# The History of the Standard Oil Company/Volume 1/Appendix/Number 26

NUMBER 26 (See page 153)
GEORGE H. BLANCHARD'S TESTIMONY ON THE BREAKING UP OF THE PIPE POOL OF 1874
[Report of the Special Committee on Railroads, New York Assembly, 1879. Volume III, pages 3445-3447 and 3449-3451.]
   The contract with the Standard Company of April 17, 1874, as I have said, contained nothing inconsistent with our obligations to the Pennsylvania and New York Central Railroads, and the New York Central, under their later contract, and our company, convinced the Pennsylvania Railroad of that fact during the discussions both as to rates and each and every other detail agreed to, but President Jewett thought it better to rely upon the arrangements between the railway companies alone, and decided to avail himself of the ninth clause of the agreement with the Standard Oil Company of April 17, 1874, which provided that either party might terminate it by six months' written notice, but that notice might be given by the Standard Company within thirty days after the election of a new board of directors of the Erie or Atlantic and Great Western Company. This trunk line oil pool of October 1 being in operation, President Jewett gave notice of the termination of the Standard agreement of April 1, 1874, on October 31, 1874, which would have terminated in six months. It was the thirty-first of the following May, but an election having in the meantime taken place upon the Atlantic and Great Western Railroad, the Standard Oil Company gave the thirty days' notice it had the right to do on January 13, 1875, which, therefore, terminated the agreement upon February 13, 1875, about three months and a half before President Jewett 's notice could, under the contract, take effect.
   The trunk line agreement of October 1, 1874, continued in force, and pool settlements were made thereunder for but five months, namely, until the close of February, 1875, during which time the Erie Company paid $31,019.05 and received $6,570.55.
   Notice of the abandonment of that contract was given by the Erie Company, April 1, 1875, although no statements or moneys were exchanged for March, and dissatisfaction with its operations had been expressed by us prior to that time, the reasons therefor being as follows:
   The higher rates of the pipe pool had stimulated new pipe-lines, and the Hunter and Cummings Line and other small pipes had been completed, or did not maintain ​the agreed rates of pipage. The Columbia Conduit Company had also been completed to Pittsburg, in the interest of the Baltimore and Ohio Company, and either acting upon the then policy or advice of that company, or with a desire to be bought out, declined to charge equal rates of pipage or agree to any fixed rates, a fact which threatened the diversion of oil largely to Baltimore, the Baltimore and Ohio Railroad not being in the trunk line oil pool of October 1, 1874, and publicly and frequently announcing its endeavour to divert the oil trade to Baltimore.
   We also believed that large drawbacks or commissions were paid by the Pennsylvania Railroad to the Empire Line in addition to those provided in our joint pool contract; and our belief has since been confirmed by later knowledge of the fact that the Pennsylvania Railroad paid to the Empire Line about 30 per cent., including the use of cars; and the mileage, being about ten (10) per cent. at current rates of car service, left the commission equal to about 20 per cent., an advantage not possessed by any other shipper or company over any of the northern lines.
   It was clear that, as the Empire Line added to its already large resources, not only this commission upon the oil business excepting Pittsburg, but the added profits upon its pipe-lines, that its combined operation and profit united to control an increasing share of the entire trade and put it in strong financial shape for a control which it subsequently entered upon to absorb also a large refining interest.
   As the northern trunk lines made no similar arrangements, allowances or commissions to any forwarder or receiver, and derived no profit from any pipe-lines, it was clearly unfair to concede them to the Empire Line, and the agreement which gave it these growing advantages was very properly annulled.
   We also desired the actual transportation of the oil rather than to receive money from others, as we had done during the pool, as their increased business might finally result in a demand for larger percentages if the pool continued.
