Titan

by Ron Chernow

  Applying a formula that Rockefeller had perfected in New York, New Jersey, and Philadelphia, Camden bought waterfront property in Baltimore, where he erected wharves and warehouses for a B&O oil-export terminal. With Standard Oil now embedded in the local transportation infrastructure, it became impossible for Baltimore refiners to operate autonomously. Standard Oil had become virtually indistinguishable from the railroad industry. On December 21, 1877, Camden triumphantly told Rockefeller that they had completed their conquest of the last independent refining center. “We have cleared up every seed in which a refining interest could spring up in Baltimore, so far as we can at present determine.”21

  Thus, only five years after the Cleveland Massacre, the thirty-eight-year-old Rockefeller, with piratical flair and tactical brilliance, had come to control nearly 90 percent of the oil refined in the United States. Perhaps a hundred tiny refineries still eked out a meager living in the interstices of the industry, but they were mostly tolerated as minor nuisances and scarcely threatened Standard Oil. As Rockefeller himself acknowledged, these isolated cases served a useful political purpose, providing a mirage of competition when it had ceased to exist altogether. He liked to point to these doughty survivors as proof that all the stories about the strong-arm tactics of Standard Oil were grossly exaggerated and that the oil industry was a scene of vibrant competition.

  In his implacable quest to rule the oil business, Rockefeller shifted focus in the late 1870s from the railroads to outright ownership of the superior alternative: pipelines. Undeterred by prophecies of exhausted oil fields, Standard Oil had both the capital and the incentive to blanket western Pennsylvania with a gigantic maze of pipelines. By 1879, the combine controlled almost the entire pipeline system, siphoning crude oil from thousands of wells and pumping it to storage tanks or railroad depots. When a driller struck oil, Standard Oil swooped down in a flash to connect his well, assuring both his livelihood and irrevocable reliance on the combine.

  Standard’s rough, brawling pipeline boss, Daniel O’Day, made sure that his construction gangs kept pace with the new fields, laying pipe at a furious pace of up to one and a half miles per day. O’Day stood forth as the agent of wealth or ruin for producers. If he wanted to punish a producer, he might hint that the producer’s backcountry well was too inaccessible for Standard to run a line through the woods. And if the producer lacked money to erect storage tanks, he might watch his fortune seep into the ground as he bickered impotently with Standard Oil.

  That O’Day exploited his power to silence dissent and cripple refractory competitors is amply documented in Rockefeller’s papers. It is important to recall that O’Day, like other Standard Oil lieutenants in the field, was the executor of Rockefeller’s will, whatever the latter’s disclaimers. When O’Day discovered that a producer named Murphy held a small stake in a competing pipeline, he dispatched to the scene John D. Archbold, who pointedly reminded this upstart that he had expected Standard “to take care of his production that might be located far back in the interior, as we have always done for him, and where such companies as the Pittsburgh line would not care to go.” 22 O’Day scared the daylights out of railroads, too. When one railway official complained that Standard was hogging crude-oil shipments between Olean, New York, and Buffalo, O’Day retorted that Standard Oil might just decide to ship all the refined oil by pipeline as well. As O’Day reported with glee to Rockefeller—who again professed ignorance of such machinations—“This seemed to stagger him a little and we may be able to hold it over him (as a club) successfully.”23 While Rockefeller communicated with his subordinates in genteel fashion, discussing muscular tactics with unctuous euphemisms, his colleagues were less restrained and gloried in their brutal shenanigans.

  As Rockefeller consolidated his virtual monopoly over the pipeline network, it provoked pandemonium along Oil Creek, where he was now dubbed the Lord of the Oil Regions. In late 1877, desperate independents thronged a “Petroleum Parliament” in Titusville, hoping to plot their escape from Standard Oil servitude. These extended, crowded sessions generated a host of resolutions, including enactment of a free-pipeline bill and another to prohibit railroad-freight discrimination. But Standard Oil spiked all such reform efforts through the liberal application of backdoor payments to legislators.

