Introductory material (continued 3)

The way in which this revenue was given and got shows what a simple and easy thing modern business really is—not in any way the brain-racker political economists have persuaded themselves and us. The representative of the oil combination writes a bright, cheery letter; the representative of the Pennsylvania answers it, and there you are; 22½ cents a barrel on millions of barrels flows out of the cash-box of the railroad into the cash-box of the combination. In one year, 1878, this tribute, at the rate of 22½ cents on the 13,750,000 barrels of oil shipped by the three trunk-lines, must have amounted to $3,093,750. The American Transfer Company had a little capital of $100,000, and its receipts from this rebate in this one year would amount to dividends of 3093 per cent. annually; the capital of the oil combination which owned this Transfer Company was at this time $3,500,000.

There are reasons to believe that some of the very railroad men who turned the money of the railroads over to the American Transfer Company were among its members. But if all the profit went to the combination, and none of it was for the railway officials through whom they got it, their revenue from that source alone would have paid in 1878 a dividend nearly equal to this capital of $3,500,000. In this device of the American Transfer Company we again see reappear in 1878, in high working vitality, the supposed corpse of the South Improvement Company of 1872. The American Transfer Company was ostensibly a pipe line, and the railroad officials met the exposure of their "nothing peculiar" dealings with it by asserting that the payment to it of 22½ cents a barrel and more was for its service in collecting oil and delivering it to them; but the Third Vice-President of the Pennsylvania Railroad admits that his road paid the money on oil which the American Transfer Company never handled.

"This 22½ cents (a barrel) paid the American Transfer Company is not restricted to oil that passed through their lines?"

"No, sir; it is paid on all oil received and transported by us."[165]

The American Transfer Company was not even a pipe line. By the Pennsylvania laws all incorporated pipe lines must report their operations and condition monthly to the State. But the publisher of the petroleum trade reports, and organizer of a bureau of information about petroleum, with offices in Oil City, London, and New York, issuing daily reports, testified that the American Transfer Company was not known in the oil regions at all as a pipe line. It published none of the statements required by law. "They do not," he said, "make any runs from the oil-wells." It had once been a pipe line, but "years ago it was merged in with other lines," and consolidated into the United Pipe Line, owned and operated by the combination.[166]

When this arrangement was exposed to public view by the New York legislative investigation, the "expert" who appeared to explain it away in behalf of the railroads and their beneficiaries, paraded a false map of the pipe-line system, drawn and colored to make it seem that the American Transfer Company was a very important pipe-line.[167] This was the same "expert" who, as we saw, defended the pipe-line holocaust of 1874 by asserting that "all were to be taken in alike."

There are three kinds of liars, an eminent judge of New York is fond of saying—liars, damned liars, and experts.

When the assistant secretary of the oil combination was asked about this "transfer" company, he replied, "I don't know anything about the organization."[168] He had described himself to the committee as "a clamorer for dividends"; but he declared he knew nothing about an organization which was "transferring" him dividends at the rate of $3,093,750 a year on $100,000 of capital. Almost at the very moment of this denial, receipts were being produced in court in Pennsylvania which had been given by the cashier of himself and his associates to the railroads for this money.[169]

Even if the independents succeeded in saving their oil from wasting on the ground, and got it into pipe lines, and had it refined, and were lucky enough to be given cars to carry it to the seaboard, they found that in leaving the oil regions they had not left behind the "no." Up to the very edge of the sea were the nets spread for them.

Part of the bargain of 1872 had been that the brothers of the South Improvement Company should provide the terminal facilities at the seaboard.[170] Railroad companies are usually supposed to have their own yards, storehouses, wharves, and the like, and, as a matter of fact, the railroads had these. The agreement of 1872 that the South Improvement Company should furnish the terminal facilities meant—it was discovered by the New York Legislature in 1879—that such terminals as the road already had should be turned over to that concern, and that thereafter nobody should be allowed to build or use terminals except as it permitted.

The New York Legislature found, in 1879, that the oil combination thus owned and controlled the oil terminal facilities of the four trunk-lines at New York, Philadelphia, and Baltimore.

"They can use the power here given, and have used it to crush out opposition."[171]

"Of course, there is in the Erie contract a statement that every shipper of oil over the road shall be treated with 'fairness' by the Standard Oil Company, and our attention was drawn to that," the counsel of the Chamber of Commerce said.... "In the first place, they have the exclusive shipment of oil, and therefore nobody could ship oil, and there was no oil handled for anybody else; but if the Erie Company should send some for somebody else, why, the sloop could not get to the dock, and the machinery at the dock would not and could not work by any possibility so as to get that oil out of that dock and into a ship (except at the end of a lawsuit)."[172]

Evidently the "cancellation" of 1872 had not cancelled anything of substance. Indeed, the "no" of 1878 was wider than the embargo of 1872, for the fourth great trunk-line, the Baltimore and Ohio, was not one of the signatories then; but by 1878 it had, like all the others, closed its port to the people—farming it out as the old régime farmed out the right to tax provinces.

He used to meet the president of the oil combination "frequently in the Erie office," a friend and subordinate has recalled.[173] Railroad offices are pleasant places to visit when such plums are to be gathered there as this of the sole right to the freedom of all ports and control of the commerce of three continents.

Down to this writing, when the little group of independents who remain masters of their own refineries along Oil Creek seek to send their oil in bulk abroad, or to transship it at any one of the principal ports for other points on the coast, the same power still says the same "no" as twenty years ago.[174]

CHAPTER IX

WHO PIPED AND WHO DANCED

Thus, by 1878, the independent producers and refiners found themselves caught in a battue like rabbits driven in for the sport of a Prince of Wales.

If the richest person then in America—that artificial but very real person the Pennsylvania Railroad—could not keep its pipe lines, nobody could. The war for the union, which ended with its surrender in 1877, closed the pipe-line industry to the people. The unanimous "no" of all the railroads which followed completed the corral.

Oil, when it got to market, found that those who had become the owners of the pipe lines were also the owners of most of the refineries, and so the only large buyers.[175] "Practically to-day there is but one buyer of crude oil for us.... We take our commodity to one buyer; we take the price he chooses to give us without redress, with no right of appeal."[176]

Then the sole carrier—the pipe-line company—refused to take the oil into its pipes—the oil as it came out of the wells—unless first sold to its other self, the oil combination. This was called "immediate shipment." Forced to waste or sell his oil, the producer, under this compulsion, had to take what he could get.[177] The Hon. Lewis Emery, Jr., a member of the State Senate of Pennsylvania, gave the authorities of the State an account of the "immediate shipment" evolution of American market liberty. "We go down," he said, "to the office and stand in a line, sometimes half a day—people in a line reaching out into the street—sixty and seventy of us. When our turn comes we go in and ask them to buy, and they graciously will take it. I am an owner in six different companies, and we all suffer the same."

To educate the producer to sell "always below the market," the Pipe Line let his oil spill itself on the ground for a few days. "We lost a considerable amount of oil, probably several thousand barrels," another producer said.

"Will you state at what price as compared with the market price, whether above or below, you sold that oil?"

"It was always below."

Asked why he sold it below the market, he said:

"Because the line would not run it until it was sold."[178]

The hills of Pennsylvania began to growl and redden as in 1872.

The Secretary of Internal Affairs was hung in effigy. Mass meetings were held—some tumultuous, others quiet; processions of masked men marched the streets, and groaned and hooted in front of the newspaper offices and the business places of the combination. In the morning the streets and sidewalks were frequently found placarded with cabalistic signs and letters, and occasionally printed proclamations and warnings. Most of the lending newspapers of the region had been either absolutely purchased by the oil combination or paid to keep silence. Others occasionally broke forth in violent articles advising the use of force.[179]

In the McKean County field the people rose in rebellion. They got up a Phantom Party, in its provocation and spirit much like a phantom party which, contrary to law and order, boarded some ships in Boston harbor a century before. One thousand men, wrapped in white sheets, marched by night from Tarport to Bradford, the headquarters in that province of the sole buyer. Not a word was spoken.

It was not enough to make the people sell under compulsion. A day came when the only buyer would not buy and the only piper would not pipe. This brought the Parker district to the verge of civil war. The citizens were in a state of terrible excitement; the pipe lines would not run oil unless it was sold; the only buyers—viz., the agents of the oil combination—would not buy oil, stating that they could not get cars; hundreds of wells were stopped to their great injury. Thousands more, whose owners were afraid to stop them for fear of damage by salt water, were pumping the oil on the ground. The leaders used all the influence they had to prevent an outbreak and destruction of railroad and pipe lines. The most important of them went over to the Allegheny Valley Railroad office and telegraphed to the president: "The refusal to run oil unless sold upon immediate shipment and of the railroad to furnish cars has created such a degree of excitement here that the most conservative part of the citizens will not be able to control the peace, and I fear that the scenes of last July will be repeated on an aggravated scale."[180]

Three of the highest officials of the road sought an immediate interview with this leader of the producers. He warned them, and the Pennsylvania road which controlled their oil business, that unless immediate relief were furnished there would be an outbreak in the oil regions, because, as he told them, "The idea of a scarcity of cars on daily shipments of less than 30,000 barrels a day was such an absurd, barefaced pretence, that he could not expect men of ordinary intelligence to accept any excuses for the absence of cars, as the preceding fall, when business required, the railroads could carry day after day from 50,000 to 60,000 barrels of oil."[181] The warning was heeded. Thousands of empty cars, which the combination and its railroad allies had said couldn't be had anywhere, suddenly appeared hastening to Parker, blocking up the tracks in all directions, deranging the passenger business of the road. "They looked like mosquitoes coming out of a swamp." The sole buyer began buying again, and for the whole week, after having declared themselves unable to buy or move any, the railroads moved 50,000 barrels a day.[182] Producers under such rule saw their prices decrease and their land pass out of their possession, as was inevitable.

