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The Columbia University Libraries reserve the right to refuse to accept a copying order if, in its judgement, fulfillment of the order would involve violation of the copyright law. Author: U.S. Bureau of Corporations Title: Conditions in the Healdton Oil Field. March 15, 1915. Place: Washington, D.C. Date: 1915 ^fi-^^^l^'") MASTER NEGATIVE # COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD :540 Un337 U. S. Bureau of corporations. ... Conditions in the Healdton oil field. Washington, Govt, print, off., 1915. March 15, 1915. xiv, 116 p. 25 em At head of title: Department of commerce. Bureau of corporations. Joseph E. Davies, commissioner. The report of an investigation made in response to the Senate resolu- tion of March 28, 1914, authorizing an inquiry into the causes of a reduc- tion in the price of crude oil in the Healdton field on the part of the Magnolia pipe line co., and the charges of discrimination made by this company between different oil producers in the field. 1. Healdton oil field, Oklahoma. 2. Magnolia pipe line co. i. Title. II. Title: Healdton oil field. ^ Library of Congress Copy 2. n HD9S67.05A5 ts26il] 15—26388 til J > 1 1 » I RESTRICTIONS ON USE: TECHNICAL MICROFORM DATA FILM SIZE: 3Svv\\frN REDUCTION RATIO: \^)i IMAGE PLACEMENT: IA(^ HA J IB IIB DATE FILMED: ^ A9 .qS INITIALS ■.m TRACKING # : MS^ /36/2^ FILMED BY PRESERVATION RESOURCES, BETHLEHEM. PA. > .^/ ^>_ ^^a9. .^/I ^, ^- 00 en 3 3 Q) O > li U) CJI COM o ^.. ^^ ^. en 3 3 > o m (DO ->j o o X --c? 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Commi«ioner • « CONDITIONS IN THE HEALDTON OIL FIELD MARCH 15, 1915 ^ WASHINGTON GOVERNMENT PRINTING OFHCE 1915 J f OOlsTTEN'TS ADDITIONAL COPIES Of THIS PUBUCAHON MAY BE PEOCURED FBOX THE SUPERINTENDENT OF DOCUMENTS GOVERNMENT PRINTINQ OFPICl WASHINGTON, D. C. AT 16 CENTS PER COPY vAaxU/, 'w^Kb i K\ »v h Page. Letters of transmittal ▼i'^ Letter of submittal ^^ CHAPTER I.— INTRODUCTION. Sec. 1. Statement of questions involved 1 2. Brief history of the Healdton field 2 CHAPTER II.— CAUSE OF THE REDUCTION IN THE PRICE OF HEALDTON CRUDE PREVIOUS TO MAR. 28, 1914. Sec. 1. Conflicting claims of producers and pipe line company 10 Claims of the producers 10 The pipe line company's virtual monopoly 10 Alleged intent to depress land values 13 Alleged intent to Repress crude-oil values 10 Claims of the pipe line company IT 2. The specific gravity of Healdton crude oil 20 S. Products obtainable from Healdton crude oil 21 The difference between tests for the different methods of re'fining 22 The laboratory distilling flash tests 23 The laboratory barrel-still tests 29 The reflnery runs 32 4. The manufacture of lubricants from Healdton crude oil 38 5. The presence of sulphur in Healdton crude oil 45 6. Comparative value of products of Healdton and other Oklahoma crude oils 49 Results of United States Bureau of Mines' analyses 49 Results from refinery runs 51 7. Comparison of crude-oil prices in the Mid-Continent field for March to September, 1914, inclusive 54 8. Comparison of the prices of refined products with that of Heald- ton crude oil 56 9. The Bureau of Corporations' conclusion relative to the cause of the price reductions 57 m rv CONTENTS. CHAPTER III.— CHARGES AGAINST THE MAGNOLIA PIPE LINE CO. IN REGARD TO DISCRIMINATON. Page. Sec. 1. The legal aspects of discrimination 59 2. General discussion of the charges of discrimination 63 3. Alleged discrimination in favor of the McMan Oil Co 68 4. Alleged discrimination in favor of the Corsicana Petroleum Co — 71 5. Alleged discrimination in favor of the Dundee Petroleum Co 72 6. Alleged discrimination in favor of the Paraffine Oil Co 74 7. The production from Indian allotment lands 75 8. Statistics of production and pipe-line runs collected by the Bureau. 81 9. Abandonment of the discrimination charges at the Corporation Commission hearing, May 1 to 6 86 10. The Bureau's conclusions relative to the subject of discrimination. 89 LIST OF TABLES. Page. 1. Holdings of Corsicana Petroleum Co. in the Healdton field Oct. 7, 1914 14 2. Laboratory distilling flask analyses made to determine the refining qualities of Healdton crude oil 24 3. Laboratory barrel-still tests made to determine the refining qualities of Healdton crude oil 30 4. Results of refinery tests and regular refining operations, using Heald- ton crude oil . 36 5. Comparison of tests made to determine the lubricating qualities of Healdton crude oil 40 6. Comparison of the values of the products of Healdton and Electra crude oil when refined to produce engine oils 42 7. Comparative value of products of Healdton, average Oklahoma and Cushing crude oils, based upon laboratory analyses of the United States Bureau of Mines (1 barrel of 42 gallons of crude oil) 50 8. Comparative value of Healdton, Cushing, Glenn Pool, and average Oklahoma, light Corsicana, and Electra (Tex.), and Mansfield (La.) crude oils, as determined by regular refinery operations (based upon 1 barrel of 42 gallons of crude) 52 9. Price of different kinds of Mid-Continent crude oil at wells, Mar. 1, 1914, to Sept. 30, 1914 (per barrel of 42 gallons) 55 10. Estimated production, pro rata proportion, and pipe-line runs on the Indian leases in the Healdton field, Apr. 1 to 15 77 11. Production and pipe-line runs, Jan. 26 to Mar. 22, 1914 82 12. Statement of pro rata of production, pipe-line runs, and comparison of pipe-line runs with pro rata production. Mar. 23 to May 11, 1914 84 MSM LIST OF EXHIBITS. LETTERS OF TRANSMITTAL. * Page. 1. Order of the Corporation Commission of Oltlahoma, prescribing regu- lations governing the Healdton field ^^ 2. Report on the gravity and general characteristics of Healdton, Okla., crude oil, by H. L. Wood, for the Corporation Commission of Okla- homa, Mar. 13, 1914 ^ 3. Affidavit of F. V. Faulkner relating to early conditions in the Heald- ton field ^^ 4. Affidavit of D. C. Stewart relating to early conditions in the Heald- ton field ^^ 5. Affidavit of E. R. Brown relating to early conditions in the Healdton field, and letter from E. E. Plumly to E. R. Brown concerning tests of Healdton crude oil ^^ 6. Letter from E. E. Plumly to E. R. Brown relating to sulphur in Heald- ton crude oil ^^^ 7. Telegrams between E. R. Brown and H. C. Folger, jr., relating to sul- phur in Healdton crude oil 1^2 8. Letter from E. R. Brown to E. E. Plumly directing a test to be made of Healdton crude oil 1^3 9. Report on the analysis of Healdton crude oil, made by M. C. Whitaker to the United States Bureau of Mines 103 10. Statement of the Magnolia Petroleum Co., showing an experiment with 45 gallons of Healdton crude In determining whether or not cylin- der oils can be in a practical way manufactured from Healdton crude for commercial purposes 107 11. Statement of the Magnolia Petroleum Co., showing an experiment with 1 barrel of Healdton crude for the purpose of determining if engine oils can be manufactured therefrom 109 12. Magnolia Petroleum Co. statement of comparative refining costs (figures taken from Corsicana refinery monthly statements) 111 13. Affidavit of C. R. Stewart relating to the pipe line company's method of taking oil from the Healdton field 112 14. Affidavit of Frank Edington relating to the pipe line company's method of taking oil from the Healdton field 113 15. Statement of Frank Edington relating to the pipe line company's method of taking oil from the Healdton field 114 16. letter from G. W. Jennings to Wirt Franklin concerning conditions In the Healdton field Mar. 20, 1914 115 VI « - 1 Department of Commerce, Office of the Secretary, Washington^ March 15^ 1915. Sir : I transmit herewith a report of the Commissioner of Corpora- tions on Conditions in the Healdton Oil Field made in response to a resolution of the Senate of March 28, 1914. Very respectfully, William C. Eedfield, Secretary, The President, Department of Commerce, Bureau of Corporations, Washington^ March 15, 1915. Sir: I have the honor to transmit herewith a report on Conditions in the Healdton Oil Field, prepared at your direction in response to a resolution of the Senate of March 28, 1914, and submitted to the President in accordance with the law creating the Bureau of Corporations. I desire to mention as especially contributing under my direction to the preparation of this report Messrs. David L. Wing and Timothy A. Carroll, of this Bureau. Very respectfully, Joseph E. Da vies, Commissioner of Corporations. To Hon. William C. Redfield, Secretary of Commerce, m It 1 LETTER OF SUBMITTAL. Department of Commerce, Bureau of Corporations, Washington March 15^ 1915. Sir: I have the honor to submit herewith a report dealing with the conditions in the Healdton, Okla., oil field (sometimes called the Ardmore oil field). This report is made pursuant to a resolution passed by the Senate on March 28, 1914, which directed an inquiry into the cause of a re- duction made shortly before that time in the price of crude oil in the "Ardmore" oil field on the part of the Magnolia Pipe Line Co., whether corresponding changes had been made in the prices of the finished products manufactured from such oil, and whether discrimi- nations were practiced on the part of the company as between differ- ent producers of oil in the field, especially against the oil on Indian allotments. '^ '( ..^ THE CONTROVERSY BETWEEN THE PRODUCERS AND THE PIPE LINE. The Healdton oil field was discovered in August, 1913. Shortly after, representatives of the Magnolia Petroleum Co. pronounced the Healdton crude oil to be a high-grade oil, similar to that from the Electra, Tex., field and the northeast Oklahoma fields. They stated publicly that they were anxious to secure a large daily supply and that the current Oklahoma crude-oil price at the wells would be paid. The Magnolia Pipe Line Co., owned by the same interests as the Magnolia Petroleum Co., was incorporated under Oklahoma laws to own and operate a pipe line in that State. Its pipe line connected at the Texas-Oklahoma boundary with the pipe line of the Magnolia Petroleum Co. By January 26, 1914, the Magnolia Pipe Line Co., which had erected storage tanks in the field, began to purchase oil and store it, in anticipation of the completion of its pipe line. There were then in the field about 15 producing wells, with an estimated total daily production of 1,555 barrels of crude oil. On January 26 the Magnolia Pipe Line Co. notified the producers that it would pay $1.03 per barrel at the wells for Healdton crude petroleum testing 32° Baume and above, which was the current Oklahoma crude-oil price. On March 2, however, the company reduced its price for Healdton IX i I X LETTER OF SUBMITTAL. crude oil testing less than 32° Baiime scale to 70 cents, although the current Oklahoma crude- oil price was $1.05. The price of Healdton crude petroleum testing 32° Baume and above was raised from $1.03 to $1.05 on March 9. The pipe line company later notified the pro- ducers that on and after March 23 it would not purchase more than 4,000 barrels daily, and that it would prorate, according to Oklahoma law, the quantity taken from each producer in the proportion of his daily production to the total production. The total daily production of the field at that time was estimated at about 10,000 barrels. On March 26 the price for all grades of Healdton crude oil was fixed at 70 cents per barrel. On April 13, and again on April 20, addi- tional reductions of 10 cents per barrel were made, bringing the price of Healdton crude oil down to 50 cents per barrel at the wells. Up to January, 1915, the price remained unchanged. In each instance the reduction in price was defended by the pipe line company on the grounds of the inferior refining qualities of the oil. Following the first cut in price (on March 2), the producers com- plained to the Corporation Commission of Oklahoma, which sent a special inspector to the Healdton field to make an official test of the gravity of the crude oil. On March 13, 1914, the commission held a hearing at Oklahoma City, at which the producers and the pipe line company presented their respective sides of the case. The report of the inspector employed by the commission was, on the whole, adversa to the producers' claim that the company was not justified in its action. The commission decided to postpone the case until both the producers and the pipe line company could more thoroughly investi- gate the refining quality of the crude oil. Following the cut in price to 50 cents per barrel on April 20, the producers laid their complaints before the attorney general of the State, who instituted proceedings against the Magnolia Pipe Line Co. before the Corporation Commission. The attorney general charged that the pipe line company was guilty of illegal acts in unreasonable restraint of trade, and various illegal practices, espe- cially discrimination between different producers in its purchases of oil. The case was heard before the Corporation Commission in May, 1914. During the course of the hearing the charge against the pipe line company for discrimination between producers was virtually abandoned. Although evidence was received regarding the quality of Healdton crude, the commission made no findings on the subject. A compromise agreement was arranged out of court between the producers and the pipe line companies. This agreement was made the basis of an official order which was issued by the Corporation Com- mission on May 7. Among other things, this order prescribed the minimum quantities of oil to be daily purchased and run by the pipe line company from the field between certain specified dates. An LETTER OF SUBMITTAL. XI iV »> inspector for the Healdton field was appointed with full authority to investigate all runs of oil, to ascertain the production of all wells, and to apportion the amount of oil which should be taken from each producer so as to prevent any discrimination. He took charge of this work on May 12, 1914. INVESTIGATION BY THE BUREAU OF CMDRPORATIONS. In the consideration of the questions raised in the Senate resolu- tion the Bureau investigated thoroughly the subject of the refining value of Healdton crude oil. It secured not only the results of many laboratory analyses and of test runs made on a small scale, in minia- ture stills holding about 1 barrel, and by refineries on a large scale, approximating commercial conditions, but it also secured from two refineries, namely, the Magnolia Petroleum Co.'s Corsicana refinery and the Pierce-Fordyce Oil Association's Fort Worth refinery, the results obtained from about 1,200,000 barrels of Healdton crude oiL which were the only important quantities of Healdton crude refined in the course of regular commercial operations. The Bureau also obtained information relating to the prices of the finished products manufactured from Healdton crude oil. A careful investigation was made into the question of whether dis- crimination was practiced by the pipe line company in its purchas- ing of oil from different producers in the field, and particular at- tention was given, in this connection, to the subject of oil produced on Indian allotments. The investigation of the Bureau of Corpora- tions included a thorough examination of the books and records of the Magnolia Pipe Line Co. and the Magnolia Petroleum Co. VIRTUAL MONOPOLr OF MAGNOLIA PIPE LINE i LETTER OF SUBMITTAL. PRICES or CRUDE OIL AND FINISHED PRODUCTS. xin In regard to the question raised in the Senate resolution, whether changes were made in the prices of the finished products manufac- tured from Healdton crude oil corresponding to the changes in the price of the crude, it should be noted that no finished products from Healdton crude oil were marketed until about the latter part of April, 1914, at which time all of the reductions in price had taken place. The Bureau has made comparisons, based on the total value of the products derived from them, of the commercial values of crude oil produced in various Oklahoma, north Texas, and north Louisiana oil fields. It has made such comparisons on two bases — first, the yields shown by the analyses made by the United States Bureau of Mines, which uses a standard method of testing for all kinds of crudes, and second, the yields shown by regular refinery operations. The results of both comparisons show that the products derived from Healdton crude are distinctly less valuable than those derived from other crudes which were available to the Magnolia Petroleum Co.'s refineries. Consequently, under competitive conditions the price of Healdton crude would naturally be lower. DISCRIMINATION BETWEEN PRODUCERS. In considering the question raised in the Senate resolution, whether discriminations were made by the Magnolia Pipe Line Co. between different producers in the Healdton field, and especially against the oil produced on Indian allotments, the Bureau has limited its investi- gation to the p2riod between January 26, the date that the pipe line company began to purchase oil from the producers in the Healdton field, and May 12, the date on which the inspector appointed by the Corporation Commission of Oklahoma took charge of the determina- tion of the quantity of oil to be taken by the pipe line company from each of the various producers in the field. The Bureau has carefully examined all of the testimony in the record of the Corporation Commission hearing in May, 1914, at which time the charge of discrimination was officially brought before the commission in the complaint filed by the attorney general. Addi- tional evidence bearing on this subject has been collected by the Bu- reau. It consists of information gathered in interviews with persons in a position to know the facts, of sworn statements, and of statistical material gathered from the records of the Magnolia Pipe Line Co. and, whenever it was possible to obtain it, from the records of the producers themselves. XIV LETTER OF SUBMITTAL. In the absence of any Federal statute defining what constitutes discrimination by pipe lines, the Bureau has based its work on the Oklahoma statute dealing with the subject. As there has been no judicial construction of several points involved in the application of this law to the conditions found to have existed in the Healdton field, the Bureau has been obliged in answering the question raised by the Senate resolution, to apply its own interpretation. Under the Okla- homa law, the pipe line company must either purchase all the current output of each producer or take such proportion of his output as his production bears to the total production. The pipe line company is allowed a period of 30 days in which to correct inequalities. The lack of definite verifiable records dealing with the production at this early period makes it difficult to determine the facts exactly. Few producers had any such records and the records of the Magnolia Pipe Line Co., while accurately showing the quantity of oil taken from each producer, contain only estimates of the production, and statements of doubtful accuracy concerning the oil held in storage in the producers' tanks. The pipe line company at this early period considered itself able to take all of the current production of the field without difficulty and therefore did not pay special attention to the matter of making its purchases from the different producers in pro- portion to their production. The Bureau found no evidence of any intent on the part of the pipe line company to discriminate between the different producers or against the oil produced on Indian allotments. The Bureau did find, however, that at various periods some producers may have been favored at the expense of others. Under the law the pipe line com- pany should either have taken the total production or should have prorated its purchases and equalized them within 30 days. In the case of most of the producers temporary inequalities were apparently corrected within the legal period. The unreliability of existing records relating to production and the unsettled question as to what legally constitutes discrimination, preclude a positive statement in regard to the subject. Very respectfully, Joseph E. Da vies. Commissioner of Corporations. The President. .^ i . I ' r f i CONDITIONS IN THE HEALDTON OIL FIELD. CHAPTER I. INTRODUCTION. Section 1. Statement of questions involved. This report is made in answer to Resolution ISo. 319, passed by the Senate on March 28, 1914. The resolution reads as follows : Resolved, That the Secretary of Commerce is directed to investigate and report to the Senate, at as early a date as practicable, as to the cause of the recent reduction In the price of crude oil in the Ardmore oil field in the State of Oklahoma on the part of the Magnolia Pipe Line Company ; and also as to Whether corresponding changes have been made in the prices of the finished products manufactured from such oil. y Second. To make like investigation and report as to whether discriminations are practiced on the part of said company as between different producers of oil m the above-mentioned field, and especially as to whether any discrimination is practiced against the oil produced on Indian allotments. The Ardmore oil field referred to in the resolution is now generally called the Healdton oil field. In addition to answering in detail the various questions in the resolution, it has seemed desirable to discuss matters not directly mentioned in the resolution, but which are necessary to a clear presentation of the situation. The Magnolia Pipe Line Co. is an Oklahoma corporation which buys, transports, and sells crude petroleum obtained from the Heald- ton field. It is legally distinct from the Magnolia Petroleum Co., a Texas corporation, but it is closely connected, however, with that company, because the majority of the stock of both companies is owned by the same interests and the business policies of the Magnolia Pipe Line Co. have been under the same final control as those of the Magnolia Petroleum Co. Furthermore, all of the oil bought by the Magnolia Pipe Line Co. and transported to the Texas line has been sold to the Magnolia Petroleum Co. The Corsicana Petroleum Co., which is one of the oil-producing companies in the Healdton field, is also closely connected with the Magnolia Petroleum Co., the majority of the stock of both companies being owned by the same interests and the business policies being under the same final control. 76568"— 15 1 s CONDITIONS IN THE HEALDTON OIL FIELD. The information for this report was obtained through interviews and cx)rrespondence, from the oflficial reports of the hearings before the Corporation Commission of Oklahoma, and from the books and records of companies involved. Representatives of nearly every company operating in the Healdton field in April, 1914, were inter- viewed by agents of the Bureau of Corporations, and information was sought from them on all of the various questions at issue. Few producers were able to furnish definite, first-hand informa- tion in regard to many important details of their own properties and operations, and could give even less information of that nature concerning other producers in the field. Concerning such details as the gravity of the crude from their wells, the exact quantity of daily production, and the quantity of oil run from their leases dur- ing the period previous to May 12, when the inspector appointed by the Corporation Commission of Oklahoma took charge of prorating the production, little information was possessed by the producers themselves. Only a few of the producers had taken steps to have their crude oil analyzed by chemists, or tested by refiners, to deter- mine its quality. Since the producers lacked definite records which would throw light on the questions at issue, such as whether discrimination be- tween producers took place, and what is the comparative commercial value of the crude oil based on its yield of marketable products, defi- nite information bearing on these subjects had to be obtained by the Bureau from the records of companies handling the oil, namely, the Magnolia Pipe Line Co., the Magnolia Petroleum Co., and the Pierce- For dyce Oil Association. In order to establish the accuracy and reliability of such information, not only were the entries in the usual permanent records examined, but, whenever it seemed desir- able, search was made through the original daily reports of employees concerning the quantities of crude oil run and refined, and concern- ing the routine tests made of the quality of the oil. Sales of prod- ucts from Healdton crude were traced to the hands of bona fide consumers and the circumstances concerning such sales and ship- ments ascertained. The information obtained from the Magnolia sources has been scrutinized closely and, wherever practicable, has been tested by comparison with information obtained from other sources. In some instances where the information was of such a nature that it could not be verified by existing records the Bureau obtained from the informants sworn statements respecting the facts. Section 2. Brief history of the Healdton field. The Healdton field (sometimes referred to as the Ardmore field) is located in the southwestern part of Carter County, Okla. It is situat-ed about 23 miles west of Ardmore and about 26 miles east of INTEODUCTION. s Addington. These points were the nearest railroad connections at the time the field was discovered. Since that time, the construction of the Oklahoma, New Mexico & Pacific Railway from Ardmore through Wilson,* about 5 miles from the Healdton field, has afforded a nearer railroad connection. At the time the discovery well was brought in (Aug. 6, 1913) the nearest through pipe lines to the Gulf of Mexico were the Magnolia Petroleum Co.'s pipe line, from the Electra field in Texas, the nearest point on its route being about 44 miles distant to the southwest ; the Texas Co.'s pipe line from the same field, the nearest point, Petrolia Station, being about 37 miles distant; and the Texas Co.'s pipe line from the Cushing field to the Gulf, about 69 miles to the southeast. There was also a 6-inch pipe line running from the Wheeler oil field to Ardmore, the nearest point to Healdton on its route being about 8 miles to the northwest. This line is owned by the Santa Fe Rail- road, and was used to carry fuel oil to Ardmore from wells owned by the railroad. In 1912 the Magnolia Petroleum Co. projected a pipe line to con- nect the Cushing field in Oklahoma with the company's refineries in Texas. The proposed route brought the main pipe line across Okla- homa through the next county west of Carter County, and made it practicable to extend a branch line into the Healdton field. Soon after the discovery well of the Healdton field was brought in, representatives of the Corsicana Petroleum Co. visited the new field, took a sample of the oil, and made attempts to buy producing land. Later, D. C. Stewart, then manager of the pipe-line department of the Magnolia Petroleum Co., stated to the producers that the oil was high grade and that the company needed all it could get and would pay the current Oklahoma price. He urged producers to bring in new wells, and in some instances they were furnished the use of tanks by the Magnolia Petroleum Co. in which to store their oil, pending the completion of the pipe line. The producers had to pay the expense of installing these tanks and had the option of buying them later on. About the middle of December, 1913, the Magnolia Pipe Line Co., which, as already stated, is owned by practically the same stockholders as the Magnolia Petroleum Co. and the Corsicana Petroleum Co., was organized as a common-carrier pipe line under the Oklahoma State laws. This company owns an 8-inch main pipe line, about 26 miles long, which, connecting at the Texas- Oklahoma boundary with the Magnolia Petroleum Co.'s pipe line, extends to Addington, Okla., from which point a 6-inch branch pipe line, about 26 miles long, was laid to the Healdton field. In the Healdton field the company had on September 30, 1914, about 45 miles of gathering lines, three 55,000-barrel steel storage • The post office is New Wilson. 4 CONDITIONS IN THE HEALDTON OIL FIELD. tanks, and a pumping station. It also had pumping stations at Mud Creek and Waurika, Okla. On September 21, 1914, the Mag- nolia Pipe Line Co. leased from the Magnolia Petroleum Co. the latter's 8-inch pipe line and its equipment, extending from the Texas State line to Fort Worth, Tex. Two 55,000-barrel steel tanks at Alvord, Tex., and four 55,000-barrel steel tanks at Fort Worth were part of the equipment leased. The distance of the pipe line from Healdton to Fort Worth is about 125 miles. The pipe line was opened for the regular business of transporting oil from Healdton on March 11. On January 26, 1914, the date on which the Magnolia Pipe Line Co. began to buy and store oil in anticipation of the opening of its pipe line, it notified producers that its price on "Oklahoma crude petroleum 32° and above" would be $1.03 per barrel at the wells. This was also the prevailing price paid at that time by the large pipe-line companies in the other Oklahoma oil fields. On February 2, 1914, the price of Mid-Continent oil at the wells was advanced to $1.05 per barrel. On March 2, 1914, the Magnolia Pipe Line Co. notified the producers that on runs of March 2 and until further notice their price on Healdton crude under 32° Baume test would be 70 cents per barrel at the wells. On March 9 it posted another notice stating that until further notice the price on Healdton crude oil 32° Baume test and above would be $1.05 per barrel. The company claimed that this distinction in price on the basis of gravity was made because it had found that a considerable part of the oil was heavy and fit chiefly for use as fuel. There was much dissatisfaction on the part of the producers over this action, and it was called to the attention of the Corporation Commission of Oklahoma. The commission took immediate steps to investigate conditions in the Healdton field. With a view to obtain- ing authentic information concerning the general character of the Healdton crude oil the commission sent a special inspector to the Healdton field to make an official test of the gravity of the crude oil. On March 13, 1914, it held a hearing at Oklahoma City at which the producers and the pipe-line company were given every opportunity to present their respective sides of the case. According to the report of the inspector employed by the commission much of the oil tested was found to be under 32° Baume. He called attention, moreover, to the odor of sulphur noticeable over the field, and gave it as his opinion that the Healdton product could easily be rated as a fuel oil in contradistinction to a refining oil. (See full report of H. L. Wood, Exhibit 2, p. 94.) After hearing the testimony the commission decided that, in the absence of accurate and reliable information as to the refining quality of the crude oil, further consideration of the case should be postponed •^ >* INTRODUCTION. 