harkness, of Cleveland, Cuyahoga County, Ohio, and William Rockefeller, of the City, County, and State of New York, have associated ourselves together under the provisions of the Act of the Legislature of the State of Ohio, entitled An Act to provide for the creation and regulation of incorporated companies in the State of Ohio, passed May 1, 1852, and the Acts supplementary thereto passed April 8, 1856, and the Act to amend the last-named Act, passed February 14, 1861, and other laws of the State of Ohio applicable thereto, for the purpose of forming a body corporate for manufacturing petroleum and dealing in petroleum, and its products under the corporate name of THE STANDARD OIL COMPANY.

And we do certify that the purpose for which said body corporate is formed is the manufacture of petroleum and to deal in petroleum and its products.

That the capital stock necessary for said company, and the amount agreed on as composing the capital stock, is the sum of One Million Dollars.

That the amount of each share of capital stock is One Hundred Dollars.

That the name of the place where said manufacturing establishment shall be located for doing business is Cleveland City, Cuyahoga County, State of Ohio.

That the name and style by which said manufacturing establishment shall be known is THE STANDARD OIL COMPANY.

John D. Rockefeller,

Henry M. Flagler,

Samuel Andrews,

Stephen V. Harkness,

William Rockefeller.

Cleveland, Ohio, January 10, 1870.

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NUMBER 3 (See page 1047) AFFIDAVIT OF JAMES H. DEVEREUX

[In the case of the Standard Oil Company vs. William C. Scofield et al. in the Court of Common Pleas, Cuyahoga County, Ohio.]

J. H. Devereux, being first duly sworn, says that he is forty-eight years of age, and is president of the New York, Pennsylvania and Ohio Railroad; that in 1868 he became vice-president of the Lake Shore Railroad, and remained in that position as well as president and general manager till 1873. That he has heard read the statements of Robert Hanna and George O. Baslington, in their affidavits filed herein in respect to transportation of oil, and in regard thereto he has to say that his experience with the oil traffic began in 1868 when he went upon the Lake Shore Railroad as vice-president, succeeding Mr. Stone who retired from ill health; that the only written memoranda connected with the business of the company with which he was furnished was a book in which it was stated—probably in Mr. Stone’s handwriting—that the representatives of the various oil interests of Cleveland would agree to pay a rate of 1 cent. per gallon on crude oil moved from the regions to Cleveland; that in addition to the inevitable friction arising from the competition of these refiners of Cleveland—probably aggregating twenty-five in number, was the further difficulty of the patent right which the Pennsylvania Railroad claimed to the transportation of oil, and the peculiar differences made by them in the rates given to refiners at Titusville, Pittsburg, and other places all thoroughly in competition with the then very limited refining capacity of Cleveland; that he took up the subject as to whether the Lake Shore Railroad could hope to compete for the transportation of oil, and the end of the matter was that the Jamestown and Franklin Railroad was extended from Franklin to Oil City, the then centre of the producing district, and a sharper contest than ever was produced, growing out of the opposition of the Pennsylvania Railroad in competition; that such rates and arrangements were made by the Pennsylvania Railroad, that it was publicly proclaimed in the public print in Oil City, Titusville, and other places that Cleveland was to be wiped out as a refining centre as with a sponge, and without exception the oil refiners of Cleveland came to affiant as a representative of transportation, and with a single exception expressed their fears that they would have either to abandon their business here or move to Titusville or other points in the Oil Regions; that the only exception to this decision was that offered by Rockefeller, Andrews 1278and Flagler, who on its assurance that the Lake Shore Railroad could and would handle oil as cheaply as the Pennsylvania Company, proposed to stand their ground at Cleveland and fight it out on that line. That later, about 1870, the first move was made to transport refined oil by rail regularly and throughout the entire year from Cleveland to New York. That prior to that time the export business from Cleveland was comparatively limited and was confined to the summer months, most of that portion of the traffic refined at Cleveland in competition with Pittsburg, Titusville, and other places being shipped by lake and canal, and as affiant remembers at a rate of about one dollar per barrel, and with a certainty of its being reduced to ninety cents. That the rail rate was nominally two dollars on refined oil from Cleveland to New York. That Mr. Flagler, at this time representing Rockefeller, Andrews and Flagler, proposed to make regular monthly shipments by rail throughout the year provided a proper rate could be made for the business then offered, this rate to cover transportation of crude from the region to Cleveland, and when refined from Cleveland to New York. Rockefeller, Andrews and Flagler being the only refiners here who proposed to compete for the export business or offered oil for the entire haul from the regions to Cleveland and thence to New York; that Mr. Flagler’s proposition was to assure to the Lake Shore Railroad sixty carloads of refined oil per day^[83] from Cleveland to New York at a rate of $1.75 per barrel from the regions to New York, being thirty-five cents per barrel for crude from the regions to Cleveland and $1.30 per barrel for refined from Cleveland to New York; and Rockefeller, Andrews and Flagler were to assume all risk and losses from fire or other accidents. That affiant took this proposition into consideration and made careful computation of the cost of this transportation to the railroad, which cost is the proper basis in fixing the rate to be charged; that affiant found that the then average time for a round trip from Cleveland to New York for a freight car was thirty days; to carry sixty cars per day would require 1,800 cars at an average cost of $500 each, making an investment of $900,000 necessary to do this business, as the ordinary freight business had to be done; but affiant found that if sixty carloads could be assured with absolute regularity each and every day, the time for a round trip from Cleveland to New York and return could be reduced to ten days, by moving these cars in solid trains instead of mixing oil cars in other trains, as would be necessary when transported in small quantities and by moving the oil trains steadily without regard to other cars; that by thus reducing the time to ten days for a round trip, only six hundred cars would be necessary to do this business with an investment therefore of only $300,000. That the regularity of the traffic would insure promptness in the unloading and return of the cars; that upon these considerations affiant concluded that Mr. Flagler’s proposition offered to the railroad company a larger measure of profit than would or could ensue from any business to be carried under the old 1279arrangements, and such proved to be pre-eminently the case; that the proposition of Mr. Flagler was therefore accepted, and in affiant’s judgment this was the turning-point which secured to Cleveland a considerable portion of the export traffic. That this arrangement was at all times open to any and all parties who would secure or guarantee a like amount of traffic or an amount sufficient to be treated and handled in the same speedy and economical way, the charges for transportation being always necessarily based upon the actual cost of the service to the railroad, and whenever any shipper or shippers will unite to reduce the cost of transportation to the railroad, to refuse to give them the benefit of such reduction would be to the detriment of the public, the consumers, who in the end pay the transportation charges. Affiant says that this legitimate and necessary advantage of the large shipper over the smaller he explained to Mr. Hanna and Mr. Baslington, and they recognised its propriety, and affiant offered them the same terms if by themselves or with others they would assure him like quantities with like regularity, thus securing like speed and economy in transportation. And further affiant saith not.