Ten years later in the Ohio oil-field all the substantial features of the plan we saw culminate at Parker are to be found in full play. There, also, the oil combination, Congress was told, is the only purchaser, and it fixes the price to suit itself. The production of the Ohio fields was between 18,000 and 20,000 barrels a day, but it could easily produce between 30,000 and 32,000. Because the only buyer refused to take care of the oil, wells have been shut back. Wells, which if opened up would run 1000 or 2000 or even more, were shut in four days out of the week.[183]

This culmination of 1878 made the people act. The producers were being ground to powder by the fact that an enemy had possession of their local pipes, their tankage, and their railways. "I am the unfortunate owner," said one of them, "of interests in nearly one hundred pumping wells. I have produced over half a million barrels of oil."[184] Oil was running out of the ground at the rate of 15,000,000 barrels a year, but the New York refiners who were in command of plenty of capital, said:

"We don't dare build large refineries, for we don't know where we could get the oil."[185]

At last the people organized the Tidewater Pipe Line. This was the first successful attempt to realize the idea often broached of a pipe line to the seaboard. It was the last hope of the "outsiders"—the "independents." "Nothing short of the ingenuity that is born of necessity and desperation" produced that pipe line. It was well contrived and well manned, and had plenty of money. It was organized in 1878, with a capital of $1,000,000, which increased in a few years to $5,000,000. It built a pipe from the oil regions to Williamsport—105 miles—on the Philadelphia and Reading Railroad, whence the oil was carried in cars by that company and over the Jersey Central to Philadelphia and New York.

Unlimited capital and strategy did all that could be done against the Tidewater. At one place, to head it off, a strip of land barring its progress was bought entirely across a valley. It escaped by climbing the hills. At another point it had to cross under a railroad. The railroad officers forbade. Riding around, almost in despair, its engineer saw a culvert where there was no watercourse. It was for a right of passage which a farmer, whose land was cut in two by the railroad, had reserved in perpetuity for driving his cattle in safety to pasture. It did not take long to make a bargain with the farmer for permission to lay the pipe there.

The pipe line was finished and ready to move oil about the 1st of June, 1879. On June 5th a meeting was held at Saratoga of representatives of the four trunk-line railroads and of members of the oil trust. The meeting decided that the new competitor should be fought to the death. The rate on oil, which had been $1.15 a barrel, was reduced to 80, then to 30, to 20, to 15 cents by the railroads, to make the business unprofitable enough to ruin this first attempt to pipe oil to the seaboard. Finally the roads carried a barrel, weighing 390 pounds, 400 miles for the combination for 10 cents or less.[186] The representative of the Tidewater offered to prove to Congress, in 1880, if it would order an investigation—which it would not—that "the announced and ostensible object of the conference at Saratoga was to destroy the credit of the Tidewater, and to enable the oil combination to buy up the new pipe line, and that a time was fixed by the combination within which it promised to secure the control of the pipe line—provided the trunk-lines would make the rates for carrying oil so low that all concerned in transportation would lose money.[187] There can be no doubt," he continued, "that, taking the avowed and ostensible object of the Saratoga meeting as the true one, it constituted, on the part of the willing participants, a criminal conspiracy of the most dangerous character."

One of the chief officials of the Pennsylvania Railroad testified to the competition which his road had carried on with the Tidewater. "It certainly was fought," he said; "the rates were considerably reduced."[188] Rates were put down to points so low that the railroad men would never tell what they were. I have no knowledge—I have no recollection—was all the president and general freight agent of the Pennsylvania Railroad could be got to say, when before the Interstate Commerce Commission.[189] "Not enough to pay for the wheel grease," said the general freight agent.[190] The oil trust also cut the prices of pipeage by its local lines from 20 cents to 5 cents a barrel, turning cheapness into the enemy of cheapness.

But the Tidewater was strong enough to withstand even so formidable an assault as this. As its business was small, its losses were small; but the railroads, making this war on it for the benefit of others, suffered heavily. The trunk-lines, it has been calculated, wilfully threw away profits equal to $10,000,000 a year for the sake of inflicting a loss of $100,000 on the pipe lines.[191] Enough revenue was lost to pay dividends of 2½ to 5 per cent. on the total capital of the roads.

One effect that followed this reduction in rates was a corresponding decline in the price of oil at New York, in which the cost of freight is a constant element. The Committee of the New York Legislature found in the testimony it heard reason to believe that the members of the oil trust took advantage of their advance knowledge to sell at high prices, to those who did not know, all they would buy for future delivery.

The "Hepburn" report of the New York Legislature of 1879 gives special prominence to the computations that $1,500,000 were the profits of this speculative deal.[192]

The customers of the Tidewater, the independent refiners in Philadelphia, were charged by the Pennsylvania Railroad on oil that came through the Tidewater 15 cents a barrel for one mile of hauling. The utmost the law allowed them was half a cent a mile, and they were carrying oil 500 miles to New York for the same charge of 15 cents a barrel, and less. Under such pressure these independent refineries, which the Tidewater had been built to supply, sold out one after another. The Tidewater was then in the position of a great transporting company, that had spent a large amount of money to bring a great product to its Philadelphia terminus, and found that refining establishments which had been begging it to give them oil had become the cohorts of its opponent. To meet this the Tidewater built refineries of its own at Chester, and at Bayonne, New Jersey, on New York waters.

When asked for a rate to another point, the Pennsylvania gave one that was three and four times as much as they would charge the oil trust, but added, "we cannot make a rate on the empty cars returning." That is, as it was interpreted, "we will carry the oil, but we will not permit the empty cars to come over the roads to get the oil. They must be taken on a wheelbarrow, or by canal, or by balloon."[193] The war went on. Attempts were made to seduce the officials of the Tidewater. A stockholder, who had been too poor to pay for his stock, received a large sum from the oil combination and began a vexatious suit for a receivership.[194] A minority forced their way into the offices of the company, and took violent possession of it by a "farcical, fraudulent, and void" election, as the court decided in annulling it. Its financial credit was attacked in the money market and by injunctions against its bonds.

Affidavits were offered from members of the oil combination denying that they had had anything to do with these proceedings. In reference to these affidavits, the representative of the Tidewater reminded the court that that combination was a multifarious body. "One-half of them," he said, "do a thing, and the other half swear they know nothing about it. In pursuance of this Machiavelian policy, they have eight or ten gentlemen to conduct negotiations, and eight or ten to say they do not know anything about them."

Then, with no visible cause, the capacity of the pipe fell below the demands upon it. This insufficient capacity was pleaded in court as one of the reasons why the pipe should be taken out of the hands of its owners. One day the cause was discovered—a plug of wood. Some mysterious hand had been set to drive a square block of wood into the pipe so as to cut down its capacity to one-third. The representative of the Tidewater declared in court his belief that this plug had been placed by "people on the other side who have made affidavits in this case." A similar deed, but much worse, as it might have cost many lives, was done during the contest with Toledo, nine years later.[195]

The Tidewater was successful, but not successful enough. It owned 400 miles of pipe, including the 105 miles of the trunk-line, and had control of nearly 3,000,000 barrels of tankage. It did a great work for the people. "It was," the Philadelphia Press said, in 1883, "the child of war. It has been a barrier between the producers and the monopoly which would crush them if it dared." While these words of exultation were being penned, a surrender was under negotiation. The Tidewater's managers were nearly worn out. These tactics of corrupting their officers, slandering their credit, buying up their customers, stealing their elections, garroting them with lawsuits founded on falsehoods, shutting them off the railroads, and plugging up their pipe in the dark, were too much. They entered into a pool. The two companies in the summer of 1883 "recognized" each other, as the trunk lines do, and agreed to divide the business in proportions, which would net the Tidewater $500,000 a year. The announcement that this pool had been forced on the Tidewater fell like a death-blow on the people of the oil regions. "The Tidewater," the Philadelphia Press said, editorially, "will probably retain a nominal identity as a corporation, but its usefulness to the public and its claim to popular confidence and encouragement were extinguished the instant it consented to enter into alliance with the unscrupulous monopoly which resorts to that means of conciliating and bribing what it had failed to destroy." As was anticipated by the Press, the Tidewater retained its nominal identity, but that was all. Its surrender was admitted by its principal organizer, Mr. Franklin B. Gowen. The officials of the Pennsylvania Railroad have testified to it. "They made an arrangement of some kind, the conditions of which I never knew; one swallowed the other or both swallowed the other, or something, and settled up their difficulties,"[196] said the general freight agent. The president said: "The competition between these pipe lines ceased."[197]

The attorney of the Tidewater was asked if there were any negotiations which resulted in a compromise of the differences with the oil combination.

