Bryan Burrough (13 page)

For the moment, though, while Hunt was certain East Texas was a massive field, the rest of Texas Oil wasn’t convinced. In mid-December all eyes turned toward the northern edge of Rusk County, just outside the town of Kilgore, where a penniless wildcatter named Ed Bateman was sinking a well called the Lou Della Crim No. 1. On December 28 the well, a full fifteen miles north of the Daisy Bradford No. 3, erupted in a gusher of oil straight from the Woodbine. The majors, now ready to believe the field extended from the first well to the second, rushed in to buy leases. The next site to draw attention loomed a full twenty miles farther north, where a team of wildcatters was drilling a well they called the Lathrop No. 1 in Gregg County, near Longview. On January 26, 1931, a crowd of eighteen thousand people hooted and hollered as the well exploded into the third East Texas gusher in as many months.

The Lathrop well confirmed what no one had dared imagine: it was all one field. One vast oil field, shaped like a forearm, Lathrop high on the northern fist in Gregg County, Daisy Bradford at the southern tip in Rusk, a single pool of oil forty-five miles long and five to twelve miles wide. At the depth of the worst depression in the nation’s history, this realization set off a boom unlike any America had ever seen—as the field’s biographers, James Clark and Michel T. Halbouty, put it, “the California gold rush, the Klondike, the Oklahoma land rush and the wildest of past oil booms rolled into one.”

Overnight the people came in waves, hundreds of them, then thousands, by train, automobile, horseback, and on foot. The sleepy hamlets of Rusk and Gregg Counties—Kilgore, Henderson, Gladewater, and Overton—were overrun. When the hotels filled, the townspeople rented out rooms; when all the rooms were let, the newcomers threw up tents; when they ran out of tents, men slept in the open fields. The first to arrive were oilmen and scouts, every single one arriving with cash to buy mineral rights and trade leases. Farmers who two years earlier couldn’t lease their rights for $1.50 an acre were suddenly demanding and receiving $1,800 to $3,000 an acre. In the oilmen’s wake came hungry and unemployed men who took thousands of new jobs, as drillers, toolies, and errand boys. Behind them came the entertainment infrastructure: prostitutes and gamblers, bar owners, fry cooks, musicians, thieves—anyone and everyone who could make a buck.

Within hours the derricks began to go up—everywhere. The epicenter of the boom was Kilgore, in Gregg County, which within days was transformed into an oil field. Scores of buildings, even a bank, were torn down to make way for derricks. Forty-four separate wells went up on a single city block; by the middle of 1931, it was said a man could leap from derrick to derrick and never touch the ground for six miles. East Texas dwarfed any boom since Spindletop; in 1931 alone, an amazing 3,067 new wells would be drilled, an average of 8 a day, and every one seemed to find oil. New fortunes sprouted on a weekly basis. The first new millionaires included Ed Bateman, who sold his acreage to Humble for $1.5 million in cash—fifty times what Hunt paid Joiner—plus $600,000 in future oil payments.

At least initially, Hunt feared he might miss out. While he now controlled the Daisy Bradford No. 3 and four thousand acres at the heart of the new field, $109 wouldn’t drill many wells. On his way back to El Dorado to break the news to Lyda and the children, he stopped in Shreveport to ask a banker there for a $50,000 loan, the cost of two wells. Louisiana bankers, however, like their brethren across the country, had yet to appreciate the intricacies of the oil business; if they couldn’t physically see their collateral, their vaults stayed shut.

“You are broke,” the banker said, as Hunt recalled the conversation, “and your statement shows you are broke.”

“I’ve got the Joiner leases,” Hunt replied. “It’s a proven field. There’s oil in the ground, and that’s a bankable asset.”

Not in Louisiana it wasn’t. Dallas, however, was another story. The city’s two largest banks, First National and Republic National, were among the first in the United States to see the wisdom of lending against proven reserves; it was their vision that would transform Dallas into the mecca of Texas oil banking and fuel the city’s future growth. All Hunt needed was a single meeting with First National’s president, Nathan Adams—the friend of Clint Murchison’s father—to walk away with the fifty thousand dollars he sought. It was the beginning of a relationship between First National and the Hunt family that would last for decades.