  In a historic departure, the independents endorsed plans for two long-distance pipelines that would bypass the whole Standard-rigged web of pipelines and railroads and open a path to the sea. The less ambitious project was the Equitable Petroleum Company, formed by Lewis Emery, Jr., to pipe oil from the Bradford fields to a railroad that would then carry the oil to Buffalo, where it would travel east over the Erie Canal. This roundabout route posed only a modest threat to Standard Oil, yet Rockefeller wired Daniel O’Day, “Don’t let them get a pipe to Buffalo.”24 To sabotage the effort, Standard Oil unleashed its full arsenal of obstructive tactics. It bought up the connecting railroad to Buffalo; threatened to yank orders from pipe manufacturers who sold to Equitable; and disconnected pipelines from all Bradford refiners who dealt with it. Despite this intimidation, the pipeline commenced operations in August 1878, exposing the first small chink in Standard Oil’s armor.

  The second, far more threatening project, led by Byron Benson, envisaged a pipeline to the seaboard, a revolutionary development in long-distance transport. Before this time, pipelines had never covered more than thirty miles. This seaboard pipeline would eclipse the railroads and shatter the whole complex structure of secret rebates and drawbacks that Rockefeller had cobbled together. Before the seaboard-pipeline battle, one could argue that Standard Oil had been an innovative force, modernizing the industry through up-to-date plants, superior management, and smoother coordination of the oil flow from wellhead to consumer. Now, it became a benighted custodian of the status quo, squelching progress to safeguard its own interests.

  At first, the independents (acting through the Tidewater Pipe Line Company) contemplated running a line from Oil Creek to Baltimore, but J. N. Camden quickly dealt a mortal blow to this plan: He bought an exclusive pipeline charter in the Maryland legislature that carried an ironclad guarantee that no other company would receive a charter that session. The Standard Oil hierarchy in Cleveland was kept closely apprised of his underhanded activities. Of the substantial money needed to grease this shady deal, Camden told Flagler: “The price is nominally $40,000.”25

  Foiled in crossing Maryland, the Tidewater Pipe Line Company then opted for a 110-mile pipeline from Bradford to Williamsport in central Pennsylvania, where the oil would then journey east by the Philadelphia and Reading Railroad. On November 22, 1878, it began its great race to the sea, laying down a ribbon of pipe at a rapid rate of two miles a day. Since the whole concept was experimental—nobody knew if oil could be pumped over 2,600-foot mountains—the Standard Oil cognoscenti reacted with cynical snickers. Writing to Rockefeller, a smug John D. Archbold professed himself “greatly amused” by the “seaboard scheme.” 26 Rockefeller was dubious yet circumspect, predicting at one point, “They are quite likely to have some disappointments yet, before consummating all their plans in that direction.”27 The Tidewater people mobilized powerful financial interests, and two Wall Street tycoons, George F. Baker and Harris C. Fahnestock of First National Bank, aided them financially.

  The fierceness of Standard Oil’s response was previewed in one of O’Day’s first letters to Rockefeller about the mavericks. “I would have no mercy on them that don’t deserve nor appreciate it.”28 In combating this challenge, Rockefeller again showed himself a virtuoso of industrial warfare. He sent his underlings to tank manufacturers, warning them not to deal with Tidewater, and deluged tank-car manufacturers with orders that kept them busy, depriving the pipeline of rolling stock needed to transport construction materials. Refiners who used Tidewater were lured away with concessionary rates on Standard Oil pipelines, and Rockefeller swiftly bought up any remaining independent refineries that might be prospective Tidewater customers.


