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Mr. VAN HOUTEN. Yes, sir.
Senator CUMMINS. Or it could be delivered to the Atchison, Topeka & Santa Fe, so far as that road would reach the destination of the freight, and when you come to the antitrust law, which is directed against the restraint of trade and commerce, the acquisition by the Santa Fe of this line now, which taps two trunk lines, I think, might be termed in restraint of trade or commerce much more readily than you could claim or it could be claimed that your road and the Atchison, Topeka & Santa Fe were in competition. There is a very marked distinction there.
Mr. van HOUTEN. Is not the test of the destruction of competition that there must be some injury to some one? Is not that, after all, the test? Any one living in Raten is just as well off—is better off in many respects--as far as competition is concerned, with the Atchison owning that read as he is with the road in our possession.
Senator CUMMINS. Let us see about that. Of course, I do not think it has much to do with this bill, really, but as it is now, theoretically at least, every shipper aleng the line of your road has the opportunity to select two routes, and when the A., T. & S. F. buys it he is limited to one route.
Mr. van HOUTEN. He has the same right that he has now.
Senator CUMMINS. He has the right, of course, to route the business, but that would be true in every instance in the acquisition of railroad property. There is the right of routing on the part of the shipper, I assume.
The CHAIRMAN. Senator Cummins, do you think that applies to the acquisition of this road by the A., T. & S. F. and would not apply to its acquisition by the Colorado & Southern? Senator CUMMINS. No; I think it is just the same.
The CHAIRMAN. Then your idea is that competition may require that this road shall be joined with neither-should be kept forever an independent road?
Senator Cummins. That would depend upon the administration of the antitrust law. I think there might be some conditions under which that might be true. But I do not see any competition involved between your road and the A., T. & S. F. any more than there is competition between your road and the Colorado & Southern. They occupy exactly the same relation to each other. But I can see very readily how that physical situation might prevent either of those roads from acquiring your road, because it would restrain trade or commerce or would prevent the people along the line of your road from having that free opportunity to avail themselves of the two outlets that they now have.
Mr. van HOUTEN. But they still have the same outlets as long as the rates are kept intact, and those rates can not be changed except by consent of the Interstate Commerce Commission.
Senator CUMMINS. Suppose the A., T. & S. F. should give up this end of the line, run a train a week on it, never have cars to furnish to its people, who live along that line. All those things of course can be corrected by application to the Interstate Commerce Commission, but it is a very difficult and torturous road to secure that relief, which some competition is intended to furnish.
Mr. VAN HOUTEN. It seems to me that the commission has full jurisdiction over all matters of that kind, and that the law provides
that the shipper shall receive the same treatment and cars and service and rates.
Senator CUMMINS. On that theory what objection would there be to any railroad acquiring the property of any other, no matter whether they were competitive or not? That theory, of course, would lead to the abolition of all restrictions against contracts between and dealings between competitive properties, would it not?
Mr. van HOUTEN. Well, yes; in a way; is it not a fact now, whether any competition exists or not between the railroads as far as rates are concerned ?
Senator CUMMINS. That brings up the real question.
Mr. VAN HOUTEN. Is not that absolutely under the jurisdiction of the commission ?
Senator CUMMINS. That is whether the railroad company should be operated under such provisions or not, or whether they should be left entirely outside. That is a question which is worthy of the gravest sort of consideration.
Mr. van HOUTEN. We are afraid of the words in there “in any degree,” but as you say it is qualified afterwards by the word “substantial,” but still it does add one more burden, there has to be more explanation and more construction. It seems to me if you leave that out, the bill is perfectly plain.
Senator POMERENE. Speaking of the House bill now?
Senator CUMMINS. Mr. van Houten, it raises this question, and it is a very interesting one to develop: In your particular instance now, or take any situation;
here are two trunk lines of road running through a State. They are 100 miles apart, we will say, running east and west. It is a populous State, full of industries. Now, between those two roads running north and south there is another road independently owned and independently operated. That north and south road passes through a great many places, and, of course, there is a great deal of freight which it inay deliver to either one or the other at either terminal. Now, do you think it is good policy to allow either one of these roads to buy that connecting link between them, so that the territory which the north and south road serves is dependent upon the one trunk line instead of being at liberty to choose the two trunk lines that it had before? That is the whole question here. It might affect a great many situations throughout the United States.
Mr. VAN HOUTEN. I want to emphasize the matter that Mr. Harlan stated, that we are in the condition where we can not go ahead and we can not back up. We are a coal company owning a railroad, and of course the law is not applicable to us as yet, but it is only a step to make it applicable.
Senator CUMMINS. I am very much in sympathy with your effort to divorce the coal business from the transportation business. I should like to help you bring about that result.
Mr. van HOUTEN. We are trying to conform to the law, and when we went into the railroad business we simply had to go into it in order to get the rates. Of course, in these seven years the Interstate Commerce Commission has been given a great deal more power, and they can enforce their demands, which they could not do seven years
ago, and now the railroad has got to be to us a kind of incubus, and we can not keep it and we can not give it away. We should like, if you gentlemen would show us the light. I think we are absolutely within the law as it is to-day—the Sherman Act—because as to the competition there now there is no substantial restraint of trade. Of course, you can not conceive any situation of that kind where there is not some little competition; there is bound to be some.
