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OIL AND GAS INDUSTRY

OIL AND GAS INDUSTRY. Luis de Moscoso, a survivor of the DeSoto expedition, recorded the first sighting of oil in Texas. After the expedition was forced ashore in the area between Sabine Pass and High Island in July 1543, the explorers observed oil floating on the surface of the water. They collected the asphaltic substance and used it to caulk their vessels. Thereafter, settlers in Texas and visitors commonly observed seepages of crude oil. During his visit to Texas in 1854, Frederick Law Olmsted noted "a slight odor of sulphurreted hydrogen" at Sour Lake. The discovery and production of oil occurred sporadically during the second half of the nineteenth century. After the Civil War, encouraged by the growing national market for kerosene and other petroleum products, Lyne T. Barret drilled and completed a well near Oil Springs in Nacogdoches County, but a decline in prices barred further financing of the venture. In 1886, George Dullnig, a Bexar County rancher, discovered a small quantity while drilling for water, but it was not sufficient to justify additional development. The first economically significant discovery came in 1894 in Navarro County near Corsicana. The Corsicana oilfield developed gradually and peaked in 1900, when it produced more than 839,000 barrels of oil. The first relatively modern refinery in Texas, operated by the J. S. Cullinan Company, opened at the field in 1898. The major importance of the Corsicana field lay in establishing the potential for commercial oil production in Texas. Its success prompted random exploration in various parts of Navarro County, which led to the discovery of the Powell oilfieldqv in 1900. This field rose to 673,221 barrels of oil a year in 1906 and peaked at 33,177,831 in 1924 after the Woodbine sand was found in January of the previous year.

Following the lead of Pennsylvania, the Texas legislature passed its first regulatory statute for oil in 1899, relating to the protection of groundwater, the abandonment of wells, and the conservation of natural gas. Subsequent legislation modified and expanded this statute. Beginning in the upper Gulf Coast area, drillers and producers attempted to establish field rules, relating primarily to fire prevention. According to one operator, "the constant danger of fire was a source of great anxiety." One of the most popular areas for exploration in the upper Gulf Coast area was near Beaumont, where drilling began in 1892. Following three shallow failures, the Gladys City Oil, Gas, and Manufacturing Company hired Anthony F. Lucas, who supervised the drilling activity of the Hamill brothers of Corsicana. After several additional failures, work resumed with the financial backing of Pittsburgh investors. With improved equipment, Lucas spudded in a well on October 27, 1900; it came in at 1,139 feet on January 10, 1901, and produced more than an estimated 75,000 barrels of oil a day. The new Spindletop oilfield, which produced the first oil boom in Texas, reached peak production of 17,500,000 barrels in 1902, after which it diminished to insignificance until it was reentered in 1925 and during the 1950s and 1960s. During the 1970s, the field produced sizable quantities of sulfur.

The success of the prolific new field prompted additional exploration in the Gulf Coast area, especially on similar salt domes. A series of economically significant discoveries followed, beginning with the Sour Lake (1902), Batson-Old (1903), Humble (1905), and Goose Creek oilfieldsqv (1908). Like earlier fields in Pennsylvania and West Virginia, Gulf Coast fields typically flourished and declined quickly. During the first decade of development, however, operators produced sufficient crude oil to provide feedstock for several refineries and to provide traffic for a growing pipeline system in the region. The Texas Company, later Texaco (formed in 1902 from the Texas Fuel Oil Company), the J. M Guffey Company, and the Sun Pipe Line Company connected with most of the fields and carried Texas crude oil for use as an unrefined boiler fuel and to Gulf Coast refineries for processing into fuel oil. In 1904 the total pipeline runs of the Security (Standard Oil of New Jersey), Texas, Guffey, and Sun pipelines was about 18,000,000 barrels. The largest producer in Texas was the J. M. Guffey Petroleum Company, which produced more than a third of the state's oil. Texas was still the province of small producers in 1905, when only three Texas companies produced more than $45,000 worth of crude oil. The Rio Bravo Oil Company (part of the Southern Pacific Railroad) and the Landslide Oil Company were the only other firms to produce more than $45,000 worth of crude during the third quarter of that year.

Small refineries proliferated at Spindletop during the first year of production. In 1902, J. M. Guffey Petroleum Company (renamed Gulf Oil Corporation in 1907), built a larger refinery capable of producing kerosene. In that same year Gulf and the Texas Company built pipelines to connect their refineries with the Glenn pool in Oklahoma. Gulf's processing capacity grew to 50,000 barrels of crude a day by 1916. That year the total capacity of plants in Jefferson County was 154,000 barrels. Other companies, principally Sun and the Houston Oil Company, also built sizable installations. The Security Oil Company, owned by a foreign subsidiary of the Standard Oil Company of New Jersey, lost its plant in 1909, when the state sold it at auction for violations of antitrust statutes; after brief ownership by John Sealyqv of Galveston, it was acquired by Socony (Standard Oil Company of New York) directors, reopened as the Magnolia Petroleum Company, and expanded to 25,000 barrels in 1916. In 1925, Magnolia merged with Socony-Vacuum. The largest refinery in the area was the Baytown plant of the Humble Oil and Refining Company (later Exxonqv), which expanded steadily until 1940, when it was the largest installation in the United States, with a capacity of 140,000 barrels.

All of the activity in the Gulf Coast region expanded the economies of cities and villages, especially after service, supply, and related manufacturing companies located plants and distribution facilities in the Houston-Beaumont-Port Arthur area, thereby diversifying the economy of the region. The Houston Ship Channel opened in 1914 and began to attract refineries after the end of World War I. Employment related to the oil industry in the Houston area continued to grow during the 1920 and 1930s; by 1929, 27 percent of all manufacturing employees in Harris County were employed by refineries. Between that date and 1940, the capacity of all of the installations in the county increased four-fold. Oil production in the upper Gulf Coast area was boosted by numerous discoveries, the most prolific of which were the Orange (1913), Damon Mound (1915), Barbers Hill (1916), West Columbia (1918), Hull (1918), and Blue Ridge (1919) oilfields. Thereafter, though exploration was spread over more of Texas, large discoveries were made in the Pierce Junction (1921), Thompson (1921; see FRIO DEEP-SEATED SALT DOME FIELDS), High Island (1922), and Sugarland (1928) fields during the 1920s.