J. H. Devereux.

Subscribed in my presence and sworn to before me this thirteenth day of November, 1880.

J. C. Cannon,

Notary Public in and for Said County.

1280

NUMBER 4 (See page 1055) TESTIMONY OF HENRY M. FLAGLER ON THE SOUTH IMPROVEMENT COMPANY

[Proceedings in Relation to Trusts, House of Representatives, 1888. Report Number 3112, pages 289–290.]

A. ... Neither of the Messrs. Rockefeller, Colonel Payne, nor myself, nor any one connected with the Standard Oil Company, ever had any confidence in or regard for the scheme known as the South Improvement Company. We did not believe in it, but the view presented by other gentlemen was pressed upon us to such an extent that we acquiesced in it to the extent of subscribing our names to a certain amount of the stock, which was never paid for. The company never did a dollar’s worth of business, and never had any existence other than its corporative existence, which it obtained through its charter. Through its president it negotiated certain railroad contracts, which, as I remember now, were signed by the company and by the officers of the railroad. Those contracts were held in escrow a few weeks and were destroyed or cancelled by mutual consent.

Q. Who presented these views to you gentlemen? Who was the person that had charge of this South Improvement Company’s scheme?

A. I think Mr. Warden and the Messrs. Logan were the great leaders in the South Improvement Company policy.

1281

NUMBER 5 (See page 1062) CONTRACT BETWEEN THE SOUTH IMPROVEMENT COMPANY AND THE PENNSYLVANIA RAILROAD COMPANY, DATED JANUARY 18, 1872

[Proceedings in Relation to Trusts, House of Representatives, 1888. Report Number 3112, pages 357–361.]

Agreement made and entered into this eighteenth day of January, in the year eighteen hundred and seventy-two, by and between the South Improvement Company, a corporation organised and existing under the laws of the State of Pennsylvania, party hereto of the first part, and the Pennsylvania Railroad Company, on its own behalf and on behalf of all other railroad companies, whose roads are controlled, owned, or leased by it, or with which it has sufficient running arrangements, which other roads are herein described as the connections of the said Pennsylvania Railroad Company, party hereto of the second part.

Witnesseth:

Whereas, the party hereto of the first part has been organized for the purpose, among other things, of increasing, facilitating, and developing the trade in and the conveyance and transportation of petroleum and its products, and for that purpose proposes, among other things, to expend large sums of money in the purchase, erection, and construction of, and maintaining and conducting works for storage, distillation, and refining, warehousing and transportation, and in various other ways, upon the inducement, among other things, of this contract.

And Whereas, the magnitude and extent of the business and operations proposed to be carried on by the party hereto of the first part will greatly promote the interest of the party hereto of the second part, and make it desirable for it, by fixing certain rates of freight, drawbacks, and rebates, and by the other provisions of this agreement, to encourage the outlay proposed by the party hereto of the first part, and to facilitate and increase the transportation to be received from it.

And Whereas, it has been agreed by and between the party hereto of the second part, for itself and its connections, the Erie Railroad Company, for itself and its connections, and the New York Central Railroad Company, for itself and its connections, that the business of transporting, by railroad, crude petroleum and its products, 1282toward the Atlantic coast, from the points of production and refining, on their lines of road, shall be allotted by the party hereto of the first part, to the said three companies, in the proposition of forty-five (45) per cent. of the whole to the Pennsylvania Railroad Company, for itself and its connections, including the Philadelphia and Erie Railway, the Northern Central Railway, the Alleghany Valley Railroad, Camden and Amboy Railway, the Pennsylvania Company, and all other railroads which are, or may be, controlled, owned, and leased by it, or with which it has, or may have, sufficient running arrangements; twenty-seven and a half (27½) per cent. of the whole to the Erie Railway Company, for itself and its connections, and twenty-seven and a half (27½) per cent. of the whole to the New York Central Railroad Company for itself and its connections, and that the transportation beyond Cleveland and Pittsburg over the railroads of the said companies and their connections, in other directions than toward the Atlantic coast, west from said points of production and refining, shall be allotted by the party hereto of the first part, in the proportion of one-third thereof, to the party hereto of the second part, for itself and its western connections, and the remainder to other railroads.

Now, therefore, this agreement witnesseth: That the parties hereto for themselves and their successors, in consideration of the promises, of the mutual execution hereof, and of the mutual advantages hereby conferred, have covenanted and agreed, and hereby do covenant and agree each with the other, as follows:

ARTICLE FIRST

The party hereto of the first part covenants and agrees:

1. To furnish to the party hereto of the second part for transportation, such a proportion of the crude petroleum and its products, owned or controlled by the party hereto of the first part, as shall give to the party hereto of the second part forty-five (45) per cent. of all the crude petroleum and its products, sent from the points of production and refining toward the Atlantic coast, by the said Pennsylvania, the Erie, and the New York Central railroads and their connections, and thirty-three and one-third (33⅓) per cent. that which is sent west of Pittsburg and Cleveland by those railroads and their connections.

2. To provide suitable tankage at the points where petroleum is produced, on the railroads of the party hereto of the second part and its connections in which to receive crude petroleum preparatory to shipment, with the necessary pipes, pumps, racks, and other appliances for its convenient transfer in bulk into railroad cars.

3. To deliver to the railroads of the party hereto of the second part, and its connections, at the places of shipment, and to receive from them, at the places of destination, all crude petroleum and its products transported over their roads for the party of the first part.

4. To provide at the places of destination on the seaboard, necessary and suitable 1283yards, wharves, warehouses, sheds, tanks, pipes, pumps, and motive power, for the reception of petroleum and its products, and loading vessels therewith.

