II. The party of the first part, that it will submit all questions, arising under said railroad contracts, which affect the interests of both producers and refiners, to the decision of the joint committee provided for in Article I of the agreement.
III. The party of the second part, that it will appoint five of its members to constitute, with the five members of the party of the first part, the joint executive committee provided for in Article I of this agreement; and will submit to said committee all the questions mentioned in Article II.
IV. The said parties mutually, that the decisions of said joint committee on all questions, affecting the joint interests of producers and refiners, which shall be submitted to them, shall be final and conclusive upon both the parties hereto. That upon the questions which shall at all times be held to affect the joint interests of both producers and refiners are the following, viz.:
1st. The rates of transportation of both crude and refined oil.
2nd. The price of crude oil at the wells and in the market.
3rd. The price of refined oil in the market.
4th. The amount of rebate and drawback which from time to time it may be necessary for the interests of the trade to ask from the railroads.
V. The said parties mutually, that the joint committee shall meet once a month, and at any intermediate time, or times, at which a meeting shall be called by the chairman, or by any four of its members, to consider such questions as shall affect the joint interests of the parties hereto.
VI. The party of the second part that it will agree to increase and lessen the aggregate production of crude petroleum, as the said joint committee shall direct, to adapt as nearly as practicable the supply of the same to the capacity of the markets of the world to absorb at a price remunerative to the producer, the refiner and the transporter.
VII. The parties hereto mutually, that the said joint committee shall, at the beginning of each year, fix the minimum average price at which crude petroleum can be produced and delivered on board railway cars, which price shall be called the minimum cost of production—that at the same periods the said committee shall also fix the minimum average price at which crude oil can be refined, put up in packages and sold, which price shall be called the minimum cost of manufacture.
VIII. The parties hereto mutually, that after paying the minimum cost of production of crude petroleum, the minimum cost of its manufacture, and the cost of transportation and storage, and shipping also, in the case of exported oil, the profits shall be apportioned between the producers and refiners, in the ratio of ... per cent. to the former, and ... per cent. to the latter.
IX. The said parties, that in case of a temporary over-production of crude petroleum, the excess shall as far as practicable be taken and withheld from market, and an advance of three-fourths of the minimum cost of production advanced thereon by the party of the first part at eight per cent., intrust the party of the second part keeping the tanked petroleum insured in good and responsible companies to the full amount of the advance, one year’s interest added.
X. The said parties mutually, that the party of the first part shall only be bound to pay the prices and make the advances aforesaid, in case the producers shall in good faith obey the instructions of the joint committee, to limit production by stopping the drilling of new wells.
XI. The party of the second part that it will keep a register of the date of the commencement of all new wells, the date at which the same shall be finished, the character of the well and the monthly production, and the date at which it may be abandoned, and that it will make it a condition, precedent to the holding of stock in its company, that the date aforesaid shall be finished by its stockholders.
XII. Both parties, that it is the especial object of this agreement to bring the producers and refiners of petroleum into harmony and co-operation, by reciprocal, fair, and just dealing, for the promotion of their mutual interests, and everything in this agreement is to be construed liberally for the carrying into effect of this object.
1st. The rates of transportation of both crude and refined oil.
2nd. The price of crude oil at the wells and in the market.
3rd. The price of refined oil in the market.
4th. The amount of rebate and drawback which from time to time it may be necessary for the interests of the trade to ask from the railroads.
NUMBER 11 (See page [1082])
EXTRACTS FROM THE TESTIMONY OF W. G. WARDEN
[From “A History of the Rise and Fall of the South Improvement Company,” pages 30–41.]
Washington, D. C., March 30, 1872.
William G. Warden affirmed and examined.
By Mr. C. Heydrick (Counsel).