During its first two decades, the petroleum industry added to both the folklore of Texas life and to public coffers. New terms and images included the go-for-broke wildcatter, the hard-working and hard-playing roughneck, and the newly rich oilman, all of them fully established in folklore and films by the 1920s and subsumed in Jett Rink, a major character in Edna Ferber's unflattering novel Giant later in the century (1952). Beginning in 1905 with taxation on oil production, the industry became increasingly important as a source of public revenue. During 1906, the first full year of taxation, the comptroller of public accounts collected $101,403.25 on the basis of 1 percent of value of product. Thereafter, the sum varied with the volume of production and the tax rate; it exceeded $1 million in 1919 and $5.9 million in 1929.

By the latter date, oil exploration and production had extended beyond the Coastal Plain into North Texas, the central section of the state, and into the Panhandle and Permian Basin of West Texas. In North Texas, from Wichita Falls to Stephens County, wildcatters found numerous fields, including five that rank in the group of four dozen that comprise the major oil plays in Texas. Interest in the region grew from small discoveries near Jacksboro and from modest production found in Archer County and in the Petrolia oilfield of Clay County. Major development began with the Producers Oil Company's discovery well in the Electra field in January 1911. Thereafter, the Burk field followed in 1912, Iowa Park in 1913, and the composite Wichita County Regular field in 1915. Major discoveries followed in the region, including the Ranger field, by the Texas Pacific Coal Companyqv in 1917, Burkburnett Townsite and Desdemona in 1918 (see RANGER, DESDEMONA, AND BRECKENRIDGE OILFIELDS), and K.M.A. (after the Kemp, Munger, and Allen Oil Company) in 1919. Further developments occurred in Archer, Coleman, and Young counties in 1921 and in Eastland, Stephens, and Shackelford counties in 1922. During this same period numerous smaller fields were discovered and developed and larger fields were extended and completed to greater depths, making the region of increasing importance in the industry. In 1924 about one-third of the new wells in Texas were completed in the Holliday-Archer area alone. Much as in the Gulf Coast area, expanded oil production in North Texas brought further industrial development. Service and supply companies opened offices in Wichita Falls and, later, in Fort Worth. Gulf Oil Corporation opened a refinery in Fort Worth in 1911, followed by Pierce Oil Corporation in 1912 and Magnolia Petroleum in 1914. North Texas was integrated into the industry through pipelines constructed by the Texas and Gulf pipeline companies in 1912. The Prairie Pipeline Company extended lines from Ranger to Galveston and from Ranger to Cushing, Oklahoma. Natural gas, produced in most of the fields in the region, was commonly piped to nearby towns and cities. With the construction of a carbon black plant in Stephens County in 1923, the Texas petrochemical industry was born. Wichita Falls, nearer early production, began as the service and supply center in the region; its population grew from 8,200 in 1910 to 40,079 in 1920. However, as production moved southward and the Texas and Pacific Railway extended spur lines to the new areas, Fort Worth, served by the T&P, supported much of the new exploration and development.

Exploration shifted back to Central Texas when A. E. Humphreys found the Woodbine sand in the Mexia field (see WOODBINE FAULT-LINE FIELDS) in Navarro County, in 1920. An 18,000-barrel confirmation well triggered a major leasing and drilling boom in the oldest producing section of the state the following year. Thereafter, production was found in the Currie in 1921, and three fields, Deep Powell, Wortham, and Richland, in 1924. Extensive pipeline construction begun in 1922 continued through 1924, as the Gulf, Humble, Magnolia, Prairie, and Texas pipeline companies provided further connections between wells in the area and refineries in the Gulf Coast area. By mid-1925, 1,725 wells were producing oil in the Corsicana area. Magnolia Oil Company operated the largest refinery in the region.

Early exploration in the Texas Panhandle proceeded during developments in North Texas, based initially on water-resource survey work carried out by Charles N. Gould, who began mapping geological formations in the area in 1904. The actual discovery came in 1918, when the Amarillo Oil Company's gas well, Masterson No. 1, was completed with initial production of 10,000,000 cubic feet daily. Additional wells, especially Masterson No. 4, which produced 107,000,000 cubic feet, and Bivins No. 1, which extended the field nearly nine miles, confirmed the presence of a natural gas field of national importance. By 1994, the various sections of the Panhandle gas field had produced about eight trillion cubic feet of natural gas. After the round of early drilling, additional gas wells were drilled for local consumption, and a line was laid to Amarillo in 1923. An oil discovery by Gulf in 1921 spurred activity briefly, but work in the region lagged until 1923, when J. C. Whittington's No. 1 Sanford well in Hutchinson County was completed as a flowing well. By 1926, the Panhandle was a major producing region. Most of the oil came from the Borger area and other parts of Hutchinson and Carson counties, though discoveries had also been made in Gray, Potter, Moore, and Wheeler counties. Peak production during the era of exploration in the Panhandle was reached in 1927, at 39,431,789 barrels, principally from Hutchinson County. After several years of declining yields, the full development of discoveries in Gray County produced a rebound in production to 32,274,822 barrels in 1930. During 1926, seven oil companies constructed pipelines and storage facilities in the area, some connecting to systems that reached the Gulf Coast and Oklahoma. Related industrial activity began in 1922 with the construction of a gasoline stripper plant, the American Refining company (later the Phillips Panhandle Refinery); carbon black operations began with the Western Carbon Company operation in Carson County in 1926. Amarillo grew with this activity, from 15,494 in 1920 to 43,142 in 1930, but much of the population growth occurred in such new settlements as Borger and in older shipping points such as Panhandle. The former, founded by A. P. "Ace" Borgerqv in February 1926, grew rapidly during its first year, like boomtowns before and after it. Estimates place its population at between 10,000 and 20,000. After it developed the reputation of being a wide-open settlement sheltering legions of moonshiners, gamblers, prostitutes, and hijackers, the Texas Rangersqv arrived in force, and drove scores of miscreants out of town, much as they had done in other parts of the state; they repeated the performance in Wink in 1929. In the Panhandle, oil and gas activity diversified the regional economy, as it had already done in other sections of the state. Repeating a pattern that began in Beaumont, oil and gas also offered alternative employment to sharecroppers and their sons, many of whom left the land and followed drilling rigs to successive booms over Texas. Model-T and Model-A Fords, with boxes and suitcases strapped to their trunks, rear seats filled with children and household goods, became familiar sights in most parts of the Texas during the first three decades of the twentieth century. Ragtowns, tent cities, and shotgun houses were as common in the oil patch as dog-run houses in the countryside and mail-order bungalows in towns. Gushers and forests of drilling rigs replaced herds of longhorn cattle as symbols of Texas life.