"If by differences," he replied, "you mean competition in trade, I answer the question, yes. That resulted in a written contract.... The purpose of the contract was to settle the rivalry in business between the two companies, each company to take a percentage of transportation and gathering, and each to do with the oil as it saw fit."[198]

The treasurer of the Tidewater, who had been in its service since 1880, corroborated its attorney. A contract had been made between the two; the date of it was October 9, 1883. Copies of the contracts are in the author's possession.

The Interstate Commerce Commission in 1892 judicially found the same fact. It says: "About December, 1883, the pipe lines, with the view of getting better rates, adjusted their differences, and the competition between them ceased. The pipe-line business appears then to have passed into the control of the National Transit Company."[199] All but 6 per cent. of the National Transit Company is owned by the oil trust. It formed practically one-third the imposing bulk of the $70,000,000 of the trust of 1882.[200] If anything can be made certain by human testimony this evidence proves that these pipe lines stopped competing in 1883. The witnesses are the men who negotiated the contract, and upon whose approval it depended. But when the president of the trust was asked under oath, in 1888, if there were any pipe lines to tide-water competing with it, he named, as "a competing company," "the Tidewater Pipe Line."

"The Tidewater Company? Does that compete with your company?"

"It does."

"It is in opposition to it?"

"It is in opposition to it."[201]

In the same spirit he denied, in 1883, that he had anything to do with the company which had represented the oil trust in this "swallowing or something" of the Tidewater. This, the National Transit Company, was the most important member of the trust. Under its cover, by means like those described, from New York to West Virginia and Ohio, almost all the pipes for gathering and distributing oil have been brought into one ownership. Millions yearly of the earnings of this company were pooled with all the others in the trust, and the president was receiving his share of them four times a year. He was the sole attorney[202] authorized to sign contracts for the trustees, who thus held all the combined companies in a common control. These trustees, of whom he was the chief, not only controlled but owned as their personal property more than half the stock of every company represented. But these facts were not then known to the public. It was not intended that they should be known, as the struggle to conceal them from the New York Legislature five years later—in 1888—showed.

"Have you any connection with the National Transit Company?" he was asked, after taking the oath.

"I have not."[203]

When the Tidewater passed under this alien control, Mr. Franklin B. Gowen severed all his connection with it. He did not hold himself for sale to any man who had money to pay fees. He stood at a height where the profession of law was immeasurably above prostitution in the temples of justice—the odious aspect in which the sacrifice of purity in the ancient temples of Aphrodite is reproduced in our courts. It would have been impossible for him to combine the functions of a great law reformer and procurer of judicial virtue for railroad corporation wreckers. He never forgot what some successful lawyers seem never to remember—that the lawyer is, as much as the judge, an officer of the court and of justice. While he lived he was proud to be recognized as the chief defender in the courts of the rights of those whom it was sought to crush in this industry, although he thus allied himself with the poor and heavy laden. He could have used his anti-monopoly eloquence as an advertisement of his value to monopoly; but he would not sell his soul to fill his stomach. His heart revolted against the wicked cruelty with which he saw the strong misuse the weak, and his penetrating vision saw clearly the ruin to which overgrown power and conscienceless greed were hurrying the liberties of his country. In his speech before the Pennsylvania Legislature in 1883, advocating a law to prevent the use of railway power by railway officials to redistribute the property of the people among their favorites, he said, speaking of what had been done in the oil regions of Pennsylvania: "If such a state of facts as I now call your attention to had been permitted by any government in Europe or Asia for a six months, instead of the sixteen years it has existed in this Commonwealth, the crown and sceptre of its ruler would have been ground into the dust, and yet the good, honest, patient, long-suffering people have submitted to it in this Commonwealth until the time has come that if we hold our peace the very stones will cry out.

"I for one intend to submit to it no longer. You may say it is unwise for me to attack this wrong, but I have attacked it before and I will attack it again. If I could only throw off the other burdens that rest upon my shoulders, I would feel it to be my duty to preach resistance to this great wrong, as Peter the Hermit preached the crusade. I would go through this State from Lake Erie to the Delaware; I would go into every part of this Commonwealth and endeavor, by the plain recital of the facts, to raise up such a feeling and such a power as would make itself heard and felt, and by the fair, open, honest, and proper enforcement of the law, right the wrong, and teach the guilty authors of this infamous tyranny

"'That truth remembered long: When once their slumbering passions waked, The peaceful are the strong.'"

Mr. Gowen bravely fulfilled his pledge not to submit. His principal occupation became the championship in the courts and the Interstate Commerce Commission of those who were oppressed by this crushing power. His incorruptible lance was always in place, until the morning he was found dead in his room in Washington.

The oil combination had, up to this time, sent all its oil east by rail as it had no pipe line, and its faithful fools, the railroads, therefore burned their fingers with joy to roast the Tidewater for so good a customer. But while the railroad officials were wasting their employers' property to destroy the combination's new competitor, its astute managers, seeing how good a thing pipe lines were, quietly built a system of their own to the seaboard. The railroads had helped them get hold of the pipe lines—had in repeated cases, as the Erie, the Atlantic and Great Western, the Pennsylvania, the Cleveland and Marietta did, allowed them to lay their pipes on the lands of the railroads—and were now to see the pipe lines used to replace the railroads in the transportation of oil. These oil men saw what the railroad men had not the wit to see—or else lacked the virtue to live up to—that the pipe line is an oil railway. It requires no cars and no locomotives; it moves oil without risk of fire or loss; it is very much cheaper than the ordinary railway, for this freight moves itself after being lifted up by pumps. The pipe line was the sure competitor of the railway, fated to be either its servant or master, as the railroad chose to use it or lose it. The railways sentimentally helped the trust to gather these rival transportation lines into its hands; then the trust, with the real genius of conquest, threw the railroads to one side. A system of trunk-line pipes was at once pushed vigorously to completion in all directions. While the members of the oil trust were building these pipe lines to take away the oil business of the railroads, the officials of the latter were giving them by rebates the money to do it with. At the expense of their own employers, the owners of the railroads, these freight agents and general managers presented to the monopoly, out of the freight earnings of the oil business, the money with which to build the pipe lines that would destroy that branch of the business of the roads.

It was the Tidewater that proved the feasibility of trunk pipe lines. The trunk pipe lines the combination has built were in imitation. Extraordinary pains have been taken to sophisticate public opinion with regard to all these matters—for the ignorance of the public is the real capital of monopoly—and with great success. The history we have transcribed from the public records is refined by one of the combination into the following illuminant:

"About 1879 or 1880 it was discovered that railways were inadequate to the task of getting oil to the seaboard as rapidly as needed. Combined capital and energy were equal to the emergency. No need to detail how it was done. To-day there reaches,"[204] etc., etc. It must have been on some such authority that this, from one of our leading religious journals, was founded: "Only by such union"—of the refiners—"could pipe lines have been laid from the oil wells to the tide-water, reducing to the smallest amount the cost of transportation."[205] An account of the pipe-line system in the New York Sun, of December 14, 1887, describing the operations of the great pumps that force the oil through the pipes, says: "Every time the piston of the engine passes forward and back a barrel of oil is sent seaward. A barrel of oil is forced on its way every seven seconds of every hour of the twenty-four. Every pulsation of the gigantic pumps that are throbbing ceaselessly day and night is known and numbered at headquarters in New York at the close of each day's business." This heart of a machine, beating at the headquarters in New York, and numbering its beats day and night, stands for thousands of hearts whose throbs of hope have been transmuted into this metallic substitute. This heart counts out a gold dollar for every drop of blood that used to run through the living breasts of the men who divined, projected, accomplished, and lost.

CHAPTER X

CHEAPENING TRANSPORTATION

Through all the tangle of this piping and dancing one thread runs clear. The oil combination had up to this time been dependent on the railroads for transportation, but it emerged out of the fracas the principal transporter of oil, made so by the railroads. It now had two trunk pipe lines to the sea-coast—the one it had conquered and the one it had built—and the railroads had made it a present of both of them.

The Tidewater—the first seaboard pipe line—had been built only because the Pennsylvania and other trunk lines had said "no" to every entreaty and demand of the oil regions for a road to the sea. That line the railroads had conquered for the combination, as they conquered for it the pipe lines of the Pennsylvania Railroad in 1877. The second seaboard pipe line was built by the combination with the railroads' money to take away the railroads' business, and best—or worst—of all, while the railroads were hard at work driving the Tidewater into its net. Such is the business genius of our "railroad kings."