Q. Are you an officer of the South Improvement Company?
A. Yes, sir; or rather, I was.
Q. What office did you hold?
A. I held the office of secretary during all the previous meetings, and was a director of the company.
Q. When was the company organised?
A. Our minutes will show that, if you will allow me to refer to them, and I desire to put them in as evidence. On referring to the minutes I find that the corporators’ meeting was held January 2, 1872. As I understand that these minutes are to go in as a part of the evidence, they will furnish you all the information you desire in regard to the organisation and proceedings of the company.
[The chairman stated that the witness could refer to the minutes as memoranda, and that the committee would determine hereafter as to whether they should be received as evidence.]
By Mr. Heydrick.
Q. For what object or business was the company organised?
A. For refining oil.
Q. That meeting was under the charter which has been presented?
A. That was the first meeting held after we got the charter.
Q. The gentlemen who attended that meeting on the second of January were those named in the act of the incorporation?
A. Yes, sir; they met and transferred the company under the charter over to the stockholders.
Q. Did the incorporators named in the act transfer their interest to the stockholders, as you have stated on that occasion?
A. Yes, sir.
Q. What refining capacity does this company possess? State the amount of capital and stock subscribed and put in?
A. At that time 1,100 shares, at $100 per share, was subscribed, and twenty per cent. thereon paid into the treasury.
Q. Where did that company intend to refine oil?
A. Their calculation was to get all the refineries in the country into the company.
Q. Was it the design of the stockholders to include all the oil refineries in this country?
A. Yes, sir; every one of them.
Q. Can you give us a list of the stockholders?
A. I can give you them from the minutes. They are as follows:
William Frew 10 shares W. P. Logan 10 〃 John P. Logan 10 〃 Charles Lockhart 10 〃 Richard S. Waring 10 〃 W. G. Warden 475 〃 O. F. Waring 475 〃 P. H. Watson 100 〃 H. M. Flagler 180 〃 O. H. Payne 180 〃 William Rockefeller 180 〃 J. A. Bostwick 180 〃 John D. Rockefeller 180 〃 2,000 By Mr. Sheldon.
Q. What was the idea of getting all the refineries of the country into one organisation?
A. The idea when the company started was this: There is a large number of refineries in the country—a great deal larger than is required for the manufacture of the oil produced in the country, or for the want of the consumers in Europe and America; the capacity of the oil refineries in the country is, I think, 45,000 or 50,000 barrels a day; we completed our organisation, and when we met together it was discovered that the parties present represented, in one way or another, a large portion of the refining interest in the country; of course all of us had our friends in the matter, who must be taken care of if any arrangement at all was made; and after discussing the matter at considerable length, it was decided to include within our company every refinery we could possibly get into it. We also had considerable discussion with the railroads in regard to the matter of rebate on their charges for freight; they did not want to give us a rebate unless it was with the understanding that all the refineries should be brought into the arrangement and placed upon the same level; there was no difference made as far as we were concerned, in favour of or against any refinery; they were all to come in alike; that was the understanding from the first to the last.
Q. Where are the refineries situated?
A. Situated in New York, Philadelphia, Baltimore, Boston, on the seaboard, and in the Oil Region, Pittsburg, and Cleveland.
Q. You say you made propositions to railroad companies, which they agreed to accept upon the condition that you could include all the refineries?
A. No, sir; I did not say that; I said that was the understanding when we discussed this matter with them; it was no proposition on our part; they discussed it not in the form of a proposition that the refineries should be all taken in, but it was the intention and resolution of the company from the first that that should be the result; we never had any other purpose in the matter.
Q. In case you could take the refineries all in, the railroads proposed to give you a rebate upon their freight charges?
A. No, sir; it was not put in that form; we were to put the refineries all in, upon the same terms; it was the understanding with the railroad companies that we were to have a rebate; there was no rebate given in consideration of our putting the companies all in, but we told them we would do it; the contract with the railroad companies was with us.
Q. But if you did form a company composed of the proprietors of all these refineries, you were to have a rebate upon your freight charges?
