Bryan Burrough (3 page)

A water-well driller was hired to sink a hole; he gave up upon hitting quicksand. A second attempt did no better. Higgins was already low on cash when a nationwide depression hit in 1893, scattering his investors. Still, he refused to give up. Hoping an official endorsement of Spindletop’s oil potential might lure new investors, Higgins invited a state geologist to assess his land; to his dismay, the geologist not only declared his venture hopeless, he published his opinion in the Beaumont newspaper, advising the town to avoid “frittering her money away upon the idle dreams or insane notions of irresponsible parties in the vain outlook for either oil or useful gas.”

It was at that point, as the specter of a local bailout evaporated, that Higgins got lucky—or so he thought. The discovery of minute amounts of oil at Corsicana, south of Dallas, had drawn a number of curious eastern oilmen to Texas, and one group, Savage Brothers of West Virginia, approached the Gladys City board about acquiring its lease rights in return for a royalty on any oil it might find. Higgins, fearful of losing control, objected, but other board members, desperate to recoup their money, overruled him. Savage Brothers, however, got nowhere. Like the previous two efforts, its driller used a cable-tool rig, which created a hole by repeatedly pounding downward, a strategy that time and again proved unable to defeat quicksand. When Higgins and his board members fell to squabbling, he quit the company; George Carroll sued and Higgins was eventually forced to sell back his stock. By 1898, while still determined to pursue his dream of oil on Spindletop, Higgins had returned to the real estate business.

Still, he couldn’t forget the Big Hill. In one final stab at seeing it drilled, Higgins placed an advertisement in a national magazine. He got precisely one answer, from a down-on-his-luck character named Anthony Lucas, a onetime captain in the Austro-Hungarian navy who had become fascinated with the possibilities of a geologic feature known as a salt dome, literally domes of salt that poked up, pimplelike, in mounds all along the American Gulf Coast. Lucas thought salt domes often harbored caches of sulfur or sometimes oil. After meeting with Higgins, he judged the Big Hill a classic salt dome.

Lucas drilled a well and found a thin shean of oil in the dirt he drew to the surface, but the hole soon collapsed. Neither Lucas nor Higgins had any more money to start again. Now it was Lucas who took up the banner of the Big Hill. He spent months canvassing the large oil companies back east, even gaining an audience at Standard Oil. But the professionals said he was crazy; any fool knew salt domes held only one thing—salt. Finally, in Pittsburgh, Lucas found a willing ear in James Guffey and James Galey, two of Pennsylvania’s best-known wildcatters. They took over the acreage Lucas had amassed, cutting him in for a share. It was Guffey and Galey who hired the Hamill brothers and dispatched them to drill the Big Hill. It was there four months later that the well appeared to explode and Al Hamill thought he saw the Earth breathe.

The Hamills had just started to pull debris off the derrick floor when a sudden roar emanated from the hole. Once again, mud bubbled to the surface. Once again came a blast of natural gas. Then, as the Hamills and Peck Byrd scrambled for cover, a geyser of greenish-black liquid erupted from the ground. As the crew stared in amazement, it grew and grew, until it reached its apex a hundred feet into the morning sky. Stultified, they sent Byrd running to fetch Captain Lucas, who appeared at a dead run a half hour later. “Al! Al!” Lucas shouted, pointing at the black spout. “What is it? What is it? ”

“Oil, captain!” Hamill yelled. “Oil! Every drop of it!”

Lucas had never seen anything like it. No human had. The Lucas No. 1 well changed the world forever. That first well produced at a greater rate than all other American oil wells in existence—
combined.
In a matter of days, in fact, the pastures around Spindletop would be producing more than the rest of the world’s oil wells—
combined.
Of those first six Texas oil wells, three produced at a higher rate than the entire country of Russia, then the world’s top producer.

Spindletop not only created the modern American oil industry, it changed the way the world used oil. Its dirty little secret was that the oil found around Beaumont was of such poor quality it could not be refined into kerosene. But it made fine fuel oil—and that’s what changed everything. So much black crude flowed from Beaumont that oil prices dropped to three cents a barrel—a cup of water cost five cents—making it economical for railroads and steamship companies to convert from coal to oil. The Santa Fe Railroad went from one oil-fired locomotive in 1901 to 227 in 1905.
¹
Others followed, as did the British, American, and German imperial navies. Everything that today runs on oil and its by-products, from automobiles to jet fighters to furnaces, barbecue grills, and lawn mowers—all of it began at Spindletop.

