From: THE HISTORY OF THE STANDARD OIL COMPANY
Published by McClure, Phillips and Co.1904
Note: This excerpt is taken from pages 168-178 of the original work, which was originally published in McClure's magazine.and has been edited for brevity and clarity. --JS
Tarbell’s devastating work provides a vivid account of the rough-and-tumble nature of business around the turn of the century. This excerpt highlights struggles involving John D. Rockefeller’s Standard Oil Company, independent oil men, and railroads. Note in particular that during the late 19th century, government at all levels, rather than being an instrument to control big business, was instead used by big businesses as a tool with which to bludgeon their opponents. It is worth noting that Standard Oil, not feeling they were doing anything wrong, opened their records to Tarbell's investigation, a decision they no doubt came to regret. The Company was broken up in 1911, though its descendants are alive and well today as the Exxon Corporation.
With Congress in such a temper the oil men felt that there might be some hope of securing the regulation of interstate commerce they had asked for in 1872. The agitation resulted in the presentation in the House of Representatives of the first Interstate Commerce Bill which promised to be effective. The bill was presented by James H. Hopkins of Pittsburgh. In aid of his bill a House investigation was asked. It was soon evident that the Standard was an enemy of this investigation. Now what Mr. Hopkins wanted was to compel the railroads to present their contracts with the Standard Oil Company. The Committee summoned the proper railroad officers and the treasurer of the Standard Oil Company. Of the railroad men, only one appeared, and he refused to answer the questions asked or to furnish the documents demanded. The Standard treasurer refused also to furnish the committee with information. The two principal witnesses of the oil men were E. G. Patterson of Titusville and Frank Rockefeller of Cleveland, a brother of John D. Rockefeller. Mr. Patterson sketched the history of the oil business since the South Improvement Company identified the Standard Oil Company with that organization, and framed the specific complaint of the oil men, as follows: “The railroad companies have combined with an organization of individuals known as the Standard Ring; they give to that party the sole and entire control of all the petroleum refining interest and petroleum shipping interest in the United States, and consequently place the whole producing interest entirely at their mercy. If they succeed they place the price of refined oil as high as they please. It is simply optional with them how much to give us for what we produce.”
Frank Rockefeller gave a pretty complete story of the trials of an independent refiner. He declared that at the moment, his concern, the Pioneer Oil Company, was unable to get the same rates as the Standard; the freight agent frankly told him that unless he could give the road the same amount of oil to transport that the Standard did, he could not give the rate the Standard enjoyed. Mr. Rockefeller said that in his belief there was a pooling arrangement between the railroads and the Standard and that the rebate given was “divided up between the Standard Oil Company and the railroad officials.” He repeatedly declared to the committee that he did not know this to be a positive fact, that he had no proof, but that he believed such was the truth. …
Of course after this controversy the railroads were more obdurate than ever. The railroad men were active in securing the suppression of the investigations, and they soon succeeded not only in doing that but in pigeon-holing for the time Mr. Hopkins's Interstate Commerce Bill.
The oil men began to seek an independent outlet to the sea. The first project to attract attention was the Columbia Conduit Pipe Line, begun by Dr. David Hostetter of Pittsburgh. He had conceived the idea of piping it to Pittsburgh, where he could make a connection with the Baltimore and Ohio road, which up to this time had refused to go into the oil pool. Now at that time the right of eminent domain for pipes had been granted in but eight counties of Western Pennsylvania. Allegheny County, in which Pittsburgh is located, was not included in the eight, a restriction which the oil men attributed rightly, no doubt, to the influence of the Pennsylvania Railroad in the State Legislature. That road could hardly have been expected to allow the pipes to go to Pittsburgh and connect with a rival road if it could help it.
Dr. Hostetter succeeded in buying a right-of-way through the county, however, and laid his pipes within a few miles of the city to a point where he had to pass under a branch of the Pennsylvania Railroad. The spot chosen was the bed of a stream over which the railroad passed by a bridge. Dr. Hostetter claimed he had bought the bed of the run and that the railroad owned simply the right to span the run. He put down his pipes, and the railroad sent a force of armed men to the spot, tore up the pipes, fortified their position and prepared to hold the fort. The oil men came down in a body, and, seizing an opportune moment, got possession of the disputed point. The railroad had thirty of them arrested for riot, but was not able to get them committed; it did succeed, however, in preventing the relaying of the pipes, and a long litigation over Dr. Hostetter's right to pass under the road ensued.
