New-York tribune., 1906-05-05
MR. GARFIELD,S REPORT.
STANDARD oil Profits from Secret
Rates, Rebates and Determinations.
Departmentsof Commerce and Labor,
Bureau OF Corporations,

Department8of Commerce and Labor,
Bureau of Corporations,
Washington. May 2. 1905.
Sir: have the, honor to submit the part Of the
report on the oil industry which has to do with
the transportation and freight rates
House resolution No. 499 passed February 15,
1905. directed particular attention 10 the condition
OF the Kansas oil field The study OF the OIL an
dustry which had heretofore been made by the
bureau showed that a special report upon the
conditions In the Kansas field would not be ad-
visable. A report on any special field would of
necessity be unfair to both the producers and the
redners, for the reason that the purely local con-
ditions do not by any means determine the price
OF either crude OIL its products, afford proper
basis for understanding the conditions OF the in
dustry. Therefore, a general and very extensive
investigation has BEEN conducted covering the fol-
lowing subjects:
Pristine crude oil production in the United
States and its relation the worlds supply; the
pYices and methods OF purchase.
Second-The use, development and control Of pipe
lines.
the cost Of refining and marketing; the prices OF
petroleum products.
Fourth-The organization. ownership and rela-
ton OF the companies engaged in the production
manufacture and distribution Of oil.
Fffth-The competitive methods used IN the pro-
duction and sale of oil.
neutrality-suspicious. and freight rates.
seventh-Foreisn trade and conditions. and their
relation to the domestic industry.
have personally visited nearly all OF the great
fields and have been in communication, either per-
sonaIlv or through the agents OF the bureau. with
many hundred producers and practically all the
reners and transportation agencies engaged in the
distribution of oil. A special agent Of the bureau
was sent to Europe TO study at first hand the con-
dtlons in foreign producing fields and distrbutng
markets. The facts obtained have IN every IeasipIS
sources OF information.
for he otto Of
been collected. The preliminary study or TINS ma
trial showed that the most importsnt suD5ect Vas Was
IS very large percentage Of the total cost to the
consumer Of the finished product, and hence most
The control of the Standard OIL Company over
special study of its relations to transportation
I therefore first submit the accompanying report
upon the subject Of railway transportation ana
fpegh rat Tates 6 t M II v6G gnto +o tSe foion
summary Of its more prominent features
RESULTS OF THE INVESTIGATION.
The general result of the investigation has been
to disclose the existence Of numerous and hagrant
determinations by the railroads in behalf of the
Standard Oil Company and its affiliated corpora
tons With comparatively few exceptions. mainly
Of other large concerns in California, the Standard
has been the sole beneficiary Of such discrimina-
tons In almost every section Of the country that
company has been found to enjoy some unfair ad-
vantages over it's competitors, and some OF these
determinations affect enormous areas.
Determinations in the transportation OF oil en-
brace a variety OF forms. the more important Of
which may be classed under the following heads:
First-Secret and senai-secret rates.
Determinations IN the open arrangement
Third Determinations in classification and rules
FouTth-Discriminat in treatment of private
tank cars.
It seems wholly possible that there may exist
multitude Of other determinations effected by Sc
Importance. involved in the local distribution OF
OIL especially in less than carload lots The Stand
ard Oil Company shipsl enormous quantities Of oil
in less than carload lots, and although the dis
tances involved in such cases usually compare
lively short the amount of freight charged under
the high rates which prevail on such business un-
der regular tariffs would be very great and the
possibilities of departure from these charges ex-
tensive.
It IS perfectly clear that the distinction between
the rebate and the secret rate is merely OF ac
counting.
Different methods are used in different places
and under different conditions, but the net result
is that from Maine to California the general ar
rangement OF open rates petroleum oil is such
as TO give the Standard an unreasonable advan-
tage over its competitors
The conclusion is unavoidable. that the Standard
Oil Company has had important voice in the
construction of such rates. and this conclusion is
supported By specific evidence developed by the
investigation
In most sections of the country all reaners op-
Grating tank Of their own receive equal treat
ment IN respect TO the mileage allowance On the
Pacific Coast, however, most Independent reflners
receive only six-tenths Of a cent mile and this on
the loaded movement only. An exception is made
where the haul exceeds eight hundred miles, in
winch case three-fourths Of a cent a mile is allowed
on the excess mileage that distance but again
on the loaded movement only. The Union Tank
Line Company and the Waters-Pierce OIL Company
also a Standard concern-are the only OIL COM
panies operating tank the lines of the
Southern Pacific company and the Santa Fe on
the Pacific Coast, which receive three-fourths OF
cent mile on both loaded and empty cars.
Similar Determinations in the mileage allowance
are practised by some Of the transcontnental sys-
TENS traversing the Northwestern states.
The advantages of the Standard Oil Company
would alone give It highly favorable position in
the oil industry. To a certain natural
policy Of railroads would be to neutralize the ad-
vactages by giving favorable rates to the smaller
pipe lines and its fleets OF oil carrying vessels. IS
an active and powerful competitor Of the railroads
already taken the transportation or crude oil al
most wholly away from rail carriers.
The general policy Of the railroads with regard
10 other freight trafflc has been TO equalize
ditiOas Of competition in given markets by tho use
OF commodity rates, relatively favorable TO
distant producing points than to the nearer pro-
,iucng points But It appears that IN the ca 81 NJ
the oil Industry this policy has been generally re-
yersed and natural disadVantaRes Of the inde-
pendent have been enormously increased.
STANDARD OIL ADVANTAGES.
The manufacture of refined OIL commonly known
kerosene. is about 100000 barrels annually OF
which the Standard OIL Company directly and in
directly controls about 23oooOO0 It also controls
H. --n.-