With less stir, oil production began in Southwest Texas with a series of small discoveries in McMullen, Calhoun, and San Patricio counties and assumed increasing importance with the opening of the Piedras Pintas field in Duval County and the Mission field in Bexar County in 1907. The Somerset field, discovered accidentally during drilling for a water well in 1913, went into major development in 1920, bringing the first sizable oil production to the area. In the same year, oil was discovered in the Refugio gas field. In random drilling near Laredo, Oliver W. Killam made small commercial discoveries in the Mirando City and Aviator fields beginning in 1921. Killam and his associates operated a medium-sized refinery in the area and built a pipeline to carry crude oil to the Texas and New Mexico Railroad. During the late 1920s, additional discoveries were made in Southwest Texas, including Government Wells in Duval County, adjacent to the Jennings gas field, and smaller gas production in the Agua Dulce, Kohler, and Three Rivers fields. Even after oil prices declined in 1929, exploration continued in the region, leading to the discovery of the Pettus Townsite field in Bee County in 1929. The steady progress of geological mapping led to the discovery in 1929 of the Darst Creek oilfield, the region's first major oilfield. In view of the glut of crude oil, operators in the field negotiated an agreement to limit production, with the cooperation of the Railroad Commission, which supervised the operation of the pact. Natural gas discoveries of importance were made at White Point in 1914, and near Laredo in 1911 and Kingsville in 1920 and 1922. As was common in other areas of natural gas production, service was first extended to communities near the fields, beginning with Laredo in 1911 and San Antonio in 1922. Completion of a gas well that produced 41,000,000 cubic feet per day in the Carolina field confirmed the presence of large quantities of natural gas in and around Webb County. During the 1920s, further important discoveries of gas were made in Southwest Texas. By 1927, natural gas production in the region passed four billion cubic feet a day. Natural gas pipelines were constructed from Live Oak County and from White Point and Refugio to Houston in 1926. Lines were also built from Mirando to the lower Rio Grande valley and from other fields to New Braunfels, Seguin, San Marcos, and Austin. Construction of trunk lines to deliver gas from the region to the Gulf Coast began in 1925 and connected to home and industrial distribution systems in Houston and Baytown during 1926 and 1927. Thereafter, the pipeline system was upgraded and expanded, especially during the 1950s and 1960s, making this region a gas-producing province of great importance to the state. With the completion of these lines and those from the Panhandle to the Middle West, the natural gas industry in Texas was established as an important part of the state's economy. The comparatively modest oil production of Southwest Texas and the absence of sufficient outlets for petroleum products retarded related industrial development until the ship channel was completed in Corpus Christi in 1926. Thereafter, the city became attractive as a site for refinery location. Humble built a small refinery at Ingleside, and a large number of small plants opened in Corpus Christi, Refugio, and Port Lavaca during the 1930s. Of this group, the largest were in Corpus Christi, operated by the Taylor Refining Company, the Pontiac Refining Company, and the Southwestern Oil and Refining Company. The Grayburg Oil Company of San Antonio extended the old Somerset field with deeper drilling and produced about 1,000 barrels of oil per day, which the company ran to its local refinery; products were sold in a dozen Grayburg stations in the area.

Oil and gas production lagged considerably in Central Texas. Though several small wells were completed in the Austin Chalk formation in 1913, the first notable discovery in the region came near Thrall, about forty miles northeast of Austin, in Williamson County, the following year. Compared to production in prolific fields in North Texas, however, wells in this field were modest and did little more than focus attention on the region for a brief period of time. The Luling fieldqv, about forty miles south of Austin, was the scene of random drilling during the third decade of the century. The United North and South Oil Company of Edgar B. Davis brought in the first significant production in the Edwards lime formation in 1922. In 1924 Magnolia ran a pipeline to Luling that connected with its refinery at Beaumont. Two years later the Lytton Springs field, twenty-eight miles south of Austin, opened; it sustained interest in the prospects of the region in part because it, like the Thrall field, produced from the "serpentine plug," an altered igneous-rock formation. The first big year for exploration in the region came in 1928, with the discovery of the Salt Flat field, the second major Edwards lime production.

The penultimate section of the state to secure significant oil production was the Permian Basin, a geological province that includes several counties of eastern New Mexico. Despite modest discoveries, including one in Mitchell County in 1920, this region did not attract statewide attention until 1924, when wells brought in by Michael L. Benedum in the Big Lake oilfield, discovered in 1923, proved the presence of commercial quantities of crude oil. Between that date and 1930 highly important discoveries were made, including the Howard-Glasscock (1925), McCamey (1925), East Howard-Iatan (1926), Yates (1926), Hendrick (1926), Kermit (1928), North Ward-Estes (1929), and Fuhrman-Mascho (1930) fields. The cumulative potential production of these fields made the thinly populated region of great importance and led to the growth of Big Spring, San Angelo, Midland, and Odessa and to the establishment of new settlements in Upton, Crane, Howard, and Winkler counties. With declining oil prices and limited pipeline transportation to Gulf Coast refineries, however, the region developed relatively slowly. Thus, producers in the Yates and Hendrick fields negotiated voluntary limitations of production, under the auspices of the Railroad Commission. With increased production from California, Oklahoma, and the Van field of Texas came lower crude oil prices in 1929, and this region settled into relative inactivity by the end of the year.