5. To provide, maintain, and operate the works necessary to refine crude petroleum upon the largest scale practicable, and with such skill, and on such a system of organisation and division of labour, as will secure both efficiency and economy; and for that purpose and for the purpose of developing and increasing the petroleum trade of the country, to provide and maintain all suitable and necessary means and facilities.

6. To keep records of the transportation over the railroads of the party hereto of the second part, and its connections, and so far as it can obtain the same, over the Erie and the New York Central railroads and their connections, of all petroleum and its products, showing the number of barrels of forty-five gallons each in bulk, and the number of barrels of forty-seven gallons each in barrels, carried by each road with the points of receiving and delivery, and the amount of freight received by each road for such transportation, which records shall at all reasonable times be open to the inspection of the duly constituted representatives of the party hereto of the second part.

Monthly abstracts of all such records shall be regularly sent to the party of the second part.

7. To pay the party of the second part weekly for all transportation over its roads and its connections, of petroleum and its products, such gross rates and half-rates of freight as are hereinafter specified, less the rebates and drawbacks hereinafter provided to be retained by the party hereto of the first part for its own use.

ARTICLE SECOND

The party hereto of the second part covenants and agrees:

1. That the party hereto of the second part will pay and allow to the party hereto of the first part, for its own use, in all petroleum and its products, transported over the railroads of the party hereto of the second part and its connections, for the party hereto of the first part, rebates, and on all transported for others, drawbacks, at the rates hereinafter provided, except in the case specified in Article Third.

2. To deliver to the party hereto of the first part all petroleum and its products in packages, transportation over the railroads, of the party hereto of the second part, and its connections, by whomsoever shipped, and consigned to the party of the first part, at the warehouses of the party of the first part, at the seaboard, and inland, at the depots of the party of the second part, at the places of destination, and to deliver all petroleum and its products, in bulk, owned by or consigned to the said party of the first part, at any point required on the line of the railroads, of the party of the second part and its connections.

3. To transport and deliver petroleum and its products over the railroads of the 1284party of the second part and its connections, at gross rates, which shall at no time exceed the following, without the consent of both parties hereto.

From any point on the Oil Creek and Allegheny River Railroad to Oil City, Union, Corry or Irvineton, which are herein designated as common points, on each barrel of forty-five gallons in bulk, and on each barrel of forty-seven gallons in barrels, thirty cents.

ON CRUDE PETROLEUM

From any common point to Cleveland, for each barrel of 45 gallons $0.80

From any common point to Pittsburg, for each barrel of 45 gallons .80

From any common point to New York, for each barrel of 45 gallons 2.56

From any common point to Philadelphia, for each barrel of 45 gallons 2.41

From any common point to Baltimore, for each barrel of 45 gallons 2.41

From any common point to Boston, for each barrel of 45 gallons 2.71

All other points, except those on the Oil Creek and Allegheny River Railway, to the places of destination last named, the same rates as from the common points.

ON REFINED OIL, BENZINE, AND OTHER PRODUCTS OF THE MANUFACTURE OF PETROLEUM

From Pittsburg to New York, for each barrel $2.00

From Pittsburg to Philadelphia, for each barrel 1.85

From Pittsburg to Baltimore, for each barrel 1.85

From Cleveland to Boston, for each barrel 2.15

From Cleveland to New York, for each barrel 2.00

From Cleveland to Philadelphia, for each barrel 1.85

From Cleveland to Baltimore, for each barrel 1.85

From any common point to New York, for each barrel 2.92

From any common point to Philadelphia, for each barrel 2.77

From any common point to Baltimore, for each barrel 2.77

From any common point to Boston, for each barrel 3.07

From and to all points intermediate between the points aforesaid, such reasonable rates as the party of the second part shall from time to time establish, on both crude and refined.

From Pittsburg, Cleveland, and other points, to places west of Pittsburg and Cleveland, such reasonable rates as the party of the second part may deem it expedient from time to time to establish.

4. To pay and allow to the party hereto of the first part, on all petroleum and its products, transportation for it over the railroads of the party of the second part and its connections, the following rebates, and on all transported for other parties, drawbacks of like amounts, as the rebates from the gross rates, the same to be deducted and retained by the party hereto of the first part, for its own use from the amounts of freights, payable to the party of the second part.

1285

ON THE TRANSPORTATION OF CRUDE PETROLEUM

From the gross rate from any common point to Cleveland, a rebate per barrel of $0.40

From the gross rate from any common point to Pittsburg, a rebate per barrel of .40

From the gross rate from any common point to New York, a rebate per barrel of 1.06

From the gross rate from any common point to Philadelphia, a rebate per barrel of 1.06

From the gross rate from any common point to Baltimore, a rebate per barrel of 1.06

From the gross rate from any common point to Boston, a rebate per barrel of 1.06

From the gross rate from all other points, and the six places of destination last named rebates the same as on the rates from the common points.

ON THE TRANSPORTATION OF REFINED OIL, BENZINE, AND OTHER PRODUCTS OF THE MANUFACTURE OF PETROLEUM

From the gross rates from Pittsburg to New York, a rebate per barrel of $0.50

From the gross rates from Pittsburg to Philadelphia, a rebate per barrel of .50

From the gross rates from Pittsburg to Baltimore, a rebate per barrel of .50

From the gross rates from Cleveland to Boston, a rebate per barrel of .50

From the gross rates from Cleveland to New York, a rebate per barrel of .50

From the gross rates from Cleveland to Philadelphia, a rebate per barrel of .50

From the gross rates from Cleveland to Baltimore, a rebate per barrel of .50

From the gross rates from any common point to New York, a rebate per barrel of 1.32

From the gross rates from any common point to Philadelphia, a rebate per barrel of 1.32

From the gross rates from any common point to Baltimore, a rebate per barrel of 1.32

From the gross rates from any common point to Boston, a rebate per barrel of 1.32

From the gross rates to and from all points, intermediate between the above points, a rebate or drawback of one-third of the gross rate, shall be paid.

From the gross rates from Pittsburg, Cleveland, and other points, to places west of the meridians of Pittsburg and Cleveland, a rebate or drawback of one-third of the gross rate shall be paid.

