[Commonwealth of Pennsylvania vs. Pennsylvania Railroad Company, United Pipe Lines, etc., Testimony. Appendix, pages 732–733.]
Office of the American Transfer Company,
Oil City, Pennsylvania, February 15, 1878.
A. J. Cassatt,
Third Vice-President, Philadelphia.
Dear Sir: Referring to the conversation I had with you in January, I wish to submit the following facts: That our company has at large expense (involving the payment of several hundred thousand dollars), purchased and created certain pipe-lines to Pittsburg, through which we are able not only to protect the Allegheny Valley road in a paying rate of freight for the oil it carries, but also to secure to that company (by agreement with it) its full proportion of the oil traffic going to Pittsburg.
You are acquainted with the efforts we have put forth in other directions during the last months in which we have acted in thorough accord with the trunk line interests, and I believe I may say without egotism, we have, to the extent of our ability, effectually protected their interests in such action. I here repeat what I once stated to you and which I asked you to receive and treat as strictly confidential, that we have, been for many months receiving from the New York Central and Erie Railroads certain sums of money, in no instance less than twenty cents per barrel on every barrel of crude oil carried by each of those roads.
Co-operating, as we are doing, with the Standard Oil Company and the trunk lines in every effort to secure for the railroads paying rates of freight on the oil they carry, I am constrained to say to you that, in justice to the interest I represent, we should receive from your company at least twenty cents on each barrel of crude oil you transport.
The fruit of co-operation referred to has been fully evidenced in the fact that since last fall your company has received fifty to sixty cents per barrel more freight than was obtained by it prior to our co-operation.
In submitting this proposition I feel I should ask you to let this date from the first of November, 1877, but I am willing to accept as a compromise (which is to be regarded as strictly a private one between your company and ours) the payment by you of twenty cents per barrel on all crude oil shipments commencing with February 1, 1878.
I make this proposition with the full expectation that it will be acceptable to your company, but with the understanding on my part that in so doing, I am not asking as much of the Pennsylvania road and its connections as I have been and am receiving from the other trunk lines.
You are doubtless aware that during the last two years a large amount of oil has been shipped to Richmond via the Chesapeake and Ohio road, and that since the purchase of the Pittsburg lines by us not one barrel has been permitted to go in that direction.
During the season of 1877, and so long as the Columbia Conduit Company afforded the Baltimore and Ohio road access to the Oil Regions, that company, I understood, refused to accept from the other trunk lines (for its proportion of the oil traffic) less than 20 per cent., but after the purchase by us of the Columbia Conduit you succeeded in arranging with the Baltimore and Ohio for about half as much as they previously claimed.
I may add that the Baltimore and Ohio road are wholly dependent upon us for any oil they may carry.
Yours truly,
(Signed) Daniel O’Day,
General Manager.
Philadelphia, May 15, 1878.
R. W. Downing, Comptroller.
Dear Sir: I enclose herewith copy of letter from Daniel O’Day, general manager of the American Transfer Company, which refers to a conversation I had with him in January last in reference to allowing the American Transfer Company a commission of twenty cents per barrel on all crude oil transported over this company’s lines to New York, Philadelphia and Baltimore.
I agreed to allow this commission from and after February 1, until further notice, after having seen receipted bills showing that the New York Central Railroad allowed them a commission of thirty-five cents per barrel and that the Erie Railway allowed them a commission of twenty cents per barrel on Bradford oil, and thirty cents per barrel on all other oil, and that they had been doing so continuously since the 17th of October last.
Of this, however, you saw the evidence yourself in the bills which I submitted to you last week. Please, therefore, prepare vouchers in favour of the American Transfer Company per Daniel O’Day, for this commission of twenty cents on shipments during February, March and April, and hereafter make settlements with that company monthly.
Yours truly,
(Signed) A. J. Cassatt,
Third Vice-President.
NUMBER 30 (See page [1197])
HENRY M. FLAGLER’S TESTIMONY ON THE REBATE PAID TO THE AMERICAN TRANSFER COMPANY
[Proceedings in Relation to Trusts, House of Representatives, 1888. Report Number 3112, pages 777–778.]
Q. Mr. Cassatt testified and offered in evidence the correspondence which showed that his company agreed to the payment of that 22½ cents to the American Transfer Company on every barrel of crude oil passing over their line in consequence of the fact that the writer of the first letter on behalf of the American Transfer Company had asserted that the New York Central and the New York and Lake Erie roads paid the same amount. You know that to be a fact, do you not?
