The History of the Standard Oil Company

by Ida M. Tarbell

GENERAL GEORGE B. MCCLELLAN
President of the Atlantic and Great Western Railroad at the time of the South Improvement Company. General McClellan did not sign the contract.

GENERAL JAMES H. DEVEREUX
Who in 1868 as vice-president of the Lake Shore and Michigan Southern Railroad first granted rebates to Mr. Rockefeller’s firm.

JOSEPH D. POTTS
President of the Empire Transportation Company. Leader in the struggle between the Pennsylvania Railroad and the Standard Oil Company in 1877.

Mr. Vanderbilt and Mr. Jewett soon joined their protests to Mr. Rockefeller’s. “The steps it (the Empire) was then taking,” said Mr. Jewett, “unless checked would result in a diversion largely of the transportation of oil from our roads; the New York Central road and our own determined that we ought not to stand by and permit those improvements and arrangements to be made which, when completed, would be beyond our control.”[^[54]] These protests increased in vehemence, until finally the Pennsylvania officials remonstrated with Mr. Potts. “We endeavoured,” says Mr. Cassatt, “to try to get those difficulties harmonised, talked of getting the Empire Transportation Company to lease its refineries to the Standard Oil Company, or put them into other hands, but we did not succeed in doing that.” “Rather than do that,” Colonel Potts told Mr. Cassatt, when he proposed that the Empire sell its refineries, “we had rather you would buy us out and close our contract with you.”

When the Standard Oil Company and its allies, the Erie and Central, found that the Pennsylvania would not or could not drive the Empire from its position, they determined on war. Mr. Jewett, the Erie president, in his testimony of 1879 before the Hepburn Commission, takes the burden of starting the fight. “Whether the Standard Oil Company was afraid of the Empire Line as a refiner,” he said, “I have no means of knowing. I never propounded the question. We were opposed to permitting the Empire Line, a creature of the Pennsylvania Railroad, to be building refineries, to become the owners of pipe-lines leading into the oil field and leading to the coast, without a contest, and we made it without regard to the Standard Oil Company or anybody else; but when we did determine to make it, I have no doubt we demanded of the Standard Oil Company during the contest to withdraw its shipments from the Pennsylvania.” Mr. Flagler gave the following version of the affair to the Congressional Committee of 1888:—

We made an agreement with the Empire Transportation Company for shipments over the Pennsylvania Railroad on behalf of the Pennsylvania interests, which were then owned by the Standard Oil Company, simply because there was no alternative. It was the only vehicle by which these Pittsburg refineries and the Philadelphia refineries carried their crude oil over the Pennsylvania Railroad. There was no other medium by which business could be done over the Pennsylvania Railroad, except through the Empire Transportation Company, a subsidiary company of the Pennsylvania Railroad Company. The Empire Transportation Company was not only the owner of pipe-lines in the Oil Regions, and tank-cars on the Pennsylvania Railroad, but also of refineries at Philadelphia and New York, and to that extent were our competitors. We, having no interest whatever in transportation,[^[55]] naturally felt jealous of the Empire Transportation Company, and drew the attention of the northern lines. By that I mean the New York Central and the Erie railroads. With the peculiar position of the oil business on the Pennsylvania Railroad, their attention was called to this very soon after the Empire Transportation Company began the business of refining. The position taken by the two Northern trunk lines in their intercourse with the Pennsylvania Railroad, as was admitted by Mr. Cassatt in his testimony, and stated to me by the representatives of the two Northern roads, Mr. Vanderbilt and Mr. Jewett, was that it was unfair to them that the Pennsylvania Railroad did not divest itself of the manufacturing business.

Backed by the Erie and Central, Mr. Rockefeller, in the spring of 1877, finally told Mr. Cassatt that he would no longer send any of his freight over the Pennsylvania unless the Empire gave up its refineries. The Pennsylvania refused to compel the Empire to this course. According to Mr. Potts’s own story, the road was partially goaded to its decision by a demand for more rebates, which came from Mr. Rockefeller at about the time he pronounced his ultimatum on the Empire. “They swooped upon the railways,” says Colonel Potts, “with a demand for a vast increase in their rebate. They threatened, they pleaded, it has been said they purchased—however that may be, they conquered. Minor officials intrusted with the vast power of according secret rates conceded all they were asked to do, even to concealing from their superiors for months the real nature of their illegal agreements.” Probably it was at this time that there took place the little scene between Mr. Vanderbilt and Mr. Rockefeller and his colleagues, of which the former told the Hepburn Commission in 1879. The Standard people were after more rebates. They affirmed other roads were giving larger rebates than Mr. Vanderbilt, and that their contract with him obliged him to give as much as anybody else did.