The rush to drill near Spindletop triggered the greatest speculative boom since the California Gold Rush. It took ten long days just to cap the Hamills’ first well, but within days more derricks began going up all around it—214 wells in all by the following summer. For a time the discovery of oil transformed Beaumont into a classic American boomtown, an orgy of mud and blood, oilmen, prostitutes, and thieves of every stripe, anyone and everyone who was willing to work for a quick buck. It was the beginning of Texas Oil.

But if Spindletop created an oil industry for Texas, little of it ended up controlled by Texans. The big money at Spindletop was initially split between groups of powerful Texas businessmen and seasoned oilmen from back east. One Texas faction was an alliance of Austin politicians and Gulf Coast attorneys led by the former governor, Jim Hogg, who acquired a valuable lease on Spindletop hill for the bargain price of $180,000 in July 1901, six months after the first gusher. Other Texas syndicates formed around East Texas’s leading lumbermen, including John Henry Kirby. Dry-goods merchants from Dallas, cattlemen from Fort Worth—just about any Texas businessman with cash threw it at Spindletop.

The Texans, unfortunately, knew next to nothing about oil. Time and again they were outmaneuvered by eastern oilmen with experience in Pennsylvania and other fields. The pivot on which everything turned, at least initially, was James Guffey, who struck “the deal of the century” when he sold much of Spindletop’s oil to a company he had never heard of—and whose executives needed a map to locate Beaumont—Royal Dutch Shell, Europe’s largest oil producer; the deal made Shell an international colossus. Guffey was backed by and later sold out to the Mellon family of Pittsburgh, who roared into the Gulf Coast fields with a new company it named, appropriately, Gulf Oil, which became one of America’s greatest oil companies. The Pew family of Philadelphia, founders of Sun Oil, swept into Spindletop in a blizzard of activity, laying pipelines, buying storage facilities and so much oil it had to build a new refinery at Marcus Hook, Pennsylvania. Another of the companies weaned at Spindletop was the Texas Company, later known as Texaco.

In the face of such competition, many of the Texas groups wilted away, leaving the Spindletop fields largely in eastern hands. Still, the boom created the first Texas oilmen, and as the prospect for new fields around Beaumont ebbed, they fanned out in search of new salt domes to drill. They found them quickly, bringing in miniature Spindletops in an arc of new fields scattered around Houston, at Batson and Sour Lake and, in 1903, at Humble, eighteen miles northeast of downtown. And then . . . nothing. In 1904 and 1905 and into 1906, every discernible salt dome on the Texas coast was poked like a patient, but no new Spindletops turned up. The boom began to wane. When, in 1906, oil was discovered in Oklahoma, hundreds of men began streaming north.

In their wake, Texas politicians confronted a troubling new reality. The state, in effect, found itself in the same position as Patillo Higgins: it had found oil, lost control over it to eastern businessmen, and had no guarantee the same thing wouldn’t happen the next time a gusher was struck. While groups led by native Texans still controlled a share of the new Gulf Coast reserves, almost all the strange new infrastructure of Texas Oil—the storage tanks, the pipelines, the refineries—was controlled by eastern interests. Ominously, easterners were in a position to dictate the terms and to some extent the price of the Texans’ oil; with that kind of power, it was only a matter of time before the hated Yankees used it to squeeze Texans out of the oil bonanza altogether.

The state’s salvation, it turned out, lay in the fine print of its antitrust laws, which forbade the integration of oil companies, that is, companies that stored, transported, and refined oil weren’t allowed to produce it. There were exceptions galore, but between 1905 and 1910, politicians in Austin moved to ensure that native Texans retained their toehold in oil, defeating two measures that would have allowed integration amid the din of anti-eastern rhetoric. Integration, one legislator decried, would “enable the great capitalists of the North to seize complete control of the Texas oil industry.” Legislators put teeth in their words when the hated Standard Oil tried to creep into Texas, secretly funding a flamboyant empresario named George A. Burt, who built the world’s largest oil refinery, outside Beaumont. When Texas oil prices rose in 1906, Burt tried to drive them down by threatening to import cheaper oil from Oklahoma. The Texas attorney general, Robert Vance Davidson, responded by strafing Burt with a series of lawsuits and fines, eventually forcing Standard to dismantle its refinery and rebuild it in Baton Rouge, Louisiana. The message was clear: don’t mess with Texas.