This campaign closed, the duty of the hour for the oil ring was to get rates advanced by rail as well as pipe.

"Then they"—the pipe lines—"were anxious to get good paying rates,"[206] so that they could make a good thing out of the business of their own pipe and of the Tidewater which they had guaranteed $500,000 a year. The advent of the independent Tidewater had brought rates down. The restoration of exclusive control by its capture put rates up. But it was not enough for the oil combination to advance their own rates. It must induce the railroads to do the same. The railroads had furnished the means for the acquisition of both pipes, and they must now be got to drive business away from themselves to these competing oil railways. This would seem to be a delicate matter to achieve, but there was no trouble about it.

"It is our pleasure to try to make oil cheap,"[207] the president of the oil trust told Congress, but it did not use its new facilities to take in hand at reduced cost the carriage of all oil, and give the industry the economic advantage of the pipe-line idea. Quite the contrary. It united with the railroads to increase the cost. Under this new blow the independent refiners and producers whom the Tidewater had been built to keep afloat grounded again. Then the railroads—the Pennsylvania especially—repented of what they had done to these their oldest customers, and sent ambassadors to them to renew the broken promises of 1872, that if they would rebuild they should forever have equal rates and fair treatment. One of the highest officials of the Pennsylvania was sent to them to say: We recognize our error in permitting your refineries to be abandoned and the traffic destroyed. We wish to build up and maintain independent refining in the oil regions. We will give you every encouragement. We will insure you equal rates, on which you can ship and live.[208]

These invitations and guarantees were repeated and pressed. They were renewed by the officials of the Erie also: "You need have no hesitation in building up your business," said the officials of the Erie; "You shall have living rates."[209]

The independents listened and believed. They rebuilt their works and prospered.[210] This meant the return of cheapness—cheapness of transportation over the railroads, to enable the refiners they had invited back to life to compete in the market—cheapness of light. Thereupon, incredible as it seems, the Pennsylvania and the other railroads were influenced to declare war again upon the men who had reinvested their money and their life energy in response to these solicitations. This new war began with a secret contract, in 1885, for an advance in rates against the independent refiners, who, in trustful reliance on the pledged faith of the railroads, had developed their capacity to 2,000,000 barrels a year.[211]

This campaign has lasted from 1885 until the present writing, 1894. In it the pipe lines, the oil combination, the Pennsylvania Railroad, and all the other great carriers between the independents and their markets in New England, Europe, and Asia, have been mobilized into a fighting corps for the annihilation of the independents. This case illustrates nearly every phase of the story of our great monopoly: dearness instead of cheapness; willingness of the managers of transportation to deny transportation to whole trades and sections; administration of great properties like the Pennsylvania Railroad in direct opposition to the interests of the owners—to their great loss—for the benefit of favorites of the officials; great wealth thereby procured by destruction, as if by physical force, of wealth of others, not at all by creation of new wealth to be added to the general store; impossibility of survival in modern business of men who are merely honest, hard-working, competent, even though they have skill, capital, and customers; subjection of the majority of citizens and dollars to a small minority in numbers and riches; subservience of rulers of the people to a faction; last and most disheartening, the impotence of the special tribunal created to enforce the rights of the people on their highways.

This secret contract of 1885 was thus described by the counsel of the refiners before the Interstate Commerce Commission: "It is a contract," he said, "so vicious and illegal that the Pennsylvania Railroad refuses to bring it into court for fear a disclosure of its terms might subject it to a criminal prosecution."

The courts have never been allowed to see it, but its provisions are known. Some of them were admitted before the Interstate Commerce Commission to be what was charged, and others were described on the trial by the counsel of the independents from personal knowledge. By this contract the railroad and the oil combination bound themselves to advance rates, and to keep them the same by pipe and rail. In return for this pledge by the railroad not to compete it was guaranteed one-quarter—26 per cent.—of the oil business to the seaboard. The Pennsylvania Railroad made no attempt to deny that it had made this contract. It admitted that it had an arrangement "substantially the same as stated."[212]

The combination was the largest shipper of oil, and yet it wanted freight rates advanced. It had pipe lines which could easily take to the seaboard all the oil that went thither, and yet it gave up a large part of the business to the Pennsylvania Railroad. The Pennsylvania Railroad knew that the pipe line was a competitor for the carriage of oil, and yet allowed it to dictate an arrangement by which the railroad got only one-quarter of the business, and signed away its rights to win a larger share if it could.

The railroad had persuaded the independent refiners to settle along its line by solemnly promising them fair and living rates, and yet now put its corporate seal to an agreement to make those rates whatever their enemy wanted them to be. Such was its honor. As for its shrewdness, that had at last brought it to this humiliation in a business where it had once been chief, of confining itself to this insignificant quarter of a restricted traffic instead of a competitive share of a traffic enlarged by freedom to the widest correspondence to the wants of the people. The mastery of the railroad men by the oil people was thorough. The latter did not agree to give the railroad one-quarter of their business. Not at all. All the traffic that came of itself to the railroad, or which its freight solicitors drummed up, must be put to the credit of the guarantee. All that was promised the railroad was that its total should amount to one-quarter of the whole traffic. All the rest the oil combination kept for itself.

The contract went at once into vigorous operation. Freight rates to the seaboard, which had been 34 cents, and, as was proved before the Interstate Commerce Commission, were profitable, were advanced to 52 cents a barrel—an increase of one-half. The railroad and the pipe line made the raise in concert, as had been agreed, and when the rates were changed again it was to still higher figures. Why should the clique, which had its principal refineries at the seaboard—to which it had to transport large quantities of oil—scheme in this way to raise the rates of transportation? Because it paid this excessive rate on only a small part of its own shipments, and compelled its rivals to pay it on all of theirs. The independents had no pipe line of their own, but the combination sent its own oil east by its own pipe line, excepting only the quantity it needed to add to the shipments over the Pennsylvania to make good its guarantee to that railroad of one-quarter of the traffic.

The cost of the pipe-line service to its owners is very small. When the manager of the pipe lines was before the Interstate Commerce Commission the lawyers of the railroads, as zealous for the oil combination, though it was not a party in the case, as for their own clients, fought through eleven pages of argument against having him compelled to tell the cost of pumping oil through the pipe to the seaboard; and when the Commission finally said, "Go on," all the general manager of the pipe lines had to say was, "I do not believe that it is possible to know."[213]

Finally, he was cornered into an estimate that the cost of pumping was 6 or 7 cents a barrel. His questioner, who had been the organizer and manager of a great pipe line—the Tidewater—knew that oil had been pumped through for 4 cents a barrel, but he could not get his witness, who, no doubt, had done it still cheaper, to admit anything of the kind.

The net effect of this pool with the railroad was that the oil combination succeeded in making its rivals pay 64 cents a barrel to reach the East and the seaboard, while it paid only 16[214]—except on the traffic guaranteed the Pennsylvania Railroad—a difference against competition of 48 cents a barrel, a difference not for cheapness. "It only costs the pipe line 7 cents," the independents explained to the Interstate Commerce Commission, "and the published rate is 52. They are willing to pay 52 or even 70 cents on some of their product if they can make the other people pay 52 upon the whole of theirs."

So much of the contract as we have referred to was admitted. Why was it, then, the counsel for the railroad fought against showing it, even to the point of pleading that it might incriminate his client?[215] It was asserted, as of his personal knowledge, by the counsel of the independents that this was because another part of the bargain gave the proof that the rates which had been made under the agreement to put them up and keep them up were extortionate; that by a bargain within the bargain the oil combination carried oil for the railroad for the 280 miles for which they ran practically side by side, and for this charged it only 8 cents a barrel. The public, shipping either by the railroad or by the pipe line, had to pay 52 cents a barrel for 500 miles; but by this arrangement between themselves the two carriers would do business at 8 cents a barrel for 280 miles, at which rate the charge to the public to the seaboard should have been not quite 15 cents instead of 52 cents.

The statement was also made that the oil combination, instead of giving the railroads the business it has guaranteed them, makes its obligation good by turning over to them periodically a check for the profits they would have had on hauling that amount of traffic. As the guarantee was made as a consideration for the maintenance of high freight rates, such a payment by it would amount, in cold fact, to paying those in charge of the highways a large bribe to deny the use of them to the people.

This declaration of the provisions of the bargain was made by the counsel for the refiners seeking relief from the Interstate Commerce Commission. In his argument demanding the production of the document he said: "I have had it in my hand and read every word of it, and know exactly what it contains."[216]

The sharpest legal struggle of the case was made on the demand that this paper be produced. The Commission decided that it was "wholly immaterial," although the chairman had previously said: "It seems to us that we cannot exclude this evidence." It was a document establishing interstate rates, and these are required by law to be published, and the Commission had always before this been liberal in compelling the production of papers which related to the making of rates.[217] The Commission had shortly before been threatened in this case by the counsel for the Pennsylvania Railroad with extinction if it insisted upon evidence of the cost of piping oil which the oil combination refused to give.

