Wealth against commonwealth

by Henry Demarest Lloyd

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]