3. As to Number 3, the insufficiency of my estimate.

The items which enter into such an estimate are pure and simple. There has been but one omission, and that is malicious mischief or deviltry, and this item is so uncertain that, without a more intimate acquaintance with “Vidi” and his supporters, I could not undertake to estimate it. I have put coal at five dollars per ton or eighteen cents per bushel, now worth five cents at Brady’s and eight at Pittsburg. Is not this enough? I have allowed fifty per cent. greater consumption at each station than has been estimated by others. I have allowed $1,000 a year for each of two engine men at each station. Will anyone say this is not sufficient? And I have, to be safe, estimated the work down below the results given by any of the ordinary hydraulic formula. It would be absurd to tell experienced pipe men that oil cannot be pumped fifteen miles under 900 pounds pressure through a four–inch pipe with a discharge of 5,000 barrels per day, which is all that the estimate is based upon, and it allows sixty-five days’ stoppage besides. Please, gentlemen, let me alone. I have had enough of newspaper controversy in former years. I am sick of it. H. HAUPT. At the same time that General Haupt was attacked the Pennsylvania Transportation Company was criticised for bad management. A long letter to the Derrick August 14, 1876, claimed that the company in the past had been mismanaged; that the credit it asked could not be given safely; that its management had been such that it had scarcely any business left. Indeed this critic claimed that the last pipe-line organised, a small line known as the Keystone, had during the last six months done almost double the business of the Pennsylvania. 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 Indiana and Armstrong 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 rumour 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 rumours 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. While all these efforts doomed to failure or to but temporary success were making, a larger attempt to meet Mr. Rockefeller’s consolidation was quietly under way. Among those interested in the oil business who had watched the growing power of the Standard with most concern was the head of the Empire Transportation Company, Colonel Joseph D. Potts. In connection with the Pennsylvania Railroad Colonel Potts had built up this concern, founded in 1865, until it was the most perfectly developed oil transporter in the country. It operated 500 miles of pipe, owned a thousand oil-tank cars, controlled large oil yards at Communipaw, New Jersey, was in every respect indeed a model business organisation, and it had the satisfaction of knowing that what it was it had made itself from raw material, that its methods were its own, and that the practices it had developed were those followed by other pipe-line companies. While the Empire had far outstripped all its early competitors, there had grown up in the last year a rival concern which Colonel Potts must have watched with anxiety. This concern, known as the United Pipe Line, was really a Standard organisation, for Mr. Rockefeller, in carrying out his plan of controlling all the oil refineries of the country, had been forced gradually into the pipe-line business. His first venture seems to have been in 1873. In that year the oil-shipping firm of J. A. Bostwick and Company laid a short pipe in the Lower Field, as the oil country along the Allegheny River was called. Now J. A. Bostwick was one of the charter members of the South Improvement Company, and when Mr. Rockefeller enlarged his business in 1872 because of the power that enterprise gave him, he took Mr. Bostwick into the Standard. This alliance, like all the operations of that venture, was secret. The bitterness of the Oil Regions against the members of the South Improvement Company was so great for many months after the Oil War that Mr. Bostwick and Mr. Rockefeller seem to have concluded in 1873 that it would be a wise precautionary measure for them to lay a pipe-line upon which they could rely for a supply of oil in case the oil men attempted again to cut them off from crude, as they had succeeded in doing in 1872. Accordingly, a line was built and put in the charge of a man who has since become known as one of the “strong men” of the Standard Oil Company. This man, Daniel O’Day, was a young Irishman who had first appeared in the oil country in 1867, and had at once made so good a record for himself as transporting agent, that in 1869, when the oil-shipping firm of J. A. Bostwick needed a man to look after its shipments, he was employed. The record he made in the next two years was such that it reached the ear of Jay Gould himself, the president of the Erie, over which Mr. Bostwick was doing most of his shipping. Now the Erie at this time was making a hard fight to meet the growth of the Empire Transportation Company. So important did Jay Gould think this struggle that in 1871 he himself came to the Oil Regions to look after it. One of the first men summoned to his private car as it lay in Titusville was the young Irishman, O’Day. He came as he was, begrimed with the oil of the yards, but Mr. Gould was looking for men who could do things, and was big enough to see through the grime. When the interview was concluded, Daniel O’Day had convinced Jay Gould that he was the man to divert the oil traffic from the Pennsylvania to the Erie road, and he walked out with an order in his pocket which lifted him over the head of everybody on the road so far as that particular freight was concerned, for