The daily telegram. [volume] (Clarksburg, W. Va.) 1901-1926, 1916-02-28


game charge.
-
from pipe line operations, because IN
most cases these companies are en-
gagged in other branches OF the oil
business such as producing, refining
and marketing, and their pipe lines
are operated merely as departments
of this integrated form Of business
These companies generally treat their
earnings as though they arose en-
tirely from merchandising oil, be-
cause they as yet have not to any
significant extent performed the duty
of common carriers.
1.-The significance Of pipe line rates
Is best appreciated by showing the
rate Of return on investment which
would be obtained II all the oil ship
ped by the interests owning the pipe
lines were charged the tariff rates at
which the pipe line offers to take oil
of other shipper. Taking all these
five pipe lines together the net in
vestment aggregated in 1913 $4S,-
$4,000; the cost Of transportation
by pipe lines including depreciation
on Investment, s1O,624,000; and the
gross receipts which would have been
obtained If tariff rates had been
charged on all the oil carried, $751;
S37, 900. On this basis the earnings
would have been $1S,213,00O, and
the rate Of return on the net invest
ment AIS per cent.
"The variation in net earnings for
the five different systems would have
been considerable, ranging from
fourteen to sixty-two per cent"
Bar Smaller Concerns.
The report goes into minimum
quantity requirements of the pipe
lines, which it charges. excludes
smaller concerns.
Conditions made regarding tbs
minimum quantity Of oil which will
be accepted for shipment" 1t says,
ARE such that small producers or
retiners are virtually precluded from
using this method OF transportation
The Prairie Pipe Line Company
makes the minimum requirement
100000 barrels; certain Others re-
quire at least $4,000. 1t is evident,
therefore. that minimum require
ment OF 100, 900 barrels is not nee
essary. But a minimum requirement
of $4,000 would appear to be excess
i've.
1.-THE really difficult problem for
pipe lines acting as common car
riers would appear 10 arise when the
shipments offered exceed the capac-
ity of the line, and in that case some
equitable rule would have to be de"
termined for apportiOning shipments.
= = Furthermore, there is no OPP
portunity to get cheaper transporta-
ton by other means, because the rail-
road rates are higher STILL
Probcrs' Conclusion.
The report concludes:
THE conclusion Is evident that
lower rates and equitable shipping
requirements by pipe line are neces-
sary in order to make pipe lines COM
mon carriers in fact as well as III
law. and that the prosperity and per
haps even the existence OF many
small concerns are dependent upon
reasonable and equitable shipping
conditions.
Lower pipe line rates and reason-
able pipe line shipping requirements
would enable many small producers
and rciners TO transport crude oil
from the mid-contncnt field by pipe
line who are now unable 10 do so,
and would, therefore, tend TO equal
izc competition In the sale of crude
oil by increasing it in some markets
where il is slight or non-eNistent ana
by reducing IL in others, where 1t is
extraordinarily keen. While the
natural disadvantage OF location OF
the mid.contlnent field with respect
10 the largest consuming markets can
not be removed, the artificial dis
advantage due TO high pipe line rates
and shipping requirements can be
eliminated.
The removal OF tnese artllcIai
disadvantages would tend 10 a great
er quality in the prices OF mid-contl-
nent and Appalachian crude oil, and
consequently the prices OF the refined
/ products which are made from them
would tend to be more equal in dit
ferent markets of the United States
Whether the general level of prices
of refined products would be thereby
reduced or kept at a lower level
would depend chiefly upon the move
ment of the prices Of the crude oil.
Such prices, under conditions oil free
competition in purchase and sale,
would be determined by supply and
demand. Competition would be
promoted, however, and more eQuit-
able conditions established by the re-
moyal of these artificial disadvant-
ages imposed on the mid-contlnent
field"