5 until such time as both the producers and the pipe-line company could make a thorough investigation. The commission's special in- spector reported an estimated total daily production from the 37 producing wells in the field of about 7,000 barrels a day. At the hearing the question of the ability of the pipe-line company to take care of the total production of the field was raised by the producers. In reply the counsel for the pipe-line company promised that it would take 10,000 barrels of oil per day. Subsequently the pipe-line company gave notice that commencing March 26 their price on all grades of Healdton crude would be 70 cents per barrel at the wells. They also, on about March 23, gave oral notice that the pipe-line company would take only 4,000 barrels per day from the field. At this time the estimated daily production of the field was about 10,000 barrels. Following their purpose to cut the price of the crude to a fuel-oil basis, additional reductions of 10 cents per barrel each were made on April 13 and 20, thereby bring- ing the price of the Healdton product down to 50 cents per barrel. In each instance the reduction in price was defended by the pipe-line company on the grounds of the heavy character and inferior refining qualities of the oil. The 50-cent price remained unchanged up to January, 1915. The action of the pipe-line company in placing all Healdton oil, regardless of gravity, on the basis of a fuel-oil crude, the subsequent two 10-cent cuts in price, and the reduction of the quantity of its daily runs to a point considerably below the daily production of the field, aroused much opposition on the part of the producers. At the time of the first 10-cent cut, on April 13, the counsel for the Mag- nolia Pipe Line Co. addressed a meeting of the Healdton producers at Ardmore. He outlined various plans which the Magnolia interests had under way for taking care of the oil, such as the building of a new refinery at Fort Worth, Tex., especially equipped for treating Healdton oil, the erection of storage tanks at Fort Worth, and the increase of the pipe-line carrying capacity by the construction of additional pipe line and pumping stations. When questioned as to the promise made by him at the March 13 hearing of the Corpora- tion Commission to take 10,000 barrels daily, he admitted that he had made a mistake because he did not then understand the difficulties of the situation. He maintained, however, that the company's tests since March 13 had showed that the Healdton crude should be con- sidered a fuel-oil crude, and not a refinable crude. The cut in price on April 20 to 50 cents per barrel and the con- tinued failure of the company to increase its facilities for handling the current output of the field, thereby throwing on the producers the burden of storing their surplus oil, aroused the producers to a high pitch of dissatisfaction. Their leaders complained to the at- lFf*3P 6 CONDITIONS IN THE HEALDTON OIL FIELD. torney general of the State, who immediately filed a complaint against the Magnolia Pipe Line Co. before the Corporation Com- mission of Oklahoma. The attorney general charged that the pipe- line company was guilty of illegal acts in mireasonable restraint of trade, and had engaged in forbidden practices in purchasing and piping oil from the Healdton field, including discrimination be- tween different producers in its purchases of oil. (See p. 67.) The Magnolia Pipe Line Co. filed an answer denying specifically most of the allegations in the bill of complaint. (See p. 66.) The case was heard before the Corporation Commission from May 1 to 6, inclusive. During the course of the hearing the charge against the company of discrimination between producers in running the oil from the field was virtually abandoned. Much conflicting testi- mony was offered in regard to the quality of Healdton crude, but none of it was considered conclusive enough by the commission to warrant its making a decision, and further investigation was held to be necessary. The questions of increased pipe-line facihties and additional tankage for the storage of the surplus oil were gone mto at length. Finally a compromise agreement was arranged, out of court, on May 5 between the producers and the counsel for the pipe- line company. A part of this agreement was embodied in an official order (Order No. 814) which was issued by the Corporation Commis- sion on May 7, 1914. (See Exhibit 1, p. 91.) In this order, the Corporation Commission directed that the Mag- nolia Pipe Line Co. should within a week from May 5, 1914, begin taking a daily average of 8,000 barrels of oil from the Healdton field, and on or before July 1, 1914, and until April 1, 1915, should not take less than a daily average of 12,000 barrels of oil from said field ; that it should immediately erect four 55,000-barrel steel tanks in the Healdton oil field, and that in addition to the daily average runs of oil above mentioned, it should, as per its agreement, clear the leases of all stocks of accumulated oil which were in a merchant- able condition, and pay the owners of same upon delivery at the rate of 50 cents per barrel for quantities delivered. The Magnolia Pipe Line Co. was released from its obligations under the State law as a common purchaser from the necessity of connecting with any new wells within six months from the date of the order, except under certain specified conditions. It was ordered to provide a pipe-line connection and loading facilities on the main line of the Chicago, Eock Island & Pacific Railway Co. at or near Addington (afterwards this order was modified to permit the plac- ing of the loading rack at Waurika, instead of Addington) and to establish a reasonable rate per barrel for the transportation of oil from the Healdton field to this point when offered for such trans- portation in carload lots. ' V INTRODUCTION. 1 An inspector for the Healdton field was appointed with full au- thority to investigate all runs of oil, to ascertain the production of all wells, and to apportion the quantity of oil which should be taken from each producer so as to prevent any discrimination. One-half of his salary was directed to be paid by the producers and one-half by the Magnolia Pipe Line Co. It was also provided that should the commission, during the life of this order, issue an order fixing the price of oil in the Healdton field, the present order (Order No. 814) would become void when such new order fixing prices be- came effective. Some of the provisions in the agreement between the producers and the pipe line company were not stated in the order. It was provided in the agreement that it was not to be construed as a violation thereof if the company were temporarily prevented from taking the stipulated average runs of oil by reason of strikes, fire, flood, or other causes over which it had no control. Also there was a clause in the agreement offering the use of the Corsicana refinery of the Magnolia Petroleum Co. for a test run of the oil under the supervision of the Corporation Commission. The order of the commission was accepted by all interested parties, and steps were taken to give it immediate effect. The in- spector appointed by the commission made such arrangements as were possible under the circumstances to prorate the runs according to the production of each lease, pending the taking of an official gauge of the wells. Drilling operations were arranged to conform with the purpose and intent of the order, and the pipe line com- pany took steps to comply with the requirements relating to its operations. Soon after entering on his duties the inspector appointed by the Corporation Commission made arrangements to take an official gauge of the field. The result of this gauge showed an estimated daily production for the field of 49,596 barrels. In the following table is shown certain statistical information contained in the in- spector's monthly reports to the Corporation Commission regarding the number of wells and their estimated daily production at various dates : Date. Wells reported. Estimated daily production. Date. Wells reported. Estimated daily production. 1014. June r241 Barrels. 49,596 53,085 58,231 58,431 65,460 1914. September 25 255 259 263 268 Barreli. 65,171 Jiilv2.^ October 24 66,173 AiiCTiicf OA 242 242 256 November 25 68,855 A IKTllCf 9(> December 24 68,058 Aug US I *0 Seotember 24 8 CONDITIONS IN THE HEALDTON OIL FIELD. On June 9, at a hearing of the Corporation Commission at Okla- homa City, Irving C. Allen, petroleum chemist of the United States Bureau of Mines, gave testimony concerning the results of analyses made by the Bureau of Mines of crude oil from the Healdton and other Oklahoma fields and the relative values of the different crudes. No action on the subject was taken by the commission at this hearing. In August, owing to the disruption of the export trade and finan- cial disturbances caused by the European war, the Magnolia Pipe Line Co. concluded that it could not handle the quantity of oil it was required to run by the order of the Corporation Commission of May 7, and with a view to obtaining relief a conference was ar- ranged with the producers on August 14 at Ardmore, Okla. At this conference Corporation Commissioner George A. Henshaw objected to any further reduction in the price, and a supplementary agreement was entered into between the Magnolia Pipe Line Co. and the produc- ers. By this agreement the pipe line company was permitted to reduce the quantity of oil to be run, beginning September 1, 1914, from 12,000 barrels to 8,000 barrels per day until January 1, 1915, and furthermore, the producers agreed to accept part payment for their oil in scrip issued by the pipe line company, bearing interest at the rate of 6 per cent per annum. In the latter part of the month an electrical storm started what proved to be one of the most disastrous fires that ever visited the Oklahoma oil fields. Practically every producer in the Healdton field suffered more or less, the total quantity of oil destroyed being estimated at from 375,000 to 400,000 barrels. About September 30 the Magnolia Pipe Line Co. served notice on the Corporation Commission and the attorney general of Oklahoma that, beginning October 6, the price of Healdton crude would be reduced to 40 cents per barrel. The Corporation Commission immediately issued an order forbidding the Magnolia Pipe Line Co. from pur- chasing or receiving or transporting oil for which it had paid or agreed to pay less than 50 cents per barrel, and, furthermore, for- bidding the producers to sell their oil at less than 50 cents per barrel, and warned them that if oil held in storage should be sold for less than that price, the producer would be penalized in the quantity taken by the pipe line company at the next prorating. Pending the hearing of the Corporation Commission in the matter of the proposed reduc- tion in price, the Magnolia Pipe Line Co. did not put the new price into effect. The hearing took place at Ardmore, Okla., on October 22 and 23. The Magnolia Pipe Line Co. presented a number of witnesses who testified as to the operations of the company. The cost of raising crude oil to the surface, cost of gathering, overhead costs, etc., were INTRODUCTION. 9 discussed, and particular attention given to the quality and refining value of products obtainable from Healdton and Cushing crudes. With a view to disposing of the controversy over the price of the Healdton crude. Corporation Commissioner Henshaw tried to induce the producers and the pipe line company to consent to the establish- ment of a permanent differential between the two crudes, making the price of Healdton crude 20 per cent lower than the Cushing crude, so that the price of Healdton crude would be automatically governed by the price paid for the Cushing oil. The pipe line com- pany, however, declined to accept this plan, stating that while this ratio of difference might then obtain such a condition might not prevail at some future time. At the close of the hearing the Magnolia Pipe Line Co. announced that it would continue to take Healdton crude at 50 cents a barrel in such quantities as it could use, estimating the runs at from 6,000 to 8,000 barrels a day. No order was issued by the commission. The net result was that, while the price of 50 cents per barrel was continued, the company was required to take only such part of the production as it might need to fill current requirements. In October the pipe line company finished running the "stock'' or storage oil, which it had agreed to take from the leases in accord- ance with the Corporation Commission's Order No. 814 of May 7, directing that in addition to the daily average quantity of oil which was stipulated in the order the Magnolia Pipe Line Co. should, in compliance with the agreement which that company had made with the producers, clear the leases of all " stock " oil accumulated up to May 5 which was in merchantable condition and pay 50 cents a barrel for it. On November 25, the Corporation Commission issued Order No. 878, which permitted the producers to sell their " stock " (accumu- lated storage) oil at 30 cents per barrel. BEDUCTION IN CRUDE OIL PBIOB. XI CHAPTER 11. CAUSE OF THE REDTJCTIOW IN THE PEICE OF HEALDTON CEXTDE PREVIOUS TO MARCH 28, 1914. Section 1. Conflicting claims of producers and pipe line company. The language of the Senate resolution passed on March 28, 1914 (see p. 1), calls for: The cause of the recent reduction in the price of crude oil in the Ardmore [Healdton] oil field in the State of Oklahoma on the part of the Magnolia Pipe Line Company. As already stated in the historical outline of the Healdton field, there were, previous to March 28, two reductions in the price. The first took place on March 2, when the price of Healdton crude test- ing under 32° gravity Baume standard <» was reduced from $1.03 to $0.70 a barrel ; the second, on March 26, when the price for all crude from the Healdton field regardless of Baume test was fixed by the company at $0.70 a barrel. Claims of the producers. — The causes alleged, on the part of the producers, for the Magnolia Pipe Line Co.'s action, were the same in the case of both reductions. These reductions were claimed by them to be the result of an endeavor of the pipe line company, by use of its monopolistic power in the field, to depress the value of oil- producing property and of unproven territory where the prospects for production seemed favorable, by a lowering of prices, with a view to buying it cheap through the medium of allied producing companies; also to acquire at a low price the large stocks of oil already above ground, or known to be available from wells then exist- ing in the field. The pipe line company''8 virtual monopoly, — ^Both charges involve the status of the Magnolia Pipe Line Co. in the Healdton field. The Oklahoma law, under which the company must operate its pipe line, requires it to be a common carrier and, if it buys oil, a common purchaser, without discrimination, from all producers in the field. This provision is contained in an act which took eflFect March 27, 1909, popularly known as the Yeager-Strain Law, to which all pipe lines engaged in transporting crude petroleum or its products, in • While in its notice of Jan. 26 the price posted by the company was for " Oklahoma crude petroleum 32° and above," the records show that for all oil taken into its lines by the company prior to March 2, one price was paid without regard to any gravity test. 10 intrastate commerce, are made subject. The Magnolia Pipe Line Co. bought the oil before transporting it, and thus came under the provision of the law requiring it to be a common purchaser. It therefore had, by virtue of the character of its business, certain obli- gations of a public-service nature, and in the conduct of its affaus its freedom of action was limited to that degree. The attitude of the producers, in relation to the monopolistic con- trol which they claimed was exercised by the Magnolia Pipe Line Co. in the Healdton field, is well stated in the complaint against the company, filed by Attorney General West before the Corporation Commission and considered by it at its hearing of May 1-6, 1914. In his bill of complaint he set forth— that the defendant is the only pipe line company engaged in the transportation of oil from said Healdton Field; that it handles many thousands of barrels dally, and that by reason of the nature and extent of its said business and the existence of a virtual monopoly therein, is such that the public must use the services of said defendant and its product of oil, produced, piped, bought and sold, at the city of Ardmore and Carter County, as to make its said busi- ness of public consequence, and to affect the community at large, as to its supply, demand and price or rate thereof, so that said business is a public business subject to be controlled by the State, by the Corporation Commission, as to all of its practices, prices, rates and charges, as defined by Section 8235,« Revised Laws of Oklahoma, 1910, and that it is now a common carrier and common purchaser, under the lav^, of all oil being produced in and piped from said Healdton Oil Field. The answer filed by the Magnolia Pipe Line Co. denies that it is a virtual monopoly. It states on this subject: The Magnolia Pipe Line Company denies, however, that it is a virtual monopoly in the purchase and transportation of oil in said field, or that the public must use its service, or that its business, except its transportation business proper, is of public consequence. In this connection this defendant says that while it is the only pipe line now extending into said field, other pipe lines could, if they found it profitable to do so, at a reasonable cost not to exceed that incurred by this defendant, construct and extend their lines from nearby connections into the Healdton Field and compete with this de- fendant, and thus afford another outlet to the markets of the world, or the producers themselves could at reasonable cost build a pipe line to connect with the railroads and other pipe lines near by, and thus obtain another outlet • SBC 8235 PuUic business de/lned.— Whenever any business, by reason of its nature, extent "or the existence of a virtual monopoly therein, is such that the public must use the same or its services, or the consideration by it given or taken or offered, or the com- modities bought or sold therein are offered or taken by purchase or sale in such a manner as to make It of public consequence or to affect the community at large as to supply demand or price or rate thereof, or said business Is conducted in violation of the first section of this article, said business is a public business, and subject to be con- trolled by the State, by the corporation commission or by an action in any district court of the State, as to all of Its practices, prices, rates and charges. And It is hereby de- clared to be the duty of any person, firm or corporation engaged in any public business to render its services and offer Its commodities, or either, upon reasonable terms without discrimination and adequately to the needs of the public, considering the faciUUes of said business. (Revised Laws of Okla., 1910, Vol. II, p. 2232.) 12 CONDITIONS IN THE HEALDTON OIL FIELD. to the markets of the world for said oil. In this connection this defendant shows that its pipe line connects said field with the Rock Island Railroad, and that by constructing only some eight or ten miles of pipe line, said field could be connected with the railroad of Okla. N. Mex. & Pacific (Company, which connects with the rail line of the Atchison, Topeka & Santa Fe Railway at Ardmore; that both the Rock Island Railroad and the Santa Fe connect with the markets of the world, and through them and the pipe lines connecting said field with said rail lines the producers could dispose of their product to pur- chasers in competition with this defendant This defendant shows that while its pipe line connects said field with the Rock Island Railroad, none of the producers have seen fit to tender any oil to this defendant for transportation to the Rock Island Railroad or to make any demand on this defendant for such transportation. This defendant will, at reasonable cost, perform such trans- portation services and put in the facilities appropriate thereunto if the pro- ducers give reasonable notice of such demand and provide necessary tankage or other facilities to receive the oil at destination. It will be noted that the Magnolia Pipe Line Co. based its denial of being a virtual monopoly on the following grounds: 1. Other pipe lines could, if they so desired, extend their lines into the Healdton field, or the producers themselves could build a pipe line to connect with the railroads and other near-by pipe lines, thereby furnishing additional outlets. 2. That the Magnolia Pipe Line Co. itself connects the Healdton field with the Rock Island Railroad and is ready to transport, as a common carrier, to its point of connection with the railroad, any oil which may be tendered it for transportation by the producers, subject to "reasonable cost," "reasonable notice of such demand," and the provision by the shipper of "necessary tankage or other facilities to receive the oil at destination." The facts in regard to the available outlets for the oil from the Healdton field, through pipe lines connecting it with the outside markets or through pipe lines and railroad transportation com- bined, must be taken into consideration. The Magnolia Pipe Line Co. was up to November, 1914, the only through pipe-line outlet by which the Healdton oil could be taken from the field to the outside markets. The expense of railroad transportation is practically prohibitive, even were there reasonable pipe-line charges imposed for carrymg the oil from the field to the railroad. The quantity that can be profit- ably consumed locally, or by refineries so situated that they can pay the expense of pipe-line and rail transportation, is, and has been, so small as to be negligible in the consideration of this subject. It was within the power of other through pipe lines to enter the field, or for producers to build pipe lines to connect with them. As a matter of fact, however, the amount of capital involved in such an undertaking was, up to November, 1914, beyond the means of the pro- . 4 V^*. \) BEDUCTION IN CRUDE OIL PRICE. 13 ducers, even had they been able to organize for the undertaking. Furthermore, the prospects of the field have not yet been sufficient to induce the Texas Co., the nearest of the other through pipe lines, to build a branch connecting the field with either of its through pipe lines between Port Arthur, Tex., and the Electra (Tex.) field or the Cushing (Okla.) field, although the Producers' Oil Co., a producing company owned and controlled by the same interests as the Texas Co., own and operate considerable producing property in' the Healdton field. Under the conditions which have actually prevailed since the discovery of the field and up to November, 1914, the Magnolia Pipe Line Co. has unquestionably had a virtual monopoly of the only practicable means of transportation for the output of the field. Alleged intent to depress land values. — The question of whether or not the pipe line company made use of its monopolistic power to depress the values of oil-producing property and unproven terri- tory, with a view to buying it cheap through the medium of allied producing companies, must be examined in the light of definite ac- tions on the part of the Magnolia interests. The Magnolia Pipe Line Co. did not produce any oil itself; it merely bought the oil produced by others and transported and sold the same. One of the producing companies, however, is closely con- nected with the Magnolia interests (see p. 1), namely, the Corsicana Petroleum Co. This company owns producing wells and also other property in the Healdton field. Soon after the bringing in of the dis- covery well, a representative of this company tried to buy the property on which the well was located. Failing in this, he tried to buy a part interest, but in this also he was unsuccessful. Later, the Cor- sicana Petroleum Co. was able to secure land or leases elsewhere in the field. The records of the company show that all of the holdings of the Corsicana Petroleum Co. in the Healdton field are by oil and gas leases, none of which were producing or operated at the date of acquisition by the Corsicana Petroleum Co. The following table shows a number of details concerning these leases: ii jl 14 CONDITIONS IN THE HEALDTON OIL FIELD. !l II H O O (^ O M M a O U » •J o Ph SZ5 O »-^ CQ PS O o o DQ o l-l Q o ca .a o § CO =3 ■*-5 5 aa o o o o o o S 8 s ^ z OQ CO S o o o o ^ flS t^ i •§ DQ CQ ^ -«» *; OQ S5 a;«« CQ OQ riz; H ^ o z f*^ CO o e CO ^ CQ r •-« CQ O '^ "** ?f£ • o M £^ o CQ o H CO •♦ o OQ CO w 55 55 ^ OQ •> Ed eo ;> OQ QQ 25 O ^ eo OQ O ^ QQ OQ -^ 3s£ S O . w ^ •« :z5 55 ^ c^ s ® o o ^■^. OQ « O o ■■♦• ^ .- — . o CQ g % W «M OQ o •» ^ o QQ ^ QQ O CQ ^ CQ ***•*• OQ w w -^ CQ .. • fe: 55 "5 »^ v< H* 55 ® • •♦• • CQ • H <» W • > ° jz; r ^ *5 w w -Hi 00 a; 55 CO % OQ . OQ 7 So*? M CQ OQ ^^ ^^ ^« Zoo t»' °° ? ^ H« •♦• o w W OQ OQ CO g 8 8 8 8 8 8 § S 5* S ^ S 8 5 g 8 8 8 § A O I I 8 CQ CQ -< d . a « a o P4 a a •§ QQ QQ «n •>• O O 55 2 £ -^ • . ►y eo W 5 ^ 55 o « «M *** •• w2^ •; O H . >o W CQ -^ O '♦^ CO •7 55 o £^^* ® 55 !z; ^ o o 8 S8 S CO 5 O CO •H & • QQ OQ » H .o £ eS 1—4 § BEDUCTION IN CKUDE OIL PBiCB. 15 > o :5 a o d O d 03 "S oa o! S as eS a> a> o '-' '^ »-t ■* -f fl . ^. C! eS rt o g g ^ o- d ii i as® --5" 5 c 03 -; o S3 ca ^ isS go J O d •S5 §- a Sill o a> 1 £ s cc CO 03 to 5^ ea v n d a -o ii *^ 0/ p^ o: C3 OS o S d be Si ^ o *^ c d ■S •••4 b ^ 2 * o ^ § O ►. 3 SI'S s d s § s O OS d ^ a> o o o ai •d •« "O C5 (h (3 fl ^ •O « V « 16 CONDITIONS IN THE HEALDTON OIL FIELD. REDUCTION IN CRUDE OIL PRICE. 17 It should be noted that the Corsicana Petroleum Co. has not ex- tended its holdings since December 11, 1913. This was about three months before the reduction in the price of oil took place. In refutation of the charges that the Corsicana Petroleum Co. had sought to take advantage of the field conditions and cuts in the price of oil since March 2 to increase its holdings, George C. Greer, gen- eral attorney for the Magnolia interests, in interviews with repre- sentatives of the Bureau of Corporations, and also in various letters, described the position of the Corsicana Petroleum Co. in this matter. He stated that it had been its policy to abstain from increasing its holdings for two reasons — first, because its actions in that respect would be the subject of misunderstanding and criticism, and second, because it was impracticable, owing to unsettled financial conditions. Mr. Greer furthermore stated that a number of attempts had been made by owners of producing property in the Healdton field, and by others who claimed to act for them, to induce the Corsicana Petroleum Co. to increase its holdings by either buying their prop- erty — stock control in their companies — or going in with them, either secretly or openly, and buying up such properties as might be pur- chased on favorable terms. He described four such instances in detail, specifying names, dates, and other particulars of the pro- posals that were made. Inasmuch as it has been ascertained by the Bureau that the Corsi- cana Petroleum Co. has not increased its holdings in the Healdton field since the first cut in price took place, it is not necessary to go into this question, nor to consider further the validity of this charge made by the producers. Alleged intent to depress crude-oil values. — The next question is how far the pipe line company made use of its monopolistic power to depress the market price for oil, with a view to acquiring at a low price the large stocks of oil already above ground, or available from the wells then existing in the field. In the determination of this question the factor of intent, in the absence of an admission, and, indeed, in the face of a direct denial on the part of the company that such was its object, must be studied through the examination of the surrounding circumstances. Briefly stated, the facts r.pon which this contention was based were — that the producers had been urged by representatives of the Magnolia interests to develop the field, under promise that all their production would be bought, and that ample facilities for taking care of the output would be pro- vided; that after they had gone ahead in good faith and brought a large quantity of oil to the surface and developed the existence of a large potential production, the Magnolia Pipe Line Co. cut the market price of the oil, refused to buy and store the oil already above ground, in excess of the company's existing tankage capacity, and • •- cut down its daily purchases and runs from the field far below the existing output of the field, and the actual carrying capacity of its pipe line. The contention of the producers was that after having, through the early promises, stimulated the development of a large output, the action taken by the Magnolia Pipe Line Co. was unjusti- fiable, and was taken in order to depress, arbitrarily, the price of Healdton oil at a time when it was practically the sole purchaser in the field. That various assurances were given to producers in the early days of the development of the field, on the part of representatives of the Magnolia interests, that all the production would be needed by the Magnolia refineries, and that some of the early producers were urged to develop their property, and tanks were loaned them in which to store their oil until the Magnolia interests could run it into the storage facilities to be erected in connection with their pipe line, are facts amply established by the evidence. That the company first made a discrimination between oil under 32° Baume and oil over that standard," and reduced its purchasing price for the former from $1.05 to $0.70 a barrel, and later put all oil from the Healdton field, regardless of gravity tests, on the same basis, at a purchase price of $0.70, are facts also established by the evidence and not disputed. The evidence also shows that there was a reduction of daily runs and a refusal to build storage tankage in the Healdton field to take care of the surplus. Claims of the pipe line company. — The Magnolia Pipe Line Co. asserts that its ea^rly promises were based on a mistake, on the part of its representatives, regarding the actual refining value of the Healdton crude, and that its later actions in regard to prices and runs were forced upon it through economic causes, and were not arbitrary nor unjustifiable under the circumstances. Briefly stated, the claim of the Magnolia Pipe Line Co. is that its representatives made a mistake in their early estimates of the refining qualities of Healdton crude, and that as soon as their more complete analyses and tests had demonstrated the fact that because of its heavy char- acter and its sulphur content the Healdton oil was chiefly valuable for fuel use, rather than for refining, it became necessary to buy it at a price corresponding to that of the fuel-oil crudes of the other fields — the heavy Caddo, the south Louisiana and Texas, and the Mexican crudes, with the products of which it entered into compe- tition in the Texas markets. Furthermore, because of the quality of the oil and the need of keeping it separate from the other crudes, such as Electra and Corsi- cana, it was unduly expensive to take off the lighter products by • In regard to the notice of Jan. 26, see note on p. lo. 76568°— 15 2 18 CONDITIONS IN THE HEALDTON OIL FIELD. REDUCTION IN CRUDE OIL PRICE. 19 "topping" at the Magnolia Petroleum Co.'s existing refineries at Corsicana and Beaumont. It was desirable, instead, to build a large refinery at Fort Worth, Tex., especially equipped to handle the Healdton crude, to build a special pipe line from Alvord, Tex., to the Fort Worth refinery to carry the oil there, and to provide enough tankage at Fort Worth to store the crude oil until it could be "topped." The Magnolia Pipe Line Co. decided to cut down its runs from the Healdton field until such time as sufficient pipe line, storage, and refining facilities could be provided to handle larger quantities. The position of the Magnolia interests in regard to the early assur- ances given to producers respecting the quality of the oil and their desire and intention to take all that could be produced is that a seri- ous mistake was made by its representatives, but that it was a mistake honestly made. The affidavits of D. C. Stewart, F. V. Faulkner, and E. R. Brown (Exhibits 3, 4, and 5, pp. 98-102) describe the circum- stances under which the mistake was made. It was admitted to this Bureau by a representative of the Magnolia interests that a lack of ordinary business precaution was shown by them in relying on field judgments as to the quality of the oil, and not first having careful and thorough analyses and tests made on substantial quantities of the oil before embarking on an undertaking of such importance.