# The History of the Standard Oil Company/Volume 1/Appendix/Number 5

NUMBER 5 (See page 62)
CONTRACT BETWEEN THE SOUTH IMPROVEMENT COMPANY AND THE PENNSYLVANIA RAILROAD COMPANY, DATED JANUARY 18, 1872
[Proceedings in Relation to Trusts, House of Representatives, 1888. Report Number 31 12, pages 357-361.]
   Agreement made and entered into this eighteenth day of January, in the year eighteen hundred and seventy-two, by and between the South Improvement Company, a corporation organised and existing under the laws of the State of Pennsylvania, party hereto of the first part, and the Pennsylvania Railroad Company, on its own behalf and on behalf of all other railroad companies, whose roads are controlled, owned, or leased by it, or with which it has sufficient running arrangements, which other roads are herein described as the connections of the said Pennsylvania Railroad Company, party hereto of the second part.
   Witnesseth:
   Whereas, the party hereto of the first part has been organized for the purpose, among other things, of increasing, facilitating, and developing the trade in and the conveyance and transportation of petroleum and its products, and for that purpose proposes, among other things, to expend large sums of money in the purchase, erection, and construction of, and maintaining and conducting works for storage, distillation, and refining, warehousing and transportation, and in various other ways, upon the inducement, among other things, of this contract.
   And Whereas, the magnitude and extent of the business and operations proposed to be carried on by the party hereto of the first part will greatly promote the interest of the party hereto of the second part, and make it desirable for it, by fixing certain rates of freight, drawbacks, and rebates, and by the other provisions of this agreement, to encourage the outlay proposed by the party hereto of the first part, and to facilitate and increase the transportation to be received from it.
   And Whereas, it has been agreed by and between the party hereto of the second part, for itself and its connections, the Erie Railroad Company, for itself and its connections, and the New York Central Railroad Company, for itself and its connections, that the business of transporting, by railroad, crude petroleum and its products, ​toward the Atlantic coast, from the points of production and refining, on their lines of road shall be allotted by the party hereto of the first part, to the said three companies, in the proposition of forty-five (45) per cent, of the whole to the Pennsylvania Railroad Company, for itself and its connections, including the Philadelphia and Erie Railway, the Northern Central Railway, the Alleghany Valley Railroad, Camden and Amboy Railway, the Pennsylvania Company, and all other railroads which are, or may be, controlled, owned, and leased by it, or with which it has, or may have, sufficient running arrangements; twenty-seven and a half (27½) per cent, of the whole to the Erie Railway Company, for itself and its connections, and twenty-seven and a half (27½) per cent, of the whole to the New York Central Railroad Company for itself and its connections, and that the transportation beyond Cleveland and Pittsburg over the railroads of the said companies and their connections, in other directions than toward the Atlantic coast, west from said points of production and refining, shall be allotted by the party hereto of the first part, in the proportion of one-third thereof, to the party hereto of the second part, for itself and its western connections, and the remainder to other railroads.
   Now, therefore, this agreement witnesseth: That the parties hereto for themselves and their successors, in consideration of the promises, of the mutual execution hereof, and of the mutual advantages hereby conferred, have covenanted and agreed, and hereby do covenant and agree each with the other, as follows:
   ARTICLE FIRST
   The party hereto of the first part covenants and agrees:
   1. To furnish to the party hereto of the second part for transportation, such a proportion of the crude petroleum and its products, owned or controlled by the party hereto of the first part, as shall give to the party hereto of the second part forty-five (45) per cent. of all the crude petroleum and its products, sent from the points of production and refining toward the Atlantic coast, by the said Pennsylvania, the Erie, and the New York Central railroads and their connections, and thirty-three and one-third (33⅓) per cent. of that which is sent west of Pittsburg and Cleveland by those railroads and their connections.
   2. To provide suitable tankage at the points where petroleum is produced, on the railroads of the party hereto of the second part and its connections in which to receive crude petroleum preparatory to shipment, with the necessary pipes, pumps, racks, and other appliances for its convenient transfer in bulk into railroad cars.
   3. To deliver to the railroads of the party hereto of the second part, and its connections, at the places of shipment, and to receive from them, at the places of destination, all crude petroleum and its products transported over their roads for the party of the first part.
   4. To provide at the places of destination on the seaboard, necessary and suitable ​yards, wharves, warehouses, sheds, tanks, pipes, pumps, and motive power, for the reception of petroleum and its products, and loading vessels therewith.
