The History of the Standard Oil Company

by Ida M. Tarbell

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

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

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

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

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

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

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

John D. Rockefeller,

Henry M. Flagler,

Samuel Andrews,

Stephen V. Harkness,

William Rockefeller.

Cleveland, Ohio, January 10, 1870.

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

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

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

J. H. Devereux.

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

J. C. Cannon,

Notary Public in and for Said County.

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

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

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

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

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

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

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