A P P E N D I X

« NUMBER 30

HENRY M. FLAGLER'S TESTIMONY ON THE REBATE PAID TO THE AMERICAN TRANSFER COMPANY

[Proceedings in Relation to Trusts, House of Representatives, 1888. Report Number 3112, pages 777-778.]

Q. Mr. Cassatt testified and offered in evidence the correspondence which showed that his company agreed to the payment of that 22-1/2 cents to the American Transfer Company on every barrel of crude oil passing over their line in consequence of the fact that the writer of the first letter on behalf of the American Transfer Company had asserted that the New York Central and the New York and Lake Erie roads paid the same amount. You know that to be a fact, do you not?

A. May I explain that now?

Q. You are entitled to make any explanation you wish.

A. The American Transfer Company was built originally for, really, the New York Central road. The New York Central had no means of getting south of Titusville with its cars. The American Transfer Company's lines were built really in the interest of the New York Central road. In those days the pipe-lines purchased the oil and oftentimes sold it at just what they paid for it, and sometimes less. They got more when they could. The New York Central, as I said, paid the American Transfer Company a price, which I presume was the figures named in Mr. Cassatt's testimony, for collecting oil in the lower country and delivering it to the Dunkirk and Allegheny Valley, which is the New York Central's connection. As that pipe-line increased its business the Erie road did the same thing. Later the Pennsylvania Railroad wanted the service of that pipe-line in collecting oil. Mr. O'Day did what I suppose any manager would do. He said to Mr. Cassatt, if you do the same thing for me that the other roads are doing, I have no objection to making the same arrangement with you. The payment made by the Pennsylvania, the Erie, and the New York Central roads constituted the gross income of the American Transfer Company, out of which it paid its expenses of doing its business and its losses, if it made any, in the purchase and sale of oil. It acted as a factor for those northern roads, and, as I said, was originally built in order that oils might be reached by the New York Central.

Q. But in addition to the sum of 22-1/2 cents, or whatever it may have been, which these trunk lines paid to the American Transfer Company, that company as a transporter of oil through its own pipe got this pipage charge besides?

A. I never so understood it. As I remember the facts in the case, while there was a nominal pipage — there might have been; I do not say there was; I do not remember.

Q. You do not say there was?

A. I do not remember. But while there might have been a nominal pipage, that nominal pipage might have been absorbed in the crude oil. In other words, it threw away its nominal pipage and relied——

Q. I am speaking now solely of the relations of the American Transfer Company to the railroads. The former received 22-1/2 cents on every barrel of oil passing over the Pennsylvania road and the other roads. But the American Transfer Company was a transporter of oil itself, and to the extent it transported oil through its pipes it made charge for that service also?

A. That is a point where I say I want to correct you. While it may have made a nominal charge, about which my memory fails me, I say it threw away that nominal charge by paying to the owner or the producer of the oil the value of the oil at the wells, plus what that pipage might have been, and that twenty odd cents paid by the Pennsylvania constituted its gross revenue.

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