   5. To provide, maintain, and operate the works necessary to refine crude petroleum upon the largest scale practicable, and with such skill, and on such a system of organisation and division of labour, as will secure both efficiency and economy; and for that purpose and for the purpose of developing and increasing the petroleum trade of the country, to provide and maintain all suitable and necessary means and facilities.
   6. To keep records of the transportation over the railroads of the party hereto of the second part, and its connections, and so far as it can obtain the same, over the Erie and the New York Central railroads and their connections, of all petroleum and its products, showing the number of barrels of forty-five gallons each in bulk, and the number of barrels of forty-seven gallons each in barrels, carried by each road with the points of receiving and delivery, and the amount of freight received by each road for such transportation, which records shall at all reasonable times be open to the inspection of the duly constituted representatives of the party hereto of the second part.
   Monthly abstracts of all such records shall be regularly sent to the party of the second part.
   7. To pay the party of the second part weekly for all transportation over its roads and its connections, of petroleum and its products, such gross rates and half-rates of freight as are hereinafter specified, less the rebates and drawbacks hereinafter provided to be retained by the party hereto of the first part for its own use.
   ARTICLE SECOND
   The party hereto of the second part covenants and agrees:
   1. That the party hereto of the second part will pay and allow to the party hereto of the first part, for its own use, in all petroleum and its products, transported over the railroads of the party hereto of the second part and its connections, for the party hereto of the first part, rebates, and on all transported for others, drawbacks, at the rates hereinafter provided, except in the case specified in Article Third.
   2. To deliver to the party hereto of the first part all petroleum and its products in packages, transportation over the railroads, of the party hereto of the second part, and its connections, by whomsoever shipped, and consigned to the party of the first part, at the warehouses of the party of the first part, at the seaboard, and inland, at the depots of the party of the second part, at the places of destination, and to deliver all petroleum and its products, in bulk, owned by or consigned to the said party of the first part, at any point required on the line of the railroads, of the party of the second part and its connections.
   3. To transport and deliver petroleum and its products over the railroads of the ​party of the second part and its connections, at gross rates, which shall at no time exceed the following, without the consent of both parties hereto.
   From any point on the Oil Creek and Allegheny River Railroad to Oil City, Union, Corry or Irvineton, which are herein designated as common points y on each barrel of forty-five gallons in bulk, and on each barrel of forty-seven gallons in barrels, thirty cents.
   ON CRUDE PETROLEUM
   All other points, except those on the Oil Creek and Allegheny River Railway, to the places of destination last named, the same rates as from the common points.
   ON REFINED OIL, BENZINE, AND OTHER PRODUCTS OF THE MANUFACTURE OF PETROLEUM
   From and to all points intermediate between the points aforesaid, such reasonable rates as the party of the second part shall from time to time establish, on both crude and refined.
   From Pittsburg, Cleveland, and other points, to places west of Pittsburg and Cleveland, such reasonable rates as the party of the second part may deem it expedient from time to time to establish.
   4. To pay and allow to the party hereto of the first part, on all petroleum and its products, transportation for it over the railroads of the party of the second part and its connections, the following rebates, and on all transported for other parties, drawbacks of like amounts, as the rebates from the gross rates, the same to be deducted and retained by the party hereto of the first part, for its own use from the amounts of freights, payable to the party of the second part.
   ON THE TRANSPORTATION OF CRUDE PETROLEUM :
   | From the gross rate from any common point to Cleveland, a rebate per barrel of. | From the gross rate from any common point to Cleveland, a rebate per barrel of. | $0.40 |
   | From“ the“ gross“ rate“ from“ any“ common“ point“ to“ Pittsburg, | rebate“ per“ barrel“ of“ | .40 |
   | From“ the“ gross“ rate“ from“ any“ common“ point“ to“ New York, | rebate“ per“ barrel“ of“ | 1.06 |
   | From“ the“ gross“ rate“ from“ any“ common“ point“ to“ Philadelphia, | rebate“ per“ barrel“ of“ | 1.06 |
   | From“ the“ gross“ rate“ from“ any“ common“ point“ to“ Baltimore, | rebate“ per“ barrel“ of“ | 1.06 |
   | From“ the“ gross“ rate“ from“ any“ common“ point“ to“ Boston, | rebate“ per“ barrel“ of“ | 1.06 |
   From the gross rate from all other points, and the six places of destination last named rebates the same as on the rates from the common points.