^ A simi- lar serious lack of business precaution was shown in not making the analyses and tests on which the first reduction of price was based (that of March 2, establishing a diflPerence in price according to the gravity of the crude) complete enough to reveal the presence in the crude oil of sulphur of such a nature as to require an expensive method of removal. It has been asserted by a representative of the Magnolia interests that because of these mistakes they also have suffered. They entered the Healdton field with their pipe line to obtain crude oil suitable for refining in their Beaumont refinery, to supplement the limited quantity of oil which they were able to obtain from the Electra field. They desired to secure an additional 10,000 barrels a day, and had planned a line to the Gushing (Okla.) field to secure this supply. • In connection with this subject it may be pointed out that in the Oil and Gas Journal In descriptions of the newly discovered Healdton field the following statements occurred. Issue of Aug. 28, 1913, p. 12, col. 2: "The oil produced from the well Is reported to be 38° gravity, while that produced in the Wheeler field is of 22° gravity." Issue of Sept. 4 p. 22, col. 4 : "A tost of the oil from this [the discovery] well shows 30° gravity." Issue of Sept. 18, p. 12, col. 4 : " The well showed 32 J ° gravity oil which Is by far the best grade ever found In the Carter County field." And In the Issue of Dec. 11, p. 14, col. 3, In a description of the Wheeler field. It Is stated : " The oil in the Oil City development is 19° gravity, while the oil found In the Healdton pool tests 32°." According to the aflSdavits submitted (which are confirmed by the private correspondence of the company officials between themselves), the pipe line company did not have reliable Information In regard to the actual quality and character of Healdton crude until February 26, 1914. »*- i ^ i ) When the Healdton field was discovered and the oil was pronounced to be a high-grade refining crude, by their representatives, it was estimated by them that the field might eventually be developed to a production of 10,000 barrels a day. The estimate of the future pro- duction of the field at that time— only one well having then been brought in — was merely a matter of judgment on the part of men experienced in oil-field conditions. When the low-grade refining qualities of the Healdton crude were established, the company not only had bought a considerable quantity of the Healdton crude at the price of high-grade refining oil, but it had to provide, at a heavy expense, special facilities to care for the future oil from the field. To supply the place of the 10,000 barrels daily of refinable crude that it had expected to get through its pipe line from Healdton, it was forced to buy crude from other fields, and have it transported by rail to Beaumont, Tex., in order to run its refinery there at its most profit- able capacity. On September 24 the Magnolia Pipe Line Co. notified the pro- ducers that on and after September 30 it would pay 40 cents per barrel. Because of action taken by the Corporation Commission, this reduction in price was not put into effect. The pipe line company, in justification of its attempt to reduce the price, abandoned its conten- tion that the price of Healdton crude should be made to correspond with the price of the fuel-oil crudes, for not only had there been no contemporaneous fall in the prices of such crudes, but in some of the fields producing them prices had actually advanced. This rise was generally attributed in the trade papers to a heavy export fuel-oil de- mand, which could conveniently be supplied from such crudes. The pipe line company based its justification on the ground that, follow- ing the fall in the price of Cushing crude to 55 cents, it was much more profitable to buy this high-grade oil, transport it in tank cars to their refineries, and refine it in place of the Healdton crude. They also pointed out that the fuel oil from Cushing crude was competing with that from Healdton. They claimed that notwithstanding the export demand, fuel-oil prices were low in north Texas, the terri- tory in which Healdton fuel oil could profitably be marketed. The validity of the explanations offered by the Magnolia interests for the cuts in prices and runs of Healdton oil depends upon the determination of the actual refining quality of Healdton oil. If, according to the contention of the Magnolia interests, it is chiefly valuable as a fuel-oil crude, or is less valuable for refining purposes than other crudes available to their refineries, then they have sound, economic grounds for placing its price on a basis which will allow it to meet other competitive crudes. If, on the other hand, it is valuable as a high-grade refining crude, much injustice has been done to the producers. 20 CONDITIONS IN THE HBALDTON OIL FIELD. Section 2. The specific gravity of Healdton crnde oil. It is a well-established fact that crude oils which are light or of low specific gravities are capable of yielding a larger proportion of gasoline and naphtha than those which are heavy or of high specific gravities. The crude oil coming from different wells in the same field will vary somewhat in respect to specific gravity. Tests to determine the specific gravity are made with the use of a hydrometer, the result being usually stated according to the empirical Baume scale at 60° F. temperature. The result expressed in terms of the Baume scale differs from that shown for specific gravity, which is the statement of the ratio of the weight of a given volume of oil to that of the same volume of water. According to the Baume scale, the higher degrees represent the lighter gravities and the lower de- grees the heavier gravities. The true specific gravities vary, broadly speaking, inversely with the degrees shown by the Baume scale. Given the gravity in degrees Baume, the true specific gravity can be readily ascertained by the use of empirical tables. The highest Baume test shown for any well in the Healdton field for which the Bureau of Corporations has been able to secure reli- able information was 33.93° Baume. This sample was taken on April 1, 1914, from a well on the Bonner lease in sec. 4, T.4S., R.3W. The lowest Baume test was 29.27°. This sample was taken on April 2, 3914, from the McClure lease on sec. 5, T.4S., R.3W. Both of these samples were taken by representatives of the United States Bureau of Mines. All of the oil from the field is run either into the pipe line company's storage tanks or through the pipe line, without any effort being made to keep the oil from different wells separate. The Baume test of the oil as it leaves the field for Texas averages 31.6°. The Bureau of Mines' average of 20 samples fresh from the wells in different parts of the field was 31.57° B. The average gravity of 886,254 barrels run by the Magnolia Petroleum Co. at its Corsicana refinery during the six months ending September 30, 1914, was 31.36° B. The importance of these differences in the gravity of oil coming from different wells in the Healdton field was emphasized when the Magnolia Pipe Line Co., between March 9 and March 26, paid 35 cents per barrel less for oil testing under 32° B. than for oil 32° B. and over. According to the judgment of the pipe line com- pany's officers at that time, the oil testing 32° B. and over was classed as having valuable refining qualities, while that under 32° B. was classed as a fuel-oil crude. This was because of the greater propor- tion of the valuable naphtha and illuminating oils obtainable from the crude which tested 32° B. and over. Whether the oil is a trifle above or a trifle below 32° B. has no particular importance, but this has often been made the dividing line in distinguishing heavy from light crudes in the Mid-Continent field. •«- i REDUCTION IN CRUDE OIL PRICE. 21 Section 3. Products obtainable from Healdton crude oil. There is at the present time no standard method in general accep- tance for absolutely and definitely establishing the refining quality of any given petroleum crude oil. It is possible, by variations in the refining methods used, to obtain a wide range from the same crude oil, not only in the kinds of refined products but also in the proportions in which such products are obtained. The commercial value of a crude oil depends not only on its quality — that is, its chemical constituents— but also on the cost of securing refined prod- ucts from it and the market prices of such products. Three general kinds of tests to establish definitely the character of the refined products, and the proportions in which they can be obtained, are in practical use— the laboratory distilling flask methods, the barrel still tests, and test runs made in actual refinery operations. In all three forms there are many modifications of method practiced. While in the estimation of oil men generally the actual results from runs made on a large scale under commercial conditions, by well- equipped refineries, afford the best tests of the value of a particular crude, yet from a scientific standpoint such returns are not conclu- sive as to the constituent elements and quality of the oil, because the market reached by the refinery may not furnish a sufficient demand for the particular refined products which, from its chemical constitu- ents, the crude is best fitted to produce. Nevertheless, for the crudes of a particular region for which the market conditions are the same, the test of actual returns from a refinery run, if reliably made to develop the highest percentage of valuable products, should and does carry the most weight in the determination of its commercial value. Crudes are chiefly valuable at the present time in proportion to their ability to furnish, without undue refinery investment and op- erative cost, either the lighter products, such as gasoline and naph- tha, or high-grade lubricants from the residuum or heavier " end " of the oil. Formerly the ability to furnish illuminating oils was more highly valued than that to furnish gasoline, a product which, for many years, was either regarded as waste or had a very limited market. The development and extensive use of gasoline engines has frequently made it profitable in more recent years to increase the output of gasoline, even at the expense of reducing the output of illuminating oil. The least valuable crudes are those which are fit only for fuel purposes. While it is theoretically possible to secure, to a limited extent, most of the chief refined products, from all crudes, in practical refinery operations the expense of the methods involved or the absence of demand for certain products in the markets accessible to the refineries practically prohibits the produc- tion of some of them from certain crudes. 22 CONDITIONS IN THE HEALDTON OIL FIELD. The Bureau has secured from a number of sources records of tests which have been made of Healdton crude oil. These include labora- tory distilling flask tests, barrel still tests, and refinery runs. The differences bei'Ween tests for the different methods of REFINING. — ^The crude oil of the Kansas, Oklahoma, Louisiana, and Texas fields is refined in two types of refineries— those which extract only the naphtha or gasoline, illuminating oils, and, in some cases, gas oil, and sell the residuum for fuel oil, and those which, in addi- tion to obtaining some of the above-mentioned products, also extract lubricants from the residuum. The first type of refineries are com- monly known as " skimming " or " topping " plants ; the second as "lubricating" plants. Most of the refineries situated west of the Mississippi Kiver do not produce lubricants. The reasons for this are found in their comparatively limited markets for lubricating oils, in the more expensive plant and higher grade of skill needed to manufacture lubricants, and, to some extent, also in the profitable local markets for fuel oil. As a result, comparatively little lubri- cating oil is refined west of the Mississippi Kiver from the crude oil of the Mid-Continent, Louisiana, and Texas fields, when the quantity of the crude oil, which unquestionably has considerable lubricant possibilities, is considered. The refiners have regarded it more ex- pedient or profitable to " top " their crude and sell the residuum for fuel oil. When market conditions warrant, sometimes part of the residuum is run to gas oil, at other times all of it goes into fuel oil. The various tests of Healdton crude of which the Bureau b.as secured the records have been made with two different objects in view. Some were made to show what products could be obtained if the crude were refined in a "topping" plant — ^that is, for gasoline, kerosene and fuel oil — and others to show the products obtainable if the crude were refined to furnish lubricants. Attention should be called to the fact that in Tables 2, 3, and 4 there is no agreement in the use of the terms " naphtha " and " gaso- line " by the different chemists and refiners. The terminology used in each report is presented in the tables. Comparisons of the differ- ent results should therefore be based on the percentage of the prod- ucts obtained at the gravity specified, since the use of the names is misleading. In a paper on " The Manufacture of Petroleum Prod- ucts," given in the Proceedings of the Engineers' Club of Philadel- phia, April, 1913, F. C. Robinson, chief chemist of the Atlantic Refining Co., stated : The first group of products from petroleum is made up of gasolines and naphthas. There is some confusion among the various names, benzine, gasoline, naphtha, etc., but the best practice is to use the word gasoline for any mixture of light hydrocarbons intended for use in any kind of vaporizer ; that is, to be BEDUCTION IN CRUDE OIL PRICE. 23 t ^ gasified in a gas machine, gasoline torch, gasoline stove, or automobile car- buretor. Also to confine the word naphtha to mixtures of hydrocarbons intended for some purpose that requires a very good odor, such as the naphtha used by cleaners, varnish-makers, soap-makers, etc. In this scheme, the word benzine finds no place. Gasolines and naphthas vary in average boiling point according to the use for which they are intended, but all lie between 125 and 280° F. In all cases it is essential that they be free from all heavy hydrocarbons that do not evaporate from the hand. I. C. Allen, in a statement submitted with the United States Bureau of Mines' analyses to the Corporation Commission on June 9, 1914, under the head of " What is to be considered gasoline," said :« The ordinary refiner grades gasoline according to its specific gravity, using the Baum6 scale. The gravity of gasoline varies within considerable limits according to the use to which it Is put. The ordinary grade of automobile gaso- line found on the market approximates 62 degrees Baum6. The laboratory distilling flask tests. — Of the different analyses and tests of Healdton crude oil, the first to be considered are various analyses made in laboratories by the use of the distilling flask. The Bureau has secured from different sources the results of 35 separate laboratory analyses of samples of Healdton crude. Through the courtesy of the United States Bureau of Mines, the results of analyses made for it on 2 samples of crude oil, by 4 different methods, by M. C. Whitaker, a consulting industrial and engineering chemist, were obtained, and also detailed results of each analysis made by the Bureau of Mines' chemists on 20 samples of Healdton oil. The resultant averages of these 20 tests, as compiled by the Bureau of Mines, is presented in the following table, together with the re- turns from 15 other analyses. In the 4 tests made by G. Y. Williams the lubricating possibilities of the crude were not determined; in the 8 tests made by M. C. Whitaker the naphtha and illuminating oil were first removed and the residue was separated into lubricating oil and coke; in 3 tests, the two tests made by C. K. Francis and the Bureau of Mines' average based on 20 tests, the heavier contents were classed as lubricating oil and residue; and in a test by L. Kirschbraun the heavy end was divided into lubricating oil, gas oil, and residue. It should be noted that all of the above-mentioned products were not " finished " to meet commercial standards. The loss in " finish- ing" the naphtha, gasoline, and kerosene would probably be small, and that in finishing certain lubricants relatively large. For gas oil and residuum, there would be no loss in percentage, but probably some gain, as the residues from the finishing processes of the lighter oils and the lubricants could be turned into the gas and fuel oil. The following table shows the results of the various laboratory distilling flask tests: • Transcript of Corporation Commission hearing. State Exhibit, Allen No. 1. 24 CONDITIONS IN THE HEALDTON OIL FIELD. Table 2.-LAB0RAT0RY DISTILLING FLASK ANALYSES MADE TO DETERMINE THE REFINING QUALITIES OF HEALDTON CRUDE OIL.* Test made by— Q. Y. WUliams: No.l No.2 No.3 No. 4. C. K. Francis: No.l No.2 Where test was made. Norman, Okla . . do Oklahoma Okla. do City, Date. 1914, Apr. 12 ..do.... May 1 ..do.... L. Kirschbraun. M. C. Whitaker: Sample 1470 — No. Id No.2e No.3/.... Ho.Aff Sample 1464— No. Id No.2« No.3/.... No. 4a U. 8. Bureau of Mines' average of 20 tests . Stillwater, Okla. do Chicago, 111. New York, N.Y. do do do .do. .do. .do. .do. Pitts: urgh. Pa. Mar. 23 -.do.... Apr. 18 June ...do. Quantity tested. Gravity of crude oU. C.c.h 100 100 100 500 300-500 300-500 .do. .do. .do. -do. .do. .do. 100 100 100 100 100 100 100 100 Deff.B. 31.80 31.80 33.70 30 40 31.80 30.30 30.30 30.30 30.30 32.75 32.75 32.75 32.75 3L57 Sulphur content of crude oil by weight. Per cent. 0.66 .55 .72 .73 Paraffin con- tent by weight. Per cent. 0.67 .67 .70 (») Asphalt con- tent by weight. Per cent. 0.71 .70 (') • All results are based on the percentages by volume. * 100 0. c. equals 3.38 fluid ounces. e Presence of asphalt stated in testimony, but amount not given. i Engler method. « Ubbelohde method. / Regnault method. 9 Nawratil method. h From the lubricating distillates from 8.5 to 1.5 per cent of paraffin wax can be obtained. (Testimony of L C. .\Uen at Corporation Commission hearing of June 9, 1914.) A BEDUCTION IN CRUDE OIL PRICE. 25 TABLE 2.-LABORATORY DISTILLING FLASK ANALYSES MADE TO DETERMINE THE REFINING QUALITIES OF HEALDTON CRUDE OILr-Continued. Product. Test made by— Naphtha. Gasoline. Kerosene. Total naphtha, Gravity. Per cent. Gravity. Per cent. Gravity. Per cent. gasoline, and kerosene. G. Y. Williams: Kn 1 Deff. B. Deg. B. 62.4 62.4 62.4 62.4 12.0 n.7 12.9 11.6 Deg. B. 42.0 42.0 42.0 42.0 35.0 34.6 34.0 34.5 Percera. 47.0 No 2 46.3 No 3 46.9 No.4 46.1 C. K. Francis: No 1 61.6 54.6 14.5 10.3 a4L9 039.1 40.8 32.0 55.3 No.2 42.3 1m ITfar^^^hhrftiiQ ....«.•••••.. 64.9 15.0 42.2 25.0 4ao M. C. Whitaker: Sample 1470— tin 16 . . .. 57.5 c7.0 57.7 55.3 60.2 62.7 62.1 59.9 9.3 5.2 3.7 2.8 16.7 11.5 9.5 11.1 41.4 43.6 43.7 44.2 40.5 43.3 43.3 43.2 32.7 32.3 34.8 34.0 28.3 30.8 31.2 30.2 42.0 Kn 9e 37. S Kn ^d 38.5 Mn i« 36.8 Samp 1464— "Kn \h 45.0 Vn 1e 42.S Kn 'id . . 4a7 Nn 4« 4LS U. S. Bureau of Mines' average i\f 9(0 tAfitj« ..... 57.7 7.0 42.2 30.7 37.7 # Weighted average. Original table shows kerosene fraction, 44.8 gravity, 27.5 per cent; Ulumlnating oils, 36.0 gravity, 13.3 per cent for test No. 1. Kerosene fraction, 40.0 gravity, 25.0 per cent; iUuminating oils, 36.1 gravity, 7.0 per cent for test No. 2. t Engler method. e Ubbelohde method. dR^piault method. •Nawratil method. t 26 CONDITIONS IN THE HEALDTON OIL FIELD. Table 2.— LABORATORY DISTILLING FLASK ANALYSES MADE TO DETERMINE THE REFINING QUALITIES OF HEALDTON CRUDE OIL— Continued. Product— Contin ued. Test made by— Gas oil. Lubricating oils. Residuum. Coke. Loss. Grav it.v. Per cent. Grav- ity. Per cent. Grav- ity. Per cent. Total. G. Y. W lliams: No 1 Deg. B. Deg. B. Deg. B. 32.5 32.5 32.5 20.4 48.0 48.2 47.0 53.9 Pr. ct. 5.0 5.5 6.1 Pr. et. («) («) («) (») Pr. rt. 100 No 2 100 No.3 ...•.•.. 100 No 4 100 C. K. Francis: No. 1 35.0 34.2 7.0 16.0 20.2 20.6 37.2 41.7 ' 0.5 .0 100 No.2 100 L Kirschbraun 32.7 15.0 26.4 12.5 15.2 32.5 (*) 100 M. C. Whitaker: Sample 1470— No. ic • 28.0 29.1 29.8' 29.1 27.7 28.7 29.2 30.8 52.9 56.0 56.0 57.5 50.5 53.5 53.5 52.5 3.5 4.8 3.9 4.0 2.6 3.1 2.7 4.8 1.6 L7 1.6 1.7 1.9 1.1 3.1 1.4 100 No 2d 100 No. 3« 100 No. 4/ 100 Sample 1464— No le 100 No 2d 100 No.3« 100 No 4/ ... 100 U. S. Bureau of Mines' avor- ftse of 20 tests 29.9 29.4 32.9 («») 100 a Loss included in coke. b Ijoss included in residuum c Engler method. d Ubbel(dide method, e Regnault method. / Nawratil method. REDUCTION IN CRUDE OIL PRICE. 27 ■i i^ All of the records of tests appearing in the foregoing table are from samples taken from single wells, except in the case of the United States Bureau of Mines, which is the average of 20 samples, taken with the special view of securing a representative test of the field. All of the tests, except those made by and for the Bureau of Mines, were made on behalf of the producers. It will be observed that there are wide variations between the results of these tests. This is partly due to the differences in chemical composition of the samples tested, the method used in testing, and the aim of the per- son making the test to produce the largest proportions of certain products, at the expense of other possible products. That the differences were partly due to chemical composition of the samples is indicated by the different Baume tests of the crude analyzed. The gravity of the crude tested varied from 30.3° to 33.7° B. scale. As has already been stated (see p. 20), the average gravity of the crude oil, as it leaves the field for Texas, is 31.6°, and when run by the Corsicana refinery, is 31.36° B. This closely corresponds with the Bureau of Mines' average of 20 samples taken fresh from the wells, which was 31.57°. These differences in gravity of the samples tested account in part for the differences shown in the total content of naphtha, gasoline, and kerosene, which varied from 36.8 per cent to 55.3 per cent. It seems probable, however, that most of the differences found in this respect were due to the method used and the manipulation of the apparatus by the persons making the tests, in order to produce more of certain products at the expense of others which were not desired. The differences due to method are best shown by the elaborate tests made by M. C. Whitaker, who used four different methods for each sample tested. The following extract from his report is in point : • A comparison of the results obtained shows a wide discrepancy in amounts of the various products obtained by the several methods of analysis, and this difference is especially great in the case of the "naphtha." On sample No. 1464 about one and three-fourths times as much "naphtha" is obtained by the Engler method as by the Regnault method, whereas in sample No. 1470 the "naphtha" obtained by the Nawratil method is less than one-third that obtained by the Engler method. The variations shown in the analysis of your oils by the different methods are directly in accord with our previous exi>erience, extending over a number of years. We do not consider any of the existing methods as dependable. It is doubtful if any of these methods will give results even approximating those attained in practical distillation. We frequently encounter disputes between producer and refiner as to the proiier evaluation of an oil due to a difference in results obtained by different methods of analysis. We have frequently urged, and still urge, that the whole question of crude oil analysis and method of valuation be subjected to the most thorough investigation with a view to establishing a standard method of analysis and report. • For full report, see Exhibit 9, p. 103. 28 CONDITIONS IN THE HEALDTON OIL FIELD. The results of the tests made by the Bureau of Mines on 20 samples are those which deserve the most weight. According to the testimony of Irving C. Allen, petroleum chemist of the Bureau of Mines, the aim of the Bureau of Mines is to use a standard method for testing all kinds of crude oils. The following extract from the record of the Oklahoma Corporation Commission hearing on June 9 shows this:° Dr. Allen. ♦ • * What the Bureau of Mines is trying to do is to get the products out of the oil without decomposition, without degradation of the product. And with our method of distilling we use an electric still. We dis- till off all the oil, including the lubricants or a greater part of the lubricants, without cracking the crude at all. With these other methods we can get a much higher yield of gasoline by cracking the contents of the still and sacrific- ing the lubricating oil. Q. But the general results from all methods and any method that you might use will arrive at comparative value of the different oils. — ^A. The method we use, we try to standardize it so we can have it absolutely under control. We say these products are gotten from the crude without decomposition of the oil in any way. You might say it is the natural product of the oil, and those, of course, can be varied at the will of the operator. Commissionei* Henshaw: Q. Now, he can increase the amount of the gasoline and decrease the amount of the kerosene. — ^A. Yes, sir. Q. Or vice versa? — A. Certainly, it is quite the common practice to run for the markets only. At the time Mr. Allen submitted the tables showing the results of the Bureau of Mines' tests, he also furnished the following state- ment in regard to the tests : * The percentages of distillates from laboratory determinations may be made to vary greatly, depending on the method used in the analysis. Although labo- ratory determinations are not comparable with refinery runs, they are useful for purposes of comparing oils of different origin and from different fields, and they enable an analyist thoroughly informed on the details and principles of any particular laboratory method of analysis and having a knowledge of refining practices, to determine the value of an oil for refining purposes. If it be desired to re-run the above naphthas for gasoline, the above per- centages of gasoline can be thereby increased from five to ten per cent. The quantity and quality of the other products also can be materially changed by re-running [re-distilling] the respective distillates, and a great variety of products may be produced therefrom. From the above lubricating distillates, from 8.5 to 1.5 per cent of parafRiie wax can be obtained. From the above residues, there can be obtained by vacuum and steam treat- ment an additional quantity of heavy lubricant. In short, the above tests would lead one to believe that first class refined products can be economically produced from the Healdton oils. •Transcript of Corporation Commission hearing, pp. 9 and 10. * Transcript of Corporation Commission hearing, State Exhibit, Allen No. 1. REDUCTION IN CRUDE OIL PRICE. 29 It is evident from Mr. Allen's testimony that the refining value of a crude oil, as measured by a standard method applicable to all kinds of crudes, may not indicate the commercial value of a particular crude for refining purposes based on the market values of the dif- ferent products procured from it. The importance of this distinc- tion is seen from the fact, already stated, that lubricants are manu- factured from only a small proportion of the crude oil capable of furnishing lubricants which is refined west of the Mississippi River. The market conditions thus far have favored the production of gasoline, illuminating oil, and fuel oil, and even some refineries equipped to make lubricants refine, for that purpose, only a small proportion of the available residues of the crude oil which they run. The Laboratory Barrel-still Tests. — ^In the barrel-still test the crude oil is distilled in a miniature still under conditions more like those of refining on a commercial scale than are obtainable through the distilling-flask method. The quantity of oil run in some barrel- still tests has been as high as 50 gallons, while that used in the dis- tilling flasks usually is from 100 to 500 cubic centimeters (from 3.38 to 16.9 fluid ounces). The larger quantities of the resultant products secured with the barrel-still facilitates the " finishing " of the prod- ucts of the first distillation into refined products meeting definite commercial standards. Because of the close approximation of the results shown by barrel-still tests to those obtainable in actual refin- ing on a commercial basis, this method is often used by refiners. All of the barrel-still tests for which the Bureau of Corporations was able to secure records were made at refineries by practical refiners. In six of them no attempt was made to carry the testing process further than the extraction of the naphtha and kerosene, the residue being classed as fuel oil. In four of them the process followed gave gas oil; and in two, engine oil lubricating stock was obtained, although no further attempt was made to produce commercial engine oils. One test was carried to the point of securing cylinder oil of commercial grade, and in another test commercial engine oils were made. The following table shows the results of the various barrel- still tests: 30 CONDITIONS IN THE HEALDTON OIL FIELD. Table 3.-LABORATORY BARREI^STILL TESTS MADE TO DETERMINE THE REFINING QUALITIES OF HEALDTON CRUDE OIL. Test made by- Cosden & Co Oklahoma Re- finery Co.: No.l No.2 , Magnolia Petro- leum Co.: No.l No.2 No. 3 No.4 No. 5 Sun Co.: No. 1« No.2 Test for engine oils; volume of crude. Per cent. 7.0 2.51 7.5 15.0 25.0 30.0 Test for cylinder oils; vol- ume of crude. Per cent. 13.3 Sun Co., barrel-still tests. c Steam-still test; vol- ume of crude. Per cent. 12.0 15.0 b Baum^ test, 30.6." 350 20.0 20.0 e Baum^ test, 31.4*. Dry-heat test; vol- ume of crude. Per cent. 10.0 5.0 15.0 35.0 / i i Table 5.-C0MPARIS0N OF TESTS MADE TO DETERMINE THE LUBRICATING QUALI- TIES OF HEALDTON CRUDE OIL— Continued. Product. Fuel oil Road or fuel oil.. Gas or fuel oil Gas oil distillate. Wax tailings Coke Loss Total. Oriental Oil Co., refinery run; vol- ume of crude. Per cent. 34.9 100.0 Magnolia Petroleum Co., barrel-still tests. Test for engine oiLs; volume of crude. Per cent. 27.5 2.5 4.7 34.7 2.8 100.0 Test for cylinder oils; vol- ume of crude. Per cent. 13.3 33.4 100.0 Sun Co., barrel-still tests. Steam-still test; vol- imae of crude. Per cent. 10.01 ^ ^3.'.0 2o.0j 3.0 100.0 Dry-heat test; vol- ume of crude. Per cent. 30.0 5.0 100.0 In the foregoing table the lubricating stock is designated by vari- ous names, but these have been grouped so as to afford a ready com- parison. The Oriental Oil Co. refinery-run test and the Magnolia Petroleum Co.'s barrel-still test for engine oils show 29.2 per cent and 30.0 per cent, respectively — a very close agreement. Attention may be called to the United States Bureau of Mines' average of 20 tests (see Table 2, p. 24) made with the laboratory distilling-flask method, which show results in rather close conform- ity with these two tests. For the sake of comparison, the yields shown by the Bureau of Mines are repeated here : Gravity of crude, 31.57° B.; gasoline, 7.0 per cent; kerosene, 30.7 per cent; lubricants, 29.4 per cent; residuum (including loss), 32.9 per cent. The two Sun Co. tests show lubricating stock amounting to 35 per cent of the volume of the crude, and the Magnolia Petroleum Co. test shows 20 per cent for the cylinder oil and also 20 per cent for "nonde- script oil," which apparently should be classed as lubricating stock. In his letter of August 19, transmitting the results of the barrel- still tests for lubricants," Mr. Greer, the general attorney of the Mag- nolia interests, stated in regard to the experiment to determine whether or not cylinder oils can, in a practical way, be manufac- tured from Healdton crude for commercial purposes : The sum and substance of this experiment is that it is not practical to use the Healdton crude, rather than other crudes, to manufacture commercial cylinder oils. The following are the leading obstacles and objections in the way: (a) The excessive emulsification ; (6) The excessive use of lye; (c) The excessive amount of washing necessary; (d) The great loss (33 J per cent) in the treatment of this oil. « Exhibits 10 and 11, pp. 107-110. 