it gave him the right to seize cars wherever he found them. For weeks after this he practically lived on the road, turning from the Pennsylvania in this time a large volume of freight, and making it certain that it would have to look to its laurels as it never had before. The next year after this episode came the Oil War. The anger of the oil men was poured out on everyone connected in any way with the stockholders of the South Improvement Company, and among others on Mr. O’Day. He knew no more of the South Improvement Company at the start than the rest of the region, but he did know that it was his business to take care of certain property intrusted to him. Resolutions calling on him to resign were passed by oil exchanges and producers’ unions. Mobs threatened his cars, his stations, his person, but with the grit of his race he hung to his post. There was, perhaps, but one other man in the employ of members of the South Improvement Company who showed the same courage, and that was Joseph Seep of Titusville. Almost every other employee fled, the principals in the miserable business took care to stay out of the country, but Mr. O’Day and Mr. Seep polished their shillalahs and stood over their property night and day until the war was over. Their courage did not go unrewarded. They were made the chief executive representatives, in the region, of the consolidated Standard interests which followed the war, though neither of them knew at the time that they were in the Standard employ. They supposed that the shipper Bostwick was an independent concern. It was a man of grit and force and energy then who took hold of the Standard’s pipe-line in 1873. Rapid growth went on. The little line with which they started became the American Transfer Company, gradually extending its pipes to seventy or eighty miles in Clarion County, and in 1875 building lines in the Bradford Field. The American Transfer Company was soon working in harmony with the United Pipe Lines, of which Captain J. J. Vandergrift was the president. This system had its nucleus, like all the others of the country, in a short private line, built in 1869 by Captain Vandergrift. It had grown until in 1874 it handled thirty per cent. of the oil of the region. Now in 1872, after the Oil War, Captain Vandergrift had become a convert to Mr. Rockefeller’s theory of the “good of the oil business,” and as we have seen, had gone into the National Refiners’ Association as vice-president. Later he became a director in the Standard Oil Company. In 1874 he sold a one-third interest of his great pipe-line system to Standard men, and the line was reorganised in the interests of that company. That is, the Standard Oil Combination in 1876 was a large transporter of oil, for the directors and leading stockholders owned and operated fully forty per cent. of the pipe-lines of the Oil Regions, owned all but a very few of the tank cars on both the Central and Erie roads, and controlled under leases two great oil terminals, those of the Erie and Central roads. It was little wonder that Colonel Potts watched this rapid concentration of transportation and refining interests with dread. It was more dangerous than the single shipper, and he had always fought that idea on the ground of policy. “In the first place, it concentrates great power in the hands of one party over the trade of the road,” he told an investigating committee of Congress in 1888. “They can remove it at pleasure. In the second place I think a large number of parties engaged in the same trade are very apt to divide themselves into two different classes as to the way of viewing markets; one class will be hopeful, and the other the reverse. The result will be there will be always one or the other class engaged in shipping some of the traffic.... The whole question seems to me to resolve itself into determining what policy will bring the largest volume in the most regular way to the carrier; and it is my opinion, based upon such experience as I have had, that a hundred shippers of a carload a day would be sure to give to a carrier a more regular volume of business, and I think, probably, a larger total volume of business in a year’s time than one shipper of a hundred cars a day.”[53] Holding this theory, Colonel Potts had opposed the rebate to the Standard granted by the Pennsylvania in 1875. Three years later he described in a communication, published anonymously, the effect of the rebates granted at that time: “The final agreement with the railways was scarcely blotter-dried ere stealthy movements toward the whole line of outside refiners were evident, although rather felt than seen. As long as practicable, they were denied as mere rumours, but as they gradually became accomplished victories, as one refiner after another, through terror, through lack of skill in ventures, through financial weakness, fell shivering with dislike into the embrace of this commercial octopus, a sense of dread grew rapidly among those independent interests which yet lived, and notably among a portion of the railroad transporters.” The chief “railroad transporter” who shared with the independents the sense of dread which Mr. Rockefeller’s absorption of refineries awakened was Mr. Potts himself. As he saw the independents of Pittsburg, Philadelphia, New York and the creek, shutting down, selling out, going into bankruptcy, while the Standard and its allies grew bigger day by day, as he saw the Standard interest developing a system of transportation greater than his own, he concluded to prevent, if possible, the one shipper in the oil business. “We reached the conclusion,” said