   ON THE TRANSPORTATION OF REFINED OIL, BENZINE, AND OTHER PRODUCTS OF THE MANUFACTURE OF PETROLEUM :
   | From the gross rates from Pittsburg to New York, a rebate per barrel of . . . . . . . . | From the gross rates from Pittsburg to New York, a rebate per barrel of . . . . . . . . | $0.50 |
   | From“ the“ gross“ rates“ from“ Pittsburg“ to“ Philadelphia, | bate“ per“ barrel“ of“ . . . . . . . . | .50 |
   | From“ the“ gross“ rates“ from“ Pittsburg“ to“ Baltimore, | bate“ per“ barrel“ of“ . . . . . . . . | .50 |
   | From“ the“ gross“ rates“ from“ Cleveland to Boston, | bate“ per“ barrel“ of“ . . . . . . . . | .50 |
   | From“ the“ gross“ rates“ from“ Cleveland“ to“ New York, | bate“ per“ barrel“ of“ . . . . . . . . | .50 |
   | From“ the“ gross“ rates“ from“ Cleveland“ to“ Philadelphia, | bate“ per“ barrel“ of“ . . . . . . . . | .50 |
   | From“ the“ gross“ rates“ from“ Cleveland“ to“ Baltimore, | bate“ per“ barrel“ of“ . . . . . . . . | .50 |
   | From“ the“ gross“ rates“ from“ any common point to New York, a rebate per barrel of . | From“ the“ gross“ rates“ from“ any common point to New York, a rebate per barrel of . | 1.32 |
   | From“ the“ gross“ rates“ from“ any“ common“ point“ to“ Philadelphia, | bate“ per“ barrel“ of“ . | 1.32 |
   | From“ the“ gross“ rates“ from“ any“ common“ point“ to“ Baltimore, | bate“ per“ barrel“ of“ . | 1.32 |
   | From“ the“ gross“ rates“ from“ any“ common“ point“ to“ Boston, | bate“ per“ barrel“ of“ . | 1.32 |
   From the gross rates to and from all points, intermediate between the above points, a rebate or drawback of one-third of the gross rate, shall be paid.
   From the gross rates from Pittsburg, Cleveland, and other points, to places west of the meridians of Pittsburg and Cleveland, a rebate or drawback of one-third of the gross rate shall be paid.
   5. To charge to all other parties (excepting such as are referred to in Article 3d) for the transportation of petroleum and its products, rates which shall not be less than the gross rates above specified, and should at any time any less rate be charged, directly or indirectly, either by way of rebate, commission, allowances, or upon any pretext whatsoever, the same reduction per barrel shall be made to the party hereto of the first part, from the net rates provided for them, on all transportation for them during the period for which such reduction shall be made to others.
   6. To permit the party hereto of the first part, if, in its judgment, the currents of trade should so require, temporarily to increase or diminish the proportion, as herein provided to the party hereto of the second part, for itself and its connections, as the whole business of transporting petroleum and its products, as between the party hereto of the second part, the Erie Railway Company and the New York Central Railroad Company. The party of the second part in such case, to receive from the party hereto ​of the first part, in full payment or indemnity, for the excess or deficiency, one-half the net schedule rates on such excess or deficiency; the other half to be paid pro rata to the said other companies, whose apportioned quantity of transportation shall thus be varied; but such diversion of business shall not, at any time, exceed one week, nor be repeated without an interval of at least sixty days, unless with the consent of the party hereto of the second part. Also, that whenever from time to time, as aforesaid, a temporary diversion of a part of the apportioned transportation of the party of the second part, to the other railroads aforesaid, or to either of them, shall become necessary, cars of the party of the second part may be loaded by the party of the first part, and sent away over such other railroads, or either of them, but the cars so sent away shall be returned without unnecessary delay, and in as good order as when taken to the railroads of the party of the second part, and mileage at the usual rates paid for their use while absent.
   7. To furnish with as much regularity as possible, at all times, good and sufficient cars, and other means suitable and necessary for the safe and prompt transportation of all crude petroleum and its products, either in bulk or in barrels, which the party hereto of the first part shall desire to send from one point to another (and which shall be supplied with as much regularity as possible), on or over the railroads of the party of the second part and its connections.
   8. To make manifests or way-bills of all petroleum or its products, transported over any portion of the railroads of the party of the second part or its connections, which manifests shall state the name of the consignor, the place of shipment, the kind and actual quantity of the article shipped, the name of the consignee, and the place of destination, with the rate and gross amount of freight and charges, and to send daily to the principal office of the party of the first part, duplicates of all such manifests or way-bills.
