The Oil Wars

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No Quick Fix

Ernest O. Thompson explained the challenges that lay ahead. “People have so long thought that it was their proud privilege to do whatever they desired with whatever they owned, that it is hard … to get them to understand that … to do as one pleases with one's property carries with it the correlative duty to … do no violence to the rights of others.”

Affidavits and letters attested to the continuing violence in East Texas

The passage of the Market Demand Act did not erase the years of bad feeling or the problems faced by the commission. The U.S. Supreme Court upheld a lower court ruling invalidating Sterling’s martial law order, leaving 9300 wells in the hands of the Railroad Commission without armed support. Field inspectors were still underqualified and subject to intimidation. Most discouraging of all, while most producers were sacrificing to try to make prorationing work, others were producing hot oil or successfully obtaining federal injunctions to overturn proration orders.

Because of the injunctions and outright defiance, prices went down to 50 cents a barrel. Production in March 1933 exceeded 85 million barrels. Sabotage also escalated. One pipeline was dynamited three times in March. Other bombings destroyed more pipelines and a well, damaged derricks and a bridge, and set a creek on fire with burning oil.

The commission also dealt with complaints from ordinary citizens

With the civil unrest, respect for the Railroad Commission once again took a dip. A Texas House committee called the commission “incompetent,” and took it to task for allowing a few operators in East Texas to demoralize an entire national industry. A bill to take oil and gas regulation away from the Railroad Commission was defeated only after drunken supporters of the bill beat up a state senator and put him in the hospital. Outraged senators voted the measure down, but faith in the commission and prorationing continued to dwindle along with the price of crude, which reached 4 cents a barrel in May.

Enter the Feds

Scene in Rusk County, 1933

A major political shift took place in the nation’s capital in 1933, as Franklin Roosevelt swept into power. Roosevelt quickly became known for taking bold and aggressive steps to combat the nation’s economic problems. His Secretary of the Interior, Harold Ickes, would play a major role in the development of the Texas oil industry and the eventual shape taken by the Railroad Commission.

Ickes was convinced that the oil producing states and oil companies were incapable of putting their own house in order. Prices were hovering near the 10-cent mark, and hot oil was shipping out with impunity. Ickes suspected that the oil companies were talking out of both sides of their mouths, calling for prorationing but buying hot oil on the cheap. Ickes proposed federal regulation, and a bill was introduced in Congress to give the Secretary of the Interior the power to regulate production and set prices nationwide.

Harold Ickes was one of the most well known and controversial figures of the New Deal

Although the bill did not pass, the state was set for a national debate. Shortly thereafter, a ban on the shipment of hot oil was written into the National Industrial Recovery Act (NIRA), the centerpiece of New Deal legislation, with enforcement powers given to the federal government.

If any issue could get Texans riled up in those years, it was the specter of federal interference in state affairs. Ernest Thompson took to the radio airwaves, drawing on populist rhetoric and the emotional touchstones of states’ rights and the Lost Cause to fight against the oil and gas section of NIRA. In addition to emotional appeals, Thompson had some powerful arguments on his side. Petroleum was in widely scattered, both known and unknown; had numerous grades and forms; and was transported by complex and uncoordinated means, all factors that seemed to point to a local rather than a federal solution. Moreover, Texas, unlike the oil-producing states of Oklahoma and Kansas, had never ceded its public lands to the federal government. Legally, the state, not the federal government, had jurisdiction over any natural resources found on those lands.

Commissioner Thompson vowed that Texans "would not bow" to Ickes

Texans mobilized their heaviest artillery to defeat the NIRA plan in Congress. Vice-president John Nance Garner, Congressman Sam Rayburn, and Senator Tom Connally — all Texans — brought their considerable power to bear, and attorney general James Allred traveled to Washington to lobby against the bill. Carl Estes of East Texas also lent his voice to the cause, comparing the irascible Ickes to Santa Anna, and predicting that the Interior Secretary would soon meet his own San Jacinto. It seemed that hostility towards Ickes was accomplishing the one thing that had seemed impossible: uniting the industry behind the Railroad Commission.

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