On the very night after the defeat of the bill (April 28, 1887) the oil men who had gathered in Harrisburg to support the measure, angry and sore as they were, arranged to call an early meeting in Oil City and organise. The meeting was held. It was large, and it was followed by others. In a very short time 2,000 oil men were enrolled in a Producers' Pro tective Association, and thirty-six local assemblies were hold ing regular meetings throughout the region. There were sev eral important points about the new association, aside from the enthusiasm and determination which animated it: (I) It was a secret order.
(2) Its membership was composed entirely of persons out side of and opposed to the Standard Oil Trust, one of its by-laws reading: "No person connected with the Standard Oil Company or any of its allies, as partners, stockholders, or employees, and friendly thereto, shall be elected to mem bership; and members becoming such shall be liable to expulsion." (3) It proposed "to defend the industry against the aggre gations of monopolistic transporters, refiners, buyers and sellers" by handling its own oil.
Hardly had the Producers' Protective Association been organised before Mr. Rockefeller had an opportunity to try his plan for conciliation. An independent movement had been started in the summer of 1887 by certain large produc ers in favour of a general "shut-down," its object, of course, being to decrease the oil stocks. The president of the Pro ducers' Association, Thomas W. Phillips, who at that time was the largest individual producer in the oil country, his production averaging not less than 6,000 barrels a day, was called into consultation with the leaders of the "shut-down" movement. Mr. Phillips promptly told the gentlemen inter ested that he would not join in such an undertaking unless the Standard went into it. He pointed out that the Standard owned a large proportion of the 30,000,00o barrels of oil above ground. They had bought it at low prices. If the pro duction was shut down prices would go up and the Standard would reap largely on the oil they owned. The producers would, as usual, be standing all the loss.
The upshot of the council was that the Producers' Protec tive Association took hold of the shut-down movement, its representative seeking an interview with the Standard offi cials as to their willingness to share in the cost of reducing the production. Here was a chance for Mr. Rockefeller to
apply his theory of handling the oil producers—conciliate them when possible—encourage them in limiting their pro duction. The oil men's representatives were met half-way, and an interesting and curious plan was worked out; the producers were to agree to limit their production by 17,5oo barrels a day. They were to do this by shutting down their producing wells a part or all of the time and by doing no fresh drilling for a year. If they would do this the Standard agreed to sell the association 5,000,000 barrels of oil at sixty two cents, and let them carry it at the usual rates as long as they wanted to. Whatever advance in price came from the shut-in movement the producers were to have on their oil, and it was to be shared by them according to the amount each shut in his production. Mr. Phillips, before agreeing to this arrangement, demanded that provision be made for the workingmen who would be thrown out of employment by the shut-down, and he proposed that the association set aside for their benefit i,000,000 barrels of the oil bought from the Standard, and that the Standard set aside another million; all the profits above sixty-two cents and the carry ing charges on the 2,000,000 barrels were to go to the work ingmen. A memorandum covering the above points of the agreement was drawn up, and it was accepted by the two interests represented.* Mr. Rockefeller's reason for signing the contract he gave to the New York State Trust Investigating Committee four months later: Q. . . . What was the inducement for the Standard Oil Trust to enter into such an agreement as that ? A. The inducement was for the purpose of accomplishing a harmonious feeling as between the interests of the Standard Oil Trust and the producers of petroleum; there was great distress throughout the oil-producing region; as an instance of that distress there was an outcry that our interest was getting a return, that theirs was not in the business, and we did not know, as a matter of fact, that the oil-producing interest was abnormally depressed, and we felt it to be to the interests of the American oil industry that a reasonable price should be had by the producer for the crude material, and we wanted to co-operate to that end.