   ARTICLE THIRD
   And it is hereby further covenanted and agreed by and between the parties hereto, that the rebates hereinbefore provided for the party hereto of the first part, may be made to any other party who shall furnish an equal amount of transportation, and who shall possess and use works, means, and facilities for carrying on and promoting the petroleum trade equal to those possessed and used by the party hereto of the first part.
   ARTICLE FOURTH
   And it is hereby further covenanted and agreed by and between the parties hereto, that the party hereto of the second part shall at all times co-operate, as far as it legally may, with the party hereto of the first part, to maintain the business of the party hereto of the first part, against loss or injury by competition, to the end that the party hereto of the first part may keep up a remunerative, and so a full and regular business, and ​to that end shall lower or raise the gross rates of transportation over its railroads and connections, as far as it legally may, for such times, and to such extent as may be necessary to overcome such competition. The rebates and drawbacks to the party of the first part to be varied pari passu with the gross rates.
   ARTICLE FIFTH
   It is hereby mutually agreed by and between the parties hereto that for the purpose of meeting such exigencies as may from time to time require change of the rates of transportation herein provided, each party, on ten days' written notice from the other, shall appoint a person on behalf of such party, and the two persons thus appointed, shall have power to change and adjust the rates, which shall go into effect on being approved by the said parties hereto.
   ARTICLE SIXTH
   It is further mutually agreed by and between the parties hereto that the gross rates of freight to the party hereto of the first part shall at all times be kept as near to the net rates as is consistent with the interests of the party hereto of the first part, and that whenever in the judgment of the party hereto of the first part it is expedient to lower the rebate below the rate above specified, it may do so, and from time to time raise the same again, not, however, above the rate hereinbefore specified. The party hereto of the first part, from time to time shall notify the party of the second part in writing of the change required, whereupon the party hereto of the second part shall forthwith make a corresponding change of such gross rates.
   ARTICLE SEVENTH
   It is further mutually agreed by and between the parties hereto, that this agreement shall continue and remain in force for the period of not less than five years, and shall not then, nor thereafter terminate, until one of the parties shall have given twelve months' written notice to terminate it.
   ARTICLE EIGHTH
   It is further mutually agreed by and between the parties hereto, that if any doubt, question, difference, cause, or suit shall at any time or times, hereafter, arise or happen between the said parties to these presents, touching the construction of these presents, or any clause, matter, or thing herein contained, or any other matters, cause, or thing whatsoever, in any wise relating to or concerning this agreement, and such doubt, question, difference, or dispute, shall not be fully settled by the parties to these presents within one calendar month after the same shall arise, then, in every such case, upon ​the request in writing of either of the said parties hereto, specifying such doubt, question, difference, or dispute, it shall be committed and referred to the hearing and arbitration of three disinterested persons; one of them to be chosen by the party of the first part, another of them to be chosen by the party of the second part, and each party on ten days' notice in writing from the other, shall make such choice, and appoint a disinterested person in behalf of such party, but, if either party on such notice shall within such ten days fail to make an appointment, the person appointed by the other party shall choose the second disinterested person, and the third disinterested person shall be chosen within one calendar month next after such request; and the award, order, or determination of the said three persons, to be chosen as aforesaid, or any two of them, shall be binding and conclusive on the parties hereto, and shall be performed and kept by them, without any further suit or trouble whatsoever; provided such award, order, or determination, be made in writing, under the hands of the said three persons, or of any two of them, within the space of sixty days after all the persons shall be so selected, as aforesaid. And for the further and better enforcing the performance of the award, so to be made, as aforesaid, the reference or submission for or in respect of the same, may, at the option of any of the parties to these presents, from time to time be made as a matter of course, a rule of court in any court of record.
   In witness whereof, the said South Improvement Company and Pennsylvania Railroad Company have caused their respective corporate seals to be hereto affixed, and these presents to be subscribed by their respective presidents, the day and year first above written.
   | [SEAL] | South Improvement Company. |
   | [SEAL] | By P. H. Watson, |
   | [SEAL] | President. |
   | [SEAL] | Pennsylvania Railroad Company. |
   | [SEAL] | By J. Edgar Thompson, |
   | [SEAL] | President. |
   | Attest: Joseph Lesley, Secretary. | |