Arizona republican., 1916-02-28
Republican A. p. Leased Wire1

 quirements, have excluded independent I shippers from their lines, was made l today by the Federal Trade commits | sion in it's report to the senate on | special investigation of the business. If the five systems that control the l nid-continent pipe lines charged their own refineries for carrying oil at the | rate they offer to carry it for the in- | dependents. the report declares, their annual net earnings should show a 415 | per cent profit on their pipe line in- vestments. As it is, they are declared to earn more than 19 per cent l The investigation was ordered by the last congress- which later directed an i Interstate Commerce commission in- uuiry. To avoid duplication the Trade l commission confined it's work to the inid-continent field. while the Com merce commission turned it's attention to systems operating in the east. 1 The commission summarizes it's i findings in this language:
 | The dominant position of the mid l continent field makes the facts devel- l oped in this report of vital importance l to the entire country.
 1 The fixed investment in pipe lines is extensive and corresponds closely with the actual cost of such property | Pipe line construction in the mid I continent field has followed. instead of | preceded, crude oil production, and l such investment is comparatively se- cure.
 l There is large difference between 1 the cost of pipe line transportation, which is very low and pipe line tariff rates, while the independent shippers 1 cannot use railroads because their rates are still higher.
 The pipe line companies require | large minimum shipments, which makes it impracticable for small pro- ducers or refiners to ship crude oil by pipe line.
 The price of crude oil delivered at the refineries is to large extent made up of the transportation charge.
 The cost of pipe line construction is so great that small concerns can not build lines from the mid continent field to the large consuming and dis | tributing markets.
 Lower pipe line rates and smaller minimum shipments are necessary to | enable small concerns to compete With large refineries affiliated with pipe line companies.
 | Reasonable and equitable conditions of shipment by pipe line would tend tc a greater equality in the prices of mid continent and Appalachian crude oil and in the prices of refined pro- ducts in different markets"
 Of the five large systems operating ir the field the commission found thar two belong to the Standard Oil com pany and that a third is controlled by the Standard Oil capitalists. The Standard Oil lines are given as the Prairie, running northeast to Illinois and Indiana; the Oklahoma Louisiana running southeast to Baton Rouge. and the Magnolia. running south to Texas points The others are the Gulf and Texas systems.
 Of Standard Oil methods the report said:
 The advantage which the Standard Oil group derives from the exclusive use of the only trunk line from the mid continent field to the east would be largely removed if this pipe line system became a common carrier in fact as well as in name'
 It is explained that though congress has declared pipe lines common car riers little use has been made of them as such. as the small refiners almost without exception buy their crude pe troleum locally. The Interstate Com merce commission has not yet passed on tariffs and requirements submitted by the pipe lines, because it has not completed it's own investigation into pipe line conditions.
 While the Standard Oil interests have in this field some lines which show relative high costs" the report adds, nevertheless their chief line run ming northeast to Chicago excels all others in capacity and in the extent tC 1 which that capacity is used. This line shows the lowest cost. This favorable situation is partly due to the fact that there is no other line running to points east of the Mississippi. AS all the connecting trunk pipe lines between this river and the Appalachian noun tains are controlled by the Standard Oil group, the independent refineries are small and scattered. other pipe line concerns in the mid continent field have not attempted to run their lines to the east. but have built them to the | Gulf of Mexico For this reason the l Standard refineries are able to obtain mid continent oil at a great advantage over competing refineries located in the principal consuming districts"
 The report has this to say of pipe line profits:
 The net earnings, before de6ucting bond interest, of the companies which operate the five pipe line systems in the mid continent field have been 19.33 per cent on the net investment for the three-year period, 1q11 to 1913 These | net earnings. however, do not show what they earned from pipe line opera tiOns, because in most cases these cOm- panies are engaged in other branches of the oil business such as producing, refining and marketing. and their pipe lines are operated merely as depai t- ments of this integrated form of busi- ness. These companies generally treat their earnings as though they arose entirely from merchandising oil, be- cause they as yet have not to any significant extent performed the duty of common carriers.
 The significance Of the pipe line rates is best appreciated bv showing the rate of return on investment which