A. No; we were to have the rebate anyhow; but were to give all the refineries the privilege of coming in.
Q. You were to have the rebate whether they came in or not?
A. Yes, sir.
Q. Were you to have a rebate upon the same freight charges that had been in existence before?
A. No; the whole object of the railroad authorities was to get better freight prices.
Q. What effect was this arrangement to have upon the producer or upon the refineries that did not go into your combination?
A. According to our opinion of it that is the way we have got into this trouble; we have been misconstrued and misrepresented as to our purposes all over the country; the whole object was, and our whole talk was, as far as any of my friends came into the matter, or as far as I myself was concerned, that the producers should receive a better price for their oil; we calculated to get five or six dollars a barrel for crude oil; that was from the beginning of our talk until the end of it; we had not our company organised, or at least the organisation was not completed, nor the contract signed, until all these disturbances commenced to be gotten up; we thought the matter would quiet down and we would get a chance to explain our position and put ourselves right; we asked for the opportunity to do so; we have evidence of that in the telegrams we sent, and I can say, under oath, that they were sent in good faith; there was never an idea in my mind that they were not.... I will state further that this matter was discussed with Mr. Scott by myself, personally, and in very great length, and also with Mr. Potts, who never has had any interest and never any part in this contract, and who spoke of this very matter from the start, expressing the opinion that it could not succeed unless the producers were taken care of. That was understood by us all from the start in every discussion we had, and by the railroad people as far as I heard from them. I can only answer for the railroad people from the conversation I had personally with Mr. Scott and Mr. Potts, in which it was perfectly understood that we could not succeed in carrying out these measures for our own benefit and the benefit of the railroads without the co-operation of the producers, and the only point we discussed was whether it should be a combination or co-operation. I took the ground personally against forming a combination inasmuch as the interests of the producers were in one sense antagonistic to ours, one as the seller and the other as the buyer. We held in argument that the producers were abundantly able to take care of their own branch of the business if they took care of the quantity produced. They were only liable to depression from our production, therefore they had in their own hands directly the power of holding the market at six or eight dollars a barrel.
Q. You did not take into consideration the good of the consumers of the country, which is by far the larger part of the population of the country?
A. Yes, we did.
Q. You wanted to put up the price of oil?
A. In answer to that I will state that the producers and refiners were both suffering under the depression that existed. The refiners were not getting enough to pay their expenses. All we asked was a fair refiner’s profit.
Q. What effect were these arrangements to have upon those who did not come into the combination or co-operation, as you have termed it, as to the price to be charged for transporting their oil, both refiners and producers?
A. I do not think we ever took that question up.
Q. Were the railroad companies to charge the same increase of freights to those who did not come into the combination that they did to you without giving them a rebate?
A. Yes, sir.
Q. Now in case you could control the oil produced by these people in any combination that you made, were you not to have a rebate upon the oil?
A. We were not to have a rebate, we were to have a drawback.
Q. What is the difference between a rebate and a drawback?
A. There is not much difference in one sense. A rebate is made at the time we pay our freight; a drawback is made afterward.
Q. That is a technical, rather than a real, difference, is it not?
A. I want to state it as you will find it in the contract.
Q. The effect was that those who did not go into the combination could not get their oil as cheaply as you could?
A. No, sir; they could not; I want to explain in what relation that occurred and why this arrangement was made. I may say that it never entered into my head that the refineries would not all be brought in; a fair manufacturer’s profit was all we wanted. They were all to be brought in on equal terms, and the object of the drawback was not to cover all the oil to be refined in this country, but only the oil that was to be exported.
Q. If all had gone into the combination, then the result would not have been to injure the producers and refiners, but to injure the consumers of the country?
A. No, sir; the purpose was not to injure them.
Q. Would it not have been to increase the price of oil, if you had increased the cost of freight?
A. Yes, sir.
Q. You say the railroad companies were going to increase the rate of freight anyhow; they had the right to do that if they were carrying too low, but would that justify them in increasing the rates of freight to such an extent that they could afford to give you a sum of money for it?