42 CONDITIONS IN THE HEALDTON OIL FIELD. You will see that the cylinder oil obtained shows a prohibitive Vis, [viscosity] (411 at 212) and exhibits a color and api)earance that would prevent its being a success on the marliet. The following table has been prepared to show a comparison of the cost and value of products of Healdton and Electra crudes, when refined to obtain engine oils at the Beaumont refinery. The barrel-still test yields have been used for presenting the Healdton crude values in the absence of any refinery runs carried to the point producing commercial engine oils, and the yields obtained by the experience of actual refinery runs at the Beaumont refinery have been used for presenting the Electra crude values. A regular refinery run of Heald- ton crude to make engine oils might show slightly different yields from the barrel test. The difference would probably be, however, in decreasing the proportion of lubricants finished up, rather than increasing it. Table 6.— COMPARISON OF THE VALUES OF THE PRODUCTS OF HEALDTON AND ELECTRA CRUDE OIL WHEN REFINED TO PRODUCE ENGINE OILS. Product. Healdton crade, barrel-still test.o Electra crude, refinery runs at Beau- mont refinery. 6 Volume of crude. Gallons. Price per gallon. Amount. Volume of crude. Gallons. Price per gallon. Amount Naphtha Per cent. 7.50 25.00 12.32 .81 3.15 10.50 5.17 .34 Cents. 6.62 5.01 4.50 4.50 $0.20853 .52605 .23265 .01530 Per cent. 27.00 30.00 21.23 n.34 12.60 8.92 Cents. 6.62 5.01 4.50 $0.75071 .63126 .40140 Refined oil Gas oil Foots oil 118/120 M. P. wax.... .23 .55 c.lO e.23 «i3.27 d3.32 .02060 .04847 124/126M. P. wax.... 128 M. P. wax .47 12.30 4.10 27.50 2.50 4.72 2.78 /.20 6.17 1.72 11.55 LOS PL 98 L17 d3.32 5.75 6.21 L88 L88 d.25 .04150 .29728 .10681 .21714 .01974 .03008 Pale oil 6.12 5.39 2.57 2.26 5.75 6.21 .14778 .14035 Red oil Fuel oil Wax tailings Coke 6.00 3.48 *2.52 L46 d.25 .04585 Loss Total 100.00 42.00 1. 70108 100.00 42.00 2 18642 o Baum^ test, 30.6°. 6 Baum6 test, 40-41 •. c Equals 0.63 pounds. d Price per poimd. e Equals 1.46 pounds. f Equals 1.25 pounds. g Equals 14.43 pounds. » Equals 18.34 pounds. In the above table the price used for naphtha is an average of the gasoline and engine naphtha prices taken from sales on an f. o. b. re- finery basis, for the Beaumont refinery, April to September, 1914. The prices of refined oil, finished (M. P.) w^ax, pale oil, and red oil, respectively, are averages of the prices taken from sales, on an f . o. b. refinery basis for the Beaumont refinery, for the same period. The prices used for gas oil and for fuel oil, respectively, are computed i A ( > REDUCTION IN CRUDE OIL PRICE. 43 on sales April to September, 1914, f. o. b. Corsicana refinery basis, no such prices being obtained from the Beaumont refinery records. No prices of sales of foots oil and of wax tailings were obtained, but as the foots oil' obtained in refining Electra is run into gas oil, and the wax tailings into fuel oil, the prices of those products were used, respectively. The price for coke was taken from a state- ment showing prices in April. The gas-oil distillate obtained on the first distillation in the Healdton crude test had so much sulphur that a further treatment would be needed to make it commercial gas oil. It has, therefore, been considered at a fuel-oil price. The total value of the lubricants — that is, the pale oil, red oil, and wax, obtained from a barrel of Healdton crude — is shown in the above table to be $0.44559, and from a barrel of Electra to be $0.35720. It is evident that Healdton crude has lubricant qualities for the manufacture of engine oils. The question is, therefore, one of the practicability of its use for this purpose, in competition with the other crudes also available to the refinery. In reference to the experiment made for the purpose of seeing if engine oils can be manufactured from Healdton crude, Mr. Greer in his letter of August 19 stated: This experiment does show that very good engine oils can be made from the Healdton crude, but it is not practical to use it for this purpose, and this cir- cumstance does not add to its value for two reasons: (o) In order to obtain the paraffine distillate from which the engine oils are manufactured you have to cut out the naphtha, the refined oil and the gas oil. You get a small percentage of naphtha and refined oil and the gas oil obtained can not be used commercially as gas oil because of the excessive amount of sulphur present, which would necessitate re-running it into fuel oil. (6) Engine oil can be manufactured from practically all crudes, and there are so many other crudes better adapted to the manufacture of engine oils than the Healdton crude that no one would ever choose Healdton crude for this puri)ose if he had these other crudes better suited, from which to select. In other words, no value is added to the Healdton crude by reason of the fact that you can make engine oil from it, because of the circumstances above stated. According to the estimates " furnished the Bureau by the Magnolia Petroleum Co., the cost of gathering, storage, and evaporation in the Electra field is 20 cents per barrel, and cost of pipage from Electra to Beaumont is 30 cents. To this must be added the cost of the crude at the wells, the price of which on September 21 w^as 65 cents. The cost of the Electra crude, f. o. b. Beaumont refinery, was, therefore, on September 21, $1.15 per barrel. The cost of Healdton crude at the Texas State line was 70 cents, the price paid by the Magnolia Petroleum Co. to the Magnolia Pipe Line Co. The distances from both fields to Beaumont are substantially the same. " These estimates were furnished to the Bureau, and while the Bureau has not, for the purposes of this report, determined for itself from an examination of the books of the company the various costs, it is of the opinion that for use in the above comparison of Healdton and Electra crudes, the estimates are sufficiently accurate. 44 CONDITIONS IN THE HEALDTON OIL FIELD. According to the estimate ^ furnished the Bureau by the Magnolia Petroleum Co., the cost of pipage to Beaumont is 25 cents. The cost of the Healdton crude f. o. b., Beaumont refinery was, therefore, 95 cents per barrel. It may be noted that the Magnolia Petroleum Co. in its estimate for cost of transporting crude to Beaumont, admits that the cost is 5 cents more for the Electra than for the Healdton crude. The estimate ° of the Magnolia Petroleum Co., furnished the Bureau for the cost of refining, not including overhead expense, de- preciation, interest, or extraordinary expenses, was $0.1677 per barrel both for Healdton and for Electra crudes. According to an estimate* furnished the Bureau by the Magnolia Petroleum Co. (see p. Ill), the cost of removing the sulphur from the refined oil and naphtha was $0.003793 per gallon. Applying this estimate to the 3.15 gallons of naphtha and 10.50 gallons of refined oil obtained from the Healdton crude in the barrel-still test, the cost of desulphurizing would be $0.0518, which should be added to the cost of refining Healdton crude. The following table shows a comparison of the relative cost in using the two crudes : Cost. Crude f. o. b. Beaumont refinery Refining (exclusive of overhead expense, etc.) Desulphurizing naphtha and refined oil Total Healdton crude, per barrel. $0.90 .1677 .0518 11.1195 Electra crude, per barrel. $1.15 .1677 $1.3177 A deduction of the above total cost of buying, transporting, and refining a barrel of Healdton crude from the total value of its products when refined for engine oils, as shown in Table 6, leaves a profit of $0.58158 per barrel ($1.70108-$1.1195=$0.58158). A simi- lar computation for the Electra crude shows a profit of $0.8G872 ($2.18642-$1.3177=$0.86872). This gives a difference in favor of Electra of $0.28714. On the basis of the prices used in Table 6, which in general are averages of sales made in the six montlis' period, April to September, 1914, inclusive, the foregoing computations show that when the price of Electra crude at the wells was 35 cents higher than that of Heald- ton, as it was from March 26 to May 5, there was a greater profit by $0.08714 a barrel in refining Electra crude for engine oils than Healdton crude. From May 5 to September 30 the difference in the « These estimates were furnished to the Bureau, and while the Bureau has not, for the purposes of this report, determined for itself from an examination of the books of the company the various costs, it Is of the opinion that for use in the above comparison of Healdton and Electra crudes, the estimates are sufficiently accurate. * ♦ y ^ A V REDUCTION IN CRUDE OIL PRICE. 45 prices of the two crudes at the wells has been 25 cents or less, making it more profitable to use Electra crude for the manufacture of engine oils, as shown above. Section 5. The presence of sulphur in Healdton crude oil. The commercial significance of the presence of sulphur in the Healdton crude is a matter of dispute. It is maintained by some experts who have made tests on the oil that the sulphur present could easily and inexpensively be removed in the process of refining. On the other hand, it is the contention of the Magnolia Petroleum Co., which has refined large quantities of Healdton crude, that the sul- phur is present in a fixed form, which requires more expensive processes for its removal to bring the products within commercial specifications than is the case w4th other competitive crudes, and that because of this fact it is expedient to remove only enough of the lighter products to bring the residue down to the required " flash " test and sell it for fuel oil. The earliest mention of the presence of sulphur in the Healdton oil which the Bureau of Corporations has found is in the report of H. L. Wood to the Oklahoma Corporation Commission on March 13.<* In this report Mr. Wood said: There is very perceptible sulphur odor noticeable over the field, like the heavy crudes produced in Texas, Louisiana, Mexico and California — the so- called fuel oils of commerce, a few of the wells showing lighter gravities give off a sweet odor lilie most of the regular refining crudes. Statements of those who maintain that the sulphur is easily re- movable are as follows : Irving C. Allen, petroleum chemist of the United States Bureau of Mines, testified before the Oklahoma Corporation Commission on June 9, 1914, in regard to various analyses made of Oklahoma crude- oils by the Bureau of Mines. In reply to a question as to whether 0.7 of 1 per cent, which he stated he had found in his analyses of 20 samples of Healdton crude, was an excessive amount of sulphur, he answered : * No, sir it is not. I think this sulphur can be removed very satisfactorily in the ordinary commercial stills of commerce. C. D. Webster, an oil refiner of considerable experience, testified at the Corporation Commission hearing of May 1 to 6 on the sub- ject of the refining quality of Healdton oil. At that time Mr. Webster had made no test himself of the Healdton crude, but based his opinions on the laboratory analyses which had been submitted to « See Exhibit 2, p. 94. * Transcript of Corporation Commission hearing, p. 6. 46 CONDITIONS IN THE HEALDTON OIL FIELD. REDUCTION IN CRUDE OIL PRICE. 47 the commission. When questioned as to what he meant by his state- ment that he didn't think the presence of sulphur in such amounts as were shown by the analyses ought to make very much depression commercially in the price of the crude oil, he answered : <* The price [cost] of eliminating that oil— the sulphur doesn't remain in the kerosene or in the gasoline. Those are the two that they get the value out of. Now what remains in the fuel oil that doesn't make any difference. Q. It smells bad enough any way? — A. Yes sir, it is just a matter of smell. A refinery run was made on May 12 and 13 at C. D. Webster's refinery at Coalton, Okla., to test the refining qualities of the Heald- ton crude, on which occasion 1,972.6 gallons (46.97 barrels) were run through the still. (See Table 4, p. 36.) This run was given the personal supervision of Guy Y. Williams, of the department of chem- istry, University of Oklahoma, and C. D. Webster. In his report of June 1, 1914, to Governor Cruce, Mr. Williams stated in reference to sulphur : The naphtha fraction gave slight tests for sulphur; the kerosene fraction showed stronger tests for sulphur. From the chemical standpoint I see no reason why this oil cannot be treated so as to remove the sulphur from the first two fractions, if their removal is necessary. This can be done by either the " Litharge process " or the " Frasch process." Mr. Webster furnished the Bureau of Corporations with a copy of his report to Wirt Franklin, president of the Crystal Oil Co., con- cerning this same run. In regard to sulphur he stated : The sulphur in the oil was a little more than we are getting out of the Schulter oil but not enough to interfere with its refining and we used only the same methods as we are using on all of our crude oils from this field. At the Corporation Commission hearing of May 1 to 6, Mr. Wil- liams testified that he had made four tests of the Healdton crude oil for sulphur, and found 0.66 per cent, 0.55 per cent, 0.72 per cent, and 0.73 per cent, respectively, making an average of 0.66 per cent. Charles K. Francis, chief chemist of the Oklahoma Agricultural and Mechanical College at Stillwater, Okla., testified that he had tested the Healdton crude oil for sulphur and found " practically 0.77 of 1 per cent." Both Messrs. Williams and Francis stated that they had not tested for sulphur content the naphtha or illuminating oil obtained in their laboratory distillation of the crude.* The proportion of sulphur existing in Healdton crude, as found by the foregoing experts, is in close correspondence with that claimed by the Magnolia Petroleum Co., as a result of their own tests. Since Messrs. Francis and Williams did not make a sulphur test of the products obtained by their laboratory distillation, and Messrs. Wil- • Transcript of Corporation Commission hearing, p. 117. •Transcript of Corporation Commission hearing, pp. 87, 88, 113 ,132, 133, 143. • ff / -I .1 liams and Webster did not state in their reports on the refinery run the exact proportions of sulphur obtained in the naphtha, kerosene, and residue, there are no definite figures to compare with those secured from the Magnolia Petroleum Co. In discussing with an agent of the Bureau of Corporations the result of two barrel-still tests made by the Sun Co. (see Table 3, p. 30), J. N. Pew, jr., president of the Twin State Oil Co., stated that Healdton crude contains from one-half of 1 per cent to 1 per cent of sulphur, but that this, however, could not affect the value of the oil to more than 1 cent per barrel at the most. When questioned by an agent of the Bureau in regard to the dif- ficulty in removing sulphur from the refined products of Healdton crude, L. Mooney, superintendent of the Pierce-Fordyce Oil Asso- ciation's Fort Worth refinery, stated that a somewhat larger amount of chemicals is required in the treatment of Healdton distillate than for Electra or Cushing distillate. He further said that the removal of the sulphur from the Healdton crude is not a serious problem for a refiner. The increased cost due to the use of more chemicals is not great. On the other hand, the contention that the sulphur is not easily removable is strongly insisted on by representatives of the Magnolia interests. At the Corporation Commission hearing on May 1 to 6, E. E. Plumly, manager of the refinery department of the Magnolia Petroleum Co., testified as to the reason why the first test did not reveal the presence of sulphur in such form as to affect the value of the crude. He said : ° The reason we didn't find the sulphur in this first test was due to the fact that all Texas and Oklahoma oils we had come in contact with before had showed such a small per cent of sulphur that it was not in our way and that was the reason this sulphur test was not made on this first sample. In describing the circumstances concerning the discovery of the sulphur difficulty he testified that the second sample of Healdton oil was received on March 14, and was at once tested on a one-barrel still. The company had at that time inquiries for a British Ad- miralty oil and wished to find out whether the residuum from Heald- ton, after taking out the light product, would answer the purpose. The sulphur test for certain of the British Admiralty specifications permits the presence of sulphur up to 0.75 of 1 per cent. The test of the Healdton residuum showed a sulphur content of about 0.92 of 1 per cent. Tests for sulphur were thereupon made on the crude oil; also on the lighter products. The crude showed 0.66 of 1 per cent, the naphtha 0.041 of 1 per cent, and the illuminating oil 0.196 of 1 per cent. The commercial specifications for naphtha permit only 0.01 of • Transcript of Corporation Commission hearing, p. 255. 48 CONDITIONS IN THE HEALDTON OIL FIELD. EEDUOTION IN CRUDE OIL PRICE. 49 h I 1 per cent, 0.04 of 1 per cent for water- white oil (first-grade kerosene) , and 0.06 of 1 per cent for common oil (second-grade kerosene). Mr. Plumly testified, in regard to the difficulty of removing the sulphur, as follows : ** A. We found it very difficult to remove ; the sulphur is of a fixed nature dif- ferent from other sulphur oils that are found in south Texas. The sulphur on the south Texas oils will pass off in the gas, but the sulphur on this oil will not pass off in the gas and we have found a way to remove it on a trial by treating the distillates with ten pounds of sulphuric acid and taking them all back for re-distillation and treating the products distilled off the second time with a second 10 pounds of sulphuric acid we barely got the refined oils down to a point where thoy would just meet the specifications. Q. Is the process in removing this sulphur from the lighter product more expensive than the process you have to resort to in the use of the Electra and the Gushing and other light oils obtainable?— A. Yes, sir, it is very much more. Q. While you can remove it the process of doing so is more expensive?— A. It is about double the cost. A letter, dated March 23, from E. E. Plumly to E. R. Brown, the general manager of the Magnolia Petroleum Co., was put in the record of the Corporation Commission hearing (defendant's Exhibit No. 5). It shows the result of the test and the importance attached by Mr. Plumly to the character of the sulphur. (See Exhibit 5, p. 100.) Telegrams which passed between Mr. Brown and H. C. Fol<^er, jr., of New York, who, with John D. Archbold, at that time owned about 70 per cent of the stock of the Magnolia Petroleum Co. and also of the Magnolia Pipe Line Co., indicate the importance attached by them to the matter. (See Exhibit 6, p. 102.) On the basis of their claim that the sulphur found in the Healdton crude is of such a nature as to be difficult of elimination in refining, the Mag- nolia Pipe Line Co., on March 26, reduced the price of oil of 32° and over from $1.05 to $0.70, making the same price for all oil from the Healdton field regardless of gravity test.* At the request of the Bureau, E. E. Plumly, manager of the re- finery department of the Magnolia Petroleum Co., prepared a state- ment showing the cost of desulphurizing the naphtha and refined oil obtained from Healdton crude in order to bring them to com- mercial specifications.*' He estimated the cost of desulphurizing to be $0.003793 per gallon of refined oil and naphtha. On the basis of the yields obtained by the Corsicana refinery in refining 886,254 barrels from April to September, 1914, inclusive, the cost per barrel would be $0.0475 per barrel of crude (12.516, the number of gallons of naphtha, gasoline, and kerosene, multiplied by $0.003793 equals « Transcript of Corporation Commission hearing, pp. 257-258. 6E. R. Brown In his affidavit (see Exhibit 5, p. 100) also referred to the low average gravity of the crude as one of the reasons for this action. The Bureau's examination of the statements made publicly at the time of reduction show that the chief reason pot forward by the pipe line company was the presence of sulphur. « See Kxhlbit 12, p. 111. A ^ $0.0475). In a letter to the Bureau concerning this statement, Mr. Plumly pointed out that, with one exception all of the basic figures used in his statement were derived directly from the regular monthly yield and cost statements of the refinery. Concerning the one ex- ception, he wrote: The estimated cost of handling the 917,190 gallons of refined oil pumped to Beaumont, re-run and treated again, was obtained from costs of re-running and treating lilie amounts of refined oil, but on account of mixing other oils with the refined oil re-run and not keeping the finished products separate, we have nothing on our regular records to show this cost. The foregoing evidence shows that the expense of desulphurizing the naphtha, gasoline, and kerosene derived from Healdton crude, together with the impracticability of obtaining gas oil from this crude and the fact that the fuel oil contains a relatively high per cent of sulphur in comparison with that from crude from other fields, would not, of itself, affect the value of Healdton crude by more than 5 cents a barrel. While the difference of 35 cents in the price per bar- rel between Healdton and the other crudes, which was made on March 26, may have been justified by other reasons, it certainly was not jus- tified primarily because of the sulphur content of the Healdton crude. Section 6. Comparative value of products of Healdton and other Okla- homa crude oils. Results of United States Bureau of Mixes' analyses. — As al- ready stated, the tests of the different crude oils obtained by the Bu- reau of Mines were made by a standard method. The object was to determine what products could be obtained from the crude without destructive distillation, i. e., without decomposition of the oil in any way. (Seep. 28.) J In the following table the prices are based upon the f . o. b. re- finery prices of the Magnolia Petroleum Co., which were verified by agents of the Bureau. The naphtha prices are an average of the gasoline and engine naphtha prices taken from sales on an f. o. b. refinery basis for the Beaumont refinery, April to September, 1914. The prices for kerosene are an average for the six months, April to . ( September, 1914, inclusive, April, May, and September being Corsicana prices and June, July, and August, Beaumont prices. The fuel-oil prices are an average of prices f. o. b. refinery at Corsicana, Tex., based upon contracts of April, May, June, and July, 1914, for present and future delivery. In the absence of any actual prices on unfin- ished lubricating distillate, the price used in computing values on this ^ product is an estimated value, being slightly more than one-half a cent per gallon higher than the price of fuel oil. Whatever varia- 76568'— 15 1 1 50 CONDITIONS IN THE HEALDTON OIL FIELD. EEDUCTION IN CKUDE OIL PRICE 61 ) < i\ tion from the actual values this might result in, it is so small as to be negligible. It should be borne in mind that the figures for the first three yield statements, which are based upon the tests made by the United States Bureau of Mines, represent only what mi••• / k\ I The difference in the value of the products is accounted for largely by the difference in the gravity of the crude oils. In this respect the influence of the high-grade Cushing crude is especially noticeable, the proportion of naphtha being more than three times larger than for the average Oklahoma crude and more than four times greater than for the Healdton crude. From the results based upon the analysis of the United States Bureau of Mines it is quite clear that the Healdton crude is less valuable than either the average Oklahoma or the Cush- ing crudes. At the hearing before the Oklahoma Corporation Com- mission June 9, 1914, Irving C. Allen, petroleum chemist of the United States Bureau of Mines, was questioned concerning the rela- tive value of Cushing, average Oklahoma, and Healdton crude oils, as compared with the best Pennsylvania crude oil, in the following manner : *» Q. I believe you stated in the beginning that in your judgment from such investigations you have made that the deep sand oil in the Cushing field was in value 90 per cent of the Pennsylvania high-grade oil and that the Healdtou oil was 90 per cent of the value of the average oil of Oklahoma. Now in this average oil of Oklahoma, did that Include the Healdton field or the deep sand field oil? — A. No, sir. I can state very briefly: The Pennsylvania oil is value 100 per cent, Bartlesville sand 90 per cent, Oklahoma in general 85 per cent and Healdton 75 per cent. Q. That would make the Healdton field, as compared with Pennsylvania 75 per cent. — ^A. 75 per cent of the Pennsylvania. Q. And 90 per cent of the value of the average Oklahoma oil? — ^A. No, Okla- homa oil is about 85, 15 per cent less than the Pennsylvania. Q. Yes, I understand it is 15 per cent less than the Pennsylvania and the Healdton oil would be 10 per cent less than the average Oklahoma oil. — A. Yes, sir. There should not be a greater difference than 25 per cent in the value of the Healdton and Pennsylvania. That is at the well, of course. Q. Now then the Bartlesville sand oil alone, what would you say is the difference between that and the Pennsylvania oil? — A. About 10 i^er cent. Q. That would be 100, 90, 85 and 75?— A. Yes, "ir. Results from refinery runs. — The Bureau, in the following table, presents a statement of the comparative value of various Okla- homa, north Texas, and north Louisiana crudes. The yields shown were obtained in actual refinery runs made for commercial pur- poses, and the prices used are the same as those in the foregoing table. As has been already pointed out, it is possible, by various changes in the processes, for the refinery to vary, within certain limits, the character and proportions of the refined products from a given crude, and, for this reason, a direct comparison of refinery runs, where the markets supplied are different, does not afford a final definite means for exact judgment of the commercial values of different crudes. (See p. 32.) Since the runs made at refineries located in Oklahoma and Kansas were made with reference to market conditions for refined \)roducts differing in some particulars from •Transcript of Corporation Commission hearing, pp. 13-14. Hi. J iJ! 52 CONDITIONS IN THE HEALDTON OIL FIELD. the conditions in Texas, that fact should be taken into consideration. For example, recently fuel oil has commanded a lower price f . o. b. refinery in Oklahoma than f. o. b. refinery in northern Texas, the region where the bulk of the Healdton crude is marketed. It is possible that, had the price of fuel oil been higher in Oklahoma, a greater proportion of the crude would have been run to that prod- uct. Notwithstanding the fact that this table does not furnish the means for arriving at a judgment, theoretically exact, of the com- mercial values of the different crudes, based on the value of the products obtainable from them, it does, however, present an approxi- mately correct statement. The table shows near enough for practi- cal purposes the commercial refinery possibilities of the different crudes. Tables.— COMPARATIVE VALUE OF HEALDTON, GUSHING, GLENN POOL, AND AVER- AGE OKLAHOMA, LIGHT CORSICANA, AND ELECTRA (TEX.), AND MANSFIELD (LA.) CRUDE OILS, AS DETERMINED BY REGULAR REFINERY OPERATIONS (BASED UPON 1 BARREL OF 42 GALLONS OF CRUDE). Crude oil and product. Healdton crude: Gasoline Engine naphtha . Kerosene Fuel oil Loss Run. Total. Healdton-Cushing crude: Gasoline Engine naphtha Kerosene Fuel oil Loss Total. Light CorsJcana crude: Gasoline Kerosene Gas oil Fuel oil Loss Total. Electra crude: Gasoline.. Kerosene. Gas oil... Fuel oil . . Loss ol Per cent yield. 5.32 2.86 2L64 68.66 1.52 100.00 Gallons. 2.23 1.20 9.09 28.84 .64 42.00 Price per gallon. 10.07081 .05766 .04796 .01875 62 8.62 L88 9.67 79.39 .44 100.00 o3 18.00 34.57 14.01 31.42 2.00 3.62 .79 4.06 33.34 .19 42.00 7.56 14.52 5.88 13.20 .84 100.00 o4 Total. 27.06 27.91 14.53 28.50 2.00 100.00 42.00 .07081 .05766 .04796 . 01875 Amount. SO. 15791 .06919 .43596 .54075 L2 381 .25633 . 01555 . 19172 ,62513 1. 12173 . 07081 .047% ,04500 .01875 .53532 . 69638 .2W60 .24750 1.74380 11.37 11. 72 6.10 11. '7 .84 42.00 . 07081 .04790 .(M.500 .01875 .80511 ,56209 ,27450 ,22444 1.86614 a Yields shown by refinery runs at the Corsicana refinery of the Magnolia Peti oleum Co. * Yields shown by refinery runs at the Fort Worth refinery of the Pierce-Fordyce Oil Association. #% .♦ BEDUCTION IN CRUDE OIL PRICE. 53 Table 8.— COMPARATIVE VALUE OF HEALDTON, GUSHING, GLENN POOL, AND AVER- AGE OKLAHOMA, LIGHT CORSICANA, AND ELECTRA (TEX.), AND MANSFIELD (LA.) CRUDE OILS, AS DETERMINED BY REGULAR REFINERY OPERATIONS (BASED UPON 1 BARREL OF 42 GALLONS OF CRUDE)— Continued. Crude oil and product. Rim. Per cent yield. Gallons. Price per gallon. Amount. Electra crude: Gasoline a5 [ 22.89 2.81 25.87 9.33 36.77 [ 2.33 9.01 L18 10.87 3.92 15.44 .98 $0.07081 .05766 .(V1796 .04500 .01875 J0.&S048 ' Engine naphtha Kerosene .52133 .17640 .28950 Gas oil Fuel oil Loss Total 100.00 42.00 1 TtriTii Mansfield crude: Gasoline be 10.00 55. CO 20.00 13.00 2.00 4.20 23.10 8.40 5.46 .84 .07081 .04796 .04500 .01875 .29740 1. 107S8 .37800 .10238 Kerosene Gas oil Fuel oil Loss Total 100.00 42.00 L&S.566 Glenn pool crude: Gasoline c7 17.69 17.28 60.64 4.39 7.43 7.26 25.47 1.84 .07081 .04796 . 01S75 .52612 .34819 .47756 Kerosene Fuel oil Loss Total 100.00 42.00 1 a.=iis7 Gushing crude: Gasoline c8 30.90 25.00 15.00 27.00 2.10 12.98 10.50 6.30 n.34 .88 .07081 .04796 .04500 .01875 .91911 .50358 .28350 .21263 Kerosene Gas oil Fuel oil Loss Total 100.00 42.00 1 91.8fi2 Average Oklahoma crude: Gasoline c9 19.52 18.13 2.41 58.33 L61 8.20 7.61 LOl 24.50 .68 .07081 .04796 .