In the first quarter of 1929, Texas operators produced 69,541,834 barrels of oil. More than half of this amount came from the following ten companies, listed in declining order of volume: Gulf Production Company, Humble Oil and Refining Company, Southern Crude Oil Purchasing Company (Standard Oil of Indiana), the Texas Company, Shell Petroleum Corporation, Yount-Lee Oil Company, Magnolia Petroleum Company, J. K. Hughes Oil Company, Pure Oil Company, and Mid-Kansas Oil and Gas Company (Ohio Oil Company). Independent operators remained active and important, however, in most sections of the state.

East Texas, the final section of the state to obtain high-volume oil production, had long been an arena for relatively unsuccessful exploration, with the exception of the closely owned Van field, discovered by Pure Oil Corporation in 1929. Further tests of the Woodbine sand in various parts of this large section of the state indicated that it was unlikely that oil would be produced profitably from it. That prognosis was proved grandly erroneous in 1930 by two promoters, Columbus M. "Dad" Joinerqv, and A. D. "Doc" Lloyd (Joseph I. Durhamqv). Their discovery well, the Daisy Bradford No. 3, brought oil from the Woodbine sand formation in Rusk County on October 6, 1930. The approximate size of the field, about forty-three miles long and 12½ miles wide, was largely established during the next four months: in December, Ed Bateman and Associates' Crim No. 1 extended it nine miles, from the Joiner well to the vicinity of Kilgore; during January 1931, Moncrief-Faring-Arkansas Gas and Fuel Company's Lathrop No. 1 found oil twelve miles from Bateman's well. The giant East Texas oilfield ultimately extended into parts of Upshur, Gregg, Rusk, Smith, and Cherokee counties. The flood of production from the field depressed exploration in West Texas and Southwest Texas until the middle of the 1930s, and the economic impact of the discovery compounded the negative effects of the Great Depression. By May, average daily production from the field reached 303,750 barrels; by June, crude oil in East Texas was selling for twenty-two cents a barrel, and higher gravity oil in the Mid-Continent area of Oklahoma, Kansas, and North Texas had fallen to twenty-seven cents. The field developed rapidly because more than three-quarters of the productive and prospective acreage was owned by independent operators and wells were relatively inexpensive to drill and complete. Operators had drilled 1,100 wells by mid-1931 and more than 2,000 more by the end of the year. By mid-year, thirty-one refineries had been completed and six more were under construction. Taylor Refining Company, of Tyler, the East Texas Refining Company, of Dallas, Central Refining Company, Dallas, and Sinclair Refining Company, Fort Worth, were the largest processors. One hundred one-barrel and two-barrel "cookers" were also manufacturing gasoline and kerosene in the field. Production in the field soared from 109,561,000 barrels in 1931 to 156,109,346 in 1932 and 211,586,118 in 1933. During the latter year, the posted price varied greatly, from $.75 in January to $.10 in April, back to $.75 in August and to $1.00 from September 30 to the end of the year. "Hot" oil, a term that meant, variously, oil produced in excess of Railroad Commission orders and oil that was siphoned from pipelines and otherwise dishonestly obtained, was reported as selling for as little as $ .03 a barrel during the year.

State officials and agencies made a number of unsuccessful attempts to curb excess production in East Texas. After reversals in court and numerous heated conferences on the topic, Governor Ross Sterling ordered a field shut-down and sent the Texas National Guard to enforce his decree and the proration rulings of the Railroad Commission that followed. Production in the field resumed, and in February 1932 the state Supreme Court ruled that the governor's decree was illegal. With additional assistance of the Texas Rangers, the commission got significant compliance in the spring of 1933, but was unable to curb the sizable outflows of hot oil to adjoining states. A partial remedy for illegal shipments came in the fall of 1933, when Section 9(e) of the National Industrial Recovery Act authorized federal interdiction of interstate shipments of oil produced in violation of state conservation regulations. Two years later, this provision was made a free-standing statute. In the meantime, continued improvement in production technologies, including instruments for measuring the bottom-hole pressure in oil wells, made it possible for the Railroad Commission to enforce allowable production levels through the legal system of the state. The increasing ownership position of major refiners and the decline of "edge" wells also facilitated limitation of production. At the end of 1935, there were still more than 1,000 operators in the field, producing oil from 19,313 wells. Reported production for the year was 158,599,275 barrels. By 1937 major refiners processed half of the oil from the field, and only half a dozen significant independent refiners remained in the field. The Texas Company operated the largest plants, in Neches and West Dallas.

As the East Texas field settled into stable production patterns, interest in the Permian Basin revived, leading to discoveries north of existing production. The North Cowden (1930), Means (1934), Goldsmith (1935), Seminole (1936), Wassonqv (1937), Slaughterqv (1937), and Dune (1938) fields became major fields that supplied distant refineries. Older areas, such as Kermit and South Cowden, were developed more fully with the stabilization of prices and the construction of additional pipeline facilities. By the end of the decade the region had eleven refineries, the largest belonging to the Cosden Petroleum Company, in Big Spring, and the Col-Tex Refining Company, in Colorado City. Two carbon black and thirteen natural gasoline plants were also in operation at the time. In the Panhandle, oil discovered during the 1920s was developed more fully during the next decade, when it supported eight refineries, the largest of which was operated by the Phillips Petroleum Company in Borger in 1938. Thirty-one carbon black plants were in operation in the Panhandle during the same year, along with forty-two natural gasoline plants, which stripped liquid from the vast quantity of natural gas produced in the region. Southwest Texas continued to be active during the 1930s, with a relatively large discovery, the Tom O' Connor field, in 1934. Other finds of regional significance included the Greta, Sam Fordyce, Loma Novia, Lopez, Placedo, Plymouth, Flour Bluff, Benavides (or North Sweden), and Premont fields. Additional refineries were constructed, bringing the number to twenty-six at the end of the 1930s. The largest installation was Humble Oil and Refining Company's expanded refinery at Ingleside. During this period, the continued construction of natural gas pipelines tied the growing volume of natural gas production to urban markets and to the growing petrochemical industry on the Gulf Coast. The major find in Central Texas also occurred during the depression, with the discovery of the Pearsall field in the Austin Chalk of Frio County in 1936. East Texas production was supplemented with oil from the Talco field the same year. In 1931 Conroe oilfield set off renewed exploration in the Gulf Coast area. Thereafter, large production was found in the Tomball (1933), Old Ocean (1934), and Anahuacqv (1935) fields, in addition to smaller finds at Manvel (1931), Hastings (1935), and Webster (1936). Natural gas resources in the region were boosted with major discoveries in the Old Ocean field in 1936 and with the first of a long succession of gas discoveries in the complicated and prolific Katy field in 1938.