5. To charge to all other parties (excepting such as are referred to in Article 3d) for the transportation of petroleum and its products, rates which shall not be less than the gross rates above specified, and should at any time any less rate be charged, directly or indirectly, either by way of rebate, commission, allowances, or upon any pretext whatsoever, the same reduction per barrel shall be made to the party hereto of the first part, from the net rates provided for them, on all transportation for them during the period for which such reduction shall be made to others.

6. To permit the party hereto of the first part, if, in its judgment, the currents of trade should so require, temporarily to increase or diminish the proportion, as herein provided to the party hereto of the second part, for itself and its connections, as the whole business of transporting petroleum and its products, as between the party hereto of the second part, the Erie Railway Company and the New York Central Railroad Company. The party of the second part in such case, to receive from the party hereto 1286of the first part, in full payment or indemnity, for the excess or deficiency, one-half the net schedule rates on such excess or deficiency; the other half to be paid pro rata to the said other companies, whose apportioned quantity of transportation shall thus be varied; but such diversion of business shall not, at any time, exceed one week, nor be repeated without an interval of at least sixty days, unless with the consent of the party hereto of the second part. Also, that whenever from time to time, as aforesaid, a temporary diversion of a part of the apportioned transportation of the party of the second part, to the other railroads aforesaid, or to either of them, shall become necessary, cars of the party of the second part may be loaded by the party of the first part, and sent away over such other railroads, or either of them, but the cars so sent away shall be returned without unnecessary delay, and in as good order as when taken to the railroads of the party of the second part, and mileage at the usual rates paid for their use while absent.

7. To furnish with as much regularity as possible, at all times, good and sufficient cars, and other means suitable and necessary for the safe and prompt transportation of all crude petroleum and its products, either in bulk or in barrels, which the party hereto of the first part shall desire to send from one point to another (and which shall be supplied with as much regularity as possible), on or over the railroads of the party of the second part and its connections.

8. To make manifests or way-bills of all petroleum or its products, transported over any portion of the railroads of the party of the second part or its connections, which manifests shall state the name of the consignor, the place of shipment, the kind and actual quantity of the article shipped, the name of the consignee, and the place of destination, with the rate and gross amount of freight and charges, and to send daily to the principal office of the party of the first part, duplicates of all such manifests or way-bills.

ARTICLE THIRD

And it is hereby further covenanted and agreed by and between the parties hereto, that the rebates hereinbefore provided for the party hereto of the first part, may be made to any other party who shall furnish an equal amount of transportation, and who shall possess and use works, means, and facilities for carrying on and promoting the petroleum trade equal to those possessed and used by the party hereto of the first part.

ARTICLE FOURTH

And it is hereby further covenanted and agreed by and between the parties hereto, that the party hereto of the second part shall at all times co-operate, as far as it legally may, with the party hereto of the first part, to maintain the business of the party hereto of the first part, against loss or injury by competition, to the end that the party hereto of the first part may keep up a remunerative, and so a full and regular business, and 1287to that end shall lower or raise the gross rates of transportation over its railroads and connections, as far as it legally may, for such times, and to such extent as may be necessary to overcome such competition. The rebates and drawbacks to the party of the first part to be varied pari passu with the gross rates.

ARTICLE FIFTH

It is hereby mutually agreed by and between the parties hereto that for the purpose of meeting such exigencies as may from time to time require change of the rates of transportation herein provided, each party, on ten days’ written notice from the other, shall appoint a person on behalf of such party, and the two persons thus appointed, shall have power to change and adjust the rates, which shall go into effect on being approved by the said parties hereto.

ARTICLE SIXTH

It is further mutually agreed by and between the parties hereto that the gross rates of freight to the party hereto of the first part shall at all times be kept as near to the net rates as is consistent with the interests of the party hereto of the first part, and that whenever in the judgment of the party hereto of the first part it is expedient to lower the rebate below the rate above specified, it may do so, and from time to time raise the same again, not, however, above the rate hereinbefore specified. The party hereto of the first part, from time to time shall notify the party of the second part in writing of the change required, whereupon the party hereto of the second part shall forthwith make a corresponding change of such gross rates.

ARTICLE SEVENTH

It is further mutually agreed by and between the parties hereto, that this agreement shall continue and remain in force for the period of not less than five years, and shall not then, nor thereafter terminate, until one of the parties shall have given twelve months’ written notice to terminate it.

ARTICLE EIGHTH

It is further mutually agreed by and between the parties hereto, that if any doubt, question, difference, cause, or suit shall at any time or times, hereafter, arise or happen between the said parties to these presents, touching the construction of these presents, or any clause, matter, or thing herein contained, or any other matters, cause, or thing whatsoever, in any wise relating to or concerning this agreement, and such doubt, question, difference, or dispute, shall not be fully settled by the parties to these presents within one calendar month after the same shall arise, then, in every such case, upon 1288the request in writing of either of the said parties hereto, specifying such doubt, question, difference, or dispute, it shall be committed and referred to the hearing and arbitration of three disinterested persons; one of them to be chosen by the party of the first part, another of them to be chosen by the party of the second part, and each party on ten days’ notice in writing from the other, shall make such choice, and appoint a disinterested person in behalf of such party, but, if either party on such notice shall within such ten days fail to make an appointment, the person appointed by the other party shall choose the second disinterested person, and the third disinterested person shall be chosen within one calendar month next after such request; and the award, order, or determination of the said three persons, to be chosen as aforesaid, or any two of them, shall be binding and conclusive on the parties hereto, and shall be performed and kept by them, without any further suit or trouble whatsoever; provided such award, order, or determination, be made in writing, under the hands of the said three persons, or of any two of them, within the space of sixty days after all the persons shall be so selected, as aforesaid. And for the further and better enforcing the performance of the award, so to be made, as aforesaid, the reference or submission for or in respect of the same, may, at the option of any of the parties to these presents, from time to time be made as a matter of course, a rule of court in any court of record.

In witness whereof, the said South Improvement Company and Pennsylvania Railroad Company have caused their respective corporate seals to be hereto affixed, and these presents to be subscribed by their respective presidents, the day and year first above written.

[SEAL]

South Improvement Company.

By P. H. Watson,

President.

[SEAL]

Pennsylvania Railroad Company.