(M.500 .01875 .58064 .36498 .04^5 .45938 Kerosene Gas oil Fuel oil L■ Section 9. The Bureau of Corporations' conclusion relative to the cause of the price reductions. After an examination of all the evidence on the subject that it has been able to secure, the conclusion of the Bureau is that the Magnolia Pipe Line Co. from January 26, 1914, when it began to buy and run oil into its pipe-line system, in the Healdton field, up to November, 1914, had a monopoly of the only practical means of transporting the oil from the field to a refinery market. It did not transport any oil as a common carrier. The lack of marketing facili- ties and the charges for transportation were such that the producers preferred to sell their oil at the wells to the pipe line company, and no oil was offered for transportation. The pipe line company bought all the oil entering its pipe line, stored it, transported it to the boundary line between Oklahoma and Texas, and sold it to the Magnolia Petroleum Co., an allied concern. The Magnolia Pipe Line Co., by virtue of the circumstances which made it the only purchaser, as well as transporter of the oil pro- duced in the field, in fixing the price which it would pay for the oil, at the same time fixed the market price for the oil produced in the field. With respect to the cause of the reductions in the price fixed by the Magnolia Pipe Line Co., the Bureau finds no evidence of an intent to arbitrarily depress land values in order to buy oil-producing property more cheaply, or to acquire stocks of oil already accumu- lated at a price much below its real value. It is true that officials of the Magnolia Petroleum Co. early in the development of the Healdton field made exceedingly favorable statements in regard to the refining quality of the oil, and said it was a high-grade oil. They assert that this was a bona fide mistake, and the evidence of the correspondence in tl.e files of the Magnolia Pipe Line Co. and the Magnolia Petro- leum Co. as well as their actions support this contention. When they discovered that only a relatively small proportion of gasoline and kerosene could be obtained from it, that the oil did not have enouf'h lubricating value to make it practicable for them to use it for the manufacture of lubricants, and that it had a relatively high percent- age of fixed sulphur, to remove which increased the cost of refining, the Magnolia Pipe Line Co. made the various reductions in price. This was done, they claim, in order to put the f. o. b. refinery cost of the crude oil from the Healdton field on a competitive basis with the similar cost of the crudes from other fields that were available to the Magnolia Petroleum Co.'s refineries. The Bureau of Corporations finds that the contention of the pipe line company regarding the small gasoline and kerosene content of !: I l|i: il 68 COKDITIONS IN THE HEALDTON OIL FIELD. the crude oil produced in the Healdton field is correct. It is of the opinion also that while Healdton crude is chemically adapted to the manufacture of lubricants yet in view of the prices at which other crudes better adapted to the manufacture of lubricants could be bought, and the limited market for the lubricants obtainable from Healdton crude, its lubricant qualities added little to its market value. The fixed sulphur which is in the Healdton crude is removable from the gasoline and kerosene by methods which are not unduly expen- sive, although more expensive than is necessary for other competing crudes. The sulphur, however, does not affect the value of the Healdton crude enough to justify any important reduction in the price paid for the oil. In brief, the conclusions of the Bureau are that the reductions in the price of Healdton crude oil were made because of the discovery by the Magnolia Pipe Line Co. of its small gasoline and kerosene content, and because the lubricating values of this crude were not enough to warrant, under existing conditions, its use for the manufacture of lubricants. The pipe line company, however, does not appear to be without blame for its failure to determine the true character of the oil at an early date. This would have saved much disappointment to pro- ducers. In regard to the question raised in the Senate resolution whether changes were made in the prices of the finished products manufac- tured from Healdton crude oil corresponding to the changes in the price of the crude, it should be noted that no finished products from Healdton crude oil were marketed until about the latter part of April, 1914, at which time all of the reductions in price had taken place. -i .1 CHAPTEE III. CHARGES AGAINST THE MAGNOLIA PIPE LINE CO. IN REGARD TO DISCRIMINATION. Section 1. The legal aspects of discrimination. The language of the resolution on the subject of discriminations is as follows : Whether discriminations are practiced on the part of said company as be- tween different producers of oil in the above mentioned field, and especially as to whether any discrimination is practiced against the oil produced on Indian allotments. Before the evidence bearing on this subject is considered, it is desirable to examine the Oklahoma law, popularly known as the Yeager-Strain Act, and also the circumstances which led to the necessity, on the part of the pipe line company, of prorating its runs from the producers in the Healdton field, because of its inability to take the entire daily production. The Yeager-Strain Act, approved March 27, 1909, is set forth in sections 4304-4318 of the Revised Laws of Oklahoma, 1910, chapter 53, Article II, pages 1111-1114. The title of the original act is as follows : AN ACT to regulate all corporations, associations and persons engaged, in this State, in the business of carrying crude petroleum, or its products, through pipe lines; to regulate operators of oil wells and refiners of crude petroleum and its products, regulating the purchasing of mineral oil by pipe lines, provid- ing punishments for violations thereof, and declaring an emergency. The first section defines the different forms of business to which the act applies; the second and third sections confer powers of acquiring rights of way, under certain conditions ; the fourth, fifth, and sixth sections deal with the duties as common purchasers and common carriers; the next five sections deal with the formalities which must be complied with in order that the privileges conferred under the act may be enjoyed. The remaining sections deal with the enforcement of the act and the penalties that may be imposed for its violation. The sections in regard to the duties of common purchasers, common carriers, and penalties, are as follows : 4307. Common purchasers of oil— required to purchase. Every corporation joint stock company, partnership or other person, claiming or exercising the ri-ht to carry or transport crude oil or petroleum or any of the products thereof, by pipe 59 ilH I 60 CONDITIONS IN THE HEALDTON OIL FIELD. line, for hire, or otherwise, witliin the limits of this State, as allowed by, and upon compliance with the requirements of this article, as owner, lessee, licensee, or by virtue of any other right or claim, which is engaged in the business of purchas- ing crude oil or petroleum therein, shall be deemed a common purchaser thereof, and shall purchase all of the petroleum in the vicinity of, or which may be reasonably reached by its pipe lines, or gathering branches, without discrimina- tion in favor of one producer or one person as against another, and shall fully perform all the duties of a common purchaser; but if it shall be unable to perform the same, or shall be legally excusable from purchasing and transport- ing all of the petroleum produced, then it shall purchase and transport petroleum from each person and producer ratably, in proportion to the average daily pro- duction; and such common purchasers are hereby expressly prohibited from discriminating in price or amount for like grades of oil, or facilities as between producers or persons; and in the event such purchaser is likewise a producer, it is hereby prohibited from discriminating in favor of its own production, or storage, or production or storage in which it may be interested directly or indi- rectly in whole or in part, and its own production and storage shall be treated as that of any other person or producer. 4308. Same— exceptions. All persons, firms, associations, and corporations are exempt from the provisions of this article where the nature and extent of their business are such that the public needs no use in the same, and the conduct of the same is not a matter of public consequence; and for this purpose the district courts of the State and the corporation commission are vested with jurisdiction to determine such exemptions in any action or proceeding properly before them, as provided in this article. 4309. Oil carriers are common carriers— discrimination prohibited. Every cor- poration, joint stock company, partnership or person engaged in the business of carrying or transporting crude oil or petroleum or any of the products thereof for hire or otherwise, by pipe line, within this State, and by virtue of and in conform- ity to any valid law incapable of revocation by any law of this State or of the United States, or by virtue of and in conformity to the provisions of this article, shall be deemed a common carrier thereof as at common law; and no such com- mon carrier shall allow or be guilty of any unjust or unlawful discrimination, directly or indirectly, in favor of the carriage, transportation, storage or deliv- ery of any crude, stock or storage oil, or any product thereof, in its possession or control, or in which it may be interested, directly or indirectly. 4315. Penalty for violations. Any person, co-partnership, or corporation, its agent or employee, violating any of the provisions of this article, or any order of the comi^etent courts of this State, or the corporation commission, pursuant to the jurisdiction conferred by this article, shall, upon conviction thereof, be fined a sum of not less than one thousand dollars, nor more than five thousand dollars, or imprisonment for not less than six months, nor more than one year, or by both such fine and imprisonment for each and every violation of this article; but in case the monthly runs or takings or transportation of oil shall average so as to be without discrimination, as herein provided, the transactions of any particular day, week, or portion of a month shall be disregarded; and the con)petent court of the county in which the omission or commission, which is a violation of this article has occurred shall have jurisdiction of an action under the penal code for the punishment thereof; and said penalties shall not be exclusive of civil liability. 4816. Suspension of penalty, when. Whenever the operation of a valid order of a competent court or the corporation commission is duly susi)ended, according to law, the puniUve provisions of this article shall likewise be suspended in their operation as to the transactions adjudicated in said court; and, further, any / ^ Jb >- DISCRIMINATION CHARGES. 61 court having jurisdiction of an action brought by the State to punish for a violation under the terms of this article, shall not impose a punishment therefor greater than five hundred dollars against any person or corporation, if it finds from the evidence that the violation was made solely with the object of testing according to law the validity of any of the provisions of this article, or of the order of any competent court or of the corporation commission, in any pro- ceeding to carry out the provisions hereof. The Magnolia Pipe Line Co., up to November, 1914, had not trans- ported any oil from the field, in its character of common carrier, because, as stated by the general counsel of the company, the pro- ducers made no demand for the transportation of oil, and further- more, because if they had succeeded in working up a market for the crude the pipe line and railroad charges to their nearest available market were such that they could not realize as much from the sale of their oil as the Magnolia Pipe Line Co. would pay them for it at Healdton. Therefore, only the sections relating to the duties of a common purchaser and to the penalties for violation of the act have thus far had much bearing on the situation. Under the law, the common purchaser must purchase all of the petroleum which may be reasonably reached by its pipe lines, or gath- ering branches, without discrimination in favor of one producer as against another, and it is further provided that if unable to perform all the duties of a common purchaser or if legally excusable from purchasing and transporting all of the petroleum produced, then the common purchaser shall make his purchases from each producer " ratably, in proportion to the average daily production," and is pro- hibited from discriminating in price or quantity run for like grades of oil, or in facilities as between producers. It should be noted that while on conviction of a violation of the act, by discrimination between producers, the pipe line company is heavily penalized, it is provided that in case the monthly runs shall average so as to be without discrimination, the transactions of any particular day, week or portion of a month shall be disregarded. Evidently this provision was inserted because it is not practicable to run the pro rata of every producer each day, which in many cases might amount to only a few barrels. It is preferable to empty a whole tank at one time. During the study of the question of discrimination raised by the Senate resolution it became evident, from the different interpreta- tions placed on the Yeager-Strain Law by various interested parties, that the actions constituting discrimination needed clearer definition.' The following are some of the questions raised concerning which up to this time there has been no judicial determination : 1. Does a pipe line have to purchase, or take proportionately from each producer or lease, oil already held in storage before the pipe line began to act as a common purchaser in a given field ? ^ 62 CONDITIONS IN THE HEALDTON OIL FIELD. m i 2. Does a pipe line at a time when it is purchasing the entire pro- duction of the field have to purchase more oil than the current pro- duction of that field during the period in which it is acting as a com- mon purchaser, even though it is running less oil than its normal daily capacity? 3. Does the fact that a pipe line company does not establish a pro rata system of purchasing oil in the field until a certain date in any way relieve it from liability for discrimination in its purchases from different producers or leases, between the time it began to be a com- mon purchaser in the field and the date on which it established a prorating system? 4. When wells were shut in, at a time when the entire production of the field was being run, because the producer had tanks filled with storage oil, accumulated before the pipe line commenced to purchase in the field, and wished to clear these tanks of such storage oil before increasing his production, is such producer entitled to have runs made from his lease by the pipe line in quantity equal to the actual daily production of his wells, or in quantity equal to their estimated capacity under normal conditions? 5. In computing the daily production of the field is the actual quantity produced from the wells on each lease to be considered, or is their potential capacity as established by estiinates or gauges at a time when the w ell was running freely to be used ? In other words, when wells have been shut in or *' pinched in " in order to prevent the oil from being accumulated in storage, are such wells to be rated in computing the pro rata entitled to be run from that lease or pro- ducer on their potential capacity for production, or on their actual production ? 6. Should the prorating be figured for each lease when more than one lease is operated by a producer, or is the producer entitled to have his total pro rata allowance derived from all his leases run from whatever leases he or the pipe line company may elect ? What is the answer to this question when diverse royalty interests in the different leases operated by one producer are involved ? Each of the foregoing questions is based on some claim put for- ward by one or more of the interested parties in the Healdton field. It is obvious, for instance, that if a pipe line company is bound, under the common purchaser clause, to purchase stock or storage oil accumulated on leases before it begins to make any purchases in the field, that its refusal to make such purchases would constitute dis- crimination against the producer having such "stock" oil. Like- wise, in cases where, in order to avoid the expense of providing tanks or earthen storage of sufficient capacity to take care of the largest potential output of his wells, a producer has shut in or DISCRIMINATION CHARGES. 63 ,\ "pinched in" the wells to reduce their output, the question of whether or not there was discrimination by the pipe line company in his case might hinge on the decision as to whether the potential daily capacity of the wells or the actual daily output is the proper basis for computing the quantity of oil which, under the law, the pipe line company is bound to purchase from that producer. In the absence of any judicial determination of the various points raised, the Bureau of Corporations, in answering the question of discrimination raised in the Senate resolution directing its investi- gation, has, for the purpose of this report, considered that, during the period from January 26 to March 23, when the pipe line com- pany was purchasing a quantity of oil which closely corresponded to the production of the field during that period, estimated on the basis of pipe line runs and stocks of oil in storage on the leases, the actual output of the wells should be taken, and not the potential capacity. In other words, if a producer, during this period, pre- ferred to restrict the output of his wells, instead of providing the necessary tankage to store it until it was taken by the pipe line com- pany (which has a legal limit of 30 days in which to correct inequali- ties in running oil from the different producers), the Bureau con- siders that he was entitled to have run by the pipe line company his actual output, not his potential capacity. The Bureau considers that after the company gave notice (about March 23) that it was not able to take the entire output of the field, that the potential capacity of the wells, and not the actual output, should be the basis for prorating the oil as between producers. Such a proceeding is in line with the elimination of waste, which would arise from the construction of unnecessary tankage and the dete- rioration of the oil in storage. After March 23 there existed a situa- tion forced upon the producer by the inability of the pipe line com- pany to take the existing daily production. Before that time the producer curtailed his output merely as an accommodation to his own operations. Section 2. Geneial discussion of the charges of discrimination. The output of the discovery well in the Healdton field, brought in August 6, 1913, was rated at 25 barrels a day. According to testi- mony presented in behalf of the Magnolia Pipe Line Co. at the Corporation Commission hearings, and to other evidence obtained by the Bureau, D. C. Stewart, superintendent of the Magnolia Petro- leum Co.'s pipe line department, advocated the building at an early date by the Magnolia interests of two 55,000-barrel steel tanks in which to store the production pending the completion of the pipe line. In spite of some opposition on the part of other officers of I 64 CONDITIONS IN THE HEALDTON OIL FIELD. the company, who doubted whether the prospects of the field war- ranted so large an outlay for storage facilities, Mr. Stewart's project was approved. Pending the construction of these steel storage tanks, the Magnolia Petroleum Co. furnished the material for 1,600-barrel wooden tanks free of charge to the following producers: Humble Oil Co., two tanks; Rex Oil Co., one tank; Crystal Oil Co., two tanks; 1911 Oil Co., two tanks; Dundee Petroleum Co. (successor to the Red River Oil Co.), four tanks. According to D. C. Stewart's .statement to the Bureau — The Magnolia Petroleum Company furnished tanks delivered at railroad ; the producers erected same, with no consideration, and had privilege of buying later on. At the time these tanks were furnished, the Magnolia Pipe Line Com- pany had not been organized. It was done to afford means to test the early wells, and as a temporary accommodation. The first 55,000-barrel storage tank was completed January 27, 1914, and the second on February 25, 1914. The pipe line was opened for the regular business of transporting oil from Healdton on March 11. At that time the estimated daily production of the field was about 6,300 barrels. The estimated capacity of the pipe line at this time was 10,000 barrels per day. At the time of the March 13 hearing before the Corporation Com- mission the subject of the capability of the pipe line to take care of the future output from the field was brought up. The following is from the official record of the hearing. In the course of his remarks referring to Healdton conditions, George C. Greer, counsel for the pipe line company, said : * We are going to take care of the field to the full extent that we had planned for. That is, so far as I know, and the manager is here and he tells me so far as he knows that is the plan, 10,000 barrels per day. If the production there exceeds our capacity we are going to follow your law and pro-rate it. If the production is 15,000 barrels and our capacity is 10,000 and we can take 10,000 and pay for it, we can only take as near as we can, ten-fifteenths from every man. The foregoing is an amplified form of a similar statement which Mr. Greer had previously made at this hearing in connection with the discussion of the quality of the oil. (Transcript of Corporation Commission hearing, p. 8.) The following extract from the hear- ings also bears upon this subject : * Mr. Greer. Isn't it true that we are now taking care of the present produc- tion? Mr. Mason. No, sir. Mr. Franklin. In response to that question, Judge Greer, whether you know It or not or whether it was done by authority, the gangers sent around by your company notified every company they wouldn't take only a small i)er cent of • Transcript of Corporation Commission hearing, p. 11. •Transcript of Corporation Commission hearing, pp. 29-30. -^ t"- n A i DISCRIMINATION CHAEGES. 65 their oil thereafter. That notice was given out day-bef ore-yesterday. Doctor Smith has a daily production of a thousand barrels and the ganger told him he wouldn't take more than Mr. Greer. If the ganger told him that he didn't know. Mr. Franklin. The ganger don't take it. It is results we are after. Mr. Greer. We will take all that is there. Mr. Mason. That is very pleasant for us to hear that you are going to take It Mr. Greer. What you have got now. If you produce too much we can not Later in the hearing it was brought out that, because of the drilling of new wells, it was expected that the daily output would be increased far over the capacity of the pipe line to care for it, and an attempt was made by the producers to secure an order from the Corporation Commission to compel the pipe line company to provide enough addi- tional storage tanks to take care of the anticipated surplus. The commission, however, did not act on this request. There is no record in the transcript of Corporation Commission hearing of March 13 of any charge being made against the pipe line company of discriminating between producers in the matter of making its runs. The only reference to the subject of discrimination appears in Mr. Greer's statements already referred to, in which he stated that if the pipe line company found it necessary to prorate its runs, it would do so, under the law, without discrimination be- tween producers. Wirt Franklin, at the Corporation Commission hearing of May 1 to 6, made the statement that the hearing of March 13 was brought about because of the charge by the producers that the pipe line company was discriminating between producers in the taking of oil.** This statement is not borne out by the official record of the March 13 hearing ; not only was there no discussion of charges of discrimination, but Commissioner Henshaw stated at that time as follows : ^ This investigation was started upon my own motion, making it part of a former investigation to ascertain the relative values of oil. According to statements made at the Corporation Commission hearing ^ on behalf of the Magnolia Pipe Line Co., the officers of the pipe line did not attempt to establish any system of prorating their runs between producers until March 23, because up to that time they had hoped to be able to take care of all of the output of the field. On March 23 the pipe line company gave oral notice through its field manager, C. K. Stewart, that it would take only 4,000 barrels per day from the field. This led to special attention being given to the subject of an equitable prorating of the runs from producers. • Transcript of Corporation Commission hearing, pp. 36-37. * Transcript of Corporation Commission hearing, p. 33. " Transcript of Corporation Commission hearing, pp. 8 and 10, 76568°— 15 5 \\ 66 CONDITIONS IN THE HEALDTON OIL FIELD. DISCMMINATION CHARGES. 67 Under the law power does not appear to be vested in any one authority to determine definitely the time when a pipe line company must begm to prorate its purchases in a field whose output threatens -/v*"^ n .^ ««P\"ty °f the pipe line. The law merely states that If It shall be unable to perform the same, or shall be legally excus able from purchasing all the petroleum produced, then it shall pur chase from each person and producer ratably, in proportion to the average daily production." The position taken by the Magnolia Pipe Line Co. in regard to the charge of d.scrimin.ntion and its action in prorating is set forth in Its response to the Corporation Commission, filed at the May 1 to G foTlowf- "* '"''''^"' *" ^''^ ''**"''"*^ general's complaint. It is as This defendant denies that it has, at any time, discriminated between the March 4th, 1914, and from that time op to about March 23rd, 1914 according to Its best Judgment and estimate, it took oil equal to the current prXt on from tlH, producers in the field. At any rate, if there were any Ineiuamies ^ tween the producers, it was unintentional, and the same were adj3 within^ i^riod of thirty days from the time this defendant began to o^li^n! March 2:ird it became apparent that the production of said fleW w's bt^nd the amount that this defendant could purchase, and therefore. It Then^ega^ o prorate the oil between the producers according to their respective pr^T tions and has, as aforesaid, since said date purchased and taken a H t^^on the difficulties that confronted It and its financial Inability to do more. A sworn statement, obtained by the Bureau of Corporations from follow^iiT" '"""'^"' '^" P'P' """ ''^•'"P^"^' ^°"*«'«<^d the 6 That op to about March 23, 1914, the production had been In the Judgment of affiant and others in charge of said pl,« line, such that the Pipe Line cin.nv could receive and handle all of it and, therefore, the PlpTLlne Commnv was up to that date endeavoring to take, and took as far as practical thHZI current production (not including the stock oil), deeming 'such cour^ a fir and substantial compliance with the Oklahoma statutes. 04'^ilTv^V t'^^ ^"^""' ^}^ ^'"^ ^"^ ^•^"^ that on January .4 J rank Edmgton, a gauger of the company, made a detailed re- port of the condition of the field, giving the names of producers and eases, he number of wells completed, number of wells drilling total estimated daily production from each lease, and the quantity of "stocky or storage oil held on each lease. He reported a S estimated daily production for the field of 1,555 barrels, and 23 82-5 barrels of "stock" oil. On March 25, in a 'similar detaiW repS he reported the total estimated daily productio n of the field at 9,625 l^ • 4 / >^ ■ .'L ■i I i barrels, and the quantity of oil in storage at 32,915 barrels. The Bureau of Corporations has computed from the data, found in the Magnolia Pipe Line files, dealing with well-completion reports, records of pipe-line runs, statements of stock oil on leases, and of estimated daily production on the leases, the total estimated produc- tion based on the estimated daily capacity of the wells, and the total estimated production, based on the records of the pipe-line runs from each lease together with the stocks of oil stated in the gangers' reports to have been on the leases on January 24 and March 25. The Bureau j&nds that the quantity of oil produced in the field for the period January 26 to March 22, inclusive, if computed on the basis of the reported estimated daily production of each lease, was 220,825 barrels, and, if computed on the basis of pipe-line runs, producers' records and stocks of oil on hand on the leases, was 170,220 barrels. (See note, Table 11, p. 83.) The total pipe-line runs during this period were 170,667.05. The actual pipe-line runs were about 74 per cent of the total production, computed on the basis that each well produced each day up to its full rated capacity, and were about 100.3 per cent of the total production, computed on the basis of oil actually run off the leases through the pipe line, taking into consideration estimated stocks on hand on January 26 and March 23 and certain producers' records. The Bureau considers that the latter basis is the more reliable one to follow, since there is abundant evidence that the wells, on many of the leases, were not allowed during this period to produce at their full capacity, because of the lack of storage facilities in which to keep the oil until the pipe line company ran it. As is shown elsewhere (see p. 86), this does not necessarily mean that the pipe line company took the current actual output of each producer. There is evidence that a part of the oil taken during this period was " stock " oil accumulated before January 26. For example, ac- cording to Mr. Edington's report of February 25, the " stock " oil in storage in the field amounted to 18,975 barrels. This was a reduc- tion from the stock oil reported for January 24 of 4,850 barrels. Between February 25 and March 25, according to the Edington re- ports, the amount of stock oil increased 13,940 barrels, which repre- sents the excess of the actual output of the field over the pipe-line runs during that period. The acts of the pipe line company, alleged by the producers to have been discriminations, all took place prior to March 23, the date on or about which, according to the statement of the pipe line com- pany, it became apparent to them that the production of the Heald- ton field was beyond the quantity that they could purchase. The attorney general, in his bill of complaint which brought about the Corporation Commission hearing of May 1 to 6, used general 68 CONDITIONS IN THE HEALDTON OIL FIELD. DISCRIMINATION CHARGES. 