Panhandle field is a giant gas and oil producing area that draws production from several horizons of Pennsylvanian and Permian age granite wash and dolomite, covering 200,000 surface acres in Hartley, Potter, Moore, Hutchinson, Carson, Gray, Wheeler, and Collingsworth counties of the Panhandle. The field was classified as one reservoir by the Railroad Commission of Texas until January 1, 1940, when cumulative production totaled 346.8 million barrels of oil. At that time oil production from the reservoir was separated into fields named Panhandle Carson County, Panhandle Gray County, Panhandle Hutchinson County, and Panhandle Wheeler County. The primary recovery of oil from the reservoir was driven by solution gas and gas-cap expansion and reservoir pressure has been maintained by gas and water injection. Secondary recovery attempts in the oilfield were begun with water flooding in 1946, but results were mixed. The vast gas reservoir, known as Panhandle Hugoton field, flanks the areas of oil production and is centered around the city of Pampa in Gray County. By 1994 the oilfields of the Panhandle district had yielded a cumulative total of nearly 1.42 billion barrels of oil and between 1973 and 1993 dry gas production was 8.1 trillion cubic feet.
Oil was first found in the Osborne area of Wheeler County in 1910. Called Panhandle Osborne field, the area gave up nearly 6 million barrels of oil before the Railroad Commission consolidated it with Panhandle Wheeler field on May 1, 1989. However, it was in Potter County, three counties to the west, that exploration resulted in the discovery of the nation's largest natural gas reserve. In 1916 Amarillo Oil Company, a locally funded venture, hired Charles N. Gould to study the Amarillo fold for petroleum exploration. Gould was a University of Oklahoma geology professor who had first mapped the area for a water study beginning in 1904. The area that Gould and his associate, Robert S. Dewey, studied and mapped for Amarillo Oil was located on either side of the Canadian River on two large ranches in northern Potter County, belonging to R. B. Masterson north of the river and to Lee Bivins south of it. When Gould and Dewey completed the study, they mapped a prominent structure that was ten to fifteen miles in diameter and exhibited 400 feet of uplift. Gould and Dewey named the structure John Ray dome for the nearby butte. Amarillo Oil was so impressed with the map and the salient anticline that the company leased 64,000 acres and spudded the No. 1 Masterson on John Ray dome in Masterson's high prairie, 225 miles from known production. The well was completed on December 9, 1918 to a total depth of 2,269 feet where 10 million cubic feet of gas were produced daily. In 1919 three additional wells were completed in the Masterson high prairie, and all four were tested on an open-flow gauge in March 1920, where they yielded 160 million cubic feet of gas a day. When other strong wells were brought in on locations several miles apart in the ever-widening field, it was obvious that the subsurface of the Panhandle held enormous natural gas reserves. Engineers have estimated that those reserves numbered 15 to 25 trillion cubic feet of natural gas at discovery.
This major gas discovery in a then-isolated section of the state captured the interest of major and independent oil companies, although they questioned the economic significance of even a giant field that had no market for production and no transportation system. Oilmen doubted that the reservoir would produce crude, the only form of hydrocarbons they sought. However, explorationists could neither deny nor ignore the possibilities of the discovery and they began leasing large blocks. On May 5, 1921 the Gulf Production Company No. 2 S. B. Burnett in Carson County reached a total depth of 3,052 feet and gave up 190 barrels of oil a day. The well was shut in after pumping 1,000 barrels of oil because there was no way to store it or move it to refineries. Although it was evident that oil could be produced in the Panhandle district, oilmen noted that production before mid-1923 in Carson and Hutchinson counties was by pump and was limited to field use.
However, on June 1, 1923 the Sanford No. 1 J. C. Whittington in southwestern Hutchinson County reached a depth of 3,077 feet and found flowing oil of 38° gravity, offering the encouragement oil explorationists needed. During 1925 three surrounding counties were opened to oil production and the first casinghead gasoline plant in the field, owned by American Refining Company, came on line. In January 1925 a well in Wheeler County drilled to a depth of 2,175 feet and began spraying oil. In March oil production was established in Gray County and in May 1925 Potter County was opened to oil. By January 1926 a second gasoline plant and a carbon-black plant were operating in the field. By June 1926 pipelines owned by Gulf Oil Corporation, Humble Oil and Refining Company (later Exxon Company, U.S.A), Magnolia Petroleum Company, and Bar-Tex, Marland, Pan-Tex, Plains, and Sinclair companies offered outlets for crude produced in the field. By late September 1926 Panhandle field reached a daily production average of 120,870 barrels of oil from 427 wells, and between 10,000 and 14,000 barrels of oil were shipped by railroad tank cars from the field to refineries. In February 1927 the Morton No. 1 Reeder in Moore County came in with initial production of 225 barrels of oil from a depth of 3,422 feet. Peak yearly production occurred in 1927 when more than 40 million barrels of oil were reported. By January 1930 voluntary proration was in practice in the five-county oilfield and met moderate success until statewide proration was installed by the Railroad Commission on August 14, 1930.
Even though development of Panhandle field was directed toward oil exploration after the first oil well was completed, natural gas reserves proved prolific. Beginning in 1925 gas pipelines were laid to move production to distant markets. From 1925 to 1930 lines were built by Northern Texas Utilities, Lone Star Gas, South Plains Pipe Line, Cities Service Gas, Canadian River Gas, and Consolidated Gas Utilities companies. By 1929 the field supported forty-four gasoline plants and fifteen carbon-black plants, but by 1931 the number of plants increased to fifty-three gasoline and twenty-four carbon black. By mid-1937 the number of carbon-black plants climbed to thirty-one. The rapid growth of these plants and the small number of gas pipelines led to waste of natural gas and to the drainage of gas from leases with no pipeline connection. Although the state legislature enacted the Common Purchaser Act in 1931 to give gas market equality, the courts struck down the order of the Railroad Commission to enforce the law. In 1933 the Sour Gas Law was passed by the state legislature at the lobbying of gas-stripping operators. It allowed owners in Panhandle Hugoton field, where the common pool consisted of as many as 300,000 acres, to use 25 percent of open-flow capacity for stripping the gas of its natural gasoline and for blowing the residual gas into the atmosphere when no reasonable market was available. Although pipeline companies wanted to buy the gas and the public protested the health hazard, operators flared over a billion cubic feet of gas each day in the field. It was 1935 before the law was repealed and upheld in the courts, effectively ending stripping and flaring procedures in Panhandle field.
Although gas flaring presented serious problems for operators and the public in the Panhandle, the field became known nationally as a helium reserve. Careful analyses of gas in the vast reservoir revealed the presence of helium in the Cliffside area in central Potter County. Since the only known helium for the nation existed in a near-depleted field near Petrolia, Texas, and one at Dexter, Kansas, the estimated reserve of 100 billion cubic feet at Cliffside represented an important find. The federal government acquired 50,000 acres on the producing structure and an extraction plant was constructed near Amarillo in April 1929. By January 1, 1994 Panhandle field, the largest-volume gas field in the United States, reported annual production of 165,664,617,000 cubic feet of gas from 4,499 producing wells. The cumulative production from 1973 through 1993 was 8,108,125,146,000 cubic feet of gas. Annual oil production in the giant field was 5,023,878 barrels, and the combined cumulative yield from the original field and its successors totaled 1,419,994,844 barrels. With its gigantic yields of both gas and oil over three-fourths of the twentieth century, Panhandle field represented one of the greatest petroleum reserves ever found in Texas.