A. I will tell you how that was done. The men in our trade are a very hard kind of men to hold. Those of us who deal in oil know that when we have purchased a lot, they would deliver it in New York for less than anybody could afford to deliver it. That has been the fact almost continuously ever since 1869. Oil has been delivered in the East for less money than was apparent from any rates known to the market; less than even we who refined it could deliver it for. The railroads were kept constantly besieged by one or another, and they were continually cutting under other routes for New York or for Cleveland, so that nobody knew what the rates were. They have been paying rebates, more or less, for the last two years.
Q. And you contemplated an increase of rates for the simple purpose of having the railroads divide with you?
A. There was no divide.
Q. A rebate is a divide to a certain extent, is it not? The proposition was that there should be taken out of the producers and consumers of this country a certain percentage of the freight for you?
A. It was done to prevent this cutting of roads one under another, and to prevent speculation.
Q. Was it not done for the purpose of oppressing the producers and consumers of this country?
A. I can only deny that such was the object, or that such would have been the effect.
Q. Has it been the practice of both the producer and refiner to make combinations from time to time by storing oils, and by large shipments abroad to affect the general price in the market?
A. The producers have made such combinations on the creek, and a few of the refiners and merchants made two combinations in 1868, which was known as the Deboe combination, and in 1869 and 1870 the Bull Ring, as they called it; but there was no combination that I knew of on the part of the producers, except among themselves; they have several times combined among themselves.
Q. Have there not been combinations of producers, refiners, and merchants to affect the price of oil?
A. There have been all kinds of combinations.
Q. Is there not at this time, if not invalidated by a change of directors of the Erie Railroad Company, a combination between officers of that road and certain parties in New York by which they control the price of coal?
A. If I were allowed to say what I think, I should reply in the affirmative and to say that one great reason why we went into this arrangement was to stop that Erie combination, which was a great source of difficulty; we could not get hold of the matter; we would ship a cargo of oil at a fair price to-day, and would be compelled to sell it to-morrow at a much less price; this arrangement did break up that combination entirely, so that there is no combination of that sort to-day.
By the Chairman.
Q. I understand that your larger combinations swallowed up the Erie combination.
A. It destroyed it at the time.
Q. Yours was somewhat in the direction of the Erie combination, but larger?
A. No, sir; it was not; the Erie was with some merchants, ours embraces the whole refining interest in the country; that was different; I will state that since I came into this Capitol I have been told that the very men engaged in prosecuting this investigation have a combination by which they intend to run up the price of their oil; I hope they will; I do not care what means are used, so that we can carry on our business, and pay just what others have to pay.
Q. I understand you to say that under your arrangement the cost of crude oil might be increased $1.25 a barrel, and that there is produced about 18,000 barrels daily in the Oil Regions of Pennsylvania, but not that on an average; can you state from memory about the amount of annual production?
A. I have a circular here which gives the statement as 5,775,000 barrels.
Q. So that the production in round numbers for last year was 6,000,000 barrels; now, of this $1.25, how much were you to get as your drawback if you had carried out your arrangement?
A. The maximum we would have been entitled to receive is one dollar a barrel.
Q. Then on this production you would have received $6,000,000 a year, and the railroad companies an additional sum of $1,500,000; in other words, under your arrangement the public would have been put to an additional expense of $7,500,000 a year.
A. What public do you refer to? They would have had to pay it in Europe.
By Mr. Negley.