   I directed careful examination of our records up to date of the abandonment of this oil pool contract; and upon the authority of General Freight Agent Vilas, state that the net rates charged to the Standard Company during this period to through points were uniform with the rates charged by our lines to other shippers, taking into account, as before stated, the transportation of the crude equivalent to their refineries. . . . The preliminary discussions and general conclusions relating to those (new) contracts were all with President Jewett, although many of their details were subsequently discussed and suggested by me; and the reasons influencing him to make them have been stated by him in his testimony; I was directed to carry them out, and have from time to time attended meetings at which the rates thereunder were advanced or reduced. I believe those contracts were not concluded until the latter part of April or early in May, and were then dated back to the disruption of the trunk line oil pool, in order to secure our guaranteed proportion of oil shipments from that earlier date and without interruption. The transportation contract continued to guarantee us 50 per cent. ​of the business of the Standard Oil Company, which 50 per cent, should not be less than the percentage we had received in the year 1874 of the total arrivals at the seaboard; and at this time, for that reason, the Standard Oil Company had no transportation arrangements with the Pennsylvania Railroad, and this fact and guaranty induced us to disregard the question as to whether or not the Standard Company had similar or other contracts with the New York Central or its connections, our only interest in the question being as to whether rates were equal and if we received our guaranteed share of the oil.
   There was no understanding or agreement by the Erie Company to my knowledge that the New York Central Company or Pennsylvania Railroad, or either of them, had or had not similar or other contracts with the Standard Oil Company.
   They were shipping by the New York Central route, and we assumed from their large business, terminal arrangements, etc., that some defined understanding probably regulated such large interests, but we were not consulted as to the terms or conditions of its contracts with other companies if it had any, because we relied upon their responsible guaranty to give us our proportion of the total arrivals of oil at the seaboard and at rates equal to those of other companies, as ample protection to our interests.
   At the time this transportation contract was made by the Erie Company, other considerations than relief from risks and the equalisation of the arrivals at the seaboard bore upon the contracts for an allowance of 10 per cent. It continued to be our belief, since fully confirmed by Mr. Cassatt's testimony, that other shippers via the Empire Line over the Pennsylvania Railroad had at least similar rates and arrangements, to which, on the part of the Erie Company, no objection was offered; it also continued to be the fact that the Empire Line continued to receive in addition to its probable pipe profits, the same or about the same, large commission as before, from the Pennsylvania Railroad, and it was believed by the officers of the Erie in making this contract with the Standard Company that the allowance to it of 10 per cent, was not much more than one-half the allowance then being made by the Pennsylvania Railroad to the Empire Line.
   In addition thereto, we secured the actual transportation of our full share of the oil, at the agreed rates, without delays or disputes in adjustments, or the preparation or exchange of the pool statements.
   It maintained the business to New York and provided against any increase to our rival railways or ports, no matter how the territory of oil production might shift or vary, and while under the trunk line pool we could not influence the various shippers to send them oil over our railway or to this city, unless their varying and dissimilar interests all agreed (as they did not), and no matter how much one company might be in deficit, the Standard Company is compelled to send it over our line. The loading and unloading, and taking the risks, were also important items to us as has before been detailed, and relieved us from a class of claims we had paid prior to that time.
   ​It was also important to us that by this contract we were explicitly released from large losses when the great fire consumed the Weehawken docks in July, 1874.
   The ninth section of the contract has also been of much value to us. In the delivery of oil to vessels or exporters, the Standard Company assumes all the risks and expenses of delays to ships, and their demurrage, even if it be the fault of the railway by non-delivery, and I have known of cases where this amounted to a large sum.
   In 1877 when the general and extended railway strikes occurred, this clause also released us beyond doubt from large claims that might otherwise have been urged.
   The freight rates provided by the railway pool of October 1, 1874, were not changed until October 1, 1875; and my recollection is that it was not until the discussion upon that change that anything was definitely known by any of the trunk lines of the arrangements of the others with the Standard Oil Company. At that meeting the 10 per cent, reduction to be allowed the Standard was distinctly understood as due upon its shipments via all the trunk lines in consideration of the facts stated, and it then first came to my knowledge that Warden, Frew and Company, of Philadelphia, represented the Standard Oil Company, as Charles Pratt and Company represented their crude interests at New York via our line.