69 terms in charging the acts of discrimination. In enumerating the *' forbidden and unlawful practices in the purchasing and piping from said Healdton oil field " he specified, among other practices as follows : By reason of discrimination as between the producers of oil in said Healdton field, in taking the full supply produced by one individual and refusing any part of that offered by another. Section 3. Alleged discrimination in favor of the McMan Oil Co. At the hearing the only instance of alleged discrimination on which evidence was heard involved a charge of favoritism in behalf of the McMan Oil Co. As this instance has been given much prom- inence by the producers before, during and after the hearing, and it, with one other instance, which was not discussed at the hearing, ap- pears to be, so far as the Bureau's investigation has been able to find, the principal specific instance on which the producers based their charges of discrimination, the evidence will be examined at some length. The charge of discrimination in favor of the McMan Oil Co. was based on two grounds — first, that the company was allowed to use a field pump to force its oil from its tanks on its Woodworth lease through the Magnolia Pipe Line Co.'s gathering line into that com- pany's storage tank, while the other companies, with one exception, were running the oil from their tanks into the company's line by gravity; and second, that the pipe line company was taking the McMan's oil as fast as it came from the wells, but did not take the storage (or stock) oil of other companies, which had previously been accumulated. The evidence either given by witnesses at the hearings, or col- lected by the Bureau of Corporations, establishes the fact that the McMan Oil Co. installed a field pump to force the oil from the stor- age tanks which received the production of their wells on the Wood- worth lease, in the southwest quarter of section 32, township 3 south, range 3 west, into the 6-inch gathering line of the Magnolia Pipe Line Co., which ran east and west between section 32, of the fore- going township, and section 5 of the next township to the south. This 6-inch gathering line also received oil from adjoining leases, operated by other companies, the oil from all such other leases being run by gravity from their storage tanks, and not by means of a pump. A letter written on March 20, by G. W. Jennings, superin- tendent of the Crystal Oil Co., to Wirt Franklin, president of the same company, gives a clear description of the situation at that time. (See Exhibit 16, p. 115.) The production from the wells on the leases of the Producers' Oil Co. and the 1911 Oil Co. had to pass the McMan lease on its way to the pipe-line storage tanks; that from the McMan / .i > had to pass the leases of the Ideal Oil Co. and of Wrightsman & Foster. G. W. Jennings testified at the Corporation Commission hearing" of May 1 to 6 that the properties of the Ideal Oil Co. directly on the east and the 1911 Oil Co. directly on the west were on the same ele- vation as that of the McMan Oil Co., and that the Ideal and 1911 oil was run by gravity, while the McMan oil w as being pumped into the pipe line. When questioned by counsel for the pipe line as to whether he had made a test to see if at that particular time the McMan oil would run by gravity or had to have a pump, Mr. Jen- nings admitted that he did not test it. On the other hand, R. M. McFarlin, vice president of the McMan Oil Co., testified that at about March 20 his company had tried for several days to run their oil, and that the 1911 Oil Co.'s property west of them was on a ridge and a good deal higher than the McMan property and had 1,600-barrel tanks; that, w^hen the 1911 Oil Co. turned on their oil, the McMan oil would not come out at all, because its tanks (of 250 barrels capacity) were smaller and lower; that thereupon the pipe line tried to run the McMan oil east, the line coming over the Ideal Oil Co.'s lease, but that the oil would not gravitate over the ridge, and that therefore the pipe line company furnished the McMan company a pump and that they pumped over into that line at such times as the Ideal Oil Co. was not running its oil. He claimed a daily production from the wells on the lease which were not shut in at that time of from 2,500 to 2,600 barrels.^ According to the G. W. Jennings letter of March 20 (see Exhibit 16, p. 115), the McMan Oil Co. at the time of his investigation was using a field pump to empty two of their tanks. Also, oil was being run into the pipe line from one of the Ideal Oil Co.'s 1,600-barrel tanks and from one of the Producers' Oil Co.'s 1,600-barrel tanks. The statement in regard to the Ideal Oil Co. is at variance with R. M. McFarlin's testimony at the Corporation Commission's hear- ing, to the effect that the McMan Oil Co. pumped over into the Ideal Oil Co.'s line at such times as that company was not running its oil.^' No complaint on the part of the Ideal Oil Co. in regard to the pipe line company's conduct in running oil from their lease has l>een brought to the notice of the Bureau of Corporations. C. J. Wrights- man stated to an agent of the Bureau that from the very beginning the pipe line discriminated in favor of the McMan Oil Co. and the Corsicana Petroleum Co. in running the oil. On the other hand, John F. Black, the manager of the Producers' Oil Co., stated to the same agent that, while it was easily possible for the pipe line cora- •Transcript of Corporation Commission hearing, pp. 126-129. * Transcript of Corporation Commission hearing, pp. 150-170. • Transcript of Corporation Commission hearing, p. 152. 70 CONDITIONS IN THE HEALDTON OIL FIELD. DISCRIMINATION CHARGES. 71 pany to make a mistake in their efforts to serve all producers alike, according to their output, the best information he could get from the Producers' field manager disclosed nothing that would justify any claim of discrimination. E. A. Latimer, general manager of the Magnolia Pipe Line Co., informed the Bureau that the pump was installed on March 8, and its use discontinued on March 23, because the 6-inch gravity line was extended so that the pipe line company was able to handle the prorated quantity by gravity. The extension was completed on March 21. No difficulty was found in running oil by gravity with- out the pump after the extension of the 6-inch gravity line. Mr. McFarlin, in his testimony at the hearing, in answer to a question concerning the necessity of using a pump to get his oil into the pipe line company's gathering line, stated : <» Ours wouldn't gravitate out that way when the 1911 people were on with 1,600-barrel tanks, and, another thing, the Magnolia had been furnishing 1,600- barrel tanks to the other people. They never did furnish my people that. I couldn't buy one at this timo. The following statement, based on the G. W. Jennings letter of March 20 (see Exhibit 16, p. 115), shows the relative storage capacity of the different producing properties near the McMan Oil Co.'s lease : Name. 1911 on Co Ideal Oil Co Producers' Oil Co Wrightsman & Foster McMan OU Co Tanks, I Capacity of each. Barrels. 1,600 250 1,600 1,600 1,600 250 Total capacity. BarreU. 9,000 3,200 3,200 4,800 1,250 It is obvious that with a total storage capacity of only 1,250 barrels and an estimated production of from 2,500 to 2,600 barrels per day, that it would be necessary to draw oil from the McMan tanks more or less continuously in order to keep them from overflowing. And, if it is a fact, as was claimed by Mr. McFarlin, and no evidence to prove the contrary was introduced at the Corporation Commission hearing, that the oil would not flow by gravity from the storage tanks of this lease into the pipe line, under the conditions which existed on or about March 20, then it is evident that no discrimi- nation against other producers was involved in the use of a pump by the McMan company so long as the quantity of oil taken from • Transcript of Corporation Commission hearing, p. 162. / <« .i them through that means did not exceed the proportion of their daily production which they were entitled to have run. In other words, the fact that the McMan Oil Co. was allowed to use a pump does not of itself show discrimination in their favor on the part of the Magnolia Pipe Line Co. The estimated production for this lease, as computed from the records of the Magnolia Pipe Line Co. by the Bureau of Corporations for the period February 1 to March 22, inclusive, was 24,292.72 barrels and the actual pipe-line runs during that period 23,042.34 barrels, or 94.9 per cent of the oil produced. The pipe line company during this period, January 26 to March 22, inclusive, took a quantity of oil equal to 100.3 per cent of the current production of the field. It, therefore, did not take from the McMan Oil Co., by 5.4 per cent, the quantity of oil which that company was entitled to have run during that period. During the period from March 23 to May 11, inclusive, when the prorating system established by the pipe line company was in effect, the quantity of oil bought by that company from the McMan Oil Co. was 1,682.28 barrels or 11.9 per cent more than it was entitled to have taken under the pro rata proportion. Section 4. Alleged discrimination in favor of the Corsicana Petroleum Co. The Corsicana Petroleum Co., as has been already stated, is the producing branch of the Magnolia interests, and is connected with the Magnolia Petroleum Co. and the Magnolia Pipe Line Co. through having a number of prominent stockholders in common. The Cor- sicana Petroleum Co. owns several leases in the Healdton field which are held or operated under its own name. The first well to be com- pleted on such leases was well No. 1 on the Roy Chilton lease, com- pleted MarcTi 31. There was no production run from any of these leases prior to March 31, 1914, and no field pumps were used to force the oil into the pipe lines. The Corsicana Petroleum Co. also has part interest in six leases in which the McMan Oil Co. is also interested. The first wells to be completed on such leases were well No. 2, on March 23, and well No. 1, on March 24, both on the E. T. Richards lease. The charge that the pipe line company has dis- criminated in favor of the Corsicana Petroleum Co. apparently arose from the belief on the part of various producers that the Corsicana Petroleum Co. had benefited in some way through the alleged favor- itism shown the McMan Oil Co. in allowing that company to use a pump on one of its leases. As will be seen from Table 1, on page 14, in which all of the holdings of the Corsicana Petroleum Co. are listed, it had no interest in the Woodworth lease in the southwest quarter of section 32, township 3 south, range 3 west, which is the 72 CONDITIONS IN THE HEALDTON OIL FIELD. DISCRIMINATION CHARGES. 73 lease referred to in tiie cliarge that the pipe line discriminated in favor of the McMan Oil Co. (See p. 68.) Section 5. Alleged discrimination in favor of the Dundee Petroleum Co. The Red River Oil Co. was organized for the purpose of drilling oil and gas wells in the southwestern part of Oklahoma. The Dundee Petroleum Co. was later organized to take over the prop- erty and business of the Red River Oil Co. and of another company, the Ralston Oil Co., which does not operate in the Healdton field. It should be observed that when informants were discussing the alleged discrimination that some called the company the Dundee, and some the Red River, but that they all referred to the use of a pump, by the company in question, in running oil, at or about March 20 from the Carrie L. McClure lease, in the southwest quarter of section 5, township 3 west, range 4 south. The G. W. Jennings letter of March 20 (see Exhibit 16, p. 115) called the attention of Wirt Franklin, president of the Crystal Oil Co., to the length of time it took to run by gravity a 1,600-barrel tank of oil into the pipe line, pointed out that the Red River Oil Co. with similar connections to the pipe line were using a pump, and requested Mr. Franklin to see if he could not get the Crystal Oil Co. a pump. Wirt Franklin, on April 27, stated to an agent of the Bureau that the Dundee Petroleam Co. is composed of old producers who have had dealings with the Standard Oil Co. in other fields, and they had always received much better treatment from the pipe line com- pany than had the rest of the producers. He claimed that the fact that the McMan and the Dundee companies were permitted to use pumps when the other producers had to be content with running the oil by gravity was pretty strong evidence of discrimination, for when the pumps were working it was impossible for the oil running through gravity lines to enter the gathering line, as the pressure from the pumps not only held the gravity oil back, but in numerous instances the gravity oil was forced back into the tanks from which it should have been flowing freely. B. A. Simpson and I^ H. Love, officials of the Ardhoma Oil Co., stated, on April 29, to an agent of the Bureau that up to the last week in March the McMan Oil Co. and the Red River Oil Co. were favored and permitted to use pumps to force their oil into the gathering lines, while all other producers had to rely upon the gravity system; that every time the Red River company started its pump it would force the oil back into the tanks of the Ardhoma company and it was impossible to run any oil until the Red River pump was stopped, and that about March 23 the pipe ./. . I line company made the Red River company quit using its pump to force its oil into the gathering line. The name of the Dundee Petro- leum Co. first appears in the transcript of the Corporation Com- mission hearing of May 1 td 6, on page 126, when, during the testi- mony of Mr. Jennings, Attorney General West asked, ''Was there any other company being treated like the Dundee and the McMan?" and received the following answer: "Not exactly. The Dundee had a small pump." No further mention of any alleged favoritism shown the Dundee Petroleum Co. occurred at the hearing. On April 28 W. S. Critchlow, secretary and general manager of the Red River Oil Co. and the Dundee Petroleum Co., stated to an agent of the Bureau that he had heard the other producers had made com- plaint because his company was using a pump to force its oil into the gathering line, but this was a right that every producer had in all other fields and his company simply followed custom until the pipe line company requested that the pump be stopped. Later, in a sworn statement made to the Bureau of Corporations, J. M. Critch- low, president of the Dundee Petroleum Co., not only emphatically denied that any favoritism had been shown to his company by the pipe line company but he also asserted that his company had had less than its proper proportion of oil run and to that extent had been discrimi- nated against. He stated, however, that he was convinced that the reason for this apparent discrimination lay in the newness and the unexpected situations arising in the field, and that he was not dis- posed to blame the pipe line company. E. A. Latimer, general man- ager of the Magnolia Pipe Line Co., informed the Bureau that the pump was installed about March 1 and its use discontinued on March 23 on account of the reduction in pipe-line runs, which made it pos- sible to handle the output by gravity. Before that there was difficulty in handling the oil by gravity. The estimated production for the Dundee Petroleum Co. leases as computed by the Bureau for the period January 26 to March 22, in- clusive, was 15,372.52 barrels and the actual pipe-line runs during that period 23,642.44 barrels, or 153.8 per cent of the oil produced. The pipe line company during this period took a quantity of oil equal to 100.3 per cent of the estimated current production of the field. It, therefore, took from the Dundee Petroleum Co. 53.5 per cent more than the quantity of oil which that company was entitled to have run during that period, in view of the fact that the current production of all the other producers was not also taken. This extra oil was storage oil, accumulated before the pipe line company began on January 26 to purchase oil in the Healdton field. According to the January 24 report of Frank Edington, the pipe line company ganger, the Dundee Petroleum Co. had 13,875 barrels of storage oil accu- 74 CONDITIONS IN THE HEALDTON OIL FIELD. DISCRIMINATION CHARGES. 75 mulated on its leases. According to his report of February 25, the quantity of storage oil was then 8,050 barrels, and on March 25 it was 8,840 barrels. The Bureau's estimate of the Dundee Petroleum Co.'s storage oil as of date of January 26 is 14,875 barrels, and as of date of March 23, is 6,605.08 barrels. This is arrived at by using the estimated daily production reported by Mr. Edington and deducting the actual pipe- line runs. It will be noted that, according to these computations, based on the Magnolia Pipe Line Co.'s records, not only was the entire current production of the Dundee Petroleum Co. run at this period, but also about 8,270 barrels of storage oil. The Bureau was not able to secure from the Dundee Petroleum Co.'s records a statement showing its actual daily production during this period, as the records were not kept in such a form that the information requested could be derived from them. It did secure a statement from the company showing the estimated daily capacity of the leases, by months. During the period from March 23 to May 11, inclusive, when the prorating system established by the pipe line company was in op- eration, the quantity of oil purchased by it from the Dundee Petro- leum Co. was 93.5 per cent of the quantity that company was entitled to have taken, being 2,226.17 barrels short. (See Table 12, p. 84.) Section 6. Alleg:ed discriniination in favor of the Faraffine Oil Co. When an agent of the Bureau interviewed, on April 29, F. J. Alderson, manager of the Paraffine Oil Co., and discussed the subject of discrimination with him, Mr. Alderson stated that if they got any preference at all from the pipe line company it must have been be- cause the lease and tanks were kept in good condition, and made readily accessible to the tank gangers, so that they would not have to climb over sloppy leases or dirty field tanks. In a sworn statement J. M. Critchlow, president of the Dundee Petroleum Co., declared that the pipe line company had taken from the 40-acre Cruce lease adjoining the 110-acre Carrie L. McClure lease of the Dundee Petroleum Co. almost as much oil as it had from the Dundee Petroleum Co.'s lease, including the latter's stock oil, although the Dundee company was an actual producer in the field before the Paraffine Oil Co. Mr. Critchlow, however, stated that he did not make this statement as a complaint against the pipe line company for favoring the Paraffine company as compared with the Dundee Petroleum Co. He considered the incident as one of the things that, owing to the newness and unorganized condition of the field, was unavoidable. The estimated production for the lease of the Paraffine Oil Co., as computed by the Bureau of Corporations for the period January 1 * V - • i V 26 to March 22, inclusive, was 10,236.54 barrels, and the actual pipe- line runs during that period were 9,523.69 barrels, or 93 per cent of the estimated production. The pipe line company during this period took a quantity of oil equal to 100.3 per cent of the current production of the field. It, therefore, did not take from the Paraf- fine Oil Co., by 7.3 per cent, the quantity of oil which that company was entitled to have run during that period. Under the prorating plan of the pipe line company, the quantity of oil taken from the Paraffine Oil Co. from. March 23 to May 11, inclusive, was 842.76 barrels, or 18.4 per cent greater than it was entitled to have run. (See Table 12, p. 84.) Section 7. The production from Indian allotment lands. The Senate resolution ordering the investigation of the Healdton situation calls for specific information concerning discrimination against oil produced on Indian allotment land. No specific charge of such discrimination has come to the attention of the Bureau of Corporations. When evidence on this particular subject was sought by an agent of the Bureau no person could be found among the Healdton producers who could furnish the slightest information in regard to any such discrimination. When the matter was called to the attention of an official of one of the principal producing con- cerns in the field, that was operating exclusively on allotment land, he stated that up to the date of the interview (April 30) the holders of allotment leases fared equally well with the other producers in the matter of pipe-line runs. This statement was corroborated by the stockholder of another company, which also was operating on allotment land. At the time the Senate resolution was passed, March 28, there were but three allotment leases on which oil w^as being produced, namely, the Cammack Broke Shoulder and W. Tillis leases, operated by John Carlock, and Allie Daney lease, operated by Dunn & Gillam. Since that date and prior to May 12, when the inspector appointed by the Corporation Commission took charge of the prorating in the Healdton field, oil has also been produced on the Silsaney Going (nee Jones) lease, operated by the Coline Oil Co., and the Walton Davis lease, operated by the Dundee Petroleum Co. During the period from January 26, 1914, when the pipe line company began to purchase oil, to March 23, when the company gave notice that it would be unable to take the entire daily output of the field, the estimated production and the actual runs from the Indian leases then producing oil were as follows: Cammack Broke Shoulder lease, operated by John Carlock, estimated production 7,400 barrels, actual pipe line runs from the lease 2,966.70 barrels; Allie 76 CONDITIONS IN THE HEALDTON OIL FIELD. DISCRIMINATION CHARGES. 77 Daney lease, operated by Dunn & Gillam, estimated production 4,000 barrels, no pipe line runs. The above estimated production for the Broke Shoulder lease is based on the capacity of the wells, as reported by Frank Edington the pipe line company's ganger. On March 15, he reported the completion of well No. 1 on this lease, with 500 barrels production. As the first pipe-line run from this lease took place on March 12, of 189.92 barrels, the Bureau of Corporations has, in the absence of more definite information, con- sidered that the lease began to produce oil on March 11, and has as- signed to that date a production of 500 barrels. On March 14 M«\ Edington reported a daily production of 700 barrels, on March 21 of 500 barrels, and on March 25 of 400 barrels. On March 25 he reported that there were 900 barrels of oil in storage on this lease. The amount of oil run from the lease March 23 and 24 was 383.54 bar- rels, or about 616.46 barrels less than the estimated production for those two days (1,000 barrels). This would leave 283.54 barrels of the storage oil assignable to the period January 26 to March 22, inclu- sive, and would make the quantity actually produced on the lease up to March 23, 3,250.24 barrels, instead of the estimated production of 7,400 barrels, on the basis of the potential capacity of the lease. Evi- dently the well on this lease was not allowed to produce at its full capacity. The figures used in the above computations were taken from the records of the Magnolia Pipe Line Co. The Bureau of Corporations tried to secure from Mr. Cariock the actual daily production from this lease, for this period, as shown by his records, but he stated his books did not contain the desired information. In the case of the Allie Daney lease, operated by Dunn & Gillam, on March 15, Mr. Edington reported the completion of well No. 1, with 350 barrels, and on March 20, of well No. 2, with 400 barrels. On March 25 he reported a daily production of this lease of 250 barrels. On the basis of these figures the estimated production up to March 23 would be 4,000 barrels, and up to March 25, 5,500 barrels. As there were no pipe-line runs from this lease the quantity in storage on March 25 should represent the total production up to that time. Mr. Edington reported on March 25 that there were 400 barrels in storage on this lease. Evidently the wells on this lease were not allowed to produce at their full capacity. The figures used in the above computations were taken from the records of the Magnolia Pipe Line Co. The Bureau of Corporations tried to secure from Dunn & Gillam the actual daily production from this lease for this period, as shown by their records, but was not able to obtain it. ■ v On April 7, 1914, D. H. Kelsey, superintendent of the Indian agency at Muskogee, telegraphed the Magnolia Pipe Line Co. as follows : Our field inspector reports likelihood of serious oil waste from Silsaney Jones, Allie Daney and Broke Shoulder Allotments in Section four, Healdton. Have requested lessees to restrict new development and urge you to run present pro- duction to highest percentage possible without discriminating against other lessees. Please advise what proportion you are taking from these restricted Indian leases. The correspondence in the Magnolia Pipe Line Co. files show^s that an investigation was at once made by the company officials. As a result of it, on April 8, George C. Greer, general attorney for the pipe line company, sent the following telegram to Mr. Kelsey: Our field men advise have been taking thirty per cent of total production of Healdton field, including Silsaney Jones, Allie Daney and Cammack Broke Shoulder Allotments, and will do everything possible without discriminating to relieve the situation. The following table, compiled from information found in the records of the Magnolia Pipe Line Co., shows the status of the esti- mated production, the pro rata apportionments and pipe-line runs on the Indian leases at this time: Table 10.— ESTIMATED PRODUCTION, PRO RATA PROPORTION, AND PIPE-LINE RUNS ON THE INDIAN LEASES IN THE HEALDTON FIELD, APR. 1-15. John Cariock ( Cammack Broke Shoulder lease). Date. March 23-31, inclusive AprUl.. AprU2.. AprU3.. April 4.. Aprils.. AprU6.. April 7.. Aprils.. April 9.. A prill 0. April 11. April 12. April 13. April 14. AprUlS. Prorata estab- lished fOT field. Per cent. 32.6 33.9 32.9 33.5 30.6 30.4 30.4 27.4 27.3 25.5 22.9 22.3 21.8 20.8 18.1 Esti- mated produc- tion. Barrels. 3.800 350 350 350 350 350 350 350 350 350 350 350 350 350 350 350 Produc- tion en- titled to have run under pro rata. Barrels. 1,457 Pipe-line runs. Barrels. 1,504.77 Pipe-line runs com- pared with pro rata. Over. Barrels. 47.77 114 118 115 117 107 107 106 96 96 89 80 78 76 73 64 291.96 295.76 401.94 385.36 107.73 61.43 123,79 50.79 Short Barrels. 66.23 7.27 124.27 231.27 42.51 148.51 244.51 27.57 107.57 185.57 13.21 78 CONDITIONS IN THE HEALDTON OIL FIELD. Table 10.-ESTIMATED PRODUCTION PRO RATA PROPORTION, AND PIPE-LINE RtlNo ON THE INDIAN LEASES IN THE HEALDTON FIELD, APR 1 lili^fto^""''^ Coline Oil Co. (Silsaney Jonet lease). Date. March 23-31 , inclusive* . Prorata estab- lished for field. April 1 . April 2. Aprils. April 4.. Aprils.. April 6.. April?.. Aprils.. April 9. . April 10. April 11 . Aprill2. April 13. April 14 . April 15. Per cent. Esti- mated produc- tion. 32.6 33.9 32.9 33.5 30.6 30.4 30.4 27.4 27.3 25.5 22.9 22.3 21.8 20.8 18.1 Barrds. Produc- tion en- titled to have run under pro rata. Pipe-line runs. 350 350 350 350 450 450 450 450 450 450 450 450 450 450 450 Barrels. Barrels. 114 118 115 117 138 137 137 123 123 115 103 100 98 94 82 198.52 Pipe-line runs com- pared with pro rata. Over. Barrels. Short. Barrels. 208.37 209.93 84.52 205.38 207.09 89.89 152.82 14.82 33.48 209.93 211.64 211.88 30.29 122.18 53.80 2.22 110.86 10.86 30.74 92.71 87.14 51.26 Dunn & Oillam (AUie Daney lease). March 23-31, inclusive Aprill April 2 Aprils April 4 April 5 April 6 April 7 Aprils April 9 April 10 April 11 April 12 Aprill3 April 14 April 15 In the foregoing table the pro rata percentages were computed by obtaining the proportion which 4,000 barrels, the daily amount to be taken from the field by the pipe line company, bore to the total esti- mated^ production for each day. The daily figures of estimated production were taken from the Magnolia Pipe Line Co 's records as were also the figu res of pipe-line runs. The daily pro rata pro- • No production reported before April 1 for this lease ' ' JFor the three producers who had authoritative records, the actual production was »» y DISCRIMINATION CHARGES. 79 portion of the production of each lease was computed by the Bureau by applying the pro rata percentage to the estimated daily produc- tion. The over and short columns represent subtractions between the pro rata production figures and the pipe-line runs for each day. In the case of the Cammack Broke Shoulder and the Silsaney Jones leases it is evident from an inspection of the over and short columns that the oil to which they were entitled under the pro rata system was being taken and adjustments made at frequent intervals, since an excess would be changed to a deficit, or vice versa, every few days. In the case of the Allie Daney lease, while apparently the oil produced from April 1 to April 14 was being taken approxi- mately according to the pro rata existing at that time, all of the quantity called for according to the pro rata had not been taken between March 23 and April 1. The Magnolia Pipe Line Co., in determining the quantity to be taken from this lease at the earlier period, did not figure any pro rata on the production on this lease prior to March 28. On that date it estimated the production to be 250 barrels and the proportion to be taken as 104 barrels, making 416 barrels for the four remaining days in March. But, according to the monthly report, dated March 25, of Frank Edington, the pipe line company's ganger, this lease was reported to have a production of 250 barrels a day and 400 bar- rels in storage. Mr. Edington had previously reported the produc- tion of the two wells on this lease— one in his well-completion report of March 15, with 350 barrels initial production, and one in his well- completion report of March 20, with 400 barrels initial production. On the basis of the above information the Bureau has considered that this lease had an estimated production of 750 barrels daily for March 23 and 24, and for the period from March 25 to March 31, in- clusive, an estimated production of 250 barrels per day. The quan- tity entitled to be run under the pro rata, computed on this basis, is 1,251 barrels, instead of 416. The actual runs from this lease dur- ing the period from March 23 to 31, inclusive, were 757.48 barrels, or 493.52 less than the quantity it was entitled to have run. By May 12, on which date the inspector appointed by the Cor- poration Commission took charge of the prorating, the excess of total quantity the lease was entitled to under the pro rata over the total of pipe-line runs was 62.78 barrels. (See Tpble 12, p. 84.) The inequality had already been equalized on May 4, on which date the total pipe-line runs were in excess of the total quantity the lease was entitled to under the pro rata. In the light of the Oklahoma statute, w^hich says that inequalities must be equalized within a period of 30 days (see p. 61), according to the Magnolia Pipe Line Co.'s com- putations, there was apparently a discrimination in favor of this lease, in that more than the proportion of oil it was entitled to under 4 .ii'T, i 80 CONDITIONS IN THE HEALDTON OIL FIELD. DISCRIMINATION CHARGES. 81 the pro rata was run during a continuous period of 50 days (March 23 to May 11, inclusive), while, according to the Bureau's computa- tions, there was apparently a discrimination against this lease, in that less than the proportion of oil it was entitled to under the pro rata was run during a continuous period of 42 days (March 23 to May 3, inclusive). It should be pointed out, however, that not only is there a discrepancy between the different pipe-line records in re- gard to the daily production capacity of this lease prior to March 28, but no definite information on this point could be obtained from the Dunn & Gillam records. Nothing was found in the pipe line company records that would indicate an intent to discriminate either in favor of or against this lease, and any intent to discriminate in favor of any lease is denied in the affidavits of C. R. Stewart and Frank Edington. (See Exhibits 13'and 14, pp. 112-114.) The following statement gives a summary of the total quantity assigned to each Indian lease under the pro rata system in force by the Magnolia Pipe Line Co. from March 23 to May 11, inclusive, the total pipe-line runs during that period from each lease, and the extent to which the pipe-line runs exceeded or fell short of the quantity which each lease was entitled to have run : Producer and lease. JohnCarlock: C. Broke Shoulder Wm. Tillis Coline Oil Co.: Sllsaney Jones Dundee Petroleum Co.: Walton Davis Dunn & Gillam: AUie Daney Total on Indian leases Amount entitled to be run under the pro rata. Barrels. 3,698.00 3,367.00 3,799.00 199.00 6,583.00 17,646.00 Pipe-line runs. Barrels. 3,560.63 3,482.79 4,173.31 6,520.22 17,736.95 Comparison between pro rata and pipeline runs. Over. Barrels. 115.79 374.31 90.95 Short. Barrels 137.37 199.00 62.78 For the computation of the quantity of oil each lease was entitled to have run under the pro rata system established by the Magnolia Pipe Line Co., the Bureau has used the estimated daily capacity ot the wells on each lease in the above table, as shown by the records of the Magnolia Pipe Line Co. How far such estimates are in accordance with the actual potential output of each lease, were wells allowed to run to capacity, the Bureau is not in a position to state, since it was not able to obtain from the records of the producers operating these leases definite information on this subject. In view of the lack of definite and trustworthy records concerning the actual and the potential production of the various oil properties in the Healdton field prior to May 12, when the inspector of the ' .