CHAPTER IX

WHO PIPED AND WHO DANCED

Thus, by 1878, the independent producers and refiners found themselves caught in a battue like rabbits driven in for the sport of a Prince of Wales.

If the richest person then in America--that artificial but very real person the Pennsylvania Railroad--could not keep its pipe lines, nobody could. The war for the union, which ended with its surrender in 1877, closed the pipe-line industry to the people. The unanimous "no" of all the railroads which followed completed the corral.

Oil, when it got to market, found that those who had become the owners of the pipe lines were also the owners of most of the refineries, and so the only large buyers.[175] "Practically to-day there is but one buyer of crude oil for us.... We take our commodity to one buyer; we take the price he chooses to give us without redress, with no right of appeal."[176]

Then the sole carrier--the pipe-line company--refused to take the oil into its pipes--the oil as it came out of the wells--unless first sold to its other self, the oil combination. This was called "immediate shipment." Forced to waste or sell his oil, the producer, under this compulsion, had to take what he could get.[177] The Hon. Lewis Emery, Jr., a member of the State Senate of Pennsylvania, gave the authorities of the State an account of the "immediate shipment" evolution of American market liberty. "We go down," he said, "to the office and stand in a line, sometimes half a day--people in a line reaching out into the street--sixty and seventy of us. When our turn comes we go in and ask them to buy, and they graciously will take it. I am an owner in six different companies, and we all suffer the same."

To educate the producer to sell "always below the market," the Pipe Line let his oil spill itself on the ground for a few days. "We lost a considerable amount of oil, probably several thousand barrels," another producer said.

"Will you state at what price as compared with the market price, whether above or below, you sold that oil?"

"It was always below."

Asked why he sold it below the market, he said:

"Because the line would not run it until it was sold."[178]

The hills of Pennsylvania began to growl and redden as in 1872.

The Secretary of Internal Affairs was hung in effigy. Mass meetings were held--some tumultuous, others quiet; processions of masked men marched the streets, and groaned and hooted in front of the newspaper offices and the business places of the combination. In the morning the streets and sidewalks were frequently found placarded with cabalistic signs and letters, and occasionally printed proclamations and warnings. Most of the lending newspapers of the region had been either absolutely purchased by the oil combination or paid to keep silence. Others occasionally broke forth in violent articles advising the use of force.[179]

In the McKean County field the people rose in rebellion. They got up a Phantom Party, in its provocation and spirit much like a phantom party which, contrary to law and order, boarded some ships in Boston harbor a century before. One thousand men, wrapped in white sheets, marched by night from Tarport to Bradford, the headquarters in that province of the sole buyer. Not a word was spoken.

It was not enough to make the people sell under compulsion. A day came when the only buyer would not buy and the only piper would not pipe. This brought the Parker district to the verge of civil war. The citizens were in a state of terrible excitement; the pipe lines would not run oil unless it was sold; the only buyers--viz., the agents of the oil combination--would not buy oil, stating that they could not get cars; hundreds of wells were stopped to their great injury. Thousands more, whose owners were afraid to stop them for fear of damage by salt water, were pumping the oil on the ground. The leaders used all the influence they had to prevent an outbreak and destruction of railroad and pipe lines. The most important of them went over to the Allegheny Valley Railroad office and telegraphed to the president: "The refusal to run oil unless sold upon immediate shipment and of the railroad to furnish cars has created such a degree of excitement here that the most conservative part of the citizens will not be able to control the peace, and I fear that the scenes of last July will be repeated on an aggravated scale."[180]

Three of the highest officials of the road sought an immediate interview with this leader of the producers. He warned them, and the Pennsylvania road which controlled their oil business, that unless immediate relief were furnished there would be an outbreak in the oil regions, because, as he told them, "The idea of a scarcity of cars on daily shipments of less than 30,000 barrels a day was such an absurd, barefaced pretence, that he could not expect men of ordinary intelligence to accept any excuses for the absence of cars, as the preceding fall, when business required, the railroads could carry day after day from 50,000 to 60,000 barrels of oil."[181] The warning was heeded. Thousands of empty cars, which the combination and its railroad allies had said couldn't be had anywhere, suddenly appeared hastening to Parker, blocking up the tracks in all directions, deranging the passenger business of the road. "They looked like mosquitoes coming out of a swamp." The sole buyer began buying again, and for the whole week, after having declared themselves unable to buy or move any, the railroads moved 50,000 barrels a day.[182] Producers under such rule saw their prices decrease and their land pass out of their possession, as was inevitable.

