Hazardous Business
Industry, Regulation, and the Texas Railroad Commission
The Railroads Come to Texas
The Fight for the Commission
John H. Reagan and Early Regulation
The Oil Wars
The Power Years
Other Responsibilities
The Railroad Commission Today

The Oil Wars

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Oil derricks with horse and wagon

Although the regulation of the railroad industry provided years of drama in Texas politics, the historical significance of the Texas Railroad Commission rests on its authority over the Texas energy industry. The discovery of oil in Texas in 1901 electrified the entire nation and changed Texas forever. In the end, the small agency created to regulate the state’s rails became a national power.

Early Days

Oil springs and tar pits had been known by Texas Indians. The Indians occasionally used the oozings to treat rheumatism or skin diseases, and taught these folk remedies to the early white settlers as well. The Americans also used the surface oil as axel grease and on a small scale for lighting and fuel.

Petroleum first began to be developed for commercial use in lighting (kerosene and other illuminating oils) after the 1859 discoveries at Titusville, Pennsylvania. Illumination remained the primary commercial use of petroleum until around 1900.

The first deliberate oil strike in Texas was at Oil Springs, near Nacogdoches, in 1866. This first Texas oil well was capable of producing ten barrels a day. However, production in Pennsylvania was much cheaper than in remote Texas, and it would be several decades before drillers returned to the area.

Questions of regulation arose with the developing industry. In 1875, the Pennsylvania Supreme Court handed down a key decision in the history of oil regulation, ruling that oil and gas should be classified under the same rules governing the hunting of wild game. Under common law, a wild animal was not owned by anyone, because it could roam wherever it pleased. Therefore, whoever captured the animal on his own land became the owner of that animal.

Under this rule of capture, oil belonged to the person under whose property it lay. The Pennsylvania decision blazed the trail for the ruthless exploitation of the nation’s oil resources over the next 60 years. Oil lay in pools under the ground that could overlap the property of many persons. There was no incentive to leave oil in the ground when the entire pool could be pumped out by a well on a neighbor’s property. Thus, people competed to pump as much oil as possible as quickly as possible, lest the riches be “stolen” by a more enterprising neighbor. The look of an oil boom town was a forest of derricks, placed as close together as possible.

The first successful well in Texas was drilled in Brown County in 1880. The Brown County well produced about 100 barrels a day. This oil was still not competitive with Pennsylvania oil for commercial purposes. It was used mostly as a lubricant or for medicinal purposes.

In 1894, crews drilling for water in Corsicana struck oil instead. Wildcatters headed for the area, which would become the first significant commercial oil venture in Texas. By the end of 1896, a well had been drilled that produced 22 barrels a day, and it was evident that more strikes were there for the taking.

The result was chaos. In 1897, so many wells were drilled in Corsicana that production flooded the market, which was limited to local use and a few shipments to Austin and Dallas for use in making gas. Moreover, production exceeded the capacity of the state’s one refinery at Sour Lake. Operators with no market for their oil just poured the excess on the ground and kept pumping. The price of oil fell to less than 50 cents a barrel.

Laying pipeline by hand

To stem the waste and contamination of their city, Corsicana town leaders sought the services of Joseph Cullinan of Pennsylvania. A successful oil-man, Cullinan contracted to construct pipelines, storage tanks, and a refinery. The Corsicana operation was the beginning of modern oil refining in Texas. The company took the name of the Magnolia Petroleum Company, later known as Mobil. Cullinan and town leaders also worked on creating a market for the oil, promoting the use of oil over coal for fuel in railway locomotives and other industries, of oil-based products such as asphalt, and of natural gas for illumination.

The strategy worked. Prices rose back to 98 cents a barrel, and useful production soared. While production in Corsicana peaked at over 800,000 barrels in 1900, the field remained commercially viable. The first oil field in Texas continues to produce today.

The Corsicana experience also prompted the state’s first attempt to regulate the industry. In 1899, the Texas legislature passed a law that required operators to case off oil and gas wells to prevent contamination of ground water, required that abandoned wells be plugged, and forbade letting gas escape into the air.

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Page last modified: August 18, 2011