By J. Edgar Thompson,

President.

Attest: Joseph Lesley, Secretary.

1289

NUMBER 6 (See page 1063) STANDARD OIL COMPANY’S APPLICATION FOR INCREASE OF CAPITAL STOCK TO $2,500,000 IN 1872

To the Secretary of the State of Ohio:

The undersigned, being a majority of the Board of Directors of THE STANDARD OIL COMPANY OF CLEVELAND, OHIO, do hereby certify that on the first day of January, A.D. 1872, at the annual meeting of the stockholders of said company held at its office in Cleveland, Cuyahoga County, Ohio, by a vote then and there taken, all the stockholders of said company being present and voting therefor, it was resolved and agreed by each and all of them, that the capital stock of said company be increased the sum of One Million Five Hundred Thousand Dollars, thereby making the capital stock of said company Two Millions Five Hundred Thousand Dollars, which action of the stockholders was as follows, to wit:

Resolved, and it is hereby agreed by each and all of us, that the capital stock of this company, namely, The Standard Oil Company of Cleveland, Ohio, be increased to the sum of Two Millions Five Hundred Thousand Dollars, and it is also agreed, and the proper officers of the company are hereby instructed to take the requisite steps to so increase said capital stock.

John D. Rockefeller, O. B. Jennings, B. Brewster, William Rockefeller, S. V. Harkness, H. M. Flagler, T. P. Handy, S. Andrews, A. Stone, Jr., S. Witt, Stockholders.

Cleveland, O., January 1st, A.D. 1872.

And afterward said meeting was adjourned. Henry M. Flagler, Secretary.

And we further certify that the whole amount of such increase of capital stock has been paid to said company, in money, that no note, bill, bond, or other security has been taken for the same, or any part thereof, and that the credit of the company has not been used directly or indirectly to raise funds to pay the same or any part thereof.

IN WITNESS WHEREOF, We hereunto set our names at Cleveland, Ohio, this ninth day of February, A.D. 1872.

John D. Rockefeller, Henry M. Flagler, Samuel Andrews, Stephen V. Harkness, Directors.

1290

NUMBER 7 (See page 1067) AFFIDAVITS OF GEORGE O. BASLINGTON

[In the case of the Standard Oil Company vs. William C. Scofield, et al., in the Court of Common Pleas, Cuyahoga County, Ohio.]

In the spring of 1869, they (Hanna, Baslington & Company) began the construction of refining works just above the Atlantic depot on the west side of the Cleveland and Columbus Railroad track, and invested in the construction of the works about $67,000, which works were completed so as to commence the refining business about the first of June, 1869, and from that time up to about the first of July, 1870, the works had netted a profit of $40,000 over all expenses of running said works, being about 60 per cent. on the capital invested per annum, and from that time on up to the first of April, 1872, said firm cleared $21,000, being about 30 per cent. per annum on the investment from the time that said firm commenced business.

Some time in February, 1872, the firm received a message from the Standard Oil Company requesting said firm to have an interview as to the disposal of the refining works of said firm; that they were indisposed to enter into any arrangement for the disposition of said works because the investment of capital in said works had proved abundantly profitable to their satisfaction and they had no disposition whatever to part with the works; but upon investigation they were somewhat surprised to find that the Standard Oil Company had already obtained the substantial control of the different refineries in the City of Cleveland; that it had obtained such rates of transportation of crude and refined oil from the different railroads that it was impossible for them to compete with it, and upon an interview which was had by Mr. Hanna and affiant with Mr. Rockefeller who was at the time president of the Standard Oil Company. Mr. Flagler, the secretary of the company, being present, Mr. Rockefeller in substance declared or said that the Standard Oil Company had such control of the refining business already in the City of Cleveland that he thought said firm of Hanna, Baslington & Company could not make any money; that there was no use for them to attempt to do business in competition with the Standard Oil Company.

Affiant further says that after having had an interview both with Mr. Watson, who was the president of a company called “The South Improvement Company,” and Mr. Devereux, who was the general manager of the Lake Shore Road, he became 1291satisfied that no arrangement whatever could be effected through which transportation could at least be obtained on the Lake Shore Road that would enable their firm to compete with the Standard Oil Company, the works of said Hanna, Baslington & Company, being so situated that they could only obtain their crude oil through the line of the Lake Shore Road. And finding that the Standard Oil Company had such special rates of transportation that unless the firm of Hanna, Baslington & Company were enabled to bring as much oil as the Standard Oil Company, that it was impossible for said firm of Hanna, Baslington & Company to obtain a fair competing rate with the Standard Oil Company. They at least came to the conclusion that it was better for them to take what they could get from the Standard Oil Company and let their works go.

And affiant further says that under these circumstances they sold their works to the Standard Oil Company, which were on the day of the sale worth at least $100,000, for $45,000 because that was all they could obtain from them, and works too which in cash cost them not less than $76,000, and which with a fair competition would have paid them an income of not less than 30 per cent. per annum on the investment.

Affiant further says that at the interviews which he had with Mr. Rockefeller, Mr. Rockefeller told him that the Standard Oil Company already had control of all the large refineries in the City of Cleveland and there was no use for them to undertake to compete against the Standard Oil Company, for it would only ultimate in their being wiped out, or language to that effect.—(November 1, 1880.)

George O. Baslington being duly sworn (November 12, 1880) says: That the firm of Hanna, Baslington & Company, the first year they were in business, made profit amounting to a little less than $40,000 and from the end of the first year up to the time of the sale to the Standard Oil Company they made no profit at all. At the time of the sale the firm reserved the privilege of running the works to close up and run them up to about April 1, 1872, and during that time they made profit to the amount of about $21,000. At the time my former affidavit was drawn by Mr. Tyler, I stated these facts to him.

In the sale of the works to the Standard Oil Company we were given the option to take cash or to take stock in the Standard Oil Company at par. We decided to and did take cash, and one reason that influenced us to take cash was that we were fearful that refining oil at Cleveland might not be successful, and if so, the cash was better than the stock, and affiant wanted the cash to enable him to embark in other pursuits.

1292

NUMBER 8 (See page 1072) ORGANISATION OF THE PETROLEUM PRODUCERS’ UNION OF 1872

[From “A History of the Rise and Fall of the South Improvement Company,” pages 8–10.]