Q. Were there not at the same time combinations upon the part of producers to affect the price of oil in the market?
A. There were not at the time we started this matter; I do not know of any just at that moment; there have been over and over again. I want to state that a large portion of our oil product goes to Europe—of this very crude oil which Mr. Sheldon talks about; I have here a circular to which I call the attention of the committee, which bears out our position in this matter; I desire to put it in evidence because it gives the general opinion of merchants connected with the exportation of crude oil. It has been the impression of everybody in the trade that the oil exported should pay us an additional amount in this country, to be divided between those interested in the handling of it and the producing of it, to the extent of eight or ten millions a year; I have had that figured out three, or four, or five successive years. We have shown over and over again that that amount ought to be retained in this country. I have been engaged for several years in the oil business, and I have yet to sell one barrel to bear the market. I have always been upon the bull side of the market; I believe there ought to be in this country a better price for oil to every one engaged in it. In 1868, 1869, and 1870, there were movements in oil which brought to this country millions of dollars; and if the producers had refrained from sending forward their oil beyond the requirements of the market, the price would have been sustained. That has been the trouble always in making movements for a higher price. There is no man in this country who would not quietly and calmly say that we ought to have a better price for these goods.
By the Chairman.
Q. Do you mean a better price here, or a better price for that exported?
A. You could not get a better price for that exported without having a better price here.
Q. That is what the committee wants to know, whether it is necessary, in order to keep up the price abroad, to keep up the price at home?
| William Frew | 10 | shares |
| W. P. Logan | 10 | 〃 |
| John P. Logan | 10 | 〃 |
| Charles Lockhart | 10 | 〃 |
| Richard S. Waring | 10 | 〃 |
| W. G. Warden | 475 | 〃 |
| O. F. Waring | 475 | 〃 |
| P. H. Watson | 100 | 〃 |
| H. M. Flagler | 180 | 〃 |
| O. H. Payne | 180 | 〃 |
| William Rockefeller | 180 | 〃 |
| J. A. Bostwick | 180 | 〃 |
| John D. Rockefeller | 180 | 〃 |
| 2,000 |
NUMBER 12 (See page [1082])
EXTRACTS FROM THE TESTIMONY OF PETER H. WATSON
[From “A History of the Rise and Fall of the South Improvement Company,” pages 76–96.]
Washington, D. C., April 5, 1872.
By Mr. Townsend.
Q. From such testimony as you have given this morning, am I correct in understanding that this whole arrangement was suspended before its completion and before anything was done under it?
A. Yes, sir.
Q. That no completion of contracts was consummated?
A. No, sir; the conditions of the original understanding about the contracts, on which alone they were to go into effect, had not been complied with.
Q. And a further arrangement was necessary to make it a complete contract?
A. Yes, sir, the South Improvement Company had to enter into a contract, such substantially as I have furnished a draft of here, to give the producers the full benefit of everything connected with the contract before the contract itself could go into effect.
Q. There are three principal interests connected with the oil trade?
A. There are, the producers, refiners and transporters; no injustice could be done to either interest without affecting, injuriously, the others. The object of the railroads in this matter was to promote the interests of the trade in order to promote their own interests.
By the Chairman.
Q. You say there were three interests, producers, refiners and shippers?
A. Yes, sir, connected with the trade.
Q. And that the object of all these arrangements was to protect these three interests?
A. To protect these three interests and incidentally, of course, protecting the general interest in doing that, for this is peculiarly an American traffic.
Q. It was in the direction of increasing to each of these parties, respectively the benefits and profits of the business?
A. Yes, sir, that each might receive a fair profit. The railroad companies had not been receiving cost for transportation, and it was to save them from loss, for they had been transporting at a loss during the whole of the year 1871.
Q. Well, that is to increase profits, is it not?
A. Yes, to save from loss.
Q. Did it look to increasing in any way the benefits of cheapness to the consumer?
A. Yes, sir.
Q. How?
A. By steadying the trade. You will notice what all those familiar with this trade know, that there are very rapid and excessive fluctuations in the oil market; that when these fluctuations take place the retail dealers are always quick to note a rise in price, but very slow to note a fall. Even if two dollars a barrel had been added to the price of oil, under a steady trade, I think the price of the retail purchaser would not have been increased. That increased price would only amount to one cent a quart, and I think the price would not have been increased to the retail dealer because the fluctuation would have been avoided. That was one object to be accomplished. Moreover, there is only one-sixth of the oil produced here consumed in this country—a very small proportion of the product. In discussing what compensating advantage would arise from an increase of price, the railroad companies considered, in the first place, that there was a very great compensation afforded by a steady trade.
