The sudden uprising of the Oil Regions against the South Improvement Company did not alarm its members at first. The excitement would die out, they told one another. All that they needed to do was to keep quiet and stay out of the oil country. But the excitement did not die out. Indeed, with every day it became more intense and more wide-spread. When Mr. Watson's tanks were tapped he began to protest in letters to a friend, F. W. Mitchell, a prominent banker and oil man of Franklin. The company was misunderstood, he complained. "Have a committee of leading producers appointed," he wrote, "and we will show that the contracts with the railroads are as favourable to the producing as to other interests; that the much-denounced rebate will enhance the price of oil at the wells, and that our entire plan in operation and effect will promote every legitimate American interest in the oil trade." Mr. Mitchell urged Mr. Watson to come openly to the Oil Regions and meet the producers as a body. A mass-meeting was never a "deliberative body," Mr. Watson replied, but if a few of the leading oil men would go to Albany or New York, or any place favourable to calm investigation and deliberation, and therefore outside of the atmosphere of excitement which enveloped the oil country, he would see them. These letters were read to the producers, and a motion to appoint a committee was made. It was received with protests and jeers. Mr. Watson was afraid to come to the Oil Regions, they said. The letters were not addressed to the association, they were private — an insult to the body. "We are lowering our dignity to treat with this man Watson," declared one man. "He is free to come to these meetings if he wants to." "What is there to negotiate about?" asked another. "To open a negotiation is to concede that we are wrong. Can we go halves with these middlemen in their swindle?" "He has set a trap for us," declared another. "We cannot treat with him without guilt," and the motion was voted down.

The stopping of the oil supply finally forced the South Improvement Company to recognise the Producers' Union officially by asking that a committee of the body be appointed to confer with them on a compromise. The producers sent back a pertinent answer. They believed the South Improvement Company meant to monopolise the oil business. If that was so they could not consider a compromise with it. If they were wrong, they would be glad to be enlightened, and they asked for information. First: the charter under which the South Improvement Company was organised. Second: the articles of association. Third: the officers' names. Fourth: the contracts with the railroads which signed them. Fifth: the general plan of management. Until we know these things, the oil men declared, we can no more negotiate with you than we could sit down to negotiate with a burglar as to his privileges in our house.

The Producers' Union did not get the information they asked from the company at that time, but it was not long before they had it, and much more. The committee which they had appointed to write a history of the South Improvement Company reported on March 20, and in April the Congressional Committee appointed at the insistence of the oil men made its investigation. The former report was published broadcast, and is readily accessible to-day. The Congressional Investigation was not published officially, and no trace of its work can now be found in Washington, but while it was going on reports were made in the newspapers of the Oil Regions, and at its close the Producers' Union published in Lancaster, Pennsylvania, a pamphlet called "A History of the Rise and Fall of the South Improvement Company," which contains the full testimony taken by the committee. This pamphlet is rare, the writer never having been able to find a copy save in three or four private collections. The most important part of it is the testimony of Peter H. Watson, the president, and W. G. Warden, the secretary of the South Improvement Company. It was in these documents that the oil men found full justification for the war they were carrying on and for the losses they had caused themselves and others. Nothing, indeed, could have been more damaging to a corporation than the publication of the charter of the South Improvement Company. As its president told the Congressional Investigating Committee, when he was under examination, "this charter was a sort of clothes-horse to hang a scheme upon." As a matter of fact it was a clothes-horse big enough to hang the earth upon. It granted powers practically unlimited. There really was no exaggeration in the summary of its powers made and scattered broadcast by the irate oil men in their "History of the Rise and Fall of the South Improvement Company": [20]

The South Improvement Company can own, contract, or operate any work, business, or traffic (save only banking); may hold and transfer any kind of property, real or personal; hold and operate on any leased property (oil territory, for instance); make any kind of contract; deal in stock, securities, and funds; loan its credit, guarantee any one's paper; manipulate any industry; may seize upon the lands of other parties for railroading or any other purpose; may absorb the improvements, property or franchises of any other company, ad infinitum; may fix the fares, tolls, or freights to be charged on lines of transit operated by it, or on any business it gives to any other company or line, without limit.