1. The territory forming the Pennsylvania petroleum field shall be divided into sixteen districts....

2. The producers in each district shall meet at some convenient place and choose one or more (not to exceed five) men, from their own number, through whose hands they shall pledge themselves to sell all their crude oil.

3. It shall be the duty of these committeemen to sell the crude oil coming into their hands: First, to the local refiners; second, to the agents of the refiners located in distant cities, as may be designated by the executive committee; and third, to such shippers, dealers, and exporters as may be named by the executive committee, and it shall be the further duty of said local committeemen to keep the executive committee fully posted as to what is being done in their respective districts with reference to the sale and removal of all crude oil.

4. There shall be an executive committee composed of members of the Petroleum Producers’ Union, to consist of one from each of the sixteen districts, to be chosen by the local committee, whose duty it shall be to meet from time to time, and take all necessary measures to fully carry out this plan in all its details.

5. That for the purpose of paying the expenses of this committee, one cent a barrel on all the crude oil shall be levied, collected, and paid over by the local committeemen to the executive committee, of which the executive committee shall keep an account to be rendered to the producers at a future meeting.

6. It shall be the especial duty of the executive committee to take such measures as they may find necessary to secure uniform mileage rates of freights on all oil and merchandise of every kind, to and from the Oil Region, and employ all lawful measures for the abolition of the railway system of rebates or drawbacks.

PLEDGE

“I do hereby agree to sell all my production of oil through, or with the consent of, the committee of the Petroleum Producers’ Union.”

1293First.—That an organisation shall be immediately formed for the exclusive purpose of advancing money to producers upon their depositing proper Tank or Pipe Company receipts therefor with the organisation or its agency.

Second.—That the name of the organisation shall be the “Producers’ Protective Association.”

Third.—That its capital shall be one million dollars, with power in the directors to increase it to such an amount as in their judgment shall be necessary to accomplish the objects of the organisation.

Fourth.—That its headquarters shall be in Oil City, and its co-operative agencies shall be located at all principal producing points.

Fifth.—That its stock shall be divided into shares of $100 each, which stock shall be transferable only upon the books of the company at its headquarters, with the consent of the board of directors.

Sixth.—That the chairman of the general committee be requested to appoint one person in each of the sixteen producing districts, who shall open books to receive, and every producer, manufacturer, or other party, directly or indirectly interested in our home industries be invited to subscribe to the capital stock of this organisation not exceeding fifty shares, or such part thereof as he shall elect, and no person shall, at any time hold more than said number of shares.

Seventh.—That when the sum of one million dollars shall have been subscribed and ten per cent. thereof paid to five trustees to be appointed by the chairman of the general committee, the said chairman shall give notice of an election of officers, who shall be elected by the votes of the subscribers, each share being entitled to a vote.

Eighth.—That said officers shall consist of a president, vice-president, and such a number of directors as shall give each district a fair presentation.

Ninth.—That the board of directors shall appoint some bank or banker in each district its co-operative agency; or in the absence of a bank or bankers such agencies be established as shall be most convenient for the producer, which bank or agency shall, as necessity requires, by draft or otherwise, obtain its funds from the headquarters of the company, and be held strictly accountable therefor.

Tenth.—That every producer shall be entitled to go to his most convenient agency, and deposit his certificate or receipt for oil, which shall be passed to his credit, and he shall receive such an advance thereof as the board of directors in their discretion shall deem prudent to make.

Eleventh.—That the association shall from time to time sell the oil belonging to it, or held as security for advances overdue in such quantities and at such prices as legitimate demand will justify said prices to be daily telegraphed from headquarters to the several agencies.

Twelfth.—That every producer depositing oil in the hands of the association on which no advance is made, may, if he so elect, have his oil held until such time as 1294he shall direct its sale, and that the appropriation of oils sold from day to day shall be as follows: First, all oils ordered sold by its owner, and the balance pro rata on oils on which advances have been made and shall then be overdue.

Thirteenth.—The association shall charge a reasonable rate of interest on all advances made, such interest to be used in defraying the expenses of the association and the surplus, if any, shall be declared as dividends upon the full paid stock. That any surplus stock remaining in the hands of the association shall be the property of the association until taken and paid for by some party entitled thereto under the foregoing provisions, but always at par.

Fourteenth.—When the producers of each district shall have appointed their committees, as provided in the second section of the Producers’ Union, and have elected their chairman, he is requested to send to the chairman of the general committee the names thereof.

Fifteenth.—And it shall be the duty of the person appointed by the general committee, as provided in section five, to use due diligence in the circulation thereof, for subscriptions, and within one week from the receipt thereof, he shall collect the ten per cent. of each subscription, as provided by section seventh, and report the same to the chairman of the general committee, together with a list of the subscribers and the amount subscribed.

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NUMBER 9 (See page 1078) CHARTER OF THE SOUTH IMPROVEMENT COMPANY

[From The Laws of Pennsylvania for 1872.]

An Act to incorporate the South Improvement Company:

Section 1. Be it enacted by the Senate and House of Representatives of the Commonwealth of Pennsylvania in General Assembly met, and it is hereby enacted by the authority of the same, That S. S. Moon, R. D. Barcley, John A. Fowler, or a majority of them, their associates, successors, and assigns, be and they are hereby authorised and empowered to form and be a body corporate, to be known as the South Improvement Company, which shall be and is hereby vested with all the powers, privileges, duties, and obligations conferred upon the act to incorporate the Pennsylvania Company by the Act of the Legislature of Pennsylvania, approved the seventh day of April, A.D. one thousand eight hundred and seventy, and the supplements thereto.

Sec. 2. That the stockholders of said company, by and with the consent of the holders of not less than two-thirds of the shares of stock, be and they are hereby authorised to change the name and title of the said company and designate the location of its general office, which changes shall be valid after the filing of a certificate in the office of the secretary of the Commonwealth, signed by the president, and attested by the seal of the said company.

Approved the sixth day of May, 1871.

The Act incorporating the Pennsylvania Company, referred to above, is the one that details the powers conferred on the incorporators.