Colonel Potts in 1888, “that there were three great divisions in the petroleum business—the production, the carriage of it, and the preparation of it for market. If any one party controlled absolutely any one of those three divisions, it practically would have a very fair show of controlling the others. We were particularly solicitous about the transportation, and we were a little afraid that the refiners might combine in a single institution, and some of them expressed a strong desire to associate themselves permanently with us. We therefore suggested to the Pennsylvania road that we should do what we did not wish to do—associate ourselves. That is, our business was transportation and nothing else; but, in order that we might reserve a nucleus of refining capacity to our lines, we suggested we should become interested in one or more refineries, and we became interested in two, one in Philadelphia and one in New York. It was incidental merely to our transportation. The extreme limit was 4,000 barrels a day only.” It was in the spring of 1876 that the Empire began to interest itself in refineries. No sooner did Mr. Rockefeller discover this than he sought Mr. Scott and Mr. Cassatt, then the third vice-president of the Pennsylvania, in charge of transportation. It was not _fair_! Mr. Rockefeller urged. The Empire was a transportation company. If it went into the refining business it was not to be expected that it would deal as generously with rivals as with its own factories; besides, it would disturb the one shipper who, they all had agreed, was such a benefit to the railroads. Mr. Scott and Mr. Cassatt might have reminded Mr. Rockefeller that he was as truly a transporter as the Empire, but if they did they were met with a prompt denial of this now well-known fact. He was an oil refiner—only that and nothing more. “They tell us that they do not control the United Pipe Lines,” Mr. Cassatt said in his testimony in 1879. Besides, urged Mr. Rockefeller, if they have refineries of course they will give them better terms than they do us. Mr. Flagler told the Congressional Committee of 1888 that the Standard was unable to obtain rates through the Empire Transportation Company over the Pennsylvania Railroad for the Pittsburg or Philadelphia refineries as low as were given by competing roads, and, added he, “from the fact that the business during those years _was so very close as to leave scarcely any margin of profit_ under the most advantageous circumstances. And we, finding ourselves undersold in the markets by competitors whom we knew had not the same facilities in the way of mechanical appliances for doing the business, knew that there was but one conclusion to be reached, and that was that the Empire Transportation Company favoured certain other shippers, I would say favoured its own refineries to our injury.” As the Standard Oil Company paid a dividend of about fourteen per cent. in both 1875 and 1876, besides spending large sums in increasing its plants and facilities, the margin of profit cannot have been so low as it seemed to Mr. Flagler in 1888 to have been; naturally enough, for he saw dividends of from fifty to nearly 100 per cent. later. [Illustration: A. J. CASSATT IN 1877 Third vice-president of the Pennsylvania Railroad in charge of transportation when first contract was made by that road with the Standard Oil Company. ] [Illustration: GENERAL GEORGE B. MCCLELLAN President of the Atlantic and Great Western Railroad at the time of the South Improvement Company. General McClellan did not sign the contract. ] [Illustration: GENERAL JAMES H. DEVEREUX Who in 1868 as vice-president of the Lake Shore and Michigan Southern Railroad first granted rebates to Mr. Rockefeller’s firm. ] [Illustration: JOSEPH D. POTTS President of the Empire Transportation Company. Leader in the struggle between the Pennsylvania Railroad and the Standard Oil Company in 1877. ] Mr. Vanderbilt and Mr. Jewett soon joined their protests to Mr. Rockefeller’s. “The steps it (the Empire) was then taking,” said Mr. Jewett, “unless checked would result in a diversion largely of the transportation of oil from our roads; the New York Central road and our own determined that we ought not to stand by and permit those improvements and arrangements to be made which, when completed, would be beyond our control.”[54] These protests increased in vehemence, until finally the Pennsylvania officials remonstrated with Mr. Potts. “We endeavoured,” says Mr. Cassatt, “to try to get those difficulties harmonised, talked of getting the Empire Transportation Company to lease its refineries to the Standard Oil Company, or put them into other hands, but we did not succeed in doing that.” “Rather than do that,” Colonel Potts told Mr. Cassatt, when he proposed that the Empire sell its refineries, “we had rather you would buy us out and close our contract with you.” When the Standard Oil Company and its allies, the Erie and Central, found that the Pennsylvania would not or could not drive the Empire from its position, they determined on war. Mr. Jewett, the Erie president, in his testimony of 1879 before the Hepburn Commission, takes the burden of starting the fight. “Whether the Standard Oil Company was afraid of the Empire Line as a refiner,” he said, “I have no means of knowing. I never propounded the question. We were opposed to permitting the Empire Line, a creature of the Pennsylvania Railroad, to be building refineries, to become the owners of pipe-lines leading into the oil field and leading to the coast, without a contest, and we made it without regard to the Standard Oil Company or anybody el