"It is possible that the powers of this Commission may be tested,"[218] bullied the counsel of the railroad. The members of the Commission laughed ostentatiously, but, for whatever reason, they gave the powerful corporations on trial no cause thereafter to "test their powers," which have slept while justice tarried, and the victims of this "contract" were kept under its harrow for three long years more, where they still lie.

The tax levied upon the consumers of oil by this agreement for high freights amounts to millions a year. This agreement is at this writing still in force. There is reason to believe that similar arrangements exist with the other trunk-lines. The result is the surprising fact that "oil rates are very much higher than they were twelve years ago, and when there was no pipe-line competition!"[219] This is true also in the field of local pipeage—the transportation of the oil from the wells to refineries and railroads. Under the caption of "cheapening transportation" the counsel of the oil trust said, before the New York Legislature in 1888: "In 1872 the pipe-line system was in its infancy. A number of local lines existed. Their service was inefficient and expensive. There was no uniform rate. The united refiners undertook to unite and systemize this business. They purchased and consolidated the various little companies into what was long known as the United Pipe Line System. The first effect of this combination was a reduction of price of all local transportation to a uniform rate of at first 30, and soon after 20 cents per barrel."[220]

"The united refiners" and "to unite and systemize" are smooth phrases, full of the unction of good-fellowship and political economy. When the "united refiners" took possession of the pipe lines which had been forced into bankruptcy or "co-operation," they did not reduce rates—they advanced them. "The uniform rate of 20 cents," for instance, is an advance of 300 per cent. on the rate of 5 cents made by the trust's pipe-line system during the war with the Tidewater, and over the similar rates made during the earlier pipe-line competition.[221] The nominal rate, Congress learned from one of the oil-country men, was 30 cents for that service, but by competition the actual rate was down to 5 or 10 cents. "They consolidated and placed it at 20 cents, and it has remained at 20 cents, I think, since the year 1876.... The whole process of transportation has been cheapened. Pipe that cost 45 cents a foot has in that time been got for 10 cents. The quality of the pipe was improved, so that there is not the leakage or the wastage. There are all those improvements and inventions that have cheapened it. We pay the same now as we did fifteen years ago. We have reduced the cost of our wells at least 50 per cent. They have reduced nothing."[222] From other sources, once in a while, facts have come to light showing how much less than cheap the local charge of 20 cents a barrel is. For instance, it was shown before Congress that a line which, with its feeders, had fifty miles of pipe, and cost $70,000, made a clear profit in its first six months of $40,000, charging sometimes less than this rate of 20 cents a barrel.[223]

It is impossible to compute how much the defeat of legislation to regulate charges, or to allow the construction of competing lines, has cost the people. The Burdick Bill alone, to regulate prices of pipeage and storage in Pennsylvania, it was calculated by conservative men, would have saved at least $4,000,000 a year. The killing of it was in the interest of keeping up the high prices of the pipe lines, which finally rest in the price of oil.

When the combination got possession of the pipe line to Buffalo, which others had built in spite of every obstacle it could interpose, it raised the rates of pipeage to 25 cents a barrel from 10 cents,[224] and as happened in Pennsylvania in 1885, the railroads to Buffalo in 1882 raised their rates simultaneously with the pipe line. Pittsburg had the same experience. When its independent pipe line was "united and systemized" by being torn up and converted into "old iron," as the Vice-President of the Pennsylvania Railroad had told its projectors it would be, the rates of transportation for oil went up.[225] The same thing happened at Cleveland. At the rate at which the Lake Shore road carries oil from Cleveland to Chicago—357 miles for 38 cents a barrel—it should charge less than 15 cents for the 140 miles between Oil City and Cleveland; but as late as 1888 it charged 25 cents. Why? The effect of the railroad charge is that little oil comes by rail to Cleveland from the oil regions; it goes by the pipe line of those whom the Lake Shore has been "protecting" ever since the South Improvement contract of 1872. There have been 3,000,000 barrels of this business yearly. The railroad officials exercise their powers to drive traffic from the railroad to a competing line. Why? We can see why the combination, which, by the possession of this pipe line, is a competitor of the Lake Shore, should desire such an arrangement; but it exists by the act of the Lake Shore Railroad. Why? The theories of self-interest would lead one to expect that the stockholders of the road would find out why.[226]

The pipe lines are the largest single item in the property of the oil combination. Here its control has been the most complete; and here the reduction of price has been least. This is a telltale fact, soon told and soon understood.

CHAPTER XI

SONG OF THE BARREL

Genius could take so unspeakable a thing as a shirt and sing it into an immortal song, but a barrel—and an oil-barrel, greasy and ill-smelling—even genius could do nothing with that. But the barrel plays a leading rôle in the drama of the great monopoly. Out of it have flown shapes of evil that have infected private fortunes, the prosperity of more than one industry, the fiduciary honor of great men, the faithfulness of the Government to its citizens. Perhaps a part of what genius could do for the shirt—force a hearing for the wronged—may be done for this homely vessel of the struggling independent by the kindly solicitude of the people to learn every secret spring of the ruin of their brothers.

The market—the barrel that went to market—the freight rate that stopped the barrel that went to market—the railway king who made the rate that stopped the barrel that went to market—the greater king who whispered behind to the railway king to make the rate that stopped the barrel that went to market—this is the house that Jack unbuilt.

Such is the superiority of a simple business organization, where "evolution" has not carried the details of the industry out of sight of the owner, and where the master and man, buyer and seller, are in touch, that the independent refiners could overcome the tax imposed on them by this pooling of the pipe line and the railroads, and not only survive but prosper moderately. During the three years—from 1885 to 1888—following the first attack upon them under the contract just described, they state, in their appeal to the Interstate Commerce Commission in 1888, they were "enabled by their advantages in the local markets to keep up, maintain, and even increase their business."[227] These "outsiders" shipped their oil largely in barrels because the trunk-lines had made it as nearly impossible as they could for them to ship in tank-cars. They, like all in the trade, could not live without access to the European market. Out of every hundred barrels of various kinds of products from the distillation of petroleum, forty are of an illuminating oil not good enough to be burned in this country. It must be sold in Europe or not sold at all; and a manufacturer who cannot get rid of 40 per cent. of his product must give up manufacturing. To destroy the barrel method of shipment would destroy those who could use no other; and to close their outlet to Europe would make it impossible for them to continue to manufacture for the home supply. The barrel was the only life-raft left to the sinking independent.

They who had planned the secret pool of 1885 between the pipe line and the railroads, and the further advance of rates by both in 1888, now called upon the railroads to deliver a final stroke against the independents.[228] The railroads, when directed in previous years to say "no" to applications for transportation, and "no" to those who wanted the right to put their own tank-cars on the road, had obeyed; they obeyed again.

A pretext for the suppression of the barrel was easily found. It was a poor one, but poor pretexts are better than none. When the future "trustees" of the "light of the world" were doing a small fraction of the business, they got the contract of 1872 from the railroads to "overcome" all their competitors, on the pretext of "increasing the trade."[229] When by this contract and those that followed it they had secured nine-tenths of the trade, they got the railroads to say "no" to the remaining one-tenth, on the pretext that they could not ship as much.[230] When the Interstate Commerce law declared it to be a crime for railroads to forbid persons the road because they could not ship as much as others, the combination had the railroads shut out its rivals, on the pretext that they did not use tank-cars,[231] although tank-cars "are worse than powder." When regular tank-cars were offered by its competitors for shipment—as to the Pacific coast—the combination introduced an inferior tank-car, of which it claimed, without warrant, as the courts afterwards held, that it owned the patent, and so obtained the sole right of way across the continent, on the pretext that other shippers did not use this poor car.[232]

The pretext now used against the refiners of Pennsylvania was the passing phrase, "He must pay freight on barrels," in a decision of the Interstate Commerce Commission concerning Southern traffic. This decision had no relevancy to the oil business of the North. Six months went by after it was given with no intimation from any one that it related in any way to the situation in Pennsylvania, and to be so applied it had to be turned inside out and upside down. In the Rice case the Commission had decided that freight rates must be reduced on barrel shipments. This was, in the sharp language of the decision, to put an end to "the most unjust and injurious discrimination against barrel shippers in favor of tank shippers," a discrimination which the Commission has elsewhere said "inured mostly to the benefit of one powerful combination."

In ordering this reduction it said: "Even then the shipper in barrels is at some disadvantage, for he must pay freight on barrels as well as on oil."

By "must pay" the Commission meant "was paying." It was, as it afterwards protested, "rather a statement of a prevailing practice than a ruling."[233] And the remark furthermore concerned the trade in the South and Southwest alone, where special circumstances existed not found at the North.