Ten years later in the Ohio oil-field all the substantial features of the plan we saw culminate at Parker are to be found in full play. There, also, the oil combination, Congress was told, is the only purchaser, and it fixes the price to suit itself. The production of the Ohio fields was between 18,000 and 20,000 barrels a day, but it could easily produce between 30,000 and 32,000. Because the only buyer refused to take care of the oil, wells have been shut back. Wells, which if opened up would run 1000 or 2000 or even more, were shut in four days out of the week.[183]

This culmination of 1878 made the people act. The producers were being ground to powder by the fact that an enemy had possession of their local pipes, their tankage, and their railways. "I am the unfortunate owner," said one of them, "of interests in nearly one hundred pumping wells. I have produced over half a million barrels of oil."[184] Oil was running out of the ground at the rate of 15,000,000 barrels a year, but the New York refiners who were in command of plenty of capital, said:

"We don't dare build large refineries, for we don't know where we could get the oil."[185]

At last the people organized the Tidewater Pipe Line. This was the first successful attempt to realize the idea often broached of a pipe line to the seaboard. It was the last hope of the "outsiders"--the "independents." "Nothing short of the ingenuity that is born of necessity and desperation" produced that pipe line. It was well contrived and well manned, and had plenty of money. It was organized in 1878, with a capital of $1,000,000, which increased in a few years to $5,000,000. It built a pipe from the oil regions to Williamsport--105 miles--on the Philadelphia and Reading Railroad, whence the oil was carried in cars by that company and over the Jersey Central to Philadelphia and New York.

Unlimited capital and strategy did all that could be done against the Tidewater. At one place, to head it off, a strip of land barring its progress was bought entirely across a valley. It escaped by climbing the hills. At another point it had to cross under a railroad. The railroad officers forbade. Riding around, almost in despair, its engineer saw a culvert where there was no watercourse. It was for a right of passage which a farmer, whose land was cut in two by the railroad, had reserved in perpetuity for driving his cattle in safety to pasture. It did not take long to make a bargain with the farmer for permission to lay the pipe there.

The pipe line was finished and ready to move oil about the 1st of June, 1879. On June 5th a meeting was held at Saratoga of representatives of the four trunk-line railroads and of members of the oil trust. The meeting decided that the new competitor should be fought to the death. The rate on oil, which had been $1.15 a barrel, was reduced to 80, then to 30, to 20, to 15 cents by the railroads, to make the business unprofitable enough to ruin this first attempt to pipe oil to the seaboard. Finally the roads carried a barrel, weighing 390 pounds, 400 miles for the combination for 10 cents or less.[186] The representative of the Tidewater offered to prove to Congress, in 1880, if it would order an investigation--which it would not--that "the announced and ostensible object of the conference at Saratoga was to destroy the credit of the Tidewater, and to enable the oil combination to buy up the new pipe line, and that a time was fixed by the combination within which it promised to secure the control of the pipe line--provided the trunk-lines would make the rates for carrying oil so low that all concerned in transportation would lose money.[187] There can be no doubt," he continued, "that, taking the avowed and ostensible object of the Saratoga meeting as the true one, it constituted, on the part of the willing participants, a criminal conspiracy of the most dangerous character."

One of the chief officials of the Pennsylvania Railroad testified to the competition which his road had carried on with the Tidewater. "It certainly was fought," he said; "the rates were considerably reduced."[188] Rates were put down to points so low that the railroad men would never tell what they were. I have no knowledge--I have no recollection--was all the president and general freight agent of the Pennsylvania Railroad could be got to say, when before the Interstate Commerce Commission.[189] "Not enough to pay for the wheel grease," said the general freight agent.[190] The oil trust also cut the prices of pipeage by its local lines from 20 cents to 5 cents a barrel, turning cheapness into the enemy of cheapness.