A. May I explain that now?
Q. You are entitled to make any explanation you wish.
A. The American Transfer Company was built originally for, really, the New York Central road. The New York Central had no means of getting south of Titusville with its cars. The American Transfer Company’s lines were built really in the interest of the New York Central road. In those days the pipe-lines purchased the oil and oftentimes sold it at just what they paid for it, and sometimes less. They got more when they could. The New York Central, as I said, paid the American Transfer Company a price, which I presume was the figures named in Mr. Cassatt’s testimony, for collecting oil in the lower country and delivering it to the Dunkirk and Allegheny Valley, which is the New York Central’s connection. As that pipe-line increased its business the Erie road did the same thing. Later the Pennsylvania Railroad wanted the service of that pipe-line in collecting oil. Mr. O’Day did what I suppose any manager would do. He said to Mr. Cassatt, if you do the same thing for me that the other roads are doing, I have no objection to making the same arrangement with you. The payment made by the Pennsylvania, the Erie, and the New York Central roads constituted the gross income of the American Transfer Company, out of which it paid its expenses of doing its business and its losses, if it made any, in the purchase and sale of oil. It acted as a factor for those northern roads, and, as I said, was originally built in order that oils might be reached by the New York Central.
Q. But in addition to the sum of 22½ cents, or whatever it may have been, which these trunk lines paid to the American Transfer Company, that company as a transporter of oil through its own pipe got this pipage charge besides?
A. I never so understood it. As I remember the facts in the case, while there was a nominal pipage—there might have been; I do not say there was; I do not remember.
Q. You do not say there was?
A. I do not remember. But while there might have been a nominal pipage, that nominal pipage might have been absorbed in the crude oil. In other words, it threw away its nominal pipage and relied——
Q. I am speaking now solely of the relations of the American Transfer Company to the railroads. The former received 22½ cents on every barrel of oil passing over the Pennsylvania road and the other roads. But the American Transfer Company was a transporter of oil itself, and to the extent it transported oil through its pipes it made charge for that service also?
A. That is a point where I say I want to correct you. While it may have made a nominal charge, about which my memory fails me, I say it threw away that nominal charge by paying to the owner or the producer of the oil the value of the oil at the wells, plus what that pipage might have been, and that twenty odd cents paid by the Pennsylvania constituted its gross revenue.
NUMBER 31 (See page [1199])
LETTER TO PRESIDENT SCOTT OF THE PENNSYLVANIA RAILROAD FROM B. B. CAMPBELL AND E. G. PATTERSON
[Proceedings in Relation to Trusts, House of Representatives, 1888. Report Number 3112, pages 363–365.]
To the President and Directors Pennsylvania Railroad Company.
Gentlemen: About July 1 last the undersigned were of a delegation from the Oil Region of our state, asking of your road an assurance that its course during the preceding two months, in giving to all producers and shippers of petroleum equal facilities and impartial rates, might be formally made its permanent policy.
In an interview with your president at that time, that assurance was given, coupled with the requisition that such support should be given it by the producers and shippers as would repay it for the exertion it must make in defending that policy, and guaranteeing that such support should be continuous and permanent.
The people of the Oil Region were only too glad to enter into such an agreement, and steps were immediately taken of a practical nature to carry it out.
It was understood that it could not be immediately done.
After the formal abandonment by the trunk lines of the South Improvement Company in 1872, your road for some months faithfully adhered, as we believe, to the pledge then given by all the trunk lines, that no discrimination should thenceforth be permitted. We believe also that it stood alone among the roads in adhering to it, for gradually the persons constituting the South Improvement Company were placed by the roads in as favourable a position as to rates and facilities as had been stipulated in the original contract with that company. At this time the line of your road in Western Pennsylvania, including that under your influence and control, was dotted with refineries capable of producing a large proportion of the refined oil needed by the world. The policy of the Standard Oil Company, the successor in everything but name of the South Improvement Company, has resulted in the dismantling and abandonment of every one of those refineries (as soon as they fell into their possession) which could not be reached by some other and a rival road to yours, and now there are in the Oil Region proper but few refineries and those universally owned by the Standard Oil Company, those in Pittsburg being owned or controlled by that combination or by the Conduit or Empire lines. The use and export of crude oil is but a small proportion of the consumption, and time and money were required to re-establish this great product upon its former basis, and these people were glad to furnish all needed means to accomplish this end, as are also capitalists at other points not strictly within the Oil Region, yet upon your lines.
