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

Page 1 2 3 4 5 6 7 8 9

Spindletop: Present at the Creation

Spindletop postcards

If the discovery of oil at Corsicana was the result of luck, the discovery known simply as Spindletop was the result of technical knowledge and deliberate exploration.

Anthony F. Lucas was a salt mining engineer from Louisiana with a great deal of experience in drilling in quicksand. An 1892 attempt to drill for oil in Beaumont had failed due to quicksand, but Lucas was convinced he could be successful there. With his knowledge of geology, Lucas believed that a large salt dome known as Spindletop would have a large pool of oil associated with it. Lucas had a great deal of trouble convincing investors. Despite the success at Corsicana, the conventional wisdom was that, in the words of one Standard Oil executive, “you could drink all of the oil west of the Mississippi.” Lucas ran out of money after unsuccessfully drilling in 1899.

Finally, Lucas raised the necessary funds and resumed drilling the following year. At 10:30 a.m. on January 10, 1901, the Spindletop well blew in in spectacular fashion, launching a thousand legends. The volume of water, sands, rocks, gas, and oil that burst from the hole almost tore the derrick to pieces and shot hundreds of feet in all directions. For the next nine days, the well spewed forth a tower 200 feet high of pure, high-quality crude, a full 70,000 barrels a day. The geyser was finally brought under control on January 19, but not before it had become famous all over the world.

There had never been a well like Spindletop. The largest previous strike in the United States yielded 60,000 barrels a day, and the only known comparison lay in the far-away Baku Field in Russia. The impact was instantaneous. Beaumont boomed from a population of 9000 to 50,000 in a matter of three months. By 1902, more than 500 companies were doing business in oil storage, pipelines, and refining. But it was not only Beaumont that was transformed by Spindletop – it was the world.

A forest of derricks at Sour Lake

Eager to find similar discoveries, investors brought billions of dollars to Texas to search for oil and gas. And find it they did. Many of the world’s major oil companies got their start or grew to major status as a result of Spindletop and its aftermath, including the Texas Company (Texaco), Gulf, Sun, Magnolia (Mobil), and Humble (Exxon).

The cheap fuel they found in vast quantities revolutionized American transportation and industry beyond recognition. As the impact spread, the industrial and agricultural life of people everywhere in the world would become closely tied to this substance that came gushing out of the ground in Texas one day in 1901.

Boom, Boom, Boom

Desdemona during the boom

Spindletop was the beginning of an incredible boom that created the Texas oil industry. Oil required the opening of new frontiers in law, in chemistry, and in engineering. Refineries that rivaled the largest in the world were built. Port facilities along the coast were dredged to accommodate tanker ships. In 1909, dredging began on the Houston Ship Channel. Even the largest of the 19th century companies, such as the Kirby Lumber Company, soon looked small beside the growing oil companies.

The oil industry’s boom extended to other industries as well. The industry needed lumber and timber, rope, steel cable, pipe, casing, and other supplies. A list of related industries grew that didn’t even exist before the boom. Foundries and machine shops that had once turned out farm implements converted to oil drilling equipment. Some of them, such as Hughes Tools, themselves became world-famous corporations.

Oil-soaked ground in West Columbia

Amidst the excitement came tremendous waste and pollution. Gushers produced oil uncontrollably, sometimes for days. The runoff soaked into the ground or was channeled into makeshift tanks. Fires were commonplace, often leaping from one well or tank to the next. An 1899 Texas law had attempted to set minimum requirements for curbing waste and pollution. Other oil-producing states, including Oklahoma, Kansas, and California, had also passed laws to try to rein in the free-wheeling industry. But the ability to regulate the industry was hamstrung by the legal doctrine of the rule of capture. Local police and state authorities could do little more than look on.

Common Carriers

Scenes of the boom at Burkburnett

Before oil, cotton had been king in Texas. It was largely to move cotton that the state’s network of railways had been constructed. Now Texas had a new king. By 1904, more than 1500 railway tanker cars had been built to move the oil, along with fleets of trucks. Oil became the #1 item in railroad freight. Oil also required its own transportation network – hundreds of miles of pipeline, from field to refinery to distribution center. Each company built its own gathering pipelines that carried oil only from their own wells.

The first push for regulation of the industry came during World War I, which revealed the importance of oil to business, transportation, and the military. The major oil companies formed the first industry group, the National Petroleum War Services Committee (later the American Petroleum Institute) to try to establish procedures to effectively meet the nation’s needs during the war. The institute found that the operations of the oil industry were undermining their own future with wasteful practices such as wasting field pressure, which resulted in leaving valuable oil in the ground and inaccessible. The committee’s director went so far as to call production methods “extremely crude and ridiculous.”

Both the state and the federal government took action to try to regulate the industry. In 1917, the Texas legislature passed the Pipeline Petroleum Law, in which oil pipelines were designated as common carriers just like railroad lines. Because of the similarities, the Texas Railroad Commission was given the responsibility of seeing that petroleum pipelines were open to everyone’s oil and gas. In 1919, the Oil and Gas Conservation Law gave the Railroad Commission authority to enforce conservation and safety rules, including Rule 37, which set minimum distance between wells to protect field pressure. The Oil and Gas Division of the agency was organized along progressive lines by George C. Butte, a law professor at the University of Texas, and Clarence Gilmore. Gas regulation was further strengthened by the Gas Utilities Act in 1920.

Oil near Ranger going over the top

On the federal level, in 1917 the U.S. Bureau of Mines established an experimental station in Oklahoma to study means of improving production. Two years later, the director of the Bureau of Mines warned that drastic measures, including government intervention, might be required to ensure that production remained adequate to meet the nation’s needs for fuel for transportation, power, and national defense. According to the Bureau’s studies, as much as 80 percent of underground reserves were being wasted due to the wasteful production methods standard in the industry.

Shortly after the end of World War I, vast new discoveries were made in California, Oklahoma, and Texas. In Texas alone, the strikes included the fabulous Burkburnett, West Columbia, Roaring Ranger, and Desdemona fields. The nation’s oil reserves were doubled by these finds, and the warnings about waste gave way to a new round of overproduction and cheap prices.

Next >>

Page 1 2 3 4 5 6 7 8 9


Page last modified: August 18, 2011