But the Tidewater was strong enough to withstand even so formidable an assault as this. As its business was small, its losses were small; but the railroads, making this war on it for the benefit of others, suffered heavily. The trunk-lines, it has been calculated, wilfully threw away profits equal to $10,000,000 a year for the sake of inflicting a loss of $100,000 on the pipe lines.[191] Enough revenue was lost to pay dividends of 2-1/2 to 5 per cent. on the total capital of the roads.

One effect that followed this reduction in rates was a corresponding decline in the price of oil at New York, in which the cost of freight is a constant element. The Committee of the New York Legislature found in the testimony it heard reason to believe that the members of the oil trust took advantage of their advance knowledge to sell at high prices, to those who did not know, all they would buy for future delivery.

The "Hepburn" report of the New York Legislature of 1879 gives special prominence to the computations that $1,500,000 were the profits of this speculative deal.[192]

The customers of the Tidewater, the independent refiners in Philadelphia, were charged by the Pennsylvania Railroad on oil that came through the Tidewater 15 cents a barrel for one mile of hauling. The utmost the law allowed them was half a cent a mile, and they were carrying oil 500 miles to New York for the same charge of 15 cents a barrel, and less. Under such pressure these independent refineries, which the Tidewater had been built to supply, sold out one after another. The Tidewater was then in the position of a great transporting company, that had spent a large amount of money to bring a great product to its Philadelphia terminus, and found that refining establishments which had been begging it to give them oil had become the cohorts of its opponent. To meet this the Tidewater built refineries of its own at Chester, and at Bayonne, New Jersey, on New York waters.

When asked for a rate to another point, the Pennsylvania gave one that was three and four times as much as they would charge the oil trust, but added, "we cannot make a rate on the empty cars returning." That is, as it was interpreted, "we will carry the oil, but we will not permit the empty cars to come over the roads to get the oil. They must be taken on a wheelbarrow, or by canal, or by balloon."[193] The war went on. Attempts were made to seduce the officials of the Tidewater. A stockholder, who had been too poor to pay for his stock, received a large sum from the oil combination and began a vexatious suit for a receivership.[194] A minority forced their way into the offices of the company, and took violent possession of it by a "farcical, fraudulent, and void" election, as the court decided in annulling it. Its financial credit was attacked in the money market and by injunctions against its bonds.

Affidavits were offered from members of the oil combination denying that they had had anything to do with these proceedings. In reference to these affidavits, the representative of the Tidewater reminded the court that that combination was a multifarious body. "One-half of them," he said, "do a thing, and the other half swear they know nothing about it. In pursuance of this Machiavelian policy, they have eight or ten gentlemen to conduct negotiations, and eight or ten to say they do not know anything about them."

Then, with no visible cause, the capacity of the pipe fell below the demands upon it. This insufficient capacity was pleaded in court as one of the reasons why the pipe should be taken out of the hands of its owners. One day the cause was discovered--a plug of wood. Some mysterious hand had been set to drive a square block of wood into the pipe so as to cut down its capacity to one-third. The representative of the Tidewater declared in court his belief that this plug had been placed by "people on the other side who have made affidavits in this case." A similar deed, but much worse, as it might have cost many lives, was done during the contest with Toledo, nine years later.[195]

The Tidewater was successful, but not successful enough. It owned 400 miles of pipe, including the 105 miles of the trunk-line, and had control of nearly 3,000,000 barrels of tankage. It did a great work for the people. "It was," the Philadelphia _Press_ said, in 1883, "the child of war. It has been a barrier between the producers and the monopoly which would crush them if it dared." While these words of exultation were being penned, a surrender was under negotiation. The Tidewater's managers were nearly worn out. These tactics of corrupting their officers, slandering their credit, buying up their customers, stealing their elections, garroting them with lawsuits founded on falsehoods, shutting them off the railroads, and plugging up their pipe in the dark, were too much. They entered into a pool. The two companies in the summer of 1883 "recognized" each other, as the trunk lines do, and agreed to divide the business in proportions, which would net the Tidewater $500,000 a year. The announcement that this pool had been forced on the Tidewater fell like a death-blow on the people of the oil regions. "The Tidewater," the Philadelphia _Press_ said, editorially, "will probably retain a nominal identity as a corporation, but its usefulness to the public and its claim to popular confidence and encouragement were extinguished the instant it consented to enter into alliance with the unscrupulous monopoly which resorts to that means of conciliating and bribing what it had failed to destroy." As was anticipated by the _Press_, the Tidewater retained its nominal identity, but that was all. Its surrender was admitted by its principal organizer, Mr. Franklin B. Gowen. The officials of the Pennsylvania Railroad have testified to it. "They made an arrangement of some kind, the conditions of which I never knew; one swallowed the other or both swallowed the other, or something, and settled up their difficulties,"[196] said the general freight agent. The president said: "The competition between these pipe lines ceased."[197]