  Standard Oil also embarked on a real-estate spree of monumental proportions, buying up strips of land or “dead lines” that ran in a straight line from the northern to the southern border of Pennsylvania, to block the Tidewater’s advance. Overnight, bewildered farmers became rich by selling parcels for extravagant sums to Standard Oil agents who invaded their sleepy towns. In another tack, Standard Oil placed stories in local papers, warning farmers who sold to Tidewater that their crops would be spoiled by pipeline leaks. And Standard Oil conspired with the railroads to withhold permission from any pipeline wishing to cross their tracks. Quick to exploit this, O’Day told Rockefeller, “The Penna R.R. should be informed of the efforts that are being made towards laying pipe lines from the Bradford District and they should see to it that the right of way secured some time since in their interest ‘across the country’ is well guarded and watched.” 29

  Still, Tidewater pushed relentlessly ahead. When Standard Oil bought an entire valley at one point, the unstoppable Tidewater changed course and climbed up over the surrounding hills. It began to look as if it might actually outflank Rockefeller and his resolute henchmen. Right on the eve of Tidewater’s success, Rockefeller decided that he might recoup in the political arena what he was on the verge of losing in the economic sphere. It was in the last-minute effort to halt Tidewater that Standard Oil first resorted to the wholesale bribery of state legislators.

  Before wading into the muck of Standard Oil’s political operations, we should note the general squalor of business-government dealings in the Gilded Age. Rockefeller had emerged in a fluid business world, with little government regulation to check entrepreneurs. At the same time, the government was heavily involved in the economy as it awarded land grants, railway franchises, and bank charters. After the Civil War, Washington hotels were crammed with businessmen jockeying for government contracts and toting suitcases full of cash to obtain them. President Grant admired the industrial captains, aspired to their society, and assembled a cabinet full of cronies and mediocrities eager to do their bidding. Government degenerated into a sink of iniquity, reflected in Mark Twain’s witticism at a contemporary banquet, “There is a Congressman—I mean a son of a bitch—But why do I repeat myself?”30 In 1876, politics touched a new nadir when Rutherford B. Hayes defeated Samuel J. Tilden for the presidency in what is now commonly regarded to have been a stolen election. A tremendous amount of money changed hands as businessmen and legislators trafficked in mutual manipulation. Businessmen such as Rockefeller preferred to think of themselves as victims of political extortion, not as initiators of bribes. Yet despite decades of categorical denials, Rockefeller’s papers reveal that he and Standard Oil entered willingly into a staggering amount of corruption. (We should remark in passing that Allan Nevins, who had access to Rockefeller’s papers, somehow managed to document only a single instance of Standard Oil bribery—in the Pennsylvania state legislature in 1887.) Standard Oil officials betrayed no qualms about paying bribes, and there is no recorded instance of Rockefeller rebuking a subordinate for engaging in graft.

  During the Tidewater battle, Standard lobbied hard to perpetuate the system that allowed state legislatures to grant exclusive pipeline charters. Representing independent producers, reformers in the late 1870s introduced measures in several states to enact free-pipe bills, which would enable Standard Oil foes to lay competing lines and enjoy the right of eminent domain; under the existing system, Tidewater had to buy costly rights-of-way along its 110-mile east-west route. Standard Oil regarded these bills with such apprehension that Henry Flagler returned from Florida, where he was recuperating from poor health, to spearhead the lobbying campaign. To foster the impression of a popular groundswell against the bill, he hired lawyers to pose as incensed farmers and landowners in favor of the status quo. Flagler and A. J. Cassatt secretly exchanged drafts of the Pennsylvania bill and killed it with crippling amendments.

  To stifle a similar pipeline bill in New York, Flagler coordinated efforts with Hugh J. Hewett of the Erie Railroad. Payoffs were an expensive business, and even Standard Oil welcomed rich partners to ease the burden. At one point, Flagler grumbled to a railroad leader, “We have spent a large sum of money to squelch Seaboard Pipe Line Charters,” and he sourly asked that the railroads pick up the tab for these “lobbying” efforts in the future.31 When Flagler recruited an Albany lobbyist, aptly named Smith M. Weed, he was ready to distribute $60,000 to legislators, but Hewett demurred and insisted that $15,000 would suffice. 32 “I send $10,000 currency,” Flagler agreed, adding, “if you need the other $5000 or any part of it, send word by bearer and (we or he) can get it for you.”33 That $15,000 would today be worth $220,000.