Q. Will you state to the committee how, with your mode of arriving at these conclusions, that cheapness to the consumer is promoted by stability in trade—how that arrangement which gave $1.50 a barrel to the South Improvement Company benefited either the railroad company or the producer?
A. Well, sir, in the agreement you will observe that the maximum rebates and maximum rates are stated. These maximum rebates were exceptions to the rule, which is a cardinal principle in the contract. The actual rates were to be kept as near to net rates as possible. Moreover, this was a contract which, before it was to go into effect, would have been a contract with the producer as well as the refiner.
Q. Does this contract show that?
A. The draft of a contract which I have presented to the committee, and which was to have been entered into with the producers before the contracts with the railroad companies went into operation, shows that.
Q. Does this contract say that anything was to be done in behalf of the producer before it was to go into operation?
A. Not on the face of the contract; it was only a condition on which it was delivered to me.
Q. A written condition so that it would become a part of the contract?
A. It was a part of the contract.
Q. I asked you whether there was anything in writing?
A. I said there was nothing in writing on the face of the contract, but nevertheless it was an essential part of it.
Q. It seems to be essential now that it should be a part of the contract?
A. It was all the time so considered from the beginning.
By Mr. Hambleton.
Q. Was this draft of a contract with the producers drawn prior to the execution of the railroad contracts?
A. Yes, sir, the draft was drawn prior to that.
By the Chairman.
Q. What is the date of that pencilled draft of a contract?
A. I could not give you the date of it; it was written in the office of the Lake Shore Railroad Company.
Q. At what place?
A. New York.
Q. State as near as you can the date?
A. I should say it was probably in December; either late in December or in the beginning of January, probably in December; indeed, I am very confident it was before I went home at Christmas.
Q. Has any copy of this ever been printed?
A. No, sir.
Q. This is all there was of it?
A. Yes, except discussion; we discussed the matter.
Q. I mean all there was committed to writing?
A. Yes, sir, all there was then committed to writing.
Q. Is it all there was as far as making out a contract is concerned?
A. Yes, sir.
Q. Was this submitted to the producers as a body or individually?
A. We were very anxious to submit it to the producers, and I asked them to appoint a committee that we might do it, but they had got up such an excitement at the time that nothing was practicable.
Q. When was that?
A. Before the last of these contracts was signed.
Q. Can you give the dates at all?
A. I cannot give the dates, but the contract with the Lake Shore road had not been signed at the time.
Q. What producers did you ask to call a meeting?
A. Among others I addressed a communication to be delivered to a gentleman who was understood to be the chairman of a meeting about to be held.
Q. What was his name?
A. Foster W. Mitchell, of Franklin.
Q. You addressed a communication to him, of what purport?
A. Asking him to appoint a committee to meet a committee of the South Improvement Company, that they might know what the objects of the South Improvement Company were. I proposed to submit these contracts with the railroad companies to that committee and also the form of contract which the railroad companies required the South Improvement Company to enter into with the producers, before these contracts went into effect.
Q. Have you a copy of that communication or letter?
A. It was a telegram.
Q. Have you a copy of it here?
A. I have not at present.
Q. Have you it in your possession, anywhere, and can you lay it before the committee?
A. I may have it; am not sure.
Q. Did you receive a reply to that communication?
A. Yes, sir.
Q. Was it stated in your communication that you proposed to lay before the committee the form of contract to be entered into with the producers?