Six months after this decision the Pennsylvania and other Northern roads made these words, "He must pay freight on the barrels," the occasion of an increase of rates, which stopped the refineries of the independents. They were carrying free the heavy tanks—"the most undesirable business we do," in the language of their freight agent. They had been carrying the barrels of the independents free for twenty years. Now, continuing to carry the tank-cars free, they levied a prohibitory transportation tax on the barrels. To cap it all, they declared, in announcing the new rule, that it had been forced upon them by the Interstate Commerce Commission. But the President of the Pennsylvania Railroad is found admitting that it was the oil combination that dictated the move—"the seaboard refiners insisted." "Upon your decision" (in the Rice case) "being promulgated," he wrote the Interstate Commerce Commission, "the seaboard refiners insisted that we were bound to charge for packages," barrels, not tanks, "as well as for the oil."[234]

The seaboard refiners were the members of the oil trust; the others at the seaboard had been wiped out years before by the help of the railroads. Though the Pennsylvania Railroad was not a party to the case before the Commission, though it had not been called upon to change its practice, which was what it ought to be, it did now change it from right to wrong. The Commission had ordered that discrimination between the barrel and the tank should cease. The Pennsylvania, which had not, strange to say, been practising that forbidden kind of discrimination, immediately resorted to it, and, stranger still, gave as its reason the order of the Commission against it. It must have been a keen eye that could find in a "qualified and incidental remark," as the Interstate Commerce Commission styles it, in such a decision, a command to charge for the weight of the barrels and increase freight rates; but such an eye there was—an eye that will never sleep as long as Naboth's vineyard belongs to Naboth.

All the trunk-line railroads to the East took part in the new regulation—September 3, 1888—that freight must be paid thereafter on the weight of the barrels as well as on the oil itself, and at the same rate. This increased the cost of transportation to New York to 66 cents from 52 cents, and to other points proportionately. Freight rates on the oil of "the seaboard refiners" who shipped in tanks were left untouched. In the circulars announcing the change it was said to be done "in accordance with the directions of the Interstate Commerce Commission."[235] When the refiners whom this advance threatened with ruin wrote to expostulate, they got the same reply from all the railroad officials as from President Roberts of the Pennsylvania Railroad: "The advance in rates ... has been forced upon us by the Interstate Commerce Commission."[236]

The Commission immediately called the responsible official of the Pennsylvania Railroad, which was the leader in this move, "to a personal interview," "expressed their surprise," and suggested the withdrawal of the circular and of the increased rates. This was in August.[237] No attention was paid to this by the road. The Commission waited until October 10th, and then sent a formal communication to the President of the Pennsylvania Railroad, which was followed by correspondence and personal conferences with him. The Commission pointed out that the statement of the circular was "misleading," "not true," "decidedly objectionable"; that the Commission had made no decision with reference to the rates of the Pennsylvania Railroad or the other Eastern lines; that its decision, applicable solely to the roads of the South or Southwest, had been that rates on barrels must be reduced, and that it was not right to use this as an excuse for increasing the rates on barrels. Finally, the Commission said that if it had made any ruling applicable to the Pennsylvania Railroad it would have been compelled to hold that its practice, of twenty years' standing, of carrying the barrels free, since it carried tanks free, was "just and proper," and that there was nothing to show that an advance in its rates was called for.[238]

The Interstate Commerce Commission was the body specially created by Congress to interpret the Interstate Commerce Law. The Pennsylvania Railroad was one of the common carriers under the orders of the Commission, and its managers were subjects of jurisdiction, not judges. But its method of running the Supreme Court of Pennsylvania, as if it were one of its limited trains, was now applied with equal confidence to the Interstate Commerce Commission. It insisted that it was itself, not the Commission, which was the judge of what the latter meant by its own decisions. The road continued the rates against which the Commission protested. The Commission demanded that the assertions that the new rule of charging for the barrels and the advance of rates was made "in accordance with the directions" of the Interstate Commerce Commission be withdrawn. The Pennsylvania road responded with another circular, in which it changed the form but repeated the substance. "The action referred to was taken for the purpose of conforming the practice of this company to the principles decided by the Interstate Commerce Commission." The Commission protested that it was not laying down any such "principles" but the corporation declared that that was what it "understood," and held to the advance made on that understanding.[239]

To the almost weeping expostulations of the Commission in interviews and letters, to show that it had said nothing which could justify the action of the roads, the officials made not the slightest concession. "I did not consider it in that way," said one of them.[240] "That was their (the Commission's) view of the case, but it was not shared by us," said the President of the Pennsylvania Railroad. "It was considered best to continue the practice," he said.[241]

"Why did you not rescind the order?" he was asked before the Interstate Commerce Commission.

"We understood their ruling to be a ruling for the whole country," he incorrigibly replied.

The railway president studiously withheld any assurance that he would obey if the Commission issued a direct command, which it had not done, though it had the authority.

"We would then take the subject up," he said.

Change the order to comply with the ruling of the Interstate Commerce Commission the roads would not and did not.[242]

All the roads to the seaboard and New England had made the order in concert, and together they maintained it. It was one hand, evidently, that moved them all, and though that hand moved them, for the benefit of a carrier rival of theirs—the pipe line of the trust—against their own customers, against their own employers, against the authority of the United States Government, all these railroad presidents and freight agents obeyed it with the docility of domestic animals.

These officials were the loyal subjects of a higher power than that of the United States, higher even than that of their railway corporations. They serve the greatest sovereign of the modern world—the concentrated wealth, in whose court the presidents of railways and republics, kings, parliaments, and congresses are but lords in waiting.

Thanks to the superior enterprise of their greater need, the independents of Oil City and Titusville had been able to survive the blows that had preceded, but this was too much. They had weathered the surrender in 1883 of the Tidewater Pipe Line, which had promised them freedom forever. Even the "contract" which made the allied pipe lines and the railroads in 1885 one, to tax them half as much again for transportation, had not broken them down. In spite of it they had been able "to maintain and increase their business."[243] But now they closed their works. The new attack had been shrewdly timed to spoil for them in that year—1888—the season of greatest activity in the export to Europe and Asia. They appealed to the Interstate Commerce Commission. "The greater proportion of our refineries are idle."[244] "I have not a customer in the entire New England States. I have not had since the advance of last September."

"How was it before the advance?"

"I had a number of customers."[245]

Labor, though, as always, the most silent, suffered the most. Three hundred coopers were thrown out of work in Titusville alone within a short time, and the loss of employment to the workmen in the refineries was still more serious. This was not because trade was bad. Exports were never greater than in 1889. Government statistics reveal as in a mirror what was being done.

The exports of refined petroleum increased 21 per cent. in 1889 over 1888. But Perth Amboy, from which the independents shipped for the most part, showed a decrease of over 18½ per cent. By the stroke of a freight agent's pen the business of these men was being taken from them, to be given to others. The general tide was rising, but their feet were sinking in a quicksand.

The export business of Boston in oil was given to the "seaboard refiners" by the same stroke. Freights that had been $100 were now $174 to Boston, and $188 to New York. These rates were so high as to stop oil from going through. "The Nova Scotia trade," it was testified, "goes to New York, and from there by water, whereas they used to buy in Boston. Boston brokers will ship oil from New York and get it to Nova Scotia cheaper than if it went from Boston, whereas when we had the export rate we could compete in that market."[246] Two months later most of what remained of the business of the independents in New England was added to the gift of their foreign trade, which had already been made to the "seaboard refiners." By an order of October 25, 1888, the railroads made it known to these "pestilences," as the lawyers of the railroads called the independent refiners in court,[247] that they would not be allowed to send any more through shipments into New England. This was done, as in Ohio in 1879,[248] without the notice required by law, though in the meantime a Federal law had been passed requiring notice.[249]

This order was the finishing touch in the task of using the freight tariff to prevent freight shipment. It shut the independents—the hunted shippers—out of over 150 towns in New Hampshire, Vermont, Maine, Massachusetts, including Manchester, Burlington, Portland, Salem, in which they had built up a good business, and it made it impossible to reach these places except by paying high local rates—from station to station—which were not required of their competitor, who shipped on through rates. The railroads would take the oil of the independents for shipment, but would not tell them what the rates would be. In this, as in all the moves of this game, we see the railroad managers of a score of different roads, at points thousands of miles apart, taking the same step at the same time, like a hundred electric clocks ticking all over a great city to the tune of the clock at headquarters that makes and breaks their circuit.

The independents were saved by a Canadian railroad from the destruction which American railroads had planned for them. The Grand Trunk gave them a rate by which they could still do some business in the upper part of New England, though to do this they had to ship the oil into Canada and back into the United States. The effect of this abolition of through rates in "cheapening" oil was that the people of Vermont, for instance, had to pay 2 cents a gallon more than any other place in New England.[250]

While all access for others to New England was cut off, the "seaboard refiners," sending the oil in free tanks to the seaboard, transshipping it there into vessels by the facilities of "which they have a monopoly,"[251] easily made their own the business of their rivals in the 150 towns from which the latter were thus cut off. No one has been able to move all the railroads in this way, as one interlocking switch, to obey a law or accommodate the public. But it was done easily enough for this kind of work. Possession was got of the railway managers at the initial points, as was done so successfully in another case,[252] and all the other railway managers, as far as Boston, followed in their trail. Reproducing the tactics in Ohio in 1879, it was only against oil that this attack of the tariff was made. Other freight for export, of which there was a vast variety, continued to be carried to Boston at the same rate as before.[253]

All the freight agent of the initial road had to do with the oil on its way to Europe was to pass it along to the next line. Whether, after leaving his road, it went by the way of Boston or that of New York made no difference to his road, and was in no way his affair. But it made a great deal of difference to those who wanted all the business of Europe and America for themselves, and we consequently find him serving them, and dis-serving his employer (the railroad), by charging 21 cents a barrel if the oil was going to Boston after leaving his line, but only 15-56/100 cents if it was going to New York. When asked if he thought he was justified as a railroad man under the law in making the charges for what he did vary according to what was done by the business after it left his hands, he refused to answer.