  As always, Rockefeller floated serenely above the bustle, pretending to be oblivious to any wrongdoing, but his correspondence implicates him directly in this skulduggery. On March 4, 1878, A. N. Cole, a New York state senator, wrote to Rockefeller on New York State Senate stationery and presented himself as an “attorney” to be hired by Standard Oil to manage the campaign against the free-pipe bill. Evidently, Rockefeller responded favorably to this overture, for Cole then mapped out an extensive campaign of pressure and subornation, complete with precise money-laundering instructions:

  Two or three good attorneys will be wanted in the Senate, and five or six in the Assembly, and these I have no hesitation in undertaking to employ, if authorized to do so. . . . Government bonds are better to deal in than money, since, were “attorneys” to be paid in cash, it might be construed into corruption, but then one can sell bonds, you know, in fact, dealing in them is an eminently becoming business. . . . In Heaven’s name, don’t make this letter public, since, were you to do so, I fear my brethren of the Methodist Church might fear I had so far fallen from grace as to leave no hope of recovery.34

  While Standard Oil conducted statehouse offensives against free pipelines, it also put out brushfires in Washington as public sentiment began to lean toward railroad reform. The electorate was beginning to realize that big-business domination of the transportation network was incompatible with a competitive economy. In 1876, a bill was introduced in Congress “to regulate Commerce and prohibit unjust discriminations by Common Carriers.” 35 By this point, J. N. Camden was a West Virginia congressman. Since he also headed the Camden Consolidated Oil Company, covertly owned by Standard Oil, he kept Rockefeller and Flagler minutely informed of legislative developments and swapped messages with them in Standard Oil code. Regarding the railroad bill, Camden assured Flagler, “I have the ear of some half dozen Senators that I will see. I can’t think there is the least probable danger of such a bill getting through the Senate.”36 True to Camden’s words, the railroad bill passed the House of Representatives then faltered in the Senate.

  By the late 1870s, as news of his wealth spread, Rockefeller was badgered for campaign contributions, sometimes by the same politicians who lambasted Standard Oil. When Ohio representative James A. Garfield ran for president in 1880, he sounded out a Cleveland source, Amos Townsend, as to whether “Mr. Rockafeller” might be sympathetic. When Garfield asked, “Do you know his state of feeling toward me?” Townsend advised extreme caution. “It would not do for him to visit us, as it would be reported and cut like a knife in Pennsylvania. ”37 A more subtle approach was another matter, and Rockefeller, along with Jay Gould, Chauncey Depew, and Levi Morton, ended up a top contributor to Garfield’s victorious campaign. Garfield was the first of many presidential contenders who grappled with the quandary of whether it made better sense to court Rockefeller’s money or capitalize on public animosity against him.

  For all his success in bottling up pipeline bills, Rockefeller couldn’t scotch the Tidewater. As the project neared completion, he executed a flurry of last-minute maneuvers and even tried to buy an interest in the operation for $300,000—all to no avail. On May 28, 1879, the Tidewater people held their breath as the great pumps whirred into motion near Bradford and the oil began to slide eastward through the pipeline. Nobody knew i
f the crude oil would actually scale the intervening mountains, and for days people expectantly tracked its slow progress. After seven days of suspense, the first oil drops sputtered out the Williamsport end and led to jubilation in western Pennsylvania, where Tidewater promised deliverance from the Standard Oil monopoly. Construction of the pipeline rated as one of the supreme engineering feats of its day, and its impresario, Byron Benson, achieved heroic status.

  Faced with a rare defeat, Standard Oil did not react with equanimity. Daniel O’Day wanted to resort to thuggery to smash the pipeline. “I feel extremely satisfied that the Tidewater Pipe Line can be stopped and torn up if it is thought best to do it,” he told Rockefeller. “I also think that the sooner the Tidewater knows this the better, as it might have a healthy effect upon them.”38 Rockefeller vetoed such crude reprisals and conceived a more elegant solution to the Tidewater menace. He had to bide his time, though, because he first had to dispose of two legal challenges that dogged his footsteps throughout 1879.