Disgusted with this turn of affairs Dr. Hostetter leased the line to three young Independent oil men. Resourceful and determined, they built tank wagons into which the oil from the pipe was run and was carted across the tracks on the public highway, turned into storage tanks and again re-piped and pumped to Pittsburgh. They were soon doing a good business. The fight to get the Columbia Conduit Line into Pittsburgh aroused again the agitation in favor of a free pipe-line bill, and early in 1875 bills were presented in both the Senate and House of the state, and bitter and long fights over them followed. It was charged that the bills were in the interest of Dr. Hostetter. “He wants to transport his other products cheaply,” sneered one opponent! Many petitions for the bill were circulated, but there were even stronger remonstrances, and the source of some of them was suspicious enough; for instance, that of the “Pittsburgh refiners representing about one-third of the refining capacity of the Pennsylvania district and nearly one third of the entire capacity now in business.” As the Pittsburgh refiners were nearly all either owned or leased by the Standard concern, and the few independents had no hope save in a free pipe-line, there seems to be no doubt about the origin of that remonstrance. Although the bills were strongly supported, they were defeated, and the Columbia Conduit Line continued to “break bulk” and cart its oil over the railroad track.
Another route was arranged which for a time promised success. This was to bring crude oil by barges to Pittsburgh, then to carry the refined down the Ohio River to Huntington and thence by the Richmond and Chesapeake road to Richmond. This scheme, started in February, was well under way by May, and “On to Richmond!” was the cry of the independents. Everything possible was done to make this attempt fail. An effort was even made to prevent the barges which came down the Allegheny River from unloading, and this actually succeeded for some time. There seemed to be always some hitch in each one of the channels which the independents tried, some point at which they could be so harassed that the chance of a living freight rate which they had seen was destroyed.
Sometime in April, 1876, the most ambitious project of all was announced—a seaboard pipe-line to be run from the Oil Regions to Baltimore. Up to this time the pipe lines had been used merely to gather the oil and carry it to the railroads. The longest single line in operation was the Columbia Conduit, thirty miles long. The idea of pumping oil over the mountains to the sea was regarded generally as chimerical. To a trained civil engineer it did not, however, present any insuperable obstacles, and in the winter of 1875 [an engineer, General Herman Haupt, was engaged to oversee the project.]
It was not long before the scheme began to attract serious attention. The Eastern papers in particular took it up. The references to it were, as a whole, favorable. It was regarded everywhere as a remarkable undertaking: “Worthy,” the New York Graphic said, “to be coupled with the Brooklyn Bridge, the blowing up of Hell Gate, and the tunneling of the Hudson River.” It was a tremendous undertaking, for the line would be, when finished, at least 500 miles long, and it would be worked by thirty or more tremendous pumps. On July 25 a meeting was held presenting publicly the reports of General Haupt. The authority and seriousness of the scheme as set forth at this meeting alarmed the railroads. If this seaboard line went through, it was farewell to the railroad-Standard combination. Oil could be shipped to the seaboard by it at a cost of 16-2/3 cents a barrel. All of the interests, little and big, which believed that they would be injured by the success of the line, began an attack.
[The first attacks, directed at General Haupt, who vigorously defended himself in the press, had no merit.]
Under the direction of the Pennsylvania Railroad, it was believed, the Philadelphia papers began to attack the plan. Their claim was that the charters under which the Pennsylvania Transportation Company expected to operate would not allow them to lay such a pipe-line. The opposition became such that the New York papers began to take notice of it. The Derrick on September 16, 1876, copies an article from the New York Bulletin in which it is said that the railroads and the Standard Oil Company, “now stand in gladiatorial array, with shields poised and sword ready to deal the cut.”
An opposition began to arise, too, from farmers through whose property an attempt was being made to obtain right of way. In several counties the farmers complained to the secretary of internal affairs, saying that the company had no business to take their property for a pipe-line. One of the common complaints of the farmers’ newspapers was that leakage from the pipes would spoil the springs of water, curdle milk, and burn down barns. The matter assumed such proportions that the secretary referred it to the attorney general for a hearing.
In the meantime the Pennsylvania Transportation Company made the most strenuous efforts to secure the right of way. A large number of men were sent out to talk over the farmers into signing the leases. Hand bills were distributed with an appeal to be generous and to free the oil business from a monopoly that was crushing it. These same circulars told the farmers that a monopoly had hired agents all along the route misrepresenting the facts about their intentions. Mr. Harley, under the excitement of the enterprise and the opposition it aroused, became a public figure, and in October the New York Graphic gave a long interview with him. In this interview Mr. Harley claimed that the pipe-line scheme was gotten up to escape the Standard Oil monopoly. Litigation, he declared, was all his scheme had to fear. “John D. Rockefeller, president of the Standard monopoly,” he said, “is working against us in the country newspapers, prejudicing the farmers and raising issues in the courts, and seeking also to embroil us with other carrying lines.”
It was not long, however, before something more serious than the farmers and their complaints got in the way of the Pennsylvania Transportation Company. This was a rumor that the company was financially embarrassed. Their certificates were refused on the market, and in November a receiver was appointed. Different members of the company were arrested for fraud, among them two or three of the best known men in the Oil Regions. The rumors proved only too true. The company had been grossly mismanaged, and the verification of the charges against it put an end to this first scheme for a seaboard pipe-line.