^ ) < ^ Oklahoma Corporation Commission took charge of the prorating of the oil to be run from each producer, the Bureau does not consider it possible to determine whether there was even a technical discrimi- nation against the Allie Daney lease. According to the Bureau's computations, based on statements found in the Magnolia Pipe Line Co.'s records, there were during the period March 23 to May 11, inclusive, 42 days when less oil was taken from the lease than it was entitled to under the pro rata. If these computations represent the actual conditions, there was a discrimination against this lease during a period of 12 days beyond the 30 days allowed by Oklahoma law for correcting inequalities. But the number of obvious errors encoun- tered by the Bureau in its examination of the Magnolia Pipe Line Co.'s records of estimates of production, and also of stocks on hand raises a reasonable doubt as to the accuracy of all such statistics. As is pointed out later (see below), the Bureau believes that the statistics of pipe-line runs obtained from the Magnolia Pipe Line Co.'s records are to be relied upon, and it accepts as trustworthy also the produc- tion records of three producers, as determined by their daily gauges of the oil produced on their leases. But the Bureau considers that the Magnolia Pipe Line Co.'s estimates of daily production on the leases and of stocks on hand on them, while the best information of the kind in existence, is not sufficient to determine the question of discrimination, even were there no doubts concerning the construc- tion of certain features in the application of the law. Section 8. Statistics of production and pipe-line mns collected by the Bureau. For the examination of the question of discrimination between producers it was of great importance to secure reliable records of the quantity of oil produced daily by each producer, as well as of the quantity taken from his property by the pipe line company. The Bureau was successful in obtaining information which it considers trustworthy, covering the quantity taken by the pipe line from each producer and covering the quantity produced daily by three pro- ducers, for portions of the period between January 26 and May 11, inclusive. The information relating to the pipe-line runs was obtained from the records of the Magnolia Pipe Line Co. The information relating to the daily production of the three producers was obtained from the records of the Crystal Oil Co., the Producers' Oil Co., and the W. & F. Oil Co. In each case the records showed the results of gauges actually made of oil contained in tanlcs. They do not show estimates. The Bureau was not successful in obtaining information which it considers trustworthy covering the daily quantity produced by 76568°— 15 6 "■*«l" -JW mm 82 CONDITIONS IN THE HEALDTON OIL FIELD. others than the above-mentioned three producers. It diligently en- deavored to secure this information, but was met by the statement of most of the producers that they had no records from which it could be obtained. The information concerning the daily produc- tion of producers other than the three who had trustworthy records was obtained from the records of the Magnolia Pipe Line Co. That company's field men reported, from time to time, estimates of the initial production of various wells completed in the field, estimates of the daily quantity being produced on certain dates by the differ- ent producers, and estimates of the amount of storage or "stock" oil held by them, on their leases, pending its purchase by the pipe line company. While such information is of value, in that in a rough way it gives sufficiently accurate details for some of the pur- poses for which it was used, yet the Bureau does not consider it suf- ficiently accurate to determine whether discrimination actually took place within the meaning of the statute. The Bureau has abundant evidence showing that certain of the estimates of daily production and of stocks on hand are incorrect. It has no means of judging whether the others are correct or not. The statistics in the following tables must be considered in the light of the foregoing remarks, and in any use made of them the different degrees of accuracy of the different kinds of information presented must be taken into account. The following table gives a statement of production and pipe- line runs for the period from January 26, when the pipe line com- pany began to purchase and run oil from the producers, to March 22, inclusive, when it established a prorating system. All of the figures shown were derived from records of the Magnolia Pipe Line Co., with the exception of those from the three producers, above mentioned, who had trustworthy information concerning their daily production. Table U.— PRODUCTION AND PIPE-LINE RUNS, JAN. 26 TO MAI?. 22, 1914. ProducCT. Alma Oil Co ArdhomaOllCo Carlock, John Crystal Oil Co Dundee Petroleum Co Dunn & Gillam Ounsburg & Forman . Humble Oil Co Production. Computed on basis of esti- matpd daily capacity. Barrels. 15,350 10,925 7,400 12,490 39,370 4,000 14,525 16,520 Computed on basis of pipe- line runs and stoclcsonhand. Barrels. 9,461.27 11,922.66 3,250.24 7,931.76 15,372.52 13,875.95 11,491.94 Taken from producers' records of actual gauges. Barrels. 9,096.38 Pipe-line runs. Barrels. 8,779.94 9,602.32 2,966.70 5,692.45 23,642.44 13,063.72 14,418.12 7 \ ^i DISCRIMINATION CHAEGES. 83 Table U.— PRODUCTION AND PIPE-LINE RUNS, JAN. 26 TO MAR. 22, 1914— Continued. Producer. Ideal Oil & Gas Co. . . . Maloney Oil & Gas Co McManOilCo Merrick, F.W 1911 Oil & Gas Co ParaffineOilCo Producers' Oil Co Rex Oil&Ref'y Co.. Schennerhom, J. B . . . Twin State Oil Co Westheimer & Nichols W. &F. OilCo Total Production. Computed on basis of esti- mated daily capacity. Barrels. 20,250 1,800 29,240 800 22,100 8,485 8,750 3,040 1,600 6,230 6,200 750 229,825 Computed on basis of pipe- line nms and stocks on hand . Barrels. 16,048.99 1,805.67 24,292.72 200.22 20,818.28 10,236.64 8,570.91 2,038.31 1,470.41 372.50 8,515.26 390.98 168 067. 13 Taken from producers' records of actual gauges. Barrels. 9,617.52 « 332.62 Pipe-line runs. Barrels. 16,048.99 1,246.77 23,042.34 200.22 21,633.11 9,523.69 7,568.95 2,438.31 848.80 1,267.50 8,291.70 0390.98 170,667.05 a The discrepancy between the gauge of production and the gauge of the oil run may be due to a mis- take on the part of one of the gangers, or to a difference in the time the gauges were taken. Note. — The Bureau considers that the total of 170,220, obtained by using the quantities taken from the producers' records of actual gauges in place of their estimated production, based on pipe-line runs and stocks on hand, represents more nearly the actual conditions. From the foregoing table it will be noted that the production for the period shown, if computed on the basis of estimated daily ca- pacity, was 229,825 barrels, and if computed on the basis of pipe-line runs and stocks on hand, was 108,067.13. If the production sho\Mi by the records of actual gauges be used instead of that based on pipe- line runs and stocks on hand for the three producers from which it was obtainable, the total production was 170,220 barrels. Probably 170,220 barrels is the figure which most nearly represents the actual production. It is derived from two sources of trustworthy information, the actual tank gauges of pipe-line runs and of pro- ducers, and one source, stocks on hand, where the information con- sisted of estimates, the accuracy of some of which is open to question. The total production computed on the basis of estimated daily pro- duction is untrustworthy not only because of errors in the estimates of the capacity of the wells but also because the flow of many of the wells was restricted from time to time by the producers, and there is no information obtainable as to the periods of diminished production. Most of the producers in their statements to the Bureau claimed a producing capacity for their wells in excess of that estimated by the pipe line company's gauger. Few producers, however, have any records that would substantiate their claims in even this respect, while records showing their actual daily production were almost wholly lacking. 84 CONDITIONS IN THE HEALDTON OIL FIELD. DISCRIMINATION CHARGES. 85 The following table presents a statement for the period from March 23, when the pipe line company established a system of pro- rating its purchases from the different producers, to May 11, inclu- sive, when the inspector appointed by the Corporation Commission took charge of the prorating of production and pipe-line runs in the Healdton field. TABLE 12 -STATEMENT OF PRO RATA OF PRODUCTION, PIPE-LINE RUNS, AND OOMPARISON OF PIPE-LINE RUNS WITH PRO RATA PRODUCTION, MAR. 23 TO MAY 11, 1914. Producer. Adkins, Conrad & Nichols. Alma Oil Co Ardhoma O il Co Car lock, John ColineOilCo Corsicana Petroleum Co — Crosbie & Beatty Crystal Oil Co Dundee Petroleum Co Dunn & GUlam Geneva Pearl Oil Co Ouinsburg A Forman Healdton OH dt Oas Co. . . . . Hernstadt, S.J Humble Oil Co Ideal 01I& Gas Co Maloney Oil & Gas Co McManOilCo Merrick,F. W Mutual Beneflt Oil Co 1911 Oil* Gas Co P. &H. Oil Co ParafTme Oil Co Producers' Oil Co Rex Oil & Rery Co. No. 1 Rex Oil & Refy Co. No. 2 Schermerhom, J. B Twin State Oil Co W. & F. Oil Co Westhetmer & Daube Westheimer & Nichols Pro rata of production. Pipe-line runs. Total. Barrel*. 1,801 10,848 7,859 7,065 3.799 3,289 2,927 3,690 34,002 6,583 750 5,310 35 6,444 7,955 3,758 3,133 14, 148 5,866 14,992 10,052 65 3,743 3,778 5,318 3,501 6,529 7,368 10,145 1,377 3,87D Barrels. 1,663.34 9,488.37 8,913.21 7,043.42 4,173.31 3,405.16 2,966.50 3,821.31 31,775.83 6, 52a 22 683.07 6,644.77 Comparison of pipe-line runs with pro rata production. Over. Barrels. 1,054.21 374.31 206.16 39.50 131.31 Short. Barrels. 137.66 1,359.63 21.58 6,907.06 9,599.76 4,351.13 3,334.34 15,830.28 5,495.48 13,082.38 11,811.05 417. 11 4,585.76 4,920.49 6,112.20 3,658.41 7,550.87 5,353.15 6,840.49 1,755.88 4,927.12 1,334.77 463.06 1,644.76 593.13 201.34 1,682.28 2,226.17 62.78 66.93 35.00 1,759. a*) 352.11 842.76 1,142.49 794.20 157. 41 1,021.87 370.52 1,909.62 200,000 203,721.47 378.88 1,057.12 15,230.72 2,014.85 3,304.51 11,609.25 The total production during the period shown in the above table was 1,067,902 barrels, using the estimates by the pipe line company of daily production and the actual production for those producers who had records of actual gauges. If the estimates made by the r- I / \ ;> U /> pipe line be used for all producers, then the total production would be 1,056,516 barrels. The largest proportion of the current produc- tion run on any one day was on March 27, when about 40 per cent of the estimated production was run. The lowest proportion was on May 11, when about 11 per cent was run. In its computation of the quantity which each producer was en- titled to have run under the pro rata established, the Bureau used the production as shown by the actual gauges for the quantity pro- duced by the three producers from whose records it could be ob- tained, and for the other producers it used the estimated daily production of each lease as shown in the records of the Magnolia Pipe Line Co. It should be pointed out, in connection with this table, that most of the producers claimed a producing capacity of their wells considerably in excess of that estimated by the pipe line company's officials. The Bureau has evidence that in the cases of some producers the producing capacity of their wells was considerably underestimated, but it has clear proof of this in only one" instance. In that case the actual production, as measured by the tank gauges, exceeded the daily production estimated for the producer by the pipe-line gauger, and consequently the daily pro rata computed by the company, on the basis of the ganger's report, was less than it should have been. In the other cases where the actual production, as measured by the tank gauges, was obtained, the daily production as shown by the measurements was less than the daily production estimated for these producers by the pipe-line gauger. Since the producers claimed to have been compelled to restrict the production of their wells during this period because of the inability of the pipe line company to take care of the current daily production of the field, their actual production would not necessarily be a measure of the potential capacity of their wells. In the opinion of the Bureau they were entitled to have the quantity of oil which was taken under the prorating system computed on the basis of their potential capacity, not their actual production. They had no records, however, which would show conclusively the potential daily capacity of their properties. If the pipe line company's estimates of daily production were used in place of the records of actual gauges, the total production for March 23 to May 11 for these three producers would appear as 86,515 barrels, instead of 97,900.52 barrels, the basis used by the Bureau in the foregoing table. The figures of estimated daily production and actual production shown by tank gauges and pipe-line runs were tabulated by the Bureau to show for each producer and lease each day's production for the period from January 26 to March 22, inclusive, the quantity 86 CONDITIONS IN THE HEALDTON OIL FIELD. DISCRIMINATION CHARGES. 87 entitled each day under the pro rata for the period from March 23 to May 11, inclusive, and the pipe-line runs on each day. According to these detailed tabulations, which are not published in this report but which form the basis of Tables 10, 11, and 12, there were, in the period from January 26 to March 22, inclusive, several producers for whom the inequalities in the quantity they were presumably entitled to have run were not equalized within 30 days. According to the construction placed on the Oklahoma law by the Bureau, 10 producers may have been technically discriminated against for periods ranging from 3 to 26 days beyond the 30 days allowed by the law for adjusting inequalities. An examination of conditions, as revealed by the detailed tabulations covering the period from March 23 to May 11, inclusive (the period of the pro- rating system established by the pipe line company), shows that there were five producers who may have been technically discrimi- nated against for periods ranging from 12 to 20 days. The information contained in the tabulations of daily estimated production and the daily proportion of the oil each producer was entitled to have run under the pro rata system is not reliable enough to warrant definite conclusions in regard to discrimination between the different producers on the part of the pipe line company. Furthermore, there is some doubt concerning the meaning of the Oklahoma statute, and, as pointed out on page 62, the question of discrimination in the legal sense might hinge on the judicial in- terpretation of the law. Section 9. Abandonment of the discrimination charges at the Corporation Commission hearings, May 1 to 6. A statement was made on May 15, 1914, before the Committee on Interstate Commerce of the United States House of Representatives, by members of a delegation of Oklahoma producers, on the subject of discrimination between producers, which relates to the Corpora- tion Commission hearing of May 1 to 6. W. B. Johnson addressed the committee on conditions in the Healdton field. In the course of his statement he complained about the methods of the Corsicana Petroleum Co. in continuing to drill its leases when there was an overproduction in the field. Representative O'Shaunessy, one of the members of the committee, asked a question, and the following colloquy took place: Mr. O'Shaunessy. They bore a well on their land, and do they get rid of the oil? Mr. Johnson. We caught them; we had evidence that they ran their pumps at night and pumped oil from their tanks into the main line. Mr. O'Shaunessy. Into the pipe lines? Mr. Johnson. Into the pipe lines. *-- •4 / Mr. O'Shaunessy. They can do that by secret processes, can they, without people knowing it? Mr. Johnson. We caught them at it. Mr. Franklin caught them right in the act. Mr. Franklin. I think it might be well to state that we caught them right in the act of doing this very thing. Under the Oklahoma law it is a felony, and by reason of the fact that I caught them in the act we were able to get this compromise before the corporation committee. There was no other single fact that made them do that, because they were afraid of the criminal prosecution, and we believed that it was for the good of the country and for the good of the field ; that it was wiser to take some concessions for the benefit of the whole people than to prosecute them. Mr. O'Shaunessy. Just what does that law state about that? Mr. Johnson. It makes it a felony for them to discriminate. Mr. O'Shaunessy. You mean for the pipe line to discriminate in favor of one over or against another? Mr. Johnson. Yes, sir. You see they are common carriers under our State law. But, you see, we could not do anything for this reason : They came into Oklahoma and took out a little charter, $500,000 capital, and built a line 40 miles long to the Texas line; then they called it the Magnolia Petroleum Co. on the other side of the river in Texas, so the extent of our jurisdiction was only in Oklahoma, you know. They very generously said, " We will transfer all the oil." We had no place to dump it except into Red River. [Hearings before the Committee on Interstate and Foreign Commerce, House of Representatives, May 15 and 16, 1914, pp. 44, 45.] In response to an inquiry from the Bureau of Corporations to Wirt Franklin, counsel for the Ardmore Producers' Association, as to why other witnesses were not introduced in support of the charge of dis- crimination at the Corporation Commission hearing of May 1 to 6, Mr. Franklin, under date of July 20, replied: * ♦ ♦ There was never any decision arrived at to withhold this testimony, but only not to go into it any further on that particular day, and devote the time on that day on other issues, which you will find disclosed by the record which you have. It was intended to further take up the question of discrimina- tion the next day, but it was not done, the producers and the Magnolia Pipe Line Company having arrived at an agreement, which agreement was made the basis of the order of the Corporation Commission of May 7th, 1914, regarding the Healdton field. As you perhaps are aware the Corporation Commission appointed an Inspector or Umpire, Mr. Vernon Calvert, who has had charge of the prorating of oil since that time. Prior to his appointment there was great discrimination among the different producers, but since that time, the prorating of oil having been taken out of the hands of the Pipe Line Company, there has been little diflSculty. In response to an inquiry from the Bureau of Corporations to George C. Greer, counsel for the pipe line company, as to whether the agreement was entered into with the producers in order to avert any prosecution of the company because of the charges of discrimina- tion, he stated, under date of September 16, as follows : * * * it is absolutely true that this charge did not influence us in the slightest in making the adjustment. I was prepared to meet and refute the 88 CONDITIONS IN THE HEALDTON OIL FIELD. charge, EXHIBITS. 95 hydrometer reading, 31.4 degrees, temperature 60 degrees — normal — corrected gravity, 31.4 degrees. Sample taken from 1,600-barrel tank 30 days old; tem- perature 49 degrees, corrected gravity, 29.7 degrees. Sample taken from ground reservoir 90 days old in open air; temperature 48 degrees; gravity, 21 degrees. McMan Oil Company. — Woodworth land, section 32-3-3; No. 1 well, hydrom- eter reading 33.6 degrees, temperature 52 degrees; corrected gravity, 34.1 degrees. Well No. 2, hydrometer reading 33.7, temperature 52 degrees; cor- rected gravity, 34.1 degrees. Top of sand 840 feet, bottom of hole 875 feet. Initial production, 1,800 barrels, now making 1,200 barrels. Ideal Oil Company. — Scoggins land, section 32-3-3; well No. 1, 955 feet deep, initial production 1,000 barrels, now making 450 barrels. Hydrometer reading, 34.1 degrees, temperature 54 degrees; corrected gravity, 34.5 degrees. Producers Oil Company. — N. E. Dawson land, section 32-3-3; well No. 1, top of sand 1,035 feet, bottom 1,088 feet, production 400 barrels. Hydrometer reading, 30.6 degrees; temperature, 53 degrees; corrected gravity, 31 degrees. Gunsburg d Forman. — Westheimer & Daube land, section 9-4-3; well No. 1, 1,010 feet deep, production 300 barrels. Hydrometer reading, 32.6 degrees; temperature 61 degrees; corrected gravity, 32.6 degrees. Red River Oil Company. — The discovery well of the field was Franklin No. 1, Franklin land, section 5-^-3, in the 900 foot sand, initial production 270 bar- rels. A sample of oil from this well could not be secured, but a sample was taken from tanks into which Nos. 1, 2, 3, 4 and 5 wells are flowing, the gravity showing on an open reading of the hydrometer 31.1 degrees, the temperature registered at 49 degrees. Fresh from the well No. 1 showed an open hydrom- eter reading of 32.1, Crystal Oil Company. — This company's lease in section 5-4-5, about the center of the field, has two gas wells completed, one registering approximately 50,000,000 cubic feet volume and 275 pounds pressure. The oil well has con- siderable gas coming with the oil. A sample taken from the tank holding crude gravitied from the flow tank, a week old, showed a temperature of 60 degrees (normal) and a specific gravity of 29.8 degrees. Humble Oil Company. — J. C. Smith land, section 4-4-3, gravity 30.9 degrees; No. 1 in section 9-4-3, 32.4 gravity; C. R. Smith land, section 9-4-3, 31.3 de- grees gravity. Ardhoma Oil Company.— Section 9-4-3, No. 1 well shows a gravity of 33.4 degrees. Rex Oil Company. — Hicks No. 1, section 9-4-3, 31.4 degrees gravity. Westheimer & Nichols. — C. R. Smith land, section 9-4-3, 29.6 gravity after standing several days. Twin State Oil Company. — Bess Tucker land, section 36-3-4, Jefferson county, the western well of the field, was being tubed and a sample could not be obtained, but an unoflicial test showed a gravity between 29 and 30 degrees. PIPE LINE AND STORAGE TANKS. The crude of varying gravities is all run into the storage tanks of the pipe line company at its pumping station, an open test of which showed a gravity of 31 degrees. The crude thus mixed, when started into the pipe line for pumping south into the main line in Texas and on south gets away at a gravity shading under 31 degrees Baum6. At the date of tanking the temperature and specific gravity tests in the Heald- ton field approximately half of the production of the field takes the $1.05 96 CONDITIONS IN THE HEALDTON OIL FIELD. price and half of It is under 32 degrees gravity and talces the 70 cent price. The pipe line ganger takes an open hydrometer reading for temperature and gravity, indicated on the run tickets where it is below 32 degrees, and the corrected gravity according to the manual is computed by the office force of the pipe line company and each producer is credited accordingly, which is the only practical manner of taking tests and computing the price, and is satisfactory and customary where the gravity basis is adopted, a representative of the producer being present when the gauge and test are made and entered on the run ticket ■UPEBFICIAL BATING OF THE QUALITY. Only a refinery run test or a chemical analysis of the crude oil produced in the Healdton field can exactly determine the exact value of the crude, but the hydrometer tests made from the crude fresh from the wells, from crude after standing in tanks from 24 to 48 hours and after it has stood seven to ninety days indicate that the oil lacks vitality and that it goes to pieces very rapidly, meaning that the specific gravity drops quickly until the volatile- ingredients are lost, leaving it rather dead, thick and sticky. There is very perceptible sulphur odor noticeable over the field, like the heavy cr'udes produced in Texas, Louisiana, Mexico and California— the so-called fuel oils of commerce; a few of the wells showing lighter gravities give off a sweet odor, like most of the regular refining crudes. These superficial data also indicate that the Healdton production can easily be rated as a fuel oil in contradistinction to a refining oil, as even the lighter gravity crude appears to deteriorate very quickly after being brought to the surface and undergoing the handling from tank to tank and moving through the lines. When exposed to the air it thickens and gets sticky. A very noticeable feature of the field Is the abnormally low temperatures of the crude as it comes from the wells, registering as low as 46 degrees Fahrenheit, ranging up to 48, 52, 54 and 62 degrees, only two of the samples tested regis^ tering the normal temperature of 60 degrees, two 61 degres and one 64 degrees. Superficially this low temperature Indicates a lack of kerosene, naphtha and gasoline, which give the vitality to crude oil, their absence creating the density of the fluid which makes fuel olL The heavy gas of the field appears to be in the center of the present pro- ducing area and it partakes somewhat of the characteristics of the crude oil from which it rises, but, lacking an analysis for heat units, its comparative value cannot here be approximated. DEVELOPMENT OF THE FIELD. As it Stands on this date, the producing area is located in section 5, section 4, section 8, section 9 and section 32, in the northwest portion of Township 4 south and Range 3 west, Carter County, section 32 being in the southwest corner of Township 3 south and range 3 west; the one well in Section 36, Township 3 south and Range 4 west being just over the line in Jefferson County. On this date 47 wells have been completed, 37 of them producing oil, four producing gas, and six of them are dry. The daily production is approximately 6,800 barrels. There are 43 wells drilling and 37 rigs up and building waiting for tools to be released from drilling wells. I ( EXHIBITS. > \ i M I 97 The Magnolia Pipe Line Company has two 55,000 barrel steel tanks full of oil and is getting its pumping station adjusted, having pumped 5,000 barrels through the line in 24 hours. This pipe line is six inch from the pump sta- tion located in section 3-4-3, east of the field, to Addington, a distance of 26 miles, and from there to its junction with the main line in Texas, near Bowie, Texas, is eight-inch. The normal capacity of the six inch line is 16,000 barrels every 24 hours, but the initial station as above would be pushed to handle that much regularly every 24 hours a distance of 60 miles. The Magnolia Petroleum Company of Texas, operating the trunk line from Electra to Beaumont, has one eight-inch line, is about completing three addi- tional pumping stations, and is running regularly 11,000 barrels a day from Electra. This crude being of a fine refining grade, it will be given the prefer- ence over the heavier and less valuable crude from the Healdton field, which means that the six inch line out of the Carter County field has a maximum carrying capacity against the Texas main line of not to exceed 9,000 barrels in 24 hours, with the regular quantity handled, as at present situated, rather under that figure. Anticipating a congestion, the Magnolia Pipe Line Company (an Oklahoma corporation), on Thursday, March 12, and several days before that date, noti- fied the producers in the Healdton field that their production would be handled on a pro rata basis according to the average quantity produced from each lease, to be adjusted from time to time as the production of the field increased. This means that oil will stand in tanks for varying periods, only a portion of their contents being run each day. This, in turn, means that the contents of the tanks will lose in gravity and much of it fall below the 32 degree line between $1.05 and 70 cents. It means that wells will have to be shut in, reducing their production. It is apparent at this time that the production of the Healdton field is likely to reach 12,000 barrels within 30 days, which means, as the pipe line facilities now stand, a surplus of 3,000 to 5,000 barrels a day, that, by standing, will deteriorate and lose part of its initial value. Relations between the producers and the piping and purchasing company are becoming strained and will become more so as the field grows and the con- gestion and consequent shrinkage of value goes on. All crude oil produced at Electra and Petrolia, Texas, 60 to 100 miles southwest of the Carter county field, is sold for $1.05 per barrel. All of the crude produced in Oklahoma and Kansas, outside of the Healdton field, is q.uoted at $1.05. All of the heavy and fuel grades of crude produced in southwest Texas and southwest Louisiana are quoted at from 90 cents to $1.05 per barrel, most of it, as a matter of fact, selling at $1.06 to $1.08 under contract. Crude produced in the Caddo field in northwest Louisiana is bought on foar grades — "crude" 75 cents; 32 gravity 90 cents; 35 gravity 95 cents and 38 gravity and better $1.05. A little crude at Corsicana, Texas, is bought on two grades — " heavy " 70 cents, " light " or 38 gravity at $1.05. Comparisons are made between these contiguous fields and their crudes and the Healdton field, the Healdton producers urging against the pipe line company that Healdton is being discriminated against both in price and the quantity of the production that is taken. I believe that the facts and statements herein set out cover the situation now existing in the Healdton oil field, which I herewith submit. Respectfully, H. L. Wood. Oklahoma City, Okla., March 13, 1914, 76568"— 15 7 ; 98 CONDITIONS IN THE HEALDTON OIL FIELD. Exhibit 3. AFFIDAVIT OF F. V. FAULKNER RELATING TO EARLY CONDITIONS IN THE HEALDTON FIELD. State of Texas 1 County of Dallas j F. V. Faulkner, being duly sworn, says: I am Vice President and General Superintendent of Corsicana Petroleum Company and in charge of the drilling and operating of oil wells and securing of leases and oil territory. On August 19th, 1913, I left Wichita Falls, Texas, with L. Campbell, an employe of Corsicana Petroleum Company, in an auto. We travelled to Waurika, Okla- homa on that day. On August 20th we, together with Wm. Goodman, another employe, went in the auto to the Red River Oil Company well, the first pro- ducing well drilled in the Healdton field. We met Mr. W. Franklin there, also Mr. Critchelow (Jr.), the latter in charge of the property and who gave us permission to get a bottle of the oil. I filled a quart bottle from the well while pumping. We spent two or three hours at the well. Several other Com- panies had representatives at the well at that time. They had had oil at the well about two weeks, and on this day they had the well pumping. I inquired of Mr. Franklin in regard to how the land on which the well was located was held, also surrounding lands. Mr. Franklin informed us that his Company, the Crystal Oil Company, had held about 5,000 acres under ownership and oil lease in that neighborhood and had assigned to Red River Oil Company half of the acreage for the consideration of drilling a well. The acreage thus given was scattered quite extensively. It was my understanding that the par- ticular tract on which the well was located was owned in fee by Apple and Franklin, and was leased by them in whole or in part to Crystal Oil Company and lease assigned among other leases to Red River Oil Company for drilling as above stated. Mr. Franklin stated the Crystal Oil Company had other lands under lease in the immediate vicinity and we talked with him about our se- curing territory from them. Their terms for an outright assignment were far beyond our ideas of value, but we thought we might get together on some- thing in the nature of a partnership where we would furnish the money and take the risk of loss and divide the profits. We came to no conclusions on that date and made no offers but left the matter open for future negotiations. On two or three occasions after this and before September 5th, 1913, Mr. Campbell interviewed Mr. Franklin and other members of the Crystal Oil Company and on September 6th, 1913, Messrs. L. Campbell and W. L. Nelll. another employe, and myself had a conference with the Crystal Oil Company in Ardmore. They represented that they had under lease about 2,300 acres, one-half of which they proposed to assign to us retaining a one-half interest in the portion thus assigned. We were to furnish all money, supplies, labor and to operate the property, giving them half of the profits and a cash bonus In hand of about $10,000, which we were willing to do; but an additional con- sideration guaranteeing to them a profit equal to one-fourth of the gross pro- duction (after royalty deducted) as asked by them made much more of a con- sideration than we were willing to concede, and the negotiations closed on that date September 6th, 1913, and we have had no negotiations with them, that I know of, since. The quart bottle of oil spoken of above, I gave to Messrs. E R. Brown and D. C. Stewart within the next day or two. I have had nothing to do with the getting of any oil from the well, except this one quart, at any A EXHIBITS. 