The upshot, by 1910 or so, was that control of Texas Oil remained split. Eastern interests—Shell, Sun, Gulf, and others—handled the purchasing, transporting, refining, and retailing of oil and its by-products, while Texans remained active in exploration and production. The official division lasted until 1917, when state legislators, realizing that out-of-state funding was crucial to the industry’s growth, finally passed a law allowing the large companies to integrate. The intervening years, however, saw the creation of a native Texas presence in the risky business of oil-finding that would endure for decades. Hundreds of small companies, many one-man operations, popped up to look for oil. During the 1910s at least, they did a dismal job of finding any. Year after year passed with no new Spindletop. Many companies disappeared. Scores of oilmen returned to their jobs as farmers, clerks, or lawyers. Thanks to their brass-knuckled political leaders, Texans had earned the right to look for their own oil.

Now they just had to find some.

Spindletop may have changed the world, but it didn’t change Texas that much—not at first. What the Spindletop boom provided native Texans and new arrivals was not so much a vault of black treasure as a classroom where the oil business could be
learned.

A few caught on quickly. Among them was a young Iowa heir named Howard Hughes, who fled a lead mine in Southwest Missouri for Spindletop within weeks of that first gusher. Captivated by oil, Hughes and a partner, Walter Bedford Sharp, who had drilled one of Patillo Higgins’s early wells, began sinking wells in fields opening in northern Louisiana. Frustrated by their drillers’ inability to penetrate solid rock, Hughes and Sharp developed a drill that could. Patented in 1908, the Hughes rock bit became an industry standard, and by the time the Hughes family returned to Houston in 1909, Hughes Sr. was fast becoming a wealthy man. In time the company he founded, Hughes Tool, would make his son, the legendary Howard Hughes Jr., the wealthiest Texas oilman of all, though in name only. When he reached adulthood in the 1920s, Howard Hughes fled Texas for Hollywood and never returned.

In those early years the best-known and most profitable of Texas-run oil companies was Humble Oil & Refining, formed in 1917 by the mass merger of an all-star team of Houston and Beaumont oilmen, many of whom began their careers at Spindletop. In later years its founders, men like Walter Fondren, Robert Lee Blaffer, and future Texas governor Ross Sterling, became what passed for “old money” in Houston. Savvy, aggressive finders and purchasers of oil reserves, the Humble men sold half the company to Standard Oil in 1919 for seventeen million dollars, the largest transaction in the Texas oil industry’s brief history. Humble, which later became better known as Exxon, would remain a power in the Texas oil fields for decades to come. Its counterpart in Dallas was the Magnolia Oil Company, formed from the remnants of the company Standard Oil left behind when it fled the state. Standard retained a sizable minority stake it slowly increased in Magnolia, whose claim to fame was the giant red-neon Pegasus it erected over its downtown headquarters, a Dallas landmark visible from fifty miles away.

The oilmen who ran Humble and Magnolia and scores of smaller rivals survived the lean years of the 1910s by dividing the risk in a very risky business. In doing so, they also divided the upside; as wealthy as they were by local standards, no one in that first generation of Texas oilmen—with the asterisked exception of Howard Hughes—created anything like a true American fortune, nor left any lasting footprints on history. Their success, however, raised a tantalizing question: What if there really was another Spindletop out there, and what if it were discovered not by a large company but by a single Texan, working alone? Just how wealthy would Patillo Higgins have become had he been able to keep Spindletop to himself?

One well, one fortune.
It was the stuff of myth, the El Dorado of Texas Oil, and as a new decade dawned, a horde of young second-generation oilmen would begin trying to find it.

—HUGH ROY CULLEN AT AGE TWELVE

B
y 1920, two decades after Spindletop, the discovery of oil hadn’t changed Texas much. Of the forty-eight states, it ranked just fourth in oil production. During the 1910s many oil field workers actually fled the state to work in fields opening in Oklahoma. “Why do you waste your time in Texas?” one asked a soon-to-be famous geologist named Wallace Pratt. “Why don’t you come up to Oklahoma where all the oil is?” What oil was pumped from Texas fields was still largely controlled by eastern interests; the biggest companies that flowered at Spindletop were now headquartered back east, Gulf in Pittsburgh, Sun in Philadelphia. Even the Texas Company, after a squabble between its Houston-based executives and eastern investors, was now based in New York. Academics viewed the state of Texas as an economic colony of the East, a view that would endure for years after it was no longer true.