An Act to incorporate the Pennsylvania Company:

Section 1. Be it enacted by the Senate and House of Representatives of the Commonwealth of Pennsylvania in General Assembly met, and it is hereby enacted by the authority of the same, That Andrew Howard, J. S. Swartz, G. B. Edwards, J. D. Welsto, and J. P. Malin, their associates, successors, and assigns, or a majority of them, be and they are hereby authorised to form and be a body corporate, to be known as the Pennsylvania Company, and by that name, style, and title shall have perpetual succession, and all the privileges, franchises and immunities incident to a corporation; may sue and be sued, implead and be impleaded, complain and defend in all courts of law and equity, of record and otherwise; may purchase, receive, hold, and enjoy, to them, their successors, and assigns, all such lands, tenements, leasehold estates and hereditaments, goods and chattels, securities and estates, real, personal and mixed, of what kind and quality soever, as may be necessary to erect depots, engine houses, 1296tracks, shops, and other purposes of the said corporation, as hereafter defined by the second section of this act, and the same from time to time may sell, convey, mortgage, encumber, charge, pledge, grant, lease, sub-lease, alien, and dispose of, and also make and have a common seal, and the same to alter and renew at pleasure, and ordain, establish, and put in execution such by-laws or ordinances, rules, and regulations as may be necessary or convenient for the government of the said corporation, not being contrary to the constitution and laws of this commonwealth, and generally may do all and singular the matters and things which to them shall appertain to do for the well-being of the said corporation, and the management and ordering of the affairs and business of the same:

Provided, That nothing herein contained shall be so construed as to give to the said corporation any banking privileges or franchises, or the privilege of issuing their obligations as money.

Sec. 2. That the corporation hereby created shall have power to contract with any person or persons, firms, corporations or any other party, howsoever formed, existing or that may hereafter exist, in any way that said parties or any of them may have authority to do, to build, construct, maintain or manage any work or works, public or private, which may tend or be designed to improve, increase, facilitate, or develop trade, travel, or the transportation and conveyance of freight, live stock, passengers, and any other traffic, by land or water, from or to any part of the United States or the territories thereof; and the said company shall also have power and authority to supply or furnish all needful material, labour, implements, instruments, and fixtures of any and every kind whatsoever, on such terms and conditions as may be agreed upon between the parties respectively; and also to purchase, erect, construct, maintain, or conduct, in its own name and for its own benefit, or otherwise, any such work, public or private, as they may by law be authorised to do (including also herein lines for telegraphic communication), and to aid, co-operate, and unite with any other company, person or firm in so doing.

Sec. 3. The company hereby created shall also have the power to make purchases and sales of or investments in the bonds and securities of other companies, and to make advances of money and of credit to other companies, and to aid in like manner contractors and manufacturers; and to receive and hold, on deposit or as collateral, or otherwise, any estate or property, real or personal, including the notes, obligations, and accounts of individuals and companies, and the same to purchase, collect, adjust, and settle, and also to pledge, sell, and dispose thereof, on such terms as may be agreed on between them and the parties contracting with them; and also to indorse and guarantee the payment of the bonds and the performance of the obligations of the other corporations, firms, and individuals, and to assume, become responsible for, execute, and carry out any contracts, leases, or sub-leases made by any company to or with any other company or companies, individuals or firms whatsoever.

1297Sec. 4. The company hereby created shall also have power to enter upon and occupy the lands of individuals or of companies, on making payment therefor or giving security according to law, for the purpose of erecting, constructing, maintaining, or managing any public work, such as is provided for or mentioned in the second section of this act, and to construct and erect such works thereon, and also such buildings, improvements, structures, roads, or fixtures as may be necessary or convenient for the purposes of the said company, under the powers herein granted; and to purchase, make, use, and maintain any works or improvements connecting or intended to be connected with the works of the said company; and to merge or consolidate, or unite with the said company the improvements, property, and franchises of any other company or companies, on such terms and conditions as the said company may agree upon; and to fix and regulate the tolls or charges to be charged or demanded for any freight, property, or passengers travelling or passing over any improvement erected, managed, or owned by the said company, or on any merchandise or property transported over any road whatever by the said company, and to make, from time to time dividends from the profits made by said company; the several railroads managed by said company shall continue taxable, as heretofore, in proportion to their length within this state respectively; and the said Pennsylvania Company shall be taxable only on the proportion of dividends on its capital stock and upon net earnings or income, only in proportion to the amount actually carried by it within the state of Pennsylvania, and all its earnings or income derived from its business beyond the limits of this Commonwealth shall not be liable for taxation.

Sec. 5. The capital stock of said company shall consist of 2,000 shares, of the value of fifty dollars each, being $100,000, and with the privilege of increasing the same by a vote of the holders of the majority of the stock present at any annual or special meeting, to such an amount as they may from time to time deem needful; and the corporators, or a majority of them, named in the first section of this act, shall have power to open books for subscriptions at such times and places as they may deem expedient; and when not less than 1,000 shares shall have been subscribed, and twenty per cent. thereon shall have been paid in, the shareholders may elect not less than three nor more than nine directors to serve until the next annual election, or until their successors shall be duly elected and qualified; and the directors so elected may, and they are hereby authorised and empowered to have and to exercise, in the name and in behalf of the company, all the rights and privileges which are intended to be hereby given, subject only to such liabilities as other shareholders are subject to, which liabilities are no more than for the payment to the company of the sums due or to become due on the shares held by them; and should the capital stock at any time be increased, the stockholders, at the time of such increase, shall be entitled to a pro rata share of such increase, upon the payment of the instalments thereon duly called for; and whenever an increase of capital stock is made, 1298a certificate thereof, duly executed under the corporate seal of the company, and signed by the president and secretary, shall be filed with the auditor-general before the same shall be deemed to be valid.

Sec. 6. The principal office of the said company shall be in the City of Pittsburg, but the directors, under such rules and regulations as they may prescribe, may establish branches or agencies in other parts of the state, or elsewhere; all of the directors of said company shall be citizens of the United States, and reside therein.

Sec. 7. The directors shall be elected annually by the stockholders, on the first Tuesday of June of each year; and they shall elect from their number, at the first meeting of the board after their election, a president, and shall also have power to elect from their number, or otherwise, a vice-president, a treasurer, and secretary, and such other officers, clerks, and agents as the business of the company may require; all elections for directors shall be by ballot, and every stockholder shall be entitled to one vote for each share of stock held by him; but no person shall be eligible as director who is not a stockholder to the amount of ten shares; at the annual or special meetings a quorum shall consist of stockholders owning at least one-half of the capital stock.