99 time. I did not test that sample, nor have I ever had any of the Healdton oil tested. They looked at the oil and smelled it and stated that it seemed similar to Electra oil. Several weeks afterward I inquired from D. C. Stewart as to the gravity of Healdton oil. He stated that it was 38 gravity. I after- wards heard it reported that the gravity was 34. This, I think, was several weeks after the above. The first chemical or refinery test I heard of was about March 1st, 1914, when Mr. Brown called me into his office and asked me if I knew that Healdton oil showed only about 30 or 31 gravity (I cannot remember which now), also that it was not a good quality for refining and virtually only a fuel oil. I told him that was news to me, as I had thought the oil was a better quality than that, although my knowledge was limited to the information stated above. I thought up to that time it was about of the quality of Electra oil, but of not quite the gravity. F. V. Faulkneb. Sworn to and subscribed before me, a Notary Public, in and for Dallas County, Texas, this 27th day of October 1914. [seal.] r. l. Holmes, Notary Public. Exhibit 4. AFFIDAVIT OF D. C. STEWART RELATING TO EARLY CONDITIONS IN THE HEALDTON FIELD. State of Texas County of Dallas ) D. C. Stewart being sworn, deposes and says on oath that, he was during the year 1913, connected with the Magnolia Petroleum Company, being the Man- ager of its pipe line department and that he continued in the service of said Company up to about February 26, 1914, when his work with the Company was discontinued, and he went to China. That the Magnolia Pipe Line Company was organized the latter part of the year 1913, and affiant was likewise connected with, and in the service of that Company up to his departure for China. Affiant remembers that sometime after the first well in the Healdton field came in, Mr. F. V. Faulkner, Vice-President and General Manager of the Cor- sicana Petroleum Co., brought to Corsicana a sample bottle containing about one quart of the oil from the first well reported to have been brought in, in that field. Mr. Faulkner brought the oil into the office at Corsicana, and affiant saw the sample, and according to his recollection, it was left in the office of Mr. B. H. Stephens, Mr. Brown's assistant, and affiant does not know what became of it, and has no knowledge of any test of that sample having been made. Affiant, sometime between the middle of August and first of September, 1913, visited the first well of the Healdton oil field, and of course, looked at it, and the oil produced therefrom, but did not at that time, take any sample of the oil, or test it. Subsequently, about November 3, 1913, affiant, together with Sam Redd, Lease Agent of the Corsicana Petroleum Co., went to the Healdton oil field together, and affiant obtained a sample of the oil from the second well brought in, In that field, out of a 250 bbl. tank located near the well, and tested it 1 I 100 CONDITIONS IN THE HEALDTON OIL FIELD. with a small hydrometer, and as affiant read the test at that time, (evidently erroneously), it showed to be 39 degrees gravity, and affiant, on such examina- tion, reported to E. R. Brown and others, that the gravity of the Healdton crude, as shown by that test, was 39 degrees gravity, and the oil was similar to the Electra oil. Affiant, based on said test, in good faith believed the Healdton crude would range from 38 to 39 degrees gravity, and would compare favorably with the Electra oil. This belief, as to the character of the oil, continued up to the time the affiant left America for China, and affiant did not know until after his arrival in China that the oil was of a different character and of a lower gravity, and of a quality inferior to the Electra oil, he having received this report by letter. Affiant further says that notwithstanding his report to E. R. Brown of the character and quality of the oil, Mr. Brown insisted that a sample of the oil be shipped to Beaumont Refinery for a Refinery test, and accordingly, a barrel of the oil was shipped under affiant's instructions, by E. A. Latimer, on the 20th day of January, 1914, said barrel of oil being long delayed in transit, and consequently the Refinery test intended was delayed. Affiant does not know exactly when sample barrel reached Beaumont, but up to the time he left for China, he had not learned of its reaching its destination. D. C. Stewabt. Sworn and subscribed to before me this the 5th day of November, A. D. 1914. [SEAL.] W. L. Holmes, Notary Pullic in ind for Dallas County, Texas, Exhibit 5. AFFIDAVIT OF E. R. BROWN RELATING TO EARLY CONDITIONS IN THE HEALDTON FIELD, AND LETTER FROM E. E. PLUMLY TO E. R. BROWN CONCERNING TESTS OF HEALDTON CRUDE OIL. s. I LLAS.J State of Texas. County of Dal: E. R. Brown, being sworn, says on oath that he is now and was during ttie year 1913 vice president and general manager of the Magnolia Petroleum Com- pany. Affiant says he has no definite recollection aboat the sample of oil— about one quart— to which Mr. F. V. Faulkner refers in his affidavit, but does remem- ber that some sample of the Healdtoi- Oil of a smaller quantity was, within a few months, perhaps within a few weeks, after the bringing in of the first well in the Healdton Field, turned over to him, and sat on j.s (.esk for some time. The sample referred to was in a small bottle and wis not as large as tht referred to in Mr. Faulkner's affidavit. It \iiC water in the bottom and had the appearance of having been picked up out of a pit. Affiant remembers that sometime after the drilling in of the first well in the Healdton Field and per- haps after the drilling in of the second well, Mr. D. C. Stewart reported to him that the Healdton Crude was of about 39 gravity and appeared to be simi- lar to the Electra Oil ; and such was the understanding and belief of affiant with reference to the Healdton Crude up to the time that Mr. E. E. Plumly. manager of the refineries of the Magnolia Petroleum Company, made his report, dated February 25th, 1914, a copy of which is hereto attached, which was the first information affiant had concerning the actual quality and character of the Healdton Oil, being the first refinery test reported to affiant on the subject. \^ ^ A ■i f •, EXHIBITS. 101 This report was a great surprise to affiant, as prior to that he had been rely- ing upon the report of Mr. Stewart that the Healdton Oil was about 39 gravity and similar to the Electra Oil. A subsequent refinery test to the one referred to above, indicated the sulphur difficulty in the oil as well as its deficiency of gasoline and kerosene. Upon receipt of the report of Mr. Plumly, of date February 25th, 1914, affiant sent John Ricker, one of the employees of the Magnolia Petroleum Company to the Healdton Field to sample and test the gravity of the oil coming from each well in that field. John Ricker did this and brought back samples which showed that the oil from the different wells ranged in gravity from about 29 to 34° Baum6 and that there was not enough difference between the sample first tested by Mr. Plumly and the average oil produced from the various wells to justify any difference in price, situated as the Magnolia Pipe Line Company and the Magnolia Petroleum Company were. Upon receiving Mr. Plumly's first report, of date February 25th, 1914, affiant had the hope that there would be some substantial difference between that sample and the average oil in the field and there was, for a short time, a difference in price posted for oil of 32 gravity and under and that over 32 gravity, because it was not then clear that there was not enough difference between the sample tested and the other oil produced in the field from the other wells to justify a difference in price. Later on the sulphur difficulty appeared in all the oil from the Healdton Field and that, together with the fact that all the oil was, on an average, of a gravity of about 31° and deficient in the quantity of lighter products contained, ren- dered it necessary to post the same price for all the Healdton oil and abolish the differential that had formerly existed. E. R. Bbown. Sworn to and subscribed before me, this 2nd Day of November, A. D., 1914. [SEAL.] W. L. Holmes, Notary PuUic, Dallas Co. Texas, Feb. 25, 1914, Beaumont, Texas. Mr. E. R. Bbown, Corsicana, Texas. Dear Sib : We received the barrel of Healdton Crude which gave the follow- ing tests : Gravity 29.1, Flash 120, Burn 170, Color, Dark Green. Following are the cuts: 5% Gravity 51.2 Temperature 349 5% 46. 5 388 5% 43. 2 " 436 5% 40. 8 « 482 5% 38. 7 526 5% 37. 4 552 5% 36. 5 568 5% 35. 7 594 5% 34. 8 •• 614 5% 34. 2 5% 33.7 5% 33.8 5% ** 35. 2 5% 34. 5% 31. 7 5% " 30.5 5% " 30.4 102 CONDITIONS IN THE HEALDTON OIL FIELD. I am disappointed in this crude, as I thought it was a light oil. From the above distillation tests, we would not be able to get over 5% of gasoline and 20 to 25% of heavy gravity refined oil. Yours, very truly, E. E. Plumlt. Exhibit 6. LETTEB FROM E. E. PLUMLY TO E. B. BROWN RELATING TO SULPHUB IN HEALDTON CBUDE OIL. Beaumont, Texas, Mar. 25, 1914, Mr. E. R. Brown, Corsicana, Texas. Dear Sir : On further investigating Healdton Crude, we find that it contains so much sulphur that I am really puzzled to know what to do with it. The crude itself contains .714% sulphur: this is not a free sulphur and does not pass off with the gas; therefore, the first 5% which can be put into naphtha contains .019% sulphur. This can be taken care of by mixing with naphtha from Electra Crude, which shows only .005% and naphtha specifications are .010% sulphur. The next 10% which we had figured on putting into 44 grav- ity water white oil, contains .183%, and the next 15% which would go into 42 gravity common oil shows .200%. We took the cuts from water white and re-run it as we would South Texas Crude to throw off the sulphur, and the first 10% over showed .106% ; the next 80% showed .172% sulphur. The limit on water white oil is .040% and on common oil .065%. By this you can readily see what we are up against in trying to handle this oil. In my opinion Heald- ton Crude is absolutely a fuel oil proposition. The small per cent of naphtha which must be taken off in order to get sufficient flash for fuel oil will not pay the cost of reducing. Yours, very truly, B. B. Plumlt. Exhibit 7. TELEGRAMS BETWEEN E. B. BBOWN AND H. C. EOLGEB, JB., RE- LATING TO SULPHXTB IN HEALDTON CBUDE OIL. Corsicana, Texas, Mar. 24, 1914* H. O. FoLGER, Jr., 26 Broadway, New York. Now find that the sulphur in Healdton crude is so high and expensive to remove from refined oil produced by it that it will not pay to run it except for naphtha and fuel oil. This makes it necessary to buy from six to eight thou- sand barrels of refinable crude per day elsewhere and it seems necessary, in addition to our previous plan of doubling line from Alvord to Fort Worth and erecting skimming plant to extend Magnolia pipe line to Cushing where there is an abundance of light crude. To do this we must in addition to increasing capital of Magnolia Petroleum Company as proposed, also increase capital of Magnolia Pipe Line Company to one million dollars paid up. Sealy, Greer and Plumly are here today and would like reply before night if possible. Please Rush. B. B. Brown. * I ^^ EXHIBITS. 103 New York, Mar. 24, 1914. B. B. Brown, Corsicana, Texas. Quality Healdton crude a surprise. It would be well to have process which removes sulphur investigated to decide what best be done for refining it. Pro- gramme outlined in message so costly it should be considered only as a last resort. Cannot today even undertake to subscribe as suggested in your letter March 14th. H. C. Folger, Jr. Exhibit 8. LETTEB FBOM E. B. BBOWN TO E. E. PLUMLY DIBECTING A TO BE MADE OF HEALDTON CBUDE OIL. TEST March 26, 1914. Mr. E. K Plumlt, Beaumont, Texas. Dear Sir: As you will be running some of the Healdton Crude at the Corsicana plant within the next few days, would it not be a good plan on this first run to make a test to see in a practical way what can be done with the small amount of refined oil that you would get from it? In other words, run off probably 25% instead of 5% or 6%, treating the distillate and re-running it, making as accurate experiments as possible, to see what grade of oil you would get and as to the cost of running it. Unless we can get a small amount of refined oil from it we could not afford to pay 70 cents for the crude based on the present fuel market, and we should make every effort to get the most value out of the oil possible so as to be able to pay as high price as we can, compared to running the other lighter and sweeter oils. Yours very truly, E. B. Brown. Exhibit 9. BEPOBT ON THE ANALYSIS OF HEALDTON CBUDE OIL, MADE BY M. C. WHITAKEB TO THE UNITED STATES BUBEAU OF MINES. [Tlie following report was made to the United States Bureau of Mines, and it is published with its permission.] M. C. Whitaker, M. Sc. F. J. Metzger,- Ph. D. CX)NSULTING INDUSTRIAL AND ENGINEERING CHEMISTS Broadway and 116th Street New York City BEPORT ON THE ANALYSIS OF CRUDE OKLAHOMA PETROLEUM. We received on May 29th, 1914, three sealed samples of crude petroleum de- scribed as follows: (1) Number 1470. Lease, Silsanny Jones Allot — Dept. lease: Township, Sec. 4, T4S, B3W: Carter County, Oklahoma: Owner, Coline Oil Company, Ard- 104 CONDITIONS IN THE HEALDTON OIL FIELD. EXHIBITS. 105 more, Oklahoma : Well No. 1 located at extreme SW cor. Nl N^ SW Si NW. Sampled by Irving C. Allen, May 23, 1914. Our laboratory number 14531. (2) Number 1^64. Million & Thomas Farm: Township, Sec. 5, T4S, R3W: Carter County, Oklahoma : Owner, Crystal Oil Company, Ardmore, Oklahoma : Well No. 3 located at extreme SE cor. of Si of SE. Sampled by Irving C. Allen, May 23, 1914. Our laboratory number 14532. (3) Number lJf69. Apple-Franklin-Harrold Farm: Township, Sec. 8, T4S, R3W: Carter County, Oklahoma: Owner, Rex Oil Company, Ardmore, Okla- homa : Well No. 2. Sampled by Irving C. Allen, May 23, 1914. Our laboratory number 14530. [This specimen was not analyzed.] No one method for the analysis of crude petroleum has been carefully inves- tigated and adopted for universal use, as has been done in the case of many of our other analytical processes, and chemists are therefore at liberty to choose whichever method is the most convenient or available. In order to establish the composition of these oils, we have analyzed and tested samples No. 1470 and No. 1464, by each of the four methods commonly described in the most recent books treating the subject of petroleum analysis. A fifth method known as Grey's method might have been added to this list, but it would have required a larger amount of oil, and the results would not have been materially changed. The methods we have used may be briefly sum- marized as follows : First: Engler Method. — (See Allen's Commercial Organic Analysis, Vol. Ill, page 48, 1910.) Distill 100 cc. of the oil from a glass distilling flask of specified dimensions, collecting separately the fractions passing over between the fol- lowing temperatures: below 150° C, 150* to 200°, 200° to 250°, 250° to 300°, above 300°. When the temperature reaches the maximum for each fraction, the source of heat is removed and the temperature allowed to fall 20° and then heated again to the maximum for the fraction. This process is repeated until no more distillate is obtained for that fraction. The temperature is then brought up for the succeeding fraction and the same practice of running up to the maximum and dropping back 20° is continued until the fraction is com- plete. The final temperature is carried up to the point at which coke only Is left in the flask. Second: Ubhelohde Method. — (See Allen's Commercial Organic Analysis, Vol. Ill, page 50, 1910.) Distill 100 cc. of the sample in a distilling flask of approxi- mately the same dimensions as that used by Engler, but by a uniform and continuous application of the heat, collecting the various fractions between the temperatures as specified by Engler. Third: Regnault Method. — (See Redwood, Petroleum and Its Products, Vol. II, page 536, 1906.) Distill 100 cc. of the sample from a metal retort connected with a metal condenser, water-cooled. The heat is applied uniformly and con- tinuously, and the fractions are collected as in the Ubhelohde Method. Fourth: Natoratil Method. — (See Allen's Commercial Organic Analysis, Vol. III, page 50, 1910.) Distill from a glass retort, uniformly and continuously heated, collecting the several fractions as already indicated. This method is used by many American chemists. In order that our results might be comparable one with another, we have adhered to the temperature ranges indicated in the First or Engler Method, for the separation of the various fractions in all distillations. \ ! ■• i^ I J ^ & ENGLEB METHOD. Sample No. 1470. 8p. gr. =0.8734 at 60° F. First drop at end of flask at 70" C. Temperatiire, ' C. Volume per cent. Sp. 60 Below 150 9.3 9.0 11.0 12.7 52.9 3.5 1.6 0.7467 150to200 ... 0.7815 200 to 250 0.8173 250 to 300 0.8413 Above 300 0.8861 Coke Loss (eases, etc.) Sample No. 1464. Sp. gr.=0.8608 at 60° F, First drop at end of flask at 50° C. Below 150 16.7 &2 9.0 11. 1 60.5 2.6 1.9 0.7361 150 to 200 0.7931 200 to 250 0.8206 250 to 300 0.8421 Above 300 a8877 C!oke . Loss (cases, etc.) UBBELOHDE METHOD. Sample No. 1470. First drop at end of flask at 60° C, Below 150 5.2 10.2 11.0 11.1 56.0 4.8 1.7 0.7486 150 to 200 0.7750 200 to 250 0.8092 250 to 300 0.8331 Above 300 a 8798 Coke : Loss (cases, etc.) Sample No. 1464' First drop at end of flask at 5o° C. Below 150 11.5 10.7 9.7 10.4 53.5 3.1 1.1 a7265 150 to 200 0.7747 200 to 250 0. 8130 250 to 300 0.8369 Above 300 0.8822 Coke - Loss leases, etc.) . ... EEGNAULT MEIHOD. Sample No. 1470. First drop at end of condenser at 110° C, Below 150 150 to 200 200 to 250 250 to 300 Above 300 Coke Loss (gases, etc.) . 3.7 0.7458 10.4 0.7726 12.0 0.8053 12.4 0.8345 56.0 a 8762 3 9 1.6 Sample No. 1464. First drop at end of condenser at 90° C. Below 150 9.5 9.6 10.3 11.3 .';.3.5 2.7 3.1 0.7289 150 to 2(X) 0.7745 200 to 250 0.80S3 250 to 300 0.S354 Above 300 a8794 Coko Loss /'f'ascs. etc ) .. • li 106 CONDITIONS IN THE HEALDTON OIL FIELD. NAWBATIL METHOD. Sample No. WO. First drop at end of retort at 90" O. Temperature, * C. Below 150 150 to 200 200 to 250 250 to 300 Above 300 Coke Loss (gases, etc.) . Sp. gr. at 60VF. 0.7556 0. 7750 0.8049 0.8322 0.8798 Sample No. VM- First drop at end of retort at 75" C. Below 150 150 to 200 200 to 250 250 to 300 Above 300 Coke Loss (gases, etc.). ILl 8.6 10.5 11.1 52.5 4.8 L4 0.7372 0. 7774 0.8059 0.8351 0.8705 «« Chemists usually report the fraction distilling over below 150° C. as Naphtha"; the combined fractions distilling between 150** and 300° C. as " Illuminating Oils " ; that distilling above 300° C, as " Lubricating Oil." In the following tables the analyses have been grouped in the customary manner : Sample No. UIO. [Bracketed items in the following tables have been inserted by Bureau of Corporations In order to secure completeness of presentation.] "Naphtha" "Illuminating Oil" "Lubricating Oil". rCoke I Loss L Total Engler. Per cent. 9.3 32.7 52.9 3.5 1.6 100.0 Ubbe- lohde. Per cent. 5.2 32.3 56.0 4.8 1.7 100.0 Reg- nault. Per cent. 3.7 34.8 56.0 3.9 1.6 100.0 Naw- ratil. Percent. 2.8- 34.0 67.5 4.0 1.7 100.0 J Sample No. 1464- "Naphtha" "Illuminating Oil" "Lubricating Oil". rCoke I Loss L Total Engler. Per cent. 16.7 28.3 50.5 2.6 1.9 100.0 Ubbe- lohde. Per cent. 11.5 30.8 53.5 3.1 1.1 100.00 Reg- nault. Per cent. 9.5 31.2 53.5 2.7 3.1 100.0 Naw- ratil. Per cent. 11. r 30.2 52.5 4.8 1.4 100.0. ^ 1 I EXHIBITS. 107 A comparison of the results obtained shows a wide discrepancy in amounts of the various products obtained by the several methods of analysis, and this difference is especially great in the case of the " naphtha." On sample No. 1464 about one and three-fourths times as much "naphtha" is obtained by the Engler method as by the Regnault method, whereas in sample No. 1470 the " naphtha " obtained by the Nawratil method is less than one-third that obtained by the Engler method. The variations shown in the analysis of your oils by the different methods are directly in accord with our previous experience, extending over a number of years. We do not consider any of the existing methods as dependable. It is doubtful if any of these methods will give results even approximating those attained in practical distillation. We frequently encounter disputes between producer and refiner as to the proper evaluation of an oil, due to a difference in results obtained by different methods of analysis. We have frequently urged, and still urge, that the whole question of crude oil analysis and method of valuation be subjected to the most thorough investiga- tion with a view to establishing a standard method of analysis and report. Such a method would be promptly adopted by the chemists, as was the case in the standardized methods of coal analysis, with the result that specifications may be drawn with fairness to producer and purchaser, and deliveries checked by both parties with reasonable accuracy. The commercial value of the transactions in crude petroleum would justify the establishment of investigation into the methods of evaluation on a broad plan. The investigation should not be limited to a few laboratory comparisons of methods, as has been done in the past, but should be taken up with the producers, refiners and chemists, with a view to correlating their problems and interests. Respectfully submitted. M. C. Whitakeb. Exhibit 10. STATEMENT OF THE MAGNOLIA PETROLEUM CO., SHOWING AN EXPERIMENT WITH 45 GALLONS OF HEALDTON CRUDE IN DE- TERMINING WHETHER OR NOT CYLINDER OILS CAN BE IN A PRACTICAL WAY MANUFACTURED FROM HEALDTON CRUDE FOR COMMERCIAL PURPOSES. l-harrel from Corsicana Run #9 Grav: 30.6.flash below 60*" Pour O. Color, Black Green Sulphur, .638 45-Gallons of this crude oil was treated as follows : 2-Lbs. per bbl. of settling acid— 1/2 hour agitation— 1 hour settling drew off 1/2 gallon of sludge. 1st dump : 10 lbs. of acid — 45 minutes agitation— 3 hours settling drew off 7 gallons of sludge. 2nd dump: 5 lbs. of acid — 45 minutes of agitation— 10 hours settling drew off 2 1/2 gallons sludge. Transfer to other agitator and wash with water — 2 still washes and four slow agitation washes, each of 1 hour duration. Great trouble was encountered in these washes, due to emulsification. Time required for wash water to settle out was 24 hours. ^Sjk^nC!!3E!!! 108 CONDITIONS IN THE HEALDTON OIL FIELD. Neutralizing with lye was very hard — four times the amount of total lye used for treatment of oil was required to bring oil into lyesids. Strength of lye used was 20 Be'L. It was given in four dumps — settling 24 hours — draw off 2 gallons of lyesoap. 5 Water washes of ordinary temperature and 5 at 120 F. were re- required to wash out lye: each wash talking 1 hour slow agitation and 24 hours settling. The same trouble of emulsifleation, as found In washing out acid was encountered in washing out lye. Loss in treatment of this batch amounted to 33 1/3%. Considerable trouble experienced with former treatments of Healdton Crude seem to justify the statement that it is not practical to treat this crude on large scale. 27 Gallons of This Treated Crude Oil were run for Cylinder Oil. Treated Crud Gravity 29.0: Flash 130 0. C. Pour 15. Sulphur .602: Color Blue-green. Cut Per f-ont. Temp Grav Flash Vis ChUl 1 5 430 *47.9 2 485 448 20% Kerosene, Grav 43.7 Flash 120 OC Fire 3 510 42.2 150 O.C. Sulphur .161 4 5:^0 40.0 8 .*) 54S 38.5 22 6 560 37.0 36 20% Gas Oil Distillate. Grav 36.0 Flash 205 Pensky Martin. Sulphur .385. Pour 40. 7 5S0 35.7 42 . 8 588 34 2 50 9 592 32.2 310 58 68 10 598 602 612 30.3 29.1 27.0 325 345 305 72 97 158 62 76 82 30% Nondescript Oil, Grav. 28.1 Flash 295 11 12 OC. Vis 129 at lOOS. Pour 70. Sulphur .696. 13 634 26.0 245 250 84 14 648 25.2 240 320 88 Bottom 30% of Cylinder Oil. Grav. 17.1 Flash 535 Fire 615 Vis. 411 at 212 Pour 40. Odor, Sulphurous Color, Blueish green Appearance, sticky, stringy pulpy. This last part is worthless for any- thing except fuel oil for home con- sumption or for thinning out heavy residues. Only an elaborate and non-paying process could convert it into either gas oil or lubricating dis- tillate. Also the paraffine could not be extracted without the extra run which would be necessary for the manufacturing of either of the above- mentioned grades. Total Contents of Treated Crude OiL 20% Kerosene 20% Gas Oil 30% Nondescript Oil 30% Cylinder Oil. 100% «i EXHIBITS. 109 Note by Bureau : Yield of Healdton crude oil, shown in percentages of the volume of the crude refined : Per cent. Kerosene ^^' ^ Gas oil ^3- ^ Nondescript oil 20.00 Cylinder oil 20. 00 Loss ^- ^ 100.00 Exhibit 11. STATEMENT OF THE MAGNOLIA PETROLEUM CO., SHOWING AN EXPERIMENT WITH 1 BARREL OF HEALDTON CRUDE FOR THE PURPOSE OF DETERMINING IF ENGINE OILS CAN BE MANU- FACTURED THEREFROM. l-BABBEL HEALDTON CRUDE FOB COBSICANA, GBAVITY 30.6. Temperature Per cent Grav ChiU Cuts Still Vapor 1 2.5 360 260 61.0 _ i « 390 290 58.1 — Naphtha 7J%. S « 420 330 55.2 — 4 (( 450 360 51.6 — Light end, Common Oil 25%. m 6 « 470 380 48.7 — « « 500 400 46.8 — 7 8 << 520 540 420 440 45.1 43.3 , Water White Stock, 15%. 9 « 560 460 41.8 — 10 <( 590 490 40.5 — 11 12 << 11 600 619 510 520 39.5 39.0 "" 1 Ileavy End, Common Oil 7^%. 13 (I 634 534 37.9 — 14 <( 650 559 37.5 — 15 11 S3 562 36.5 — 16 <( :_ 563 36.5 16 17 t( SE 565 36.7 18 18 ti K 570 36.8 22 19 (( c= 571 36.7 18 jGas Oil Dist. 27.5%. 20 (< K 572 35.6 26 21 (( a. 573 34.4 26 22 <( s 589 34.1 26 23 (( ms 595 34.5 26 24 l^Z^%,ar„ PMic. (My Commission expires April 28, 1918.) [SEAL.] Exhibit 15. COMPANY'S METHOD OF TAKIJNJU ux^ (Kote by B«reau.-B.a„. o. some ^^^^^^^^ which the prorating of the oil >» ^f "f ^^^j („ Healdton and Investigatea the Chan,bers. of the Magnolia ^X,J^^Molvn.nk Edington, t..keu from Mr conditions there. The foUow ng bU -.en o ^_^ ^^^^ ^^^^^^^^ ^^ ^^^ ^^ Chambers' report dated ApiU 9, i->i*- »" that time). ^ . ^d of tbe total daily production On April 1st we "««-' ^e«"2» ^'', ,^,a„. ^^ enable us to arrive at the of what is known as the Healdton F>eKl. " o™ ^^^^^^^ ^^^^^^ ^^ prorata part of oil to be run rom ea h 1-.^. t^»t '^^^^^.^..^ „.„„,j ,, „„ he 4,000 barrels which I was •n^'™^;;'^ !;''j*„^ that we would be able to take ^»J«;\^ ^Z''^, ^'.^d ,.roductU,u of the Field For example: on Apr.l lB'/'f''';f^„^^;"4,o(,o barrels per day, or 34.3% omounted to 11,645 barrels and we -'^^^^^e Oil Co. on the Wirt Franklin trre'r^Ctt'^O^br-s p^dfy-therefore, we would only take from "The'esur.:;:dproduo,ion is se<.ured from the producers, and which I tblnU '^r dan;'::tlmated production is changed according to increase or decrease every two or three days. j^^^ r^eord kept as to Between March 2«th and Apr.l l^^-Jl'^^ ^^^„^^^^ ..j. „,« and in ea.-h and amount to be run fron, each '^"^rTZ rZL lease than another. My m- ,very ca^e I did not run -"^ ""'^^ /j;'^^,^ of the 4.000 barrels, which is structions were to run --f^^^uZtZ production between the above dates. the amount we were t«/«'''^^;™ " "'^ "j" [^ey have a full tank. we do not run the oil from the leases nnW they ^ ^^^^_^_^ _^^ ^^^ ^^„y particular producer. i t / % EXHIBITS. Exhibit 16. 115 LETTER FROM G. W. JENNINGS TO WIRT FRANKLIN CONCERNING CONDITIONS IN THE HEALDTON FIELD MARCH 20, 1914. P Wirt Franklin, Pre3. A. T. McGhee, Vice Pres. Edward Gait, ©ec. Roy M. Johnson, ' Treas. CRYSTAL OIL COMPANY Capital Stock $50,000 Directors: Wirt Franklin A. T. McGhee Edward Gnlt Roy M. Johnson S. A. Apple Ardmore, Oklahoma, 3-20-1914. Mr. Wirt Franklin, Pres., Ardmore, Okla. Dear Sir: Reporting on the investigation of the pipe lines to the different tanks in the field in the Healdton district. Where the Magnolia Pipe Line Co. have their lines connected to. Our tanks on the Thomas farm in Sec. 5-4-S- 3-W are connected with two inch pipe and same runs out 50 feet from the tanks and connects into three inch pipe. Same being a gravity line and it takes from three to four days to get a 1600 bbl. tank of oil in the line. The Red River Oil Co., west of the Thomas farm have the same connections as we have only they have a small steam pump which is run by gas, size of the pump 7^ixl. Paraffine Oil Co., in the Southwest i of the South West J of Sec. 5-4-S-3-W, have their tanks connected with two inch pipe going into three inch inpe, and same being a gravity line. Red River Oil Company in the N. E. i of Sec. 8-4-S-3-W on the Apple & Franklin farm, tanks are located on the bottom land in the north corner of the farm, tanks are connected up with two inch pipe going into four inch almost at the tanks. But the Pipe Line Co. today are laying a six inch line up the bottom going south towards tlie Red River Tanks in Sec. 8. Humble Oil Co. in the N. W. i of Sec. 9, 4-S-3-W, have the same connections being two and three inch pipe. And being a gravity line. Watchorn Oil Co. in the S. W. \ of Sec. 4.4-S-3W have two and three inch connections and oil goes out by gravity. Wrightsman & Foster Oil Co. in the N. E. i of Sec. 5.4S-5W, have a battery of three 1600 bbl. tanks connected with two and three inch pipe and oil run by gravity. Ideal Oil Co. in the S. W. i of Sec. 32, 3S-3W, just north of the Wrightsman & Foster Oil Co. in Sec. 5 have two 1600 bbl. tanks connected with two and three inch pipe, and oil run by gravity. The six inch line runs east and west between Sec. 32 and 5 and the three inch lines connect to the six inch line. * ■^ 116 CONDITIONS IN THE HEALDTON OIL FIELD. The Ideal and the Wrightsman & Foster Cos. lines to their tanks have check valves ou their Hues, at the tanks. And all other companies have checks at the tanks. The Ideal Company has one 1600 tank on the line. The McMan Oil Co. just west of the Ideal Co. in the same Sec. had a battery of tive 250 bbl. tanks for a production of from 1200 bbls to 1500 per day with two tanks on the line being punipe• ./ mnQ-im' hstf 06 1 ^^ u^w^ & E ^?iliK.!i?;.H.'!f.'.)lf "SITY LIBRARIES 0041429532 Wvx 33 7 ^^^ - < iys^ £23?^ "§ 'i^ o -^5y^^^ • _„>)' ^iS- \? vVV END OF TITLE