In 1939, the beginning of World War II in Europe disrupted European petroleum markets. American exports to Europe fell by nearly a quarter. In Texas the Railroad Commission responded by cutting allowables by one-fifth and by increasing shut-down days. With further curtailments in 1942, Texas was producing less than 60 percent of its potential, and both exploration and field development slowed. In the last year of the war, with the completion of the Big Inch and Little Big Inch pipelines, which carried Texas oil to Eastern markets, the industry picked up somewhat. During the course of the war, however, shortages of trained personnel and the diversion of steel for war uses continued to hold back areas of known reserves. The wartime system of price controls and rationing lasted until 1946. During the war years, 1939–46, Texas oilmen found seventy-seven new fields or producing horizons. Many of these discoveries, modest by prewar standards, were in older fields, but they made significant additions to reserves in Texas. New development occurred in most sections of the state, except the Panhandle, North Texas, and Central Texas. The Oyster Bayou field in Chambers County went into production in 1941 and was tied to upper Gulf Coast refineries. In the Seeligson field of Southwest Texas (Kleberg and Jim Wells counties), six new producing horizons were discovered; 19C produced nearly 100 million barrels by 1994. In this same region, the TCB 21-B field (Tijerina-Canales-Blucher), brought significant gains in reserves. The discovery of the Hawkins Woodbine field in East Texas was the largest significant find in Texas during the entire period. Quitman Paluxy field also added significantly to the reserves of this region. In West Texas, Wassonqv 6000' (1940) and 7200' (1941), McElroy (1941), Fullerton (1941), Mabee (1943), Sandhills-McKnight (1944), Anton-Irish (1944), Fullerton 8500' (1944), TXL Devonian (1944), Midland Farms (1945), Fullerton San Andres (1945), Block 31 (Devonian) (1945), Levelland (1945), and Fullerton (Ellenburger) (1945) were important discoveries and continued the development of this prolific region. Old production was extended on the Louisiana border with the Rodessa fieldqv. Major additions to natural gas reserves were made with the discovery of Carthage (Pettit, Lower Gas) and Opelika (Transpeak) fields in East Texas and the Headlee (Devonian) and Brown-Bassett (Ellenburger) fields in the Permian Basin.

Postwar markets for oil and gas expanded so rapidly during the autumn of 1947 that the Texas Railroad Commission ordered no shutdown days for the first time in eight years. With the end of federal regulation of oil and gas production, reversion to well-spacing regulations of the commission brought a surge of drilling. As demand swelled, petroleum prices rose to heights unequaled in almost three decades, beginning as soon as price controls ceased on July 25, 1946. The posted price of West Texas intermediate-grade crude, for example, frozen at $.92 during the War, jumped to $1.27 by the end of that month, rose another $.10 before the year's end, and went to $1.62 in March 1947, $1.82 in October, and $2.32 in December 1947. Demand for natural gas grew, in part as a result of strikes by eastern coal miners in 1946. Some of the extraordinary demand for oil products was met with imported crude oil, however, and in 1948, despite peak domestic production, the United States became a net importer of oil. Imports increased 24 percent in 1948–49 alone. Large-scale importation retarded exploration in areas that did not seem to have the promise of large oil reserves; Southwest Texas was especially affected. Nevertheless, by 1948 further pipeline construction connected fields in Southwest Texas and the Permian Basin with regional outlets for oil and gas. By January 1, 1950, Texas had 15,010 miles of gas transmission line and 26,409 mile of crude oil trunk lines. Their operation encouraged development of additional gas reserves in the upper Gulf Coast area, in Southwest Texas (especially in Hidalgo and Zapata counties), and in the Permian Basin. Interstate gas shipments more than doubled between 1950 and 1955 as transmission systems reached forty-six of the contiguous states. In the Permian Basin, the discovery of high-grade crude oil below the Permian formations encouraged deep tests in both new areas and old fields; it also led to reinvestigation of areas where prospecting had been unsuccessful in the twenties and thirties. Drilling in the region rose 50 percent between 1947 and 1948 and again between 1949 and 1950. Between 1946 and 1951 the number of independents and major oil companies doing business in Midland rose from 135 to 363, as companies such as J. S. Abercrombie of Houston and Rowan Drilling of Fort Worth established local offices. Among the newcomers were growing numbers of young men from other parts of the country; George H. W. Bush and John and Hugh Liedtke, among others, launched oil careers in the Permian Basin during this era. Major finds in this region included new discoveries in the Midland and Delaware basins, on the Central Basin platform and in the multicounty Spraberry trend. Major discoveries during the period 1946–50 included Andector (1946), Goldsmith 5600' (1947), Kelly-Snyder and Diamond M (1948), TXL (Ellenburger) and Cogdell (1949), and Prentice and Salt Creek (1950). By the end of the decade the Permian Basin was the leading oil-producing area in the United States.