The attorney of the Tidewater was asked if there were any negotiations which resulted in a compromise of the differences with the oil combination.

"If by differences," he replied, "you mean competition in trade, I answer the question, yes. That resulted in a written contract.... The purpose of the contract was to settle the rivalry in business between the two companies, each company to take a percentage of transportation and gathering, and each to do with the oil as it saw fit."[198]

The treasurer of the Tidewater, who had been in its service since 1880, corroborated its attorney. A contract had been made between the two; the date of it was October 9, 1883. Copies of the contracts are in the author's possession.

The Interstate Commerce Commission in 1892 judicially found the same fact. It says: "About December, 1883, the pipe lines, with the view of getting better rates, adjusted their differences, and the competition between them ceased. The pipe-line business appears then to have passed into the control of the National Transit Company."[199] All but 6 per cent. of the National Transit Company is owned by the oil trust. It formed practically one-third the imposing bulk of the $70,000,000 of the trust of 1882.[200] If anything can be made certain by human testimony this evidence proves that these pipe lines stopped competing in 1883. The witnesses are the men who negotiated the contract, and upon whose approval it depended. But when the president of the trust was asked under oath, in 1888, if there were any pipe lines to tide-water competing with it, he named, as "a competing company," "the Tidewater Pipe Line."

"The Tidewater Company? Does that compete with your company?"

"It does."

"It is in opposition to it?"

"It is in opposition to it."[201]

In the same spirit he denied, in 1883, that he had anything to do with the company which had represented the oil trust in this "swallowing or something" of the Tidewater. This, the National Transit Company, was the most important member of the trust. Under its cover, by means like those described, from New York to West Virginia and Ohio, almost all the pipes for gathering and distributing oil have been brought into one ownership. Millions yearly of the earnings of this company were pooled with all the others in the trust, and the president was receiving his share of them four times a year. He was the sole attorney[202] authorized to sign contracts for the trustees, who thus held all the combined companies in a common control. These trustees, of whom he was the chief, not only controlled but owned as their personal property more than half the stock of every company represented. But these facts were not then known to the public. It was not intended that they should be known, as the struggle to conceal them from the New York Legislature five years later--in 1888--showed.

"Have you any connection with the National Transit Company?" he was asked, after taking the oath.

"I have not."[203]

When the Tidewater passed under this alien control, Mr. Franklin B. Gowen severed all his connection with it. He did not hold himself for sale to any man who had money to pay fees. He stood at a height where the profession of law was immeasurably above prostitution in the temples of justice--the odious aspect in which the sacrifice of purity in the ancient temples of Aphrodite is reproduced in our courts. It would have been impossible for him to combine the functions of a great law reformer and procurer of judicial virtue for railroad corporation wreckers. He never forgot what some successful lawyers seem never to remember--that the lawyer is, as much as the judge, an officer of the court and of justice. While he lived he was proud to be recognized as the chief defender in the courts of the rights of those whom it was sought to crush in this industry, although he thus allied himself with the poor and heavy laden. He could have used his anti-monopoly eloquence as an advertisement of his value to monopoly; but he would not sell his soul to fill his stomach. His heart revolted against the wicked cruelty with which he saw the strong misuse the weak, and his penetrating vision saw clearly the ruin to which overgrown power and conscienceless greed were hurrying the liberties of his country. In his speech before the Pennsylvania Legislature in 1883, advocating a law to prevent the use of railway power by railway officials to redistribute the property of the people among their favorites, he said, speaking of what had been done in the oil regions of Pennsylvania: "If such a state of facts as I now call your attention to had been permitted by any government in Europe or Asia for a six months, instead of the sixteen years it has existed in this Commonwealth, the crown and sceptre of its ruler would have been ground into the dust, and yet the good, honest, patient, long-suffering people have submitted to it in this Commonwealth until the time has come that if we hold our peace the very stones will cry out.