Its capital stock can be expanded or "watered" at liberty; it can change its name and location at pleasure; can go anywhere and do almost anything. It is not a Pennsylvania corporation only; it can, so far as these enactments are valid, or are confirmed by other Legislatures, operate in any state or territory; its directors must be only citizens of the United States — not necessarily of Pennsylvania. It is responsible to no one; its stockholders are only liable to the amount of their stock in it; its directors, when wielding all the princely powers of the corporation, are also responsible only to the amount of their stock in it; it may control the business of the continent and hold and transfer millions of property, and yet be rotten to the core. It is responsible to no one; makes no reports of its acts or financial condition; its records and deliberations are secret; its capital illimitable; its object unknown. It can be here to-day, to-morrow away. Its domain is the whole country; its business everything. Now it is petroleum it grasps and monopolises; next year it may be iron, coal, cotton, or breadstuffs. They are landsmen granted perpetual letters of marque to prey upon all commerce everywhere.

When the course of this charter through the Pennsylvania Legislature came to be traced, it was found to be devious and uncertain. The company had been incorporated in 1871, and vested with all the "powers, privileges, duties and obligations" of an earlier company — incorporated in April, 1870 — the Pennsylvania Company; both of them were children of that interesting body known as the "Tom Scott Legislature." The act incorporating the company was not published until after the oil war; its sponsor was never known, and no votes on it are recorded. The origin of the South Improvement Company has always remained in darkness. It was one of several "improvement" companies chartered in Pennsylvania at about the same time, and enjoying the same commercial carte blanche.

Bad as the charter was in appearance, the oil men found that the contracts which the new company had made with the railroads were worse. These contracts advanced the rates of freight from the Oil Regions over 100 per cent. — an advance which more than covered the margin of profit on their business — but it was not the railroad that got the greater part of this advance; it was the South Improvement Company. Not only did it ship its own oil at fully a dollar a barrel cheaper on an average than anybody else could, but it received fully a dollar a barrel "rake-off" on every barrel its competitors shipped. It was computed and admitted by the members of the company who appeared before the investigating committee of Congress that this discrimination would have turned over to them fully $6,000,000 annually on the carrying trade. The railroads expected to receive about one and a half millions more than from the existing rates. That is, an additional cost of about $1.25 a barrel was added to crude oil, and it was computed that this would enable the refiners to advance their wholesale price at least four cents a gallon. It is hardly to be wondered at that when the oil men had before them the full text of these contracts they refused absolutely to accept the repeated assertions of the members of the South Improvement Company that their scheme was intended only for "the good of the oil business." The committee of Congress could not be persuaded to believe it either. "Your success meant the destruction of every refiner who refused for any reason to join your company, or whom you did not care to have in, and it put the producers entirely in your power. It would make a monopoly such as no set of men are fit to handle," the chairman of the committee declared. Of course Mr. Warden, the secretary of the company, protested again and again that they meant to take in all the refiners, but when he had to admit that the contracts with the railroads were not made on this condition, his protestations met with little credence. Besides, there was the damning fact that no refiners had come in except those in Cleveland, and that they with one accord testified that they had yielded to force. Not a single factory in either New York or the Oil Regions was in the combination. The fact that the producers had never been approached in any way looked very bad for the company, too. Mr. Watson affirmed and reaffirmed before the committee that it was the intention of the company to take care of the producers. "It was an essential part of this contract that the producers should join it," he declared. But no such condition was embodied in the contract. It was verbal only, and, besides, it had never been submitted to the producers themselves in any form until after the trouble in the Oil Regions began. The committee, like the oil men, insisted that under the circumstances no such verbal understanding was to be trusted. [21]

No part of the testimony before the committee made a worse impression than that showing that the chief object of the combination was to put up the price of refined oil to the consumer, though nobody had denied from the first that this was the purpose. In a circular, intended for private circulation, which appeared in the newspapers about this time explaining the objects of the South Improvement Company, this was made clear:

"The object of this combination of interests," ran the circular, "is understood to be twofold: firstly, to do away, at least in a great measure, with the excessive and undue competition now existing between the refining interest, by reason of there being a far greater refining capacity than is called for or justified by the existing petroleum-consuming requirements of the world; secondly, to avoid the heretofore undue competition between the various railroad companies transporting oil to the seaboard, by fixing a uniform rate of freight, which it is thought can be adhered to by some such arrangement as guaranteeing to each road some such percentages of the profit of the aggregate amount of oil transported, whether the particular line carries it or not. It is also asserted that a prominent feature of the combination will be to limit the production of refined petroleum to such amounts as may serve, in a great measure, to do away with the serious periodical depressions in the article. Is it also to be expected that, desiring to curtail the production of refined petroleum in this country, the railroads will not offer any additional facilities for exportation of the crude article."

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