The CHAIRMAN. You are willing to take your chances under the Sherman law, but do not want the new legislation to embarrass you?
Mr. VAN HOUTEN. That means I have to hire more lawyers. It seems to me if you just use the words “impairing substantially competitive conditions," without the words “in any degreee,” that covers almost everything that you attempt to cover.
Senator CUMMINS. If I were undertaking to defend a suit either under this section or under the antitrust law in your case, I would choose this section rather than the antitrust law.
The CHAIRMAN. We will take the matter under consideration.
(Thereupon, at 11.45 a. m., May 15, 1914, the committee took up the consideration of other business.)
WEDNESDAY, MAY 20, 1914.
COMMITTEE ON INTERSTATE COMMERCE,
UNITED STATES SENATE,
Washington, D.C. Present: Senators Newlands (chairman), Pomerene, Robinson, Saulsbury, and Gore.
The CHAIRMAN. The committee is called together for the purpose of considering Senate bill 5559, a bill to regulate the transportation of oil by means of pipe lines. Several gentlemen are here from Oklahoma who wish to be heard upon the matter. Senator Gore has requested this meeting:
Senator ROBINSON. May I ask a question—are all these gentlemen in favor of the legislation ?
Senator GORE. Yes, sir.
Senator GORE. No, sir; except that I should like to mention in the beginning that Oklahoma produces 65 per cent of refinable oil produced in the United States. I mean by refinable oil that not including fuel oil. Our annual production is about 75,000,000 barrels a year. The ruling price until recently was $1.05 a barrel. It has been reduced in the Tulsa field to 75 cents a barrel, and in the Healdton field it has been reduced from $1.05 to 50 cents. The Standard Oil Co. is, of course, the principal purchaser, and it owns and is supposed to control all the pipe lines, and, of course, controlling the means of transportation, controls largely the situation.
The object of the pending bill is to make pipe lines carriers. That was the purpose of the Hepburn bill several years ago. The court of commerce held that was unconstitutional. That case is pending on appeal now in the Supreme Court of the United States, and decision is expected soon. The opinion is understood to have been written, but has not been handed down. If that decision should be adverse, this bill attempts in a different way to make the pipe lines common carriers, and also attaches the commodity clause to the pipe lines as common carriers, after the fashion of the commodity clause applied to the railroads.
Senator ROBINSON. If the Supreme Court holds the act you have referred to, declaring pipe lines common carriers, constitutional, this bill may not be necessary.
Senator GORE. Except as to the commodity clause provision.
Mr. CHARLES WEST. I think that statement is not exactly correct. We want to have this bill, anyway, whether the Supreme Court holds the other good or bad.
Senator GORE. Particularly the commodity clause. The Prairie Oil is a Standard Oil branch in Oklahoma which has been declaring dividends of from 85 to 125 per cent. It purchases from the independent producers at pretty much its own price. Not only that, it is draining the oil from other wells; you have an oil lease in some neighborhoods, and unless you let the oil flow, some one with the neighboring well gets your oil out from under the ground. So that they are oppressed from the two angles. First, they do not get a reasonable price for the oil, and by holding back the purchases from the independents they drain their oil underground.
Senator ROBINSON. What does this bill propose ?
Senator GORE. This bill undertakes to make the pipe lines common carriers, in the first instance; and it undertakes to divorce the producers from the common carriers, prevents the pipe line from being at once a common carrier and a producer also. It also has the commodity clause as applied to the railroads a few years ago.
The CHAIRMAN. Divorces the producing business from the transportation business?
Senator GORE. It divorces the producing business from the transportation business.
The CHAIRMAN. As the first step in the process it turns the pipe lines that belong to a company that both produces and transports into a common carrier.
STATEMENT OF MR. JAMES J. MARONEY, OKMULGEE, OKLA.
The CHAIRMAN. What is your name?
Mr. MARONEY. Okmulgee, Okla.; editor of Mid-continent Oil News and Okmulgee Democrat.
The question naturally arises, perhaps, from parts of the country other than those in which oil is produced, why pipe lines have not been common carriers—why at this late day of the oil business men would come before you seeking to have legislation which might appear as very simple and fundamental. On that point I should like to explain this that the pipe lines throughout the oil history of the country, beginning some 50 years ago, have really by the State laws been common carriers. In Pennsylvania, Ohio, New York, and West Virginia these pipe lines have been made common carriers by State law. They have throughout the early oil history of the country avoided common-carrier duties, avoided the imposition of common-carrier responsibilities under those State laws by generally pleading their interstate character. The result has been that there has never been a common-carrier service accorded to oil locally or interstate. As to home shipments in those States under whose laws they were subject to common-carrier regulations, they always avoided it by one subterfuge or another, and now the business has become so large that it is practically all interstate; and the Hepburn rate bill, amending commerce laws, provided that they should be common carriers subject to the regulation of the Interstate Commerce Commission. To avoid that jurisdiction they then have flown back to their domestic character, and divided themselves as to States, pretending not to cross a State line in interstate carriage.
Considerable information, I think, is given in the testimony in the famous Kellogg cases.