"You will not answer?"

"Not at present."[254]

All the connecting and following roads are on record as having protested against the measures in which they followed the lead of the initial lines.[255] The freight agent of the West Shore Railroad declared that the prohibition of through shipments to the towns of Massachusetts, Vermont, New Hampshire, and Maine "occurred simply through mistake;" but the mistake, he acknowledged, had never been corrected.[256] This "mistake" and that of September, which preceded it, put an end to a large business, amounting in 1888 to 900,000 barrels. The men, whom the railroads began to massacre after having pledged them full protection, saved a fraction of their trade in New England, as we have seen, only by taking refuge with a foreign railroad. The railroads against their will, as they swore, lost business as well as honor, but the mistake was not corrected.

It would tax the imagination of a Cervantes to dream out a more fantastic tangle of sense and nonsense in quixotic combat than that which these highwaymen spun out of the principles of "scientific railroading." All that highway control could do to destroy the barrel shippers for the benefit of the tank shippers was done; and yet the barrel method is the safer and more profitable for the railroads.[257] The cars that carry oil in barrels can return loaded; the railroads have to haul the tank-cars back empty and pay mileage on them.[258] For a series of years on the Pennsylvania Railroad the damage from carrying oil in barrels was less than half the damage from the carrying of oil in tanks.[259] The general freight agent of the Pennsylvania Railroad Company tells the Interstate Commerce Commission that the carriage of oil in tank-cars "is the most undesirable business we do." He described a smash-up at New Brunswick where there was a collision with a line of tank-cars. The oil got on fire; it ran two squares, got into a sewer, overflowed the canal, which was then frozen over, and followed the ice a square or two beyond. Besides having to pay nearly five hundred thousand dollars damages for the destruction done, the railroad lost its bridge, which cost two or three hundred thousand dollars. It lost more money than it could make carrying oil for ten years. "I regard it," he said, "as worse than powder to carry; I would rather carry anything else than oil in tanks."[260] Barrel shipments being the best for the railroads, these princes of topsy-turvydom move heaven and earth to destroy them.[261]

There was no end to the "mistakes" made by the railroads for the "self-renunciation" of their business, though this was in favor of those whose pipe line made them rivals. They charged more for kerosene in barrels than for other articles of more value, contradicting their own rule of charging what the traffic will bear. They let the combination carry sixty-two gallons in every tank free on the theory of leakage in transportation. "The practice," said the Commission, "is so obvious and palpable a discrimination that no discussion of it is necessary;" and they ordered it discontinued.[262]

Though the railroads brought back the tanks free, for the return of the empty barrels they never forgot to charge. This charge was made so high that at one time it prohibited the return from all points.[263] "The monopoly uses a large number of barrels in New York City," the independents said to the Commission; "it is to its interest that empty second-hand barrels should not be returned to the inland refiner." When this was brought out the Pennsylvania and other railroads promised to make reparation, but had not done so years later when the case was still "hung up" in the Interstate Commerce Commission.

It was not lack of capital or of diligence that made the independents use barrels instead of tanks; tanks were useless to them. All the oil terminal facilities of the railroads at the seaboard had been surrendered to the combination for its exclusive use.[264] These were the only places where tank-cars could be unloaded into steamers. "There are no facilities to which we, as outside refiners, have access to load bulk oil into vessels," and none where these refiners could send oil in tank-cars to be barrelled for shipment abroad.[265] No matter how many tank-cars and tank-vessels the independents might have provided, they could not have got them together. Between the two were the docks in the unrelenting grip which held solely for its private use the shipping facilities of these public carriers. Not even oil in barrels could the independents get through these oil docks.

The Weehawken oil docks of the Erie road on New York harbor are the best in the world. The Erie Railroad has $920,760 invested in them, but only one shipper can use them either for tanks or barrels.

The Western traffic manager of the Erie was asked:

"Would you take a shipment there over the Erie road of independent oil consigned to the New York docks?"

"No, sir."[266]

The Pennsylvania Railroad refuses to haul tank-cars for the independents to any other point at New York than the terminals so controlled by the combination. It will not haul them to other docks of its own. It will not let oil be shipped over its line to the points at which it connects with other roads for other harbors, though it will take shipments of anything else than oil.[267] This amounts to a refusal to allow the independents to use tank-cars or tank-steamers. Practically the same policy is pursued by all the main trunk-lines. These independents could get rid of their export oil only by selling to the combination. Through its other self—the company which controls the terminals—it has kept an agent in the oil regions for years to buy for export this refined oil which its owners and makers could not export themselves. This is the "immediate shipment" of 1878 in another phase.[268]

"You have to sell to the Standard Oil Company in order to get your oil shipped in bulk from Communipaw?"

"Yes, sir."

"The independent cannot get his oil into a bulk vessel at Communipaw?"

"No, sir."[269]

To meet these disclosures the Pennsylvania presented two affidavits. One was from its general freight agent that its tank-cars were offered freely to all; but it did not deny, for it could not deny, any of these facts about terminals, which explained why the flies did not walk into its parlor. The other affidavit was from the secretary of the corporation controlling the terminals for the oil combination, and it similarly declared that its accommodations were furnished "upon exactly the same terms to all." How long it had been doing so, or how long it would continue to do so, it did not state, as the independents pointed out to the Commission. If this were the truth instead of being, as the independents hinted, "evidently a situation that has been recently arranged for the purposes of this application"—to the Interstate Commerce Commission for further delay—why had none of the independents, dying for want of export facilities, resorted to it? This was not explained, for it could not be. The independents explained the situation to the Interstate Commerce Commission: "The inland refiner who intrusts his oil to a storage company at the seaboard with a view to exporting, puts himself completely into the power of such concern. The exactions that may be unfairly imposed in individual cases for 'loss by leakage,' 'dumping and mixing for off-color or off-test,' 'cost of water white oil for mixing,' 'tares,' 'tares guarantee,' 'commissions on sales,' 'interest on goods until loaded and paid for,' 'incidental expenses,' and many other known matters of charge, may amount to a partial confiscation of the cargo."

The corporation which manages this monopoly of the terminals at Communipaw is a mysterious concern. Who own its stock, and what its relations with the railroad are, the Interstate Commerce Commission could not find out. Its president and treasurer were summoned to testify, but refused to attend. The manager of the oil combination's pipe lines stated that he knew of stock in the company that was owned by a member of the trust, though he afterwards qualified that he did not know it "positively."[270] The charge that this company was controlled by the monopoly was specifically made before the Interstate Commerce Commission and was not denied, and the Commission found that the oil combination "have a monopoly of those facilities to the exclusion of complainants."[271] It thus reported the same state of facts in 1892 as the New York Legislature in 1879.

The barrel was therefore the fountain of life for the independent. Without barrels he could not get his oil on board ship for export, and without exporting he could not live and refine for the home market. The oil combination ships in barrels also. According to the figures given in this case by one of its "assistant managers" its shipments by barrel are very large. This testimony was introduced to make it appear cruel to insinuate that the difference between barrels and tanks was made by the railroads to favor it, since it as well as the independents used barrels. The Commission openly expressed its dissatisfaction with this evidence, and dismissed the subject by the conclusive observation that the combination gains more by the low tank-car rates than it loses by the high barrel rates.[272] For the independent, however, the difference in rates was almost all loss, for he at that time shipped mostly in barrels. The high prices it made for oil and for freights at Titusville and Oil City did not hurt the combination. It had only to close its refineries there and transfer their business for the time to its establishments elsewhere. This it did, keeping some of them idle for years.[273]

Such was the story told to the Interstate Commerce Commission, in many hundred pages of testimony, by the refiners of Oil City and Titusville, who appealed to it for the justice "without expense, without delay, and without litigation" promised the people when the Interstate Commerce Commission was created.[274] The game, of which you have perhaps been able to get a dim idea from the printed page, the Commissioners saw played before them like chess with living figures. For years the principal subject of their official investigations had been the manœuvres of the oil ring. They had been compelled by the law and the facts to condemn its relation with the railroads in language of stinging severity, as every court has done before which it has been brought. Better than any other men in the country, except the men in the ring, the Commissioners knew what was being done. They comprehended perfectly who the "seaboard refiners" were whose demand that their competitors should be shut out of Europe and New England was better law with the Pennsylvania Railroad than the decisions of the Commission. They needed no enlightenment as to the purpose of the secret contract between the members of the oil trust and the Pennsylvania, nor any instruction that the "pool" between the pipe line and the railroad was as hostile to the public interest as any pool between common carriers.