A. No, sir. I proposed to lay that before the committee if it should be appointed.
Q. If you are not able to furnish a copy of that communication I will ask you to state orally its contents.
A. I could not give you the words of it; it was in general terms asking that they appoint a committee to confer with a committee of the South Improvement Company.
Q. To confer in reference to what?
A. I do not know that I should be safe in undertaking to say; I know what my object was in writing it.
Q. That you have stated. If you received a reply from Mr. Mitchell, state whether it was by letter or telegram.
A. I received a reply by telegraph from Mr. Mitchell, stating that the meeting of the producers received the communication with scorn—as of course they would if read to them, as a mass-meeting is always called for a specific object.
Q. That was not in his reply?
A. No, sir, it was not. I replied to him that I had intended the communication to him to be for the purpose of laying it before a few of the principal producers; that to lay the proposition before the meeting was of course to insure its defeat, because the meeting had convened for a predetermined purpose, which was to denounce and treat with scorn the South Improvement Company, because the South Improvement Company had been represented to them as hostile to their interests. This last perhaps was not in the communication.
By Mr. Hambleton.
Q. Have you a copy of that paper which you addressed to Mr. Mitchell?
A. I am not sure whether I have or not. It was a telegram.
Q. Did that substantially close the written communications between you and the producers upon that subject?
A. No, sir. I had a great many communications with individual producers; I think with more than half the producers, estimating them by the quality of oil produced.
Q. State what occurred.
A. I have corresponded with them and in that correspondence they have expressed their belief that the proposed plan of the South Improvement Company would work greatly for the benefit of the producing interest; that there was something greatly needed for the producing interest, and that it could not thrive without something of this kind, because it could not pay fair, living rates, for transportation to the railroad companies at the price oil was bringing, and that there was no likelihood of oil increasing in price under the existing condition of things; that the railroad could not always, of course, continue carrying at a loss.
Q. Will you give the names of the producers who proposed to join the South Improvement Company, or who expressed themselves favourable to the plan of that company, in addition to the name of Mr. Mitchell?
A. I could give you the names of several of them, but I do not think their lives and property would be safe. They requested me not to mention their names because they thought it would be an imprudent thing to do.
Q. You refuse, then, to give the names which you say you could state?
A. I refuse to give the names for the reason I have stated.
Q. Are there any of them you are willing to mention?
A. I will look over the letters and see whether there are any of them not marked confidential. If there are any not so marked, I will give you the names.
Q. Why do you state to this committee that you are not willing to give the names of the parties to whom you refer, when you state that a great many producers were in favour of this plan, and were consulted in regard to it?
A. I stated it because it was a fact.
By Mr. Sheldon.
Q. Did the danger to the lives of these parties arise from the excitement in the Oil Regions in consequence of these proceedings?
A. Yes, sir, one of the presidents of one of the committees representing the producers was in New York, a Mr. Patterson. He stated, as I understood, to one of the railroad officers, that he did not think my life would be safe if I were to go into the Oil Region, although he himself would not take it. I had received a number of threatening letters, but I did not attach any importance to them until Mr. Patterson made that statement.
By the Chairman.
Q. What was the reason given why your life would not be safe?
A. I do not know that the reason given, I think by Mr. Patterson, that there was such an unreasonable excitement among the people as to the nature and object of the South Improvement Company, which was represented to them to be a measure altogether hostile to them.
Q. Do you know what these misrepresentations were?
A. I only know by what I have seen stated in the papers and what persons have mentioned to me.
Q. Did you make an effort to correct the false impressions?
A. I did; the papers called for the other day by the committee, and which I have here to-day to produce, will show that.
Q. Were your efforts to correct these misrepresentations successful?
A. No, sir, they were not. I will read the despatches which I sent for the purpose of endeavouring to do that, and you will see from them the nature of the efforts I made.
Q. Sent to whom?
A. I sent a despatch to F. W. Mitchell through S. P. McCalmont of Franklin, which I have here.
The Chairman.—We will not stop to read them.
