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the economic efficiency of its petroleum business by
controlling as many phases of the production process as
possible. This includes acquiring oil refineries, crude
oil producing properties, and related transportation
systems.
Mr. Cowden began encouraging petitioner’s board of
directors to establish an oil refinery as early as 1931.
He believed that vertical integration in the petroleum
business would be beneficial despite the fact that, at
least for some time during the 1930's, petitioner was able
to obtain favorably priced petroleum products on the open
market. Mr. Cowden believed that the cooperative should
vertically integrate its petroleum operations to enable it
to compete with large companies.
In 1938, petitioner organized a subsidiary called the
Cooperative Refinery Association, Inc. (CRA) to construct
and operate an oil refinery in Phillipsburg, Kansas.
Although CRA was organized as a cooperative, petitioner
was at all times its only patron and owned all of its
outstanding common stock. The Phillipsburg refinery and a
70-mile network of pipeline were constructed during 1938
and 1939. The refinery officially opened in May 1940,
although it did not commence production until 1941. At the
time it opened, the refinery was capable of processing
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