Within days Hunt began sinking new wells on Daisy Bradford’s land. To sell the oil, he quickly laid a three-mile pipeline to the nearest railhead and was soon moving not only his own oil but his competitors’ as well, all of it sold to the Sinclair Oil Company at sixty-two cents a barrel. By the time Hunt completed his first wells, hundreds of seasoned drilling crews were already at work across East Texas. Unlike the Dad Joiners and Ed Batemans of the world, who took months scraping together enough cash to complete a well, the majors and their professional crews could reach the Woodbine in fifteen days, sometimes nine or ten. The furious pace of drilling was driven by what was called the “rule of capture,” a legal term roughly translated as finders keepers. Oil beneath the earth doesn’t conform to the niceties of lease boundaries, and a well drilled beside a competitor’s lease might well suck up oil from both. No matter. What you got, you kept. Those who tarried might end up with nothing. Thus, every well was a race.

The problem, as oilmen had found at the height of several booms during the 1920s, was that too much drilling risked reducing the subterranean pressure oil needs to rise to the surface; if a field was “overdrilled,” no amount of effort would coax oil out of a hole. An entire oil field could, in effect, be destroyed. As far back as the Winkler County boom of 1926 the majors had argued that drilling should be regulated so that a field wouldn’t be permanently damaged. That was fine for large companies, but wildcatters, most of whom drilled on a shoestring and needed immediate returns to stay afloat, strongly objected; they saw drilling limits, or “proration” as it was called, as a plot by the big companies to squeeze them out of business. Prorationing had been tried in Winkler County and elsewhere with some success; Clint Murchison had been among the independents who protested loudest. The problem was that enforcement fell to the Texas Railroad Commission, a toothless state agency widely regarded as a joke. The Railroad Commission had field agents, but many were corrupt. By and large, proration only worked where oilmen policed themselves.

The debate whether to institute proration in East Texas began almost as soon as the drilling. Governor Ross Sterling, a onetime chairman of Humble Oil, had issued proration orders even before Dad Joiner brought in the Daisy Bradford No. 3. But the Railroad Commission was all but powerless to enforce them, and they were widely ignored. Hunt, a stranger to most Texas oilmen, quickly emerged as one of proration’s strongest proponents; though an independent, he was sitting on millions of barrels of oil, which he would need time to drill. His first public appearance came at a meeting of oilmen in Longview on February 5. Tensions between pro- and anti-proration oilmen were already running high. “We don’t want rules that favor major companies over independents,” Hunt told the crowd. “We want long-term conservation measures that will benefit all operators in the field.”

“Sell out!” someone yelled.

“I haven’t sold out to anyone,” Hunt replied. “I favored prorationing in Arkansas. I favored it in Louisiana. And I favor it in Texas, too.”

Arguments over proration stretched on into the spring, even as oil prices began to plummet. Before the Daisy Bradford No. 3, prices stood at $1.10. By May, the rushing tide of East Texas oil had driven them down to fifteen cents a barrel, as low as two cents on the spot market. At these levels, it was almost impossible for anyone to make a profit. The Railroad Commission issued its first proration order for the field on May 1, fixing the field’s production at 160,000 barrels a day at a time when it was already producing a half million; the order was widely ignored. The Texas Legislature got involved, arguing proration bills all through the summer. Finally, on August 5, a day after the governor of Oklahoma declared martial law and sent in troops to shut down and begin regulating his state’s oil fields, Hunt and thirty-six other large East Texas operators sent a telegram to Governor Sterling urging him to follow suit. Sterling gave in. On August 16, declaring East Texas oilmen to be in open “rebellion” against the state, he declared martial law and sent in the National Guard to shut down the oil field.

The next morning, more than twelve hundred Guardsmen, many of them on horseback, marched into Rusk and Gregg Counties as the frantic drilling whirred to a stop. Scores of small oilmen, unable to pay their bills, abandoned their wells or sold out to larger outfits. Three weeks later, on September 5, Governor Sterling announced the field was being reopened, but with sharp limits: no well could produce more than 225 barrels a day. With prices so low, it was impossible for many wildcatters to make money. Only the wealthiest drilling groups, including the majors and large acreage holders like Hunt, could afford to keep drilling, and they did. When they found oil, they simply left it in the ground, confident that they would be able to sell it at some future point.

