MICHAEL MURPHY
The present President of the Pure Oil Company.
DAVID KIRK
The first President of the Pure Oil Company.
The special committee, of which Mr. Taylor was chairman, went actively to work. Lawyers were employed to consider the safest form of organisation for a company doing an interstate pipe-line business and carrying on refineries. Certain German capitalists, owners of tank-steamers and interested in foreign marketing agencies, were brought into the scheme. Things were going well, when suddenly the committee found the chairman cooling toward the enterprise. Then came the rumour that Mr. Taylor and his partners — Mr. Satterfield and J. L. and J. C. McKinney — had sold the Union Oil Company to the Standard. A meeting of the executive board was at once called, Messrs. Taylor and J. L. McKinney both being present. They acknowledged the truth of the report and were promptly informed their resignations would be accepted.
The rumour of the secret desertion of strong members of the Producers' Protective Association, while holding positions of trust, soon spread through the Oil Regions. It was a staggering blow. It took from them one of the largest single interests represented. It deprived them of men of ability on whom they had depended. It introduced a fear of treachery from others. It brought them face to face with a new and serious element in the oil problem — the Standard as an oil producer. Up to 1887, the year of the organisation of the Producers' Protective Association, Mr. Rockefeller had not taken his great combination into oil production to any extent, and wisely enough from his point of view. It was a business in which there were great risks, and as long as he could control the output by being its only buyer, why should he take them? Now, however, the situation was changing. A number of sure fields had been developed — Bradford, Ohio, West Virginia. Their value was depressed by over-production. Mr. Rockefeller had money to invest. The producers were threatening to disturb his control by a co-operative scheme. It was certain that he had not yet produced a "harmonious feeling." It was not sure he would. If he failed in that they might one day even shut off his supply of oil, as they had done in 1872, and Mr. Rockefeller, with great foresight, determined to become a producer. In 1887 he went into Ohio fields. Soon after he began quietly to buy into West Virginia. When he learned, in 1890, from Mr. Taylor and his partners, that a co-operative company of producers was on foot, he naturally enough concluded that the best way to dismember it was to buy out the largest interest in it. The Union Oil Company saw the advantage of being a member of the Standard Oil Trust, and sold. In this one year, 1890, over 40,000 shares of Standard Oil Trust certificates were issued to oil-producing companies, [139] as follows:
| For | stock | of | Union Oil Company… | 18,249 | shares |
| " | " | " | Forest Oil Company… | 17,378 | " |
| " | " | " | North Pennsylvania Oil Company… | 2,647 | " |
| " | " | " | Midland Oil Company… | 2,000 | " |
| -------- | |||||
| 40,274 | " | ||||
There was general consternation in producing circles, and if there had not been a number of men in the organisation who realised that the life of the independent effort was at stake, and who turned all their strength to saving it, the association would undoubtedly have gone to pieces. Chief among these men were Lewis Emery, Jr., and C. P. Collins, of Bradford, Pennsylvania; J. W. Lee and David Kirk, of Pittsburg; A. D. Wood, of Warren; Michael Murphy, of Philadelphia; Rufus Scott, of Wellsville; J. B. Aiken, of Washington; R. J. Straight, of Bradford; Roger Sherman and M. W. Quick, of Titusville. They urged an immediate meeting of the General Assembly, at which a plan for co-operative action should be adopted and at once put into force.
On January 28, 1891, the General Assembly convened at Warren, Pennsylvania. The whole miserable story of the co-operative plan which the executive board had worked out, and its destruction by the desertion of the Union Oil Company, came out. It was at once evident that, instead of disheartening the Assembly, it was going to harden their determination and spur them to action; that they would not leave Warren until they had something to work on. The session lasted three days, and before finally adjourning it had adopted a drastic plan, framed by a committee of nine, of which Mr. Quick was chairman. This plan aimed, so the resolution adopted by the Assembly stated, to cut off the supplies of the producers' oil from the Standard Trust! This was to be accomplished by forming a limited partnership, whose subscribers should all be trusted members of the Producers' Protective Association (only persons having no affiliation with the Standard Oil Company were members of the Producers' Protective Association, it will be remembered), and which should aim to take care of the crude oil from the wells of the producers who went into the movement, furnish it local transportation, and find a market for it either by building independent refineries or by alliance with those already in existence.
From Warren the delegates went home to work for the new scheme. J. W. Lee and J. R. Goldsborough, the secretary of the association, at once made a tour of the Oil Regions to explain the project and solicit subscriptions. The response was immediate. In a few weeks over 1,000 producers had subscribed to the new company, which was at once organised as the Producers' Oil Company, Limited, its capital being $600,000.
But it is one thing to organise a company, and another to do business. Where were they to begin? Where to set foot? The only thing of which they were sure was a supply of crude oil, and in order to take care of that they began operations by putting up four iron tanks at Coraopolis, Pennsylvania, near the rich McDonald oil field. But they must have a market for it, and their first effort was to ship it abroad. At Bayonne, New Jersey, on the border of the territory occupied by the Standard's great plant, stands an independent oil refinery, the Columbia Oil Company. The Columbia has "terminal privileges," that is, a place on the water-front from which it can ship oil — an almost impossible privilege to secure around New York harbour. The Producers' Oil Company now obtained from Hugh King, the president of the Columbia, the use of his terminal. They at once had fifty tank-cars built, and prepared to ship their crude oil, but the market was against them, stocks were increasing, prices dropping. The railroad charged a price so high for running their cars that there was no profit, and the fifty tank-cars were never used in that trade. A futile effort to use their crude oil as fuel in Pittsburg occupied their attention for a time, but it amounted to nothing. It was becoming clearer daily that they must refine their oil. The way opened to this toward the end of their first year.
In and around Oil City and Titusville there had grown up since 1881 a number of independent oil refineries. They had come into being as a direct result of the compromise made in 1880 between the producers and the Pennsylvania Railroad, a clause of which stipulated that thereafter railroad rates should be open and equal to all shippers. The Pennsylvania seems to have intended at first to live up to this agreement, and it encouraged refiners in both the Oil Regions and Philadelphia to establish works. At first things had gone very well. There were economies in refining near the point where the oil was produced, and so long as the young independents had a low rate to seaboard for their export oil they prospered. But in 1884 things began to change. In that year the Standard Pipe Line made a pooling arrangement with the Pennsylvania Railroad, by which rates from the Oil Regions were raised to fifty-two cents a barrel, an advance of seventeen cents a barrel over what they had been getting, and in return for this raise the Standard agreed to give the railroad twenty-six per cent. of all the oil shipped Eastward, or pay them for what they did not get. This advance put the independents at a great disadvantage. In September, 1888, another advance came. Rates on oil in barrels were raised to sixty-six cents, while rates on oil in tanks were not raised. The explanation was evident. The railroad owned no tank-cars, but rented them from the Standard Oil Company. It refused to furnish these tank-cars to the independents, but forced them to ship in barrels, and now advanced the price on oil in barrels. This second advance was more than the refiners could live under, and they combined and took their case to the Interstate Commerce Commission, a hearing being given them in Titusville in May, 1889. No decision had as yet been rendered, and they in the meantime were having a more and more trying struggle for life, and their exasperation against the Standard was increasing with each week. When, therefore, the representatives of the Producers' Oil Company proposed a league with the independent refiners they were cordially welcomed.
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