The long-standing dispute over ownership of the Tidelands was settled with federal legislation in 1953. Earlier work, including a discovery on State No. 245, had not established the economic importance of these areas, but geophysical work off Brazoria, Chambers, Galveston, Jefferson, and Matagorda counties supported increasing levels of leasing and, in later years, significant discoveries. On-shore discovery of the Neches field in 1953 and West Hastings in 1958 supported declining reserves in the upper Gulf Coast and East Texas areas. The intense exploration of the early 1950s made sizable additions to the estimated known reserves of the state, which peaked in 1952 at 15,314,964,000 barrels. The major on-shore oilfields of Texas had been located by the middle of the 1950s. Though there were annual increases during some years thereafter, the general trend was downward, to 14,859,674,000 barrels in 1960 and 13,063,182,000 barrels in 1970. During the period of declining oil reserves, natural gas came to occupy an increasingly important place in the petroleum industry of Texas both as a source of energy and as the origin of feedstocks for a growing petrochemical industry. Federal and state governments had important roles in this general development. In 1947, the Railroad Commission ordered well shutdowns where it found operators flaring large quantities of casinghead gas. Its first target was the complex Seeligson field in Southwest Texas, where it required that all oil or gas be put to uses that conformed to conservation orders. The Seeligson order marked the first shot in a series of legal battles over gas conservation from which the commission emerged triumphant. By the end of 1948, eighty-two projects utilizing casinghead gas had been completed in Texas and forty-three more were underway, largely by major companies and large independents, often acting cooperatively. On April 1, 1953, the commission shut down the 2,268 producing wells in the Spraberry trend of the Permian Basin in its battle to eliminate the conspicuous waste of natural gas. A large measure of control over natural gas passed to the Federal Power Commission in 1954, when the United States Supreme Court ruled that the FPC had jurisdiction over the production of gas sold in interstate commerce (the FPC had set interstate prices since 1939). This decision, and the FPC policy of keeping the price of natural gas low, led to the growth of intrastate gas sales and encouraged the further expansion of the petrochemical industry within the state, as El Paso Natural Gas and other companies invested in sizable gathering and transmission systems.

During the 1950s, oilmen enhanced the gas reserves of Texas with the discovery of two new horizons in the Katy field (1954) and of eight new gas fields: Hansford (Morrow, Upper) in 1953; Emperor (Devonian) in 1954, Dora Roberts (Devonian) in 1955, Fashing and Halley (Devonian) in 1956, Viboras (Brooks) in 1957, and Thompsonville, NE (Wilcox 9500') and the Massive First and Massive Second sands of Viboras in 1959. Oil producers were less fortunate in sustaining reserves, in part because of a persistent cross-pressure of rising costs against constant revenues, largely the consequence of the increasing volume of less expensive foreign crude oil. With the exception of a short break during the Suez crisis of 1956, cheap foreign oil continued to reach American markets in increasing volume. In 1955, when total demand for oil rose 7.6 percent over the previous year, imports increased by 17.2 percent. When domestic demand fell in 1957 and 1958, Texas allowable production was cut in half, but imports continued to rise. Attempts made by the Texas Independent Producers and Royalty Owners Association and other industry associations to restrict imports did not succeed in Washington. By 1960, increased imports prompted the Railroad Commission to lower producing days to eight per month, a level that remained into 1962. The consequence of low prices and severely restricted production was the sale of numerous oil and gas properties and companies during the 1960s. Honolulu Oil, Union Texas Natural Gas, Republic Natural Gas, Monterey Oil, and Plymouth Oil were among the companies acquired by other firms during the decade. In 1969, Michel T. Halbouty of Houston, a leader in petroleum trade associations, estimated that the number of independent producers in the United States had declined by three-quarters during this period; though Texas was less hard-hit, as many as one-quarter of the independents in Midland, one of the state's petroleum centers, went out of business between 1951 and 1969.

The most notable developments in oil during the latter half of the 1950s were the improved management of production, the expansion of the petrochemical industry, and natural gas discoveries. Producers, caught between rising costs and prices depressed by imported crude oil, increasingly implemented efficiency measures, including unitized production of oil from common fields or pools. Scurry County producers formed the Scurry Area Canyon Reef Operators Committee, and the large and complex Seeligson field was unitized, along with fields throughout the state, with the encouragement of the Railroad Commission. The commission also sought and secured the watchdog's role over pollution, confirmed by judicial decision in 1964. The petrochemical industry of Texas grew dramatically as national demand for products grew at a rate of 10 percent a year into the 1960s. New installations appeared along the upper Gulf Coast, along the Houston Ship Channel, in Odessa, and in other locations. New products included styrene, butadiene, polypropylene, and benzene; larger quantities of synthetic rubber and ammonia were also produced in the state.

Expansion of petrochemical production in Texas was a response to the increasingly large quantities of intrastate gas available from Southwest Texas, the Permian Basin, and the upper Gulf Coast area. In Southwest Texas, the Wilcox sands yielded new reserves in Bee, Goliad, Webb, and Duval counties, while exploration in Hidalgo County found additional gas in the Frio sands. During the early years of the 1960s, drillers located more than half a dozen new gas fields in Zapata and Zavala counties. In the upper Gulf area, new production was found in the Alligator Bayou (Chambers County) and Chocolate Bayou (Brazoria County) fields. The largest gas discoveries were located in the Permian Basin of West Texas: Oates, N.E. (Devonian), Sandhills, Lockridge (Ellenburger 18600'), Waha, Toro, Sawyer, Block 16 (Devonian), Greasewood, Barstow (Fusselman), Block 16 (Ellenburger), MiVida (Fusselman) Evetts (Silurian), ROC (Devonian), Grey Ranch, War-Wink, Vermejo, and Elsinore. The largest gas discovery since the Panhandle field, the Gomez field in Pecos County, was followed by large additions to the Coyanosa and Ozona fields during the latter half of the decade. In Southwest Texas there were important gas discoveries in the Alazan, North (J-36), Laguna Larga, Zone 21-b trend, Laredo, C. J. Martin, and McMurray fields. In the upper Gulf Coast area the Katy I-B, Katy Cockfield Upper B, and Point Bolivar fields came into production near petrochemical installations. The other major gas fields discovered during the 1960s and 1970s include Trawick (Travis Peak) and Oak Hill (Cotton Valley) in East Texas, Giddings (Austin Chalk, Gas) in Central Texas, Washita Creek (Hunton 19475'), Buffalo Wallow (Hunton 19600'), Buffalo Wallow (Morrow), and Canadian, South East (Douglas) in the Panhandle, and No Word (Edwards) in Lavaca County.