"I for one intend to submit to it no longer. You may say it is unwise for me to attack this wrong, but I have attacked it before and I will attack it again. If I could only throw off the other burdens that rest upon my shoulders, I would feel it to be my duty to preach resistance to this great wrong, as Peter the Hermit preached the crusade. I would go through this State from Lake Erie to the Delaware; I would go into every part of this Commonwealth and endeavor, by the plain recital of the facts, to raise up such a feeling and such a power as would make itself heard and felt, and by the fair, open, honest, and proper enforcement of the law, right the wrong, and teach the guilty authors of this infamous tyranny

"'That truth remembered long: When once their slumbering passions waked, The peaceful are the strong.'"

Mr. Gowen bravely fulfilled his pledge not to submit. His principal occupation became the championship in the courts and the Interstate Commerce Commission of those who were oppressed by this crushing power. His incorruptible lance was always in place, until the morning he was found dead in his room in Washington.

The oil combination had, up to this time, sent all its oil east by rail as it had no pipe line, and its faithful fools, the railroads, therefore burned their fingers with joy to roast the Tidewater for so good a customer. But while the railroad officials were wasting their employers' property to destroy the combination's new competitor, its astute managers, seeing how good a thing pipe lines were, quietly built a system of their own to the seaboard. The railroads had helped them get hold of the pipe lines--had in repeated cases, as the Erie, the Atlantic and Great Western, the Pennsylvania, the Cleveland and Marietta did, allowed them to lay their pipes on the lands of the railroads--and were now to see the pipe lines used to replace the railroads in the transportation of oil. These oil men saw what the railroad men had not the wit to see--or else lacked the virtue to live up to--that the pipe line is an oil railway. It requires no cars and no locomotives; it moves oil without risk of fire or loss; it is very much cheaper than the ordinary railway, for this freight moves itself after being lifted up by pumps. The pipe line was the sure competitor of the railway, fated to be either its servant or master, as the railroad chose to use it or lose it. The railways sentimentally helped the trust to gather these rival transportation lines into its hands; then the trust, with the real genius of conquest, threw the railroads to one side. A system of trunk-line pipes was at once pushed vigorously to completion in all directions. While the members of the oil trust were building these pipe lines to take away the oil business of the railroads, the officials of the latter were giving them by rebates the money to do it with. At the expense of their own employers, the owners of the railroads, these freight agents and general managers presented to the monopoly, out of the freight earnings of the oil business, the money with which to build the pipe lines that would destroy that branch of the business of the roads.

It was the Tidewater that proved the feasibility of trunk pipe lines. The trunk pipe lines the combination has built were in imitation. Extraordinary pains have been taken to sophisticate public opinion with regard to all these matters--for the ignorance of the public is the real capital of monopoly--and with great success. The history we have transcribed from the public records is refined by one of the combination into the following illuminant:

"About 1879 or 1880 it was discovered that railways were inadequate to the task of getting oil to the seaboard as rapidly as needed. Combined capital and energy were equal to the emergency. No need to detail how it was done. To-day there reaches,"[204] etc., etc. It must have been on some such authority that this, from one of our leading religious journals, was founded: "Only by such union"--of the refiners--"could pipe lines have been laid from the oil wells to the tide-water, reducing to the smallest amount the cost of transportation."[205] An account of the pipe-line system in the New York _Sun_, of December 14, 1887, describing the operations of the great pumps that force the oil through the pipes, says: "Every time the piston of the engine passes forward and back a barrel of oil is sent seaward. A barrel of oil is forced on its way every seven seconds of every hour of the twenty-four. Every pulsation of the gigantic pumps that are throbbing ceaselessly day and night is known and numbered at headquarters in New York at the close of each day's business." This heart of a machine, beating at the headquarters in New York, and numbering its beats day and night, stands for thousands of hearts whose throbs of hope have been transmuted into this metallic substitute. This heart counts out a gold dollar for every drop of blood that used to run through the living breasts of the men who divined, projected, accomplished, and lost.