Slowly but surely, prices began to rebound, hitting ninety-eight cents a barrel in early 1933 before once again dropping like a stone, eventually falling to a low of four cents a barrel that May. The problem was obvious: many wildcatters were staying in business by openly flouting the proration limits. This illegal oil, much of it piped into tanker trucks that made nightly smuggling runs into Louisiana and Oklahoma, quickly became known as “hot oil,” and the fall of 1931 marked the beginning of a four-year struggle between feisty independents and state and federal regulators known as the “hot oil wars.” All through the Depression the Railroad Commission and its allies sued, seized, arrested, and prosecuted hot oil operators, who fought back with bribes, secret pipelines, and a blizzard of lawsuits.

To the big operators in East Texas, including Hunt, hot oil not only depressed prices, it threatened to damage the field itself. Stopping the flow of hot oil, however, proved beyond the Railroad Commission’s limited capabilities. At the end of their rope, Humble and other majors appealed directly to the new president, Franklin Roosevelt, to appoint a federal oil czar to squelch the hot oilers. Roosevelt appointed a top aide, Harold Ickes, and on July 14, 1933, the president signed an executive order not only upholding proration but sending hundreds of federal agents into East Texas to enforce it. It took three more years of hot oil prosecutions and legal challenges, some going all the way to the Supreme Court, but by 1936 the federal government had brought order to the East Texas field and stability to oil prices.

All through the hot oil wars Hunt drilled wells like a madman. Shirtsleeves rolled above the elbow, khaki pants splattered with mud, a cigar habitually jammed in one corner of his mouth, he worked from dawn till late in the evening seven days a week, driving from well to well to well, often with his teenage son Hassie at his side. Every cent he took in—from oil sales, from the new First National loans, occasionally from selling part of a lease—he plowed back into the search for more oil. By the end of 1932, despite proration and chaotic conditions and drenching rains, he managed to drill an astonishing 145 wells on his new East Texas leases. More than seven hundred thousand dollars in profits went to Dad Joiner, but even with oil prices at less than a dollar, Hunt himself took home his first million dollars and probably much more.

Closing his business in El Dorado and Shreveport, Hunt opened new offices in the People’s National Bank Building in downtown Tyler, a genteel southern town twelve miles west of the oil field’s western boundary. One of his brothers, Sherman, quit his Montana ranch to become Hunt’s right-hand man. Hunt had brought Lyda and the children from Arkansas in June 1931, moving them into a three-bedroom red-brick rental on Woldert Street. Though jammed with seven people—Hassie was now sent to Culver Military Academy in Indiana—the household ran with precision. Meals were served at eight, noon, and six, on the dot. The children were enrolled in schools. Other than a vague kidnapping threat or two—after one scare Texas Rangers guarded the family—life was good.

The foundation of Hunt’s little empire, however, remained far from secure. The problem was legal title to the Joiner leases. The old wildcatter had sold and resold shares of his mineral rights so many times that, as Hunt’s attorneys analyzed the situation, he actually held unobstructed titles to barely two of the four thousand acres he sold Hunt. One by one Joiner’s investors sued, until by mid-1932 Hunt found himself facing some three hundred separate legal challenges. Rather than fight each one in court, Hunt told his lawyers to offer the plaintiffs cash settlements. It worked. Dozens of the plaintiffs, mostly poor farmers, took the $250 or so Hunt offered and withdrew their suits. The whole mess would still take nearly a decade to clean up, but Hunt’s strategy saved him a fortune in legal fees and potential judgments.

The real danger, however, was Joiner himself. The trouble began in the autumn of 1932. On a rainy night outside Tyler, Hunt and his brother Sherman came upon an overturned car. The driver was trapped inside. Hunt joined a crowd of people trying to push the car into an upright position, but in the process he badly wrenched his back. The pain was so bad, he could barely move. A doctor gave him a steel back brace and ordered him to remain in bed for the next six months. It was just days later, on the night of November 19, while lying in the brace in Tyler, that ominous rumblings reached Hunt’s beside: Dad Joiner was unhappy.

Hunt cursed. He had done everything in his power to placate the old man. Every month he made sure Joiner received his scheduled oil payments, usually between thirty thousand and fifty thousand dollars. But Joiner was now living high, squiring a new girlfriend around Dallas, and pouring much of his earnings into questionable new ventures. Every month, it seemed, he would track down Hunt and ask for an advance or a loan. Hunt gave it to him, usually with a little lecture on the importance of saving, but even though Joiner continued testifying on Hunt’s behalf in the lease-challenge lawsuits, it was clear Joiner resented it.
He
had discovered East Texas, not Hunt, yet he was the one obliged to beg for money.