In response to the Permian Basin Rate Case decision by the United States Supreme Court in 1964, which confirmed more extensive Federal Power Commission jurisdiction over the production of gas for the interstate market, the shift of gas to the intrastate market continued, making additional feedstock available to installations within the state. As prices moved up sporadically during the 1960s and early 1970s, hitting $.35 per thousand cubic feet of "new gas" in 1973, exploration for natural gas increased. Oil activity also picked up during 1972, when the Railroad Commission increased allowables to 100 percent of the "maximum efficient rate." In response to the continuing decline of national petroleum reserves, the federal government, which had capped oil prices in 1972, reclassified them according to four categories: old oil (oil produced from properties in production in 1972), released oil (oil from old reservoirs in excess of 1972 production), stripper oil (from wells that produced ten barrels or less per day), and new oil (not in production in 1972). Price ceilings were removed from all but old oil. Texas achieved record production in 1972 with 1,263,412,000 barrels, but estimated proven crude oil reserves continued to decline from the historical high point of 15,581,642,000 barrels, achieved in 1951. The decline of Texas reserves both affected and reflected the loss of spare capacity in the domestic petroleum industry with the continuing decline of the domestic industry and reserves.

Though the Texas industry had come to accept the fact that the prospects of the oil industry were increasingly determined in Washington, during 1973 it was indisputable that the future of Texas oil was being written in foreign capitals. Renewed warfare between Israel and some Middle Eastern Arab countries brought the United States and the Netherlands to support Israel, thus prompting Mu`ammar al-Gadhafi of Libya to call for an embargo of crude oil shipments from Muslim counties to the two western nations. Though the embargo "leaked" from the time it was proclaimed, the occasion permitted OPEC (the Organization of Petroleum Exporting Countries) to execute a grand shift of economic power: suppliers took control over the price of crude oil from multinational purchasers. Within six weeks of the October onset, the price of Arabian crude rose from $5.40 to $17 a barrel. In the United States the Emergency Petroleum Allocation Act, the federal government's response to shortages, adjusted the ceiling price of "old" oil upward to a national average of $5.05. New, released, and stripper oil was still uncontrolled and rose to $10.82 in December. In Texas the response was a dramatic increase in drilling and exploration. The rig count increased 35 percent between 1973 and 1974 and 26 percent the following year. The increased activity slowed the rate of decline of the state's oil production and crude oil reserves. The impetus lasted until 1976, when new federal classifications and lower price lids were established. Thus, while well completions rose 30.8 percent in 1975, they declined 4.3 percent the following year, in response to federal price regulation. Federal regulation also encouraged an economically risky shift of exploration investment to the Anadarko Basin of Texas and Oklahoma. Producers continued to implement secondary recovery projects in the Seminole and other fields. With improvements in geophysical techniques, offshore exploration for large reserves actually increased and the discovery rate improved, from Galveston to Corpus Christi, with significant discoveries in Galveston Bay and other areas by Pennzoil, Union Oil of Texas, and other companies. Refineries in the state invested largely in energy-saving and pollution-control technologies in response to higher operating costs and more stringent federal regulation. Federal policies changed again in 1976, with the Energy Policy and Conservation Act, which reorganized categories of oil, reduced the price of "upper-tier" oil, and placed ceilings on other categories. Wildcat drilling declined temporarily, but after six months new prices were issued, producing an increase in activity during 1977. During this year, a brisk demand in the interstate gas market stimulated additional off-shore exploration and the construction of additional processing projects on the Texas Gulf Coast. Refineries continued to reduce stack-gas emissions and to process waste oil for energy generation. By the end of the following year, the Alaska Pipeline was flowing; it alleviated international shortages until the autumn of 1978.

The second major international shock to the petroleum industry came in late 1978 with the fall of the government of the Shah of Iran. Shortages stemming from that event led to international shortages that lasted into the fall of the following year. With panic buying on new international oil exchanges and a rise in spot prices, crude prices rose by nearly one-third in March alone, while product prices rose by nearly two-thirds. President James E. Carter decontrolled oil prices in the United States, and the average price rose from $12.64 in 1979 to $21.59, and to $30 and then to $34 in 1980. In Texas, rig counts jumped from a yearly average of 770 in 1979 to 1,318 in 1981. During these years, old records in bids for state leases were broken. Costs of lease bonuses, royalties, supplies, and services and compliance with federal regulation, especially the Clean Air Act, drove the cost of exploration ever higher. Federal inducements through the Natural Gas Policy Act led oilmen to seek economically risky objectives, notably deep tight-sand gas. The Windfall Profits Tax of 1980 and the Economic Recovery Tax Act of 1981 made it progressively more difficult to raise capital for exploration. Subsequent lowering of the maximum tax rate and the setting of minimum tax standards dried up sources of the risk capital that had funded exploration during the postwar period. Some areas remained active, including edges of the Midland basin, gas exploration in off-shore areas and in South Texas, and the Austin Chalk formation of Central Texas. The latter, long known to contain oil, saw extensive lease play and drilling to 1986. State government received increased tax revenues from the petroleum industry during the boom. In 1983, 28 percent of all tax revenue came from oil and gas operations. With the inclusion of federal payments, income from oil and gas taxes, mineral lease and bonus, and oil and gas royalties still comprised 17.16 percent of the revenues of state government.

As most of Texas on-shore was considered "mature" in terms of geological exploration, producers turned increasingly during the 1980s to costly secondary and tertiary development programs to extract more crude oil from known fields. Shell, Mobil, Amoco, and Gulf undertook expensive carbon dioxide injections in Permian Basin fields. Texaco undertook steam-flood projects in the Sour Lake field; Mitchell Energy and Development Corporation and other operators tested Enhanced Oil Recovery techniques in East and North Texas. Though higher natural gas prices had prompted additional searches for this resource, oil exploration was prompted increasingly by optimistic economic projections of the price of oil. As Daniel Yergin put it, "forecasting blossomed." With the passing of time, however, oilmen realized that the decline of economic activity, especially in Europe during the early 1980s, fuel substitutions, and conservation had reduced demand in developed countries during the Texas boom. Thus, as price balanced demand, the price of crude oil declined and precipitated the initial wave of business failures in oil, finance, and real estate in Texas; in March of 1983, OPEC cut its price from $34 to $29 a barrel. In October of that year, distress in Texas business was clearly signaled by the failure of the largest independent bank in the state, the First National Bank of Midland. Further reversals were anticipated in 1985, when declines to $18 to $20 were forecast, but markets rose to $31.75 in late November, prompting buy-outs within Texas. The following year, prices fell as low as $7, triggering additional failures within the industry and the related financial community. The Texas rig count fell by more than half, from 677 to 311 in 1986, the most dramatic proportionate decline since the end of World War II. Drilling permits fell to about one-third of the high point reached in 1981. The rig count, reflecting exploration, fell to 206 in 1989, one-sixth of the record achieved eight years earlier. Austin Chalk-area exploration and development continued in brisk spurts, in response to new technologies such as horizontal drilling, used extensively by Oryx Energy in the area. Natural gas exploration in Southwest Texas and in off-shore areas slowed, but was sustained by finds in the Vicksburg sands and by the application of three-dimensional geophysical modeling of offshore areas. The rig-count in 1991 fell to 315, less than a quarter of its level in 1981. As national oil reserves and production declined sharply-by two million barrels per day between 1986 and 1990-Texas followed the trend. Estimated proven reserves as of January 1, 1992, were 6,797,000,000 barrels, less than half the historical peak achieved forty years before. Production of 612,692,000 barrels was less than half of the peak reached twenty years earlier.