The chairman of the Commission had openly hinted that the relations of the oil trust and the railroads were collusive, and that the spring from which they flowed was a secret contract.[275] It was shown to the Commission that at the same time the railroads advanced their rates the oil combination bid up the price of the raw material of the Titusville and Oil City refineries. This is called "advancing the premium."[276] The raise of the freight rate added 14 cents a barrel to the cost of production, and the increased price of oil put on 12 cents more, either item large enough to embarrass competition. The Interstate Commerce Commission in its decision recognized the practical simultaneity of the three movements to the disadvantage of the independent refiners: (1) the bidding up of the price of crude oil against them; (2) the new rule of charging for the weight of the barrel; and (3) the abrogation of the through rates to New England. These three things occurred in a period of about two months. This, the Commission says, lends color to the charge that there was concert of action between the combination and the railroad.

The Commissioners in their sittings had seen that the counsel for the railroads did not pretend to bring forward any evidence to prove that their attack on the barrel shippers was just or proper. Although "the seaboard refiners," for whose pecuniary profit these things had been done, were not on trial, their witnesses, agents, and attorneys were in constant attendance, and kept close watch of the testimony and arguments. The Commission had its attention called specifically to the fact that the defence of the railroads on trial was being directed by the same "seaboard refiners" who had "insisted" that the railroads should violate the law. The counsel for the Erie road was frank enough to admit that it was they who had prompted that carrier in its litigation before the Commission. When the Erie appeared before the Commission to give "further testimony," its representative could not tell at whose request its application therefor had been made, and said he had known nothing about the matter until the day before. Three of the six witnesses then examined were from the offices of the oil trust, whose members had refused to come when summoned. The only subpœnas they obey are those issued from their own headquarters.

The president of the oil combination's pipe lines—who is also the president of the steamship line in which its members are interested—and the vice-president of the pipe lines, and the president and the treasurer of the company which holds for the trust the monopoly of the terminal facilities, and the President of the New York, Lake Erie, and Western Railroad, and its vice-president, were all served with official notice to come and testify. But these gentlemen refused to appear. "It is for your honors," said the counsel for the refiners, suggestively, "to determine what obedience shall be paid to your subpœnas."[277] But the Commission did nothing.

The defendant corporations, and their lawyers, officers, and witnesses, made no pretence of treating the Interstate Commerce Commission with anything more than a physical respect. The representatives of the railroad companies practically told the Commission that its decisions were subordinate to theirs, and that they knew better than it what its rulings meant. Witnesses refused to answer questions they found awkward, and the lawyers gave the court to understand that if it did what they did not like they would snuff it out. The Commission heard one of the refiners who was a petitioner before it assailed with coarse vituperation, described in open court as a "pestilence,"[278] because he had dared to write more than once to the railroads for the reduction of rates which would save him from destruction, and which the Commission had, not once, but half a dozen times, said the railroads ought to give to all.

The Commission had itself, outrunning the complainants, been the first to "pointedly disapprove" the attempt to destroy the barrel shippers, and to call upon the railroads to rescind their action. This protest it had made repeatedly—first with the subalterns, then with the chief of the Pennsylvania Railroad, in personal interviews, letters, and finally in an official pamphlet, which was an appeal to the public to judge between it and the corporation. It had reiterated its protest in a formal decision rendered September 5, 1890, after deliberating seven months on the evidence and arguments. In this "they recalled the fact, now almost ancient history, that" the change was "pointedly disapproved by the Commission" when first made, and with lamentations noted that, though almost two years had passed, "the carriers have failed to comply with the suggestions there made. In charging for the weight of the barrels as well as the oil, the carriers that make use of both modes of transportation have disregarded the principles plainly and emphatically laid down by the Commission in the cases cited, and have paid no attention to the subsequent official memorandum explanatory of the decisions in those cases, but have persisted in maintaining a discrimination against barrel shippers. An order requiring the discontinuance of the discrimination has therefore become necessary."[279]

An order has therefore become necessary. The Commission then ordered one road concerned in this separate case to "cease and desist" within thirty days. Although several cases affecting a number of refiners and a number of roads had been heard and submitted together, as practically one in traffic, territory, circumstances, and the main question, it confined its decision to the case which involved only one road, and that a subordinate. There the Commission stopped; and there it stuck for more than two years, from September 5, 1890, to November 14, 1892, refraining from a decision in the case of the principal offender, the Pennsylvania Railroad.

The Pennsylvania Railroad is the representative carrier in the oil traffic. It controls all the oil business that passes over its lines, no matter how far away it originates. The initial road which led the attack on the barrel shippers is subsidiary to the Pennsylvania in the oil business, and the Pennsylvania controls its rates and regulations.[280] The Pennsylvania has been the head and front of the railroad attack on these men, and has been the open nullifier of the law and the Commission in this matter. It was the principal defendant on trial, and its case was identical with that of the others, except that it was the most flagrant; but no order would the Commission issue against it for two years. Wendell Phillips says: "There is no power in one State to resist such a giant as the Pennsylvania road. We have thirty-eight one-horse legislatures in this country; and we have a man like Tom Scott with three hundred and fifty millions in his hands, and if he walks through the States they have no power. Why, he need not move at all; if he smokes, as Grant does, a puff of the waste smoke out of his mouth upsets the legislatures." When the Commission had ordered a change of rates on barrels in the South, the Pennsylvania did the Commission the double disrespect of declaring that that order was binding upon itself against the protest of the Commission, and of using an order to reduce rates as an excuse for raising them. But now when the Commission, September 5, 1890, made a decision on the same point in a case arising in the territory and traffic in which the Pennsylvania was the chief carrier—a case, too, of a bunch of cases in which the Pennsylvania was a defendant—that road ignored it. The Commission, in the Rice, Robinson and Witherop case, in 1890, promulgated the very rule which the Pennsylvania Railroad established, which it had been following for twenty years, and which its officers before the Commission swore was the correct one, but the Pennsylvania refused now to accept and follow it. The road which was now ordered to go back to the correct practice, and which had perforce done so, was the initial road. The Pennsylvania had followed its initiative in adopting a "false" and "misleading" and "unwarranted" practice, but would not follow it in changing to the good.

The attitude in which the Pennsylvania road and the Commission were thus placed towards each other was this: Shall the Pennsylvania Railroad be allowed to make a charge which the Commission volunteered to rebuke it for making, and which it had decided, in the parallel case of another road in the same situation, was altogether unwarranted and must cease? They stood thus facing each other more than two years. There was apparently no excuse for delay the Commission would not accept. At one time it granted postponement on the plea of a lawyer that his father was sick. More than the lawyer's father were sick; a whole community of business men were sick; the entire country was sick, its industry, law, politics, morals—all. The administration of justice was sick. If the facts had been uncertain, or the law undetermined, the course of justice would still have seemed cruelly sluggish; but here was a matter in which the facts and the law in question had been settled, and by the Commission itself, over and over again. The only thing remaining was that the Pennsylvania Railroad, as well as the road which was its next neighbor, must obey the law. The railroad against which the Interstate Commerce Commission decided in 1890 on this point joined the Pennsylvania at Irvineton and Corry. The Commission put the law into force on one side of those points, but for two years gave the Pennsylvania Railroad and others "rehearings" and other means of delay, and did not open its lips to say that the same law must reign on the other. The conduct of this corporation meant that it intended to respect neither the Interstate Commerce Commission nor the Interstate Commerce law; that it recognized the will of cliqued wealth as the supreme law; that the protestations of loyalty to the law and the Commission with which it accompanied its defiance of both were not offered as a disguise of respect, but were chosen as a method which would most embarrass the people's tribunal in upholding itself and the rights of the citizens. All that was needed by those who had contrived and were continuing the wrong was time—they had everything else. Time they got, and plenty of it.

July 15, 1891, the refiners said to the Commission: "Two and one-half years have elapsed since these complaints were filed, and the end is not yet. We earnestly hoped that we had succeeded in convincing this Commission that this respondent was inflicting on complainants a great and unnecessary wrong, which merited the most speedy remedy and redress possible. If we have failed in this we are unable to ascribe the failure to a lack of evidence or promptness in presenting it. It was not thought possible that all this great length of time would be required to reach a conclusion in these matters, under all these circumstances, especially after the decision in the Rice, Robinson, and Witherop case (September 5, 1890). The enemies of the complainants could scarcely have found or wished for any more effectual way of injuring complainants than by a long delay of their cause. Further delay simply means further injury to complainants." The two years and a half have gone on to more than five years. A decision has been made, but the end is not yet. The delay prevented the injured men from going to any other tribunal with their complaint. They have succeeded in keeping alive, though barely alive, because the price of their raw material has declined a little, and given them a margin to cling to. This delay has denied them justice in the special tribunal they were invited to attend, and has also denied them the relief they could have got from other courts.