Sec. 8. Ten days’ notice shall be given, by publication, in two newspapers published in the City of Pittsburg, of the time and place of the annual election; which election shall be conducted by three stockholders, one of whom shall act as judge, and the other two as inspectors.

Sec. 9. The board of directors shall make all by-laws necessary for conducting the business of the company; which by-laws shall at all times be accessible to persons transacting business with them; the said directors shall have power, by a vote of a majority of their number at any meeting of the board, to change the name of the said corporation; and by any new name, thus adopted, upon filing with the secretary of the Commonwealth and the auditor-general a truly certified certificate, the said company shall have, hold, and enjoy all the rights, powers, privileges, and immunities hereby granted; the directors shall have power to require payment of the amount remaining unpaid on the stock of said company, at such times and in such proportions as they shall think proper; the said assessment to be made as the by-laws of said company shall direct.

Elisha W. Davis,

Speaker of the House of Representatives.

Charles H. Stinson,

Speaker of the Senate.

Approved—The seventh day of April, Anno Domini, one thousand eight hundred and seventy.

John W. Geary.

1299

NUMBER 10 (See page 1080) DRAFT OF CONTRACT BETWEEN THE SOUTH IMPROVEMENT COMPANY AND PRODUCERS OF PETROLEUM IN THE VALLEY OF THE ALLEGHENY AND ITS TRIBUTARIES. DATED JANUARY, 1872^[84]

[From “A History of the Rise and Fall of the South Improvement Company,” pages 121–122.]

Agreement made and entered into this day of January, A.D. 1872, by and between the South Improvement Company, a corporation under the laws of Pennsylvania, and embracing among its stockholders more than two-thirds (reckoned by their refining capacity) of the refineries of petroleum in the United States, parties hereto of the first part; and the Associated Producers of Petroleum, a corporation also organised under the laws of Pennsylvania, and embracing among its stockholders more than two-thirds (reckoned by the actual production of the crude petroleum at their wells) of the producers of petroleum in the Valley of the Allegheny and its tributaries, party hereto of the second part. Witnesseth.

That whereas, The party of the first part has entered into certain contracts, viz.: The first with the Pennsylvania Railroad Company; the second with the Erie Railway Company; the third with the Atlantic and Great Western Railway Company; and the fourth with the New York Central and Hudson River Railroad, and the Lake Shore and Michigan Southern Railway Company, which contracts secure certain advantages in relation to the transportation of petroleum and its products, which it is the purpose of the contracting parties to use for the promotion of the common interests of the producers, refiners, and transporters of petroleum.

To the end that the said object may be more fully attained the said parties hereto have covenanted and agreed, each with the other, as follows, viz.:

I. The party of the first part, that it will appoint five of its members to form, with a like number of the party of the second part, a joint executive committee, who shall choose some competent and discreet person not of their number who shall serve as the chairman and the eleventh member of the joint committee.

1300

II. The party of the first part, that it will submit all questions, arising under said railroad contracts, which affect the interests of both producers and refiners, to the decision of the joint committee provided for in Article I of the agreement.

III. The party of the second part, that it will appoint five of its members to constitute, with the five members of the party of the first part, the joint executive committee provided for in Article I of this agreement; and will submit to said committee all the questions mentioned in Article II.

IV. The said parties mutually, that the decisions of said joint committee on all questions, affecting the joint interests of producers and refiners, which shall be submitted to them, shall be final and conclusive upon both the parties hereto. That upon the questions which shall at all times be held to affect the joint interests of both producers and refiners are the following, viz.:

1st. The rates of transportation of both crude and refined oil.

2nd. The price of crude oil at the wells and in the market.

3rd. The price of refined oil in the market.

4th. The amount of rebate and drawback which from time to time it may be necessary for the interests of the trade to ask from the railroads.

V. The said parties mutually, that the joint committee shall meet once a month, and at any intermediate time, or times, at which a meeting shall be called by the chairman, or by any four of its members, to consider such questions as shall affect the joint interests of the parties hereto.

VI. The party of the second part that it will agree to increase and lessen the aggregate production of crude petroleum, as the said joint committee shall direct, to adapt as nearly as practicable the supply of the same to the capacity of the markets of the world to absorb at a price remunerative to the producer, the refiner and the transporter.

VII. The parties hereto mutually, that the said joint committee shall, at the beginning of each year, fix the minimum average price at which crude petroleum can be produced and delivered on board railway cars, which price shall be called the minimum cost of production—that at the same periods the said committee shall also fix the minimum average price at which crude oil can be refined, put up in packages and sold, which price shall be called the minimum cost of manufacture.

VIII. The parties hereto mutually, that after paying the minimum cost of production of crude petroleum, the minimum cost of its manufacture, and the cost of transportation and storage, and shipping also, in the case of exported oil, the profits shall be apportioned between the producers and refiners, in the ratio of ... per cent. to the former, and ... per cent. to the latter.

IX. The said parties, that in case of a temporary over-production of crude petroleum, the excess shall as far as practicable be taken and withheld from market, and an advance of three-fourths of the minimum cost of production advanced thereon by the party of 1301the first part at eight per cent., intrust the party of the second part keeping the tanked petroleum insured in good and responsible companies to the full amount of the advance, one year’s interest added.

X. The said parties mutually, that the party of the first part shall only be bound to pay the prices and make the advances aforesaid, in case the producers shall in good faith obey the instructions of the joint committee, to limit production by stopping the drilling of new wells.

XI. The party of the second part that it will keep a register of the date of the commencement of all new wells, the date at which the same shall be finished, the character of the well and the monthly production, and the date at which it may be abandoned, and that it will make it a condition, precedent to the holding of stock in its company, that the date aforesaid shall be finished by its stockholders.

XII. Both parties, that it is the especial object of this agreement to bring the producers and refiners of petroleum into harmony and co-operation, by reciprocal, fair, and just dealing, for the promotion of their mutual interests, and everything in this agreement is to be construed liberally for the carrying into effect of this object.