Texas refineries, still the most active in the nation, processed 1,625,156,579 barrels of fluids during 1992, including 784,805,108 barrels of gasoline, 136,972,276 barrels of home heating oil, and 107,953,913 barrels of kerosene (jet fuel). In that year seven refineries had individual capacities or more than 200,000 barrels of oil a day: Amoco (Texas City), Exxon (Baytown), Chevron (Port Arthur), Mobil (Beaumont), Lyondell Petrochemical (Houston), Star Enterprise (Port Arthur and Neches), and Shell (Deer Park). Beginning in the late 1970s, with the decline of domestic oil production, these installations processed increasing quantities of heavier, higher-sulfur crude oil from Saudi Arabia, Canada, Mexico, and Venezuela that required investments in improved desulfurization techniques.

During the 1970s and 1980s the Texas oil and gas industry had what might well have been its last boom. Subsequently, economic, social, and political life in the state changed greatly. The petroleum industry, more than one-quarter of the state's economy in 1981, fell to half that level ten years later. Massive losses in energy and real estate lending brought the collapse of the large home-owned financial institutions that had commonly been at the center of community development; of the large banks, Frost National alone survived. One-third of oil and gas employment was lost between 1982 and 1994. Workers left producing regions as rigs shut down and producers carried through successive reductions in staff; white-collar ranks thinned noticeably from the late 1980s onward, as producers cut technical and managerial personnel in the face of stagnant prices and rising costs. State and local governments found that lower income from production and property taxes necessitated austere budgets, and affected communities launched searches for new revenue and increased efforts to diversify their economies. The proportion of state government revenue from the petroleum industry declined to 7 percent in 1993, one-quarter of its level ten years earlier. In the final decade of the twentieth century, a great industry and the aspects of Texas life that were related to it were downsizing. Only petrochemicals gained: lower prices for oil and gas caused facilities to expand and related employment to increase by one-tenth between 1988 and 1991. This sector of the industry remained competitive in international markets, despite pollution control and abatement costs, which approached $1 billion a year in 1994. At a rate governed by international prices and technology, the rest of the petroleum industry in Texas was inching down the road from Spindletop.

See also BANKS AND BANKING, CARBON BLACK INDUSTRY, GEOLOGY, GULF OF MEXICO, MARINE RESOURCES, OIL EXPLORATION, OILFIELD STRIKE OF 1917, SULFUR INDUSTRY, SYNTHETIC RUBBER MANUFACTURE, and TIDELANDS CONTROVERSY.

BIBLIOGRAPHY: 

Mody C. Boatright and William A. Owens, Tales from the Derrick Floor: A People's History of the Oil Industry (Garden City, New York: Doubleday, 1970). Christopher J. Castaneda and Joseph A. Pratt, From Texas to the East: A Strategic History of Texas Eastern Corporation (College Station: Texas A&M University Press, 1993). James Anthony Clark and Michel T. Halbouty, The Last Boom (New York: Random House, 1972). James Anthony Clark and Michel T. Halbouty, Spindletop (New York: Random House, 1952). John O. King, Joseph Stephen Cullinan (Nashville: Vanderbilt University Press, 1970). Henrietta M. Larson and Kenneth Wiggins Porter, History of Humble Oil and Refining Company (New York: Harper, 1959). Samuel D. Myres, The Permian Basin: Petroleum Empire of the Southwest (2 vols., El Paso: Permian, 1973, 1977). Roger M. and Diana Davids Olien, Easy Money: Oil Promoters and Investors in the Jazz Age (Chapel Hill: University of North Carolina Press, 1990). Roger M. and Diana Davids Olien, Life in the Oil Fields (Austin: Texas Monthly Press, 1986). Roger M. and Diana Davids Olien, Oil Booms (Lincoln: University of Nebraska Press, 1982). Roger M. and Diana Davids Olien, Wildcatters: Texas Independent Oilmen (Austin: Texas Monthly Press, 1984). Joseph A. Pratt, The Growth of a Refining Region (Greenwich, Connecticut: Jai Press, 1980). David F. Prindle, Petroleum Politics and the Texas Railroad Commission (Austin: University of Texas Press, 1981). Walter Rundell, Jr., Early Texas Oil: A Photographic History, 1866–1936 (College Station: Texas A&M University Press, 1977). M. Elizabeth Sanders, The Regulation of Natural Gas: Policy and Politics, 1938–1978 (Philadelphia: Temple University Press, 1981). John S. Spratt, The Road to Spindletop (Dallas: Southern Methodist University Press, 1955; rpt., Austin: University of Texas Press, 1970). Charles Albert Warner, Texas Oil and Gas Since 1543 (Houston: Gulf, 1939). Daniel Yergin, The Prize: The Epic Quest for Oil, Money and Power (New York: Simon and Schuster, 1991).

Roger M. Olien

Citation

The following, adapted from the Chicago Manual of Style, 15th edition, is the preferred citation for this article.

Roger M. Olien, "OIL AND GAS INDUSTRY," Handbook of Texas Online (http://www.tshaonline.org/handbook/online/articles/doogz), accessed September 16, 2014. Uploaded on June 15, 2010. Published by the Texas State Historical Association.