We are met in the midst of this preparation by assertion of agents of the combination, and as accepted news by the press, that such a combination is entered into, or under consideration by your road and the Empire Transportation Company, the Erie, Central, Lake Shore, and Baltimore roads of the one part, and the Standard Oil Company of the other, as would preclude your road from carrying out the policy announced by your president at the interview heretofore referred to.
We believe there is danger that such a result may be reached, and we in behalf of these whom we represent, in making our efforts to prevent its accomplishment, or if accomplished to defeat it, as the first step, address this communication to you, desiring to present its aspect as affecting your road from our stand-point.
So far as we, and the general public are affected, you will not question that the present scheme is but the repetition of the South Improvement scheme, never abandoned by its authors, and seeking the sole and absolute control of all petroleum produced, purchased, refined, and shipped within the states of Pennsylvania, New York, Ohio, or West Virginia.
The over-production of 1873, 1874, 1875, and the consequent almost entire destruction of petroleum values, gave the Standard Oil Company, with its organisation and capital, almost the desired monopoly. The equalisation of consumption and production of 1876–1877 brought that combination to the same point that they were in 1872—utterly unable by reason of geographical position, if for no other, to monopolise this product without the co-operation of all the transportation, and then only under a contract similar to that of the South Improvement Company, and including all of its dangerous and extraordinary features. None other can serve them, and so they stand to-day, and we believe that your road can enter into no compromise, treaty, or arrangement which will serve the ends of the monopoly, under any less stringent stipulations and devoid of the liabilities thereof.
Under such an arrangement it is probable that the Central and Erie have transported its oil, during nearly all of this year. It is now an open secret in the producing region, that no charges follow the shipments over at least one of these roads, and crude oil is delivered in New York, on shipping order, at prices which barely repay the cost of packages and contents, with little or no remainder for transportation charges. This aid to the scheme of the combination is possibly given in view of the high tariff and consequent large revenue promised to be derived hereafter, when the scheme has been made a success, and all opposition in trade and transportation extinguished.
Suppose your opposition to be withdrawn, and you join the alliance, when does your profit come in? We are entitled to impartiality. As we are advised, the law, common and statute, provides for it; it pronounces those participating in such a scheme conspirators against the public weal, and there is no court upon your line but what will enforce by mandamus and injunction the impartiality that we ask. The combination will promise you an immediate increase of revenue. If we are well advised, will you realise upon that promise? Can you make a contract with them that if we do not succeed in destroying, it will be their interest to keep? You will not have a refinery left; and they are now completing pipe-lines from Pittsburg to Oil City, and can deliver the oil received by all their pipe-lines, independent of your road and its branches. In case of a contract with them executed but afterwards broken, from what source will you derive your oil traffic and what court will enforce the broken contract in your favour? We urge that you cannot enter into any arrangement with the monopoly that can be permanently useful to it and to you, and doubt if it can be made temporarily so.
Suppose that you decline to enter into such a treaty, or any such scheme, but announce and adhere to the opposite policy? There is no law, not even that of necessity, to compel you to serve the ends of the Standard Oil Company.
If Messrs. Vanderbilt and Jewett believe that their aid alone is insufficient to the establishment of the monopoly, for how long will they carry its oil as at present for nothing, when they could have full rates, by uniting the railroad interest, and leaving the Standard Oil Company to do its business in common with all others?
If the Pennsylvania Railroad, having the geographical position in its favour, will announce and adhere to the policy of impartial and competitive rates, in three or six months, it can have all the facilities and extent of business which the Standard Oil Company can give the competitive roads, and by men who have all to gain by so doing.
We ask consideration of our views and of our assurance of good results from their favourable consideration.
If you choose to place the matter in the light of an experiment, its trial can cost you nothing but the failure to realise upon the immediate fulfillment of the promises of the common enemy, and that realisation we believe will not be permitted.
Very respectfully,
B. B. Campbell, of Pittsburg,
E. G. Patterson, of Titusville.
Philadelphia, September 11, 1877.