Mr. Scheide was also shipping refined oil over the Erie. George R. Blanchard, who in October, 1872, became the general freight agent of the Erie, told the Hepburn Com mittee in 1879 that he found on entering his position that $7,00o in rebates had been paid Mr. Scheide for Mr. Ney hart in the month of September, 1872, on this refined. He does not say how long this had been going on. Mr. Blanchard found at the same time the March 25 agreement. He asked why it was not observed, and the reply convinced him that it had not been kept more than two weeks by the Pennsylvania and Central systems. "The representations made to me," says Mr. Blanchard, "also convinced the Atlantic and Great West ern as to what our rivals were doing, and that railway com pany and our own decided to continue to pay the twenty-four cents per barrel drawback then being paid on the rate of $1.35, provided by their producers' agreement of March 25, 1872." But Mr. Blanchard was shipping only Mr. Neyhart's re fined, and naturally he looked for more business and was will ing to give a rebate to get it. He soon had some from another of the oil men who had signed the agreement of March 25. This was Mr. Bennett, of Titusville, who with J. D. Archbold and his other partners entered into a contract with Mr. Blanchard to ship their entire product for a year at a rate considerably below the one agreed upon on March 25.* The contract was a short-lived one, for in November Mr. Bennett and his partners turned their shipments over to the Pennsyl vania.
The Erie had some compensation, however, in the fact that in July, 1873, Mr. Neyhart's crude shipments had all come to them. Mr. Scheide, Mr. Neyhart's agent, explained to the Hepburn Commission that he left the Pennsylvania because of what he considered "very bad treatment—a dis crimination against us in furnishing us cars." The Pennsyl vania had indeed undertaken to carry out the clause in the agreement of March zs which stipulated that there should be no discrimination in furnishing cars. Mr. Scheide, considering himself "their shipper," that is, shipping larger quantities more regularly than anybody else, and as a consequence hav ing better rates, thought it unfair that the cars should be pro rated,* and left the road, giving his business to the Erie, where presumably he got assurances that cars would be fur nished to shippers according to the quantity and regularity of shipments. Mr. Scheide's excellent testimony is good evidence of how deep a hold the principle that the large shippers are to have all the advantages had taken hold of some of the best men in the oil country, although the oil country as a whole utterly repudiated the "rebate business." These details, all drawn from sworn testimony, show how, before a year had passed after the end of the Oil War all the roads were practising discrimination, how a few shippers were again engaged in a scramble for advantages, and how the big ship,, pers were bent on re-establishing the principle supposed to have been overthrown by the Oil War that one shipper is more convenient and,profitable for a road_than many, and this being so, the matter of a road's duty as a common carrier has nothing to do with the question.f This was the situation when in June, 1873, General Deve reux, (whom we have met on the Lake Shore road, became president of the Atlantic and Great Western. Now at this time Peter H. Watson, the president of the South Improve ment Company, was president of the Erie. The two at once looked into the condition of their joint oil traffic. They found the rebate system abolished a year before again well entrenched. Nevertheless the Erie was not doing much busi ness. The entire shipments of oil over the Erie for 1873 were but 762,000 barrels out of a total of 4,963,000. Naturally they went to work to build up a trade, and their relations being what they had been with the Standard, the company con trolling a third of the country's refining capacity, they went to them to see if they could not get a percentage of their seaboard shipments from Cleveland. Mr. Rockefeller was
willing to give them shipments if they would make the rates as low as were given to any of his competitors on any of the roads, and if they would deliver his oil at Hunter's Point, Brooklyn, where he had oil yards, and where the Central delivered, or if they would not do that if they would lease their own oil yards to him. There was an excellent business reason for making that latter demand, which Mr. Blanchard ex plained to the Hepburn Commission : "The Standard," said Mr. Blanchard, "had a force of men, real estate, houses, tanks and other facilities at Hunter's Point for receiving and coopering the oil ; and they had their cooper age materials delivered over there. The arrangement prior to that time was that the Erie Company performed this ser vice for its outside refiners at Weehawken, for which the Erie Company made specific charges and added them to their rates for freight. The Standard Company said to us: 'We do the business at low cost at Hunter's Point because we are expert oil men and know how to handle it; we pay nobody a profit, and cannot and ought not to pay you a profit for a service that , is not transportation any more than inspecting flour or cotton ; and the New York Central delivers our oil at that point. Now if you will deliver our oil at Hunter's Point and permit us to ' do this business, you may do so; we want to do that business, and we cannot pay to the Erie Railway Company at Wee hawken a profit on all of those staves, heads, cooperage, fill ing, refilling and inspection, for we have our own forces of men and our own yards necessary for this work in another part of the harbour of New York; and it is not a part of your business as a carrier, anyway.' "In lieu thereof and for the profits that we could have made from the aggregate of these charges, we said to them : 'If you will pay us a fixed profit upon each one of these barrels • of oil arriving here, you may take the yards and run them subject to certain limitations as to what you shall do for other people who continue to ship oil to the same yards.' They were • only able to make this arrangement with us because of their controlling such a large percentage of shipment, and because of permanent facilities in Brooklyn ; if the larger percentage of shipments had belonged to outside parties, and they had • had no yards of their own, we would probably have retained . the yards ourselves." A contract was signed on April 17, 1874. By it the Standard agreed to ship fifty per cent. of the products of its refineries by the Erie at rates "no higher than is paid by the competitors . of the Standard Oil Company from competing Western refin eries to New York by all rail lines," and to give all oil patrons . of the Erie system a uniform price and fair and equal facili , ties at the Weehawken yards.* It was a very wise business deal for both parties. It made Mr. Rockefeller the favoured shipper of a second trunk line (the Central system was already his) and it gave him the control of that road's oil terminal so that he could know exactly what other oil patrons of the road were doing—one of the advantages the South Improvement contract looked out for, it will be remembered. As for the Erie, it tied up to them an important trade and again put them into a position to have something to say about the division of the oil traffic, the bulk of which outside of the Standard Oil Company the Pennsylvania was handling. In connection with the Central the Erie now said to the Pennsylvania that hence forth they proposed to maintain their position as oil shippers.