Witness.—It will answer your question in a great deal shorter period than I could answer it verbally.
The Chairman.—We will put the answers themselves in as testimony.
Witness.—Then I will read this as my answer, if you please, because it expresses as fully as I could express the facts you desire to know.
The Chairman.—Very well, you may hand the despatches to the reporter, and they will go in as a part of your testimony, and save the committee the time of reading them.
Witness.—You can hardly comprehend the answer without hearing the despatches. There were three despatches, showing the efforts I made to have the producers understand that the whole arrangement was one which looked as much to their interest as to any other.
The Chairman.—Very well, you may furnish them to the committee; we will not stop to read them now.
Witness.—I then offer you first my despatch to S. P. McCalmont, dated New York, March 4, 1872. I next offer another despatch from myself to F. W. Mitchell, dated New York, March 5, 1872, and also a despatch from myself to the same party, dated New York, March 6, 1872.
The despatches referred to are as follows:
New York, March 4, 1872.
S. P. McCalmont,
Franklin, Pennsylvania.
Your telegram received. Please deliver the following communication to F. W. Mitchell, or, in his absence, to somebody else who will make its contents known to the principal producers attending the meeting to be held to-morrow at Franklin:
To F. W. Mitchell:
Yesterday I received by mail from you or some other friend in Franklin several newspaper slips, one of which threatened the destruction of my oil at Franklin. At the same time I received an anonymous letter threatening injury to the Jamestown and Franklin Railroad. Disapproval of my connection with the South Improvement Company is alleged as the reason of both threats. This morning the telegraph informs me that the threat to destroy my oil has been executed by tapping the tank and letting it run to waste. While there may be some excuse for working up the present excitement to induce people to subscribe their money to new railroad schemes, there can be nothing but reprobation for the lawless destruction of property. You have sufficient character and influence, and sufficient information of the purposes of the company, to quell this excitement by a word, and I think it your duty to say that word. It seems to me that a great responsibility rests with somebody among you for stimulating the present causeless excitement, and the lawless destruction of property. On meeting you here on your return from the South, I explained to you, very briefly, that the whole plan of the South Improvement Company was founded upon the expectation of co-operation with the oil producers to maintain a good price for crude oil, as the only means of securing a fair remuneration to either the transporter, the refiner, or the merchant.
Unless the producers will co-operate with us, first, by limiting the production or the capacity of the markets of the world to absorb petroleum at a good price; and, secondly, by tanking a large part of the production for the next two or three months, that it may be withheld from the market until the present glut is exhausted and production reduced, it will be impossible, I am convinced from recent advices of the state of supply and demand in the principal markets of the world, to keep the price of crude oil up to $3.50, and of refined oil up to twenty-two cents, during the coming summer.
I stated to you in the strongest terms the desire of the South Improvement Company to enter into an arrangement for a series of years with the producers, whereby good prices for crude oil at the wells and fair and reasonable rates of transportation would at all times be assured. The desire still exists. You expressed to me your concurrence in these views, as others among the leading producers whom I have more recently seen have also done.
I then explained to you certain important business which I had postponed to await the organisation of the South Improvement Company. That business I have been engaged upon for the last ten days. As soon as I get through with it, which I hope will be in a few days, I should like to meet a committee of the principal producers to arrange the details of the plan of co-operation of which we spoke. I therefore request you to have such a committee appointed by the meeting noticed for to-morrow on the newspaper slip sent to me, and if possible have a plan prepared by which, among other things, we could extend to you large facilities of tankage and capital to take care of the surplus oil until the present production can be checked.
P. H. Watson.
New York, March 4, 1872.
S. P. McCalmont,
Franklin, Pennsylvania.
Your telegram received. Please deliver the following communication to F. W. Mitchell, or, in his absence, to somebody else who will make its contents known to the principal producers attending the meeting to be held to-morrow at Franklin: