February 19, 2025 • 35 mins
We tell the story of how the National Guard descended on the East Texas oilfield, the chaos that followed, and how a bar fight in Austin helped establish a new system of energy regulation.
The post The Bar Fight That Changed the World appeared first on KUT & KUTX Studios -- Podcasts.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Previously on The Disconnect.
Really?
We had what they called our fever
here.
Instead of having a
cabal of big oil companies
develop at East Texas field.
You had farmers doing it.
Small independent operators kept
drilling and the price of oil
kept plummeting.
Now it's just unsustainable.
(00:20):
The idea was that lowering
production would stabilize prices.
That's when Governor Ross Sterling
declared martial law.
Sterling sent two Ranger captains
and about 1100 National Guards
who turn off the pumps to turn off
the oil rigs, shut everything down.
(00:42):
So when we left off last time,
East Texas was in
revolt.
Small time oil drillers were
upset about the government coming in
to try to control their business.
The battle pitted big
oil companies on one side against
these small time Texas.
You know what they sometimes call
wildcatters? You know, old school
(01:03):
Texas oil men on the other
side.
Now, what happens
next will set Texas
on a course of global
energy dominance.
It was regulated by the state
of Texas because that's where the
oil was coming from.
It'll help defeat fascism and World
War Two.
Today, oil is the most
(01:23):
precious single substance the Earth
produces.
And ultimately
it will give rise to a new
global cartel that still
calls the shots today.
The glory days of the Railroad
Commission ended in 1972.
I Mose Buchele.
This is the disconnect.
Power, politics and
(01:45):
the Texas blackout.
So today we pick the story back up
as National Guard troops are
sent into East Texas
to confront these rogue oil
men who are opposed to government
control.
And again, joining me to help tell
this story is Audrey McGlinchey.
(02:05):
Hey, Audrey.
Hey, Mose.
So you were just saying that the
governor declared martial law and
sent all these troops to East Texas?
What did the people there think of
this?
Not very highly.
They didn't like it.
They did not like it.
And they didn't like it for a bunch
of reasons. But one of them was
that the Texas governor at the time,
this guy, Ross Sterling, was himself
(02:28):
one of the founders of a big
Texas oil company called Humble
Oil, which was actually
kind of a local subsidiary
of the company, Standard Oil,
you know, which we heard about last
episode is called was called The
Octopus, this big bad oil
company that the people in East
Texas didn't like.
So this is a fact that did not help
Ross Sterling kind of win the hearts
(02:49):
and minds of East Texas
oil workers and independent
producers when he sent in the
National Guard.
And Sterling chose Brigadier General
Jacob Walters to put down the
so-called insurrection
in civilian life.
Walters was a lawyer for Texaco
in Houston.
So another connection to those big
oil producers, the fact that,
again, made the small time oil
(03:09):
drillers pretty angry.
Absolutely.
But Walters was more than
just a lawyer.
He did have some experience
doing this sort of thing as a
National Guard leader.
He'd also been sent to establish
order in other oil boomtowns.
Yeah, In fact, he was so well known
for that. He actually wrote a book
about martial law.
Kind of, I guess, like a how to
manual, how to do martial law.
(03:30):
So so this guy knew what he was
doing, but in East Texas,
they were ready for him.
Many small producers began laying
their own pipelines.
Here's Page Foshee again, Landman,
and oil historian.
Crisscrossing the area
and getting them to refineries that
would accept their oil.
And there was plenty of it flowing.
(03:51):
A bunch of steel pipes under
the surface, the East Texas field.
These Texas guys came up with
ingenious ways of evading detection.
They built fake houses around oil
wells, set up field refineries,
kind of like whiskey stills in hard
to reach places.
They even installed hidden bypass
valves to secretly divert oil
to storage tanks.
That oil sometimes moved by truck,
(04:13):
train or secret pipeline out of the
area and often
out of the state.
Back we we haul a lot of oil.
This is Joe Kinsey, whose interview
can also be found at the oral
history collection at Steven F
Austin University.
He worked as a hot oil smuggler in
1931.
They little little refinery.
They paid cash for the oil when it
came in.
(04:34):
They sold the gasoline for cash.
There's no record made.
This was the system.
The National Guard was sent in to
shut down.
And when they came in, things
turned violent fast.
Within days of the troops arriving,
arsonists started burning buildings.
Remember those churches where the
Texas Ranger, Lone Wolf Gonzalez,
(04:54):
kept his prisoners?
They call them trot line churches
because they hid the prisoners in
the church.
This is Helen Griffin again.
We heard from her in the first
episode.
And soon after, the
arsonists.
And we assume that they were
boomers
set fire to all the three
main churches and burn them to
the ground.
(05:14):
On one night, Helen
blamed disgruntled oil workers.
Local police, maybe improbably
blamed communist agitators,
and other people suggested the fires
were themselves set by pro
regulation forces
as a kind of a false flag
to justify the martial law.
Whatever was really going on, the
arsons ended the use of the, quote,
(05:36):
trot line churches and
left locals with nowhere to pray.
They had to have church in the city
hall as well as their
baptismal and all of it from
the city hall
You know, hearing about this now,
you've got to wonder if martial law
might have actually increased the
criminality. Right?
It created this massive black market
for hot oil.
(05:57):
And that meant that thievery,
extortion, bribery, all these things
could kind of flourish around
this black market.
And really, there was no way for the
victims to report the crimes
without implicating themselves.
And I think it's important to add
that while the big oil companies
publicly opposed oil smuggling,
they were active producers and
especially purchasers of hot oil
(06:19):
themselves.
Yeah, I mean, after all, was just
really cheap.
Yeah, it makes sense.
So as martial law continued,
oil producers attacked each other.
People dynamited oil wells.
People took pot shots at state
troopers.
Gunfights were breaking out in one
of the most serious ones, gunmen
clashed with troops at a National
(06:39):
Guard checkpoint.
The gunmen were then able to escape
into the woods.
The best thing that East Texas had
going for it, at least
East Texas, is scofflaws were
the Pine Trees.
State troopers and regulators seemed
completely helpless.
Decades later, former Texas
Senator Ralph Yarborough
remembered visiting the East Texas
field as a young assistant attorney
(06:59):
general
who went over there to help. Buildsome of this railroad
commission, had National Guard.
Out.
Researcher David Prindle interviewed
Yarborough back in the 1970s
and told me the problem is.
Running hot oil.
What he's saying is that he went out
to an oil field and started talking
to one local guy who was running
hot oil, and this guy
was laughing about how clueless the
Railroad Commission and National
(07:20):
Guardsmen, were
They didn't do anything with them
around. And then it's nice to have
them around. It looks like they're
enforcing the law and you're not
questioned.
It was it was an interesting time.
While all this was going on.
There were other types of fights
over oil field regulations
playing out in courtrooms and
legislatures in Austin and
(07:41):
Washington.
At times, it wasn't even clear
whether the rules the National
Guard was imposing were
themselves legal, or even
if the National Guard's presence
in East Texas was legal.
And it turns out it wasn't.
In December of 1932, the U.S.
Supreme Court ruled that the martial
law orders were invalid.
(08:03):
Jacob Walters left East Texas
and he gave oversight of the oil
field to the Texas Railroad
Commissioner, Ernest Thompson.
So this is how it was.
The Railroad Commission, you know,
an agency that was originally
formed to regulate trains
now running the basically
the occupation of this rogue
oil field.
Walters had set up his National
(08:23):
Guard headquarters on a hill outside
of Kilgore.
In the book The Last Boom, there's
a description of the moment when
Thompson arrives to take command.
Do you have a name for your
headquarters?
Thompson is said to have asked.
I thought of naming it, Hell replied
Walters.
If you have no objection, sir,
I'll call it proration, Hill.
(08:46):
said Thompson.
They both mean the same thing.
But right as the commission began to
claim full authority over the oil
field, there would be one more
bloody fight
In Austin small independent producers
had been lobbying lawmakers since
martial law was declared they wanted
to remove the Railroad Commission's
(09:07):
authority over the Texas oil
fields. They wanted production
limits gone.
This was getting a ton of attention
from all over the country.
Ralph Yarborough, the young
assistant attorney general, later
remembered how Austin was crawling
with undercover agents.
Undercover agents.
From whom?
Well, they were undercover agents
from Maine.
(09:27):
And the local he knew.
From everybody everywhere had his
own intelligence file.
You didn't have any CIA then?
The remember, 1931.
And the FBI was one might
know.
Opponents of the Railroad
Commission, including a lot of
these small time independent
oilmen, finally got a bill
before the state legislature to
gut the commission's authority
(09:49):
and create a new agency to
regulate oil.
It would be an appointed board that
small time drillers thought would be
more on their side.
So on April 24th, 1933,
Railroad Commissioner Ernest
Thompson returned
to Austin from that proration
hill to be present for the vote.
He did not have high hopes the very
day he arrived, the Texas House
(10:11):
that approved the measure, and the
next day it would head to the
Senate.
Former Railroad Commissioner Kent
Hance picks up the story from there.
The night of the vote,
some of the old men
were celebrating that they had
defeated the regulation,
oil and gas.
Everyone had been drinking.
And that's when one group of
(10:33):
Texas oil men, small
time wildcatter types, started
harassing supporters of
the commission.
And one of those supporters was
State Senator Gordon Byrnes.
And this group of independent oil
men confronted him in the lobby
of the Steven F Austin Hotel.
And they got an argument, got in a
fight over and got to arguing, and
(10:54):
somebody hit somebody and
they hit the ground.
Other accounts, including from Ralph
Yarborough, make it sound more like
a beating than a fight with
at least three men setting on Burns.
In fact, on the floor and stomped
him and beat him and crippled him.
The next day as the state Senate was
set to vote on the measure.
Burns was brought into Senate
chambers, badly bruised
(11:15):
in a wheelchair.
The legislature was outraged
about it.
The anger among state politicians
over the attack on one of their own.
Was so great that they killed the
new legislation.
The Railroad Commission survived.
It maintained its authority over
oil and gas.
It's a fascinating part of the
history that that happened
(11:35):
the way it did.
Had they not acted
foolishly and got
in a fight, they would
not have had the regulation.
In his interview with Ralph
Yarborough. David Prindle asked
what happened to the independent
oilman who beat the state senator
at that hotel in Austin.
In answer, Yarborough asks
(11:56):
Prindle.
Well, did you ever see the motion
picture.
Jail? Did you ever see the movie
Giant? No, I didn't.
He says. In the movie, there's a
scene where a poor cowboy
who has become a rich oil man makes
a pass at a wealthy rancher's
wife. The rancher pulls
his gun to try to shoot the cowboy,
and his friends say, No, you can't
(12:16):
kill him now.
He's too big.
If you're going to get in that.
You should have killed him when hewas a poor, cowboy.
By this time, he said, the Texas
oilman had just gotten too
big for the law.
They were let off with a reprimand,
which was quickly followed up by an
apology from several supportive
state senators for inconveniencing
them.
They were too big
(12:37):
and they were about to get a
lot bigger.
More coming up after the break.
So before we move forward, here is
maybe a good place to point out, you
know, what we've been looking at so
(12:57):
far in this story.
And I think it's important to point
out that so far, even
though this has all been about
regulation and about
big, massive fights between
regulators and industry,
the Railroad Commission's role is
also kind of to protect
the industry from itself.
It's really working to support
(13:18):
the industry.
Yeah, the Railroad Commission is not
against oil and gas.
What it's doing is trying to support
the industry by forcing these
different factions, Big Oil
and little Texas producers, to
get along.
And we're going to see a lot more of
that as we keep telling this story.
And you see it a lot in these
kind of crisis moments in the Texas
energy industry when suddenly things
(13:38):
are turned on their head and there
needs to be some kind of
state intervention.
Who ends up benefiting?
Is it the small time drillers or the
big oil companies?
And one group that really has not
come up is, you know, the consumer
for.
The Railroad Commission.
The question is what faction of the
industry is the government going to
support?
And we're going to see how that
shakes out.
(14:01):
So now the Texas Railroad Commission
has finally come into its own thanks
to this bar fight in downtown
Austin.
It has kept its power
to enforce the rules over Texas oil
and gas.
This does not mean that enforcing
the rules came any easier at
the outset.
I mean, like we said, opponents of
these production controls, they
basically fought a war over them in
East Texas.
(14:21):
But within a matter of years, the
issue was pretty much settled.
The commission not only set the
rules, but oil companies,
big and small, followed them.
The main reason that these
rebellious Texas oilmen came
to accept state regulation
was really they decided they liked
it.
It turned out it really worked for
them.
It did. And to understand how
(14:42):
we've got to get a little
more into detail about this thing
called proration,
what was essentially a system
of price control.
Yeah, it's a form of rationing.
Rationing of oil supply.
So how this would work is that all
the different kind of parts of the
oil industry and the Railroad
Commission would sit down every
month to agree on
(15:02):
what supply of oil was available
and to try to figure out what they
thought oil demand would be.
Once these two factor supply and
demand were determined, the
commission would tell producers how
much crude they could pump from each
oil field to meet that set
demand.
And this was all a friendly meeting.
I mean, there were conflicts under
the surface, but everybody knew that
they had to keep the ship afloat.
(15:24):
Author David Prindle says that
balancing of supply and demand
was basically how prices were fixed.
They needed to find this kind of
Goldilocks just right amount
of crude to produce
to keep the prices stable so.
That everybody makes money and then
they can do the same thing the next
month.
And for the small time independent
oil guys, this was the important
part. After they agreed upon the
(15:45):
amount of oil that was going to be
produced, the commission would give
each producer a slice of that
pie.
So you can pump this much from this
oil well. You can pump this much
from that oil well.
The amount of oil each company was
allowed to produce was called their
allowable.
During the East Texas oil boom.
The little independent oil men,
they hated this system because it
set a cap on their production.
(16:08):
But now that the system was in
place, they realized that they were
getting special treatment from the
Railroad Commission.
They were getting an oversize slice
of that pie.
Yeah. I mean, after all, these
commissioners needed to stay
friendly with the local guys.
These are the people that are voting
them in.
So they made sure smaller Texas
drillers got more than their fair
share of allowable versus the big
(16:29):
companies.
And the smaller you were,
the more the rules favored you.
They kept the prices up, which made
the big guys happy.
And they made rules that favored
the little guys, which
made them profitable.
And therefore, everybody
began to love the Railroad
commission.
This system helped the little guys
in other ways, too.
There's this one story about a
(16:50):
driller who struck oil in
Wyoming. The guy bragged to the
Railroad Commission about how he
could pump as much oil as
he wanted because he wasn't in
Texas.
But then he realized there was only
one pipeline connected to his wells,
and that pipeline didn't want any
of his oil.
In Texas, where the state guaranteed
every producer a share of the market
and allowable, some of this guy's
(17:12):
crude would have made it down that
pipeline and.
He would have gotten paid.
Maybe regulation wasn't so bad.
Finally, there was one other really
big reason this fight over proration
was pretty quickly settled in Texas.
It turned out there was another much
bigger fight on the horizon.
Yeah, a really, really big
one.
(17:32):
On September the 1st, 1939,
the Nazi army smashed into Poland.
The start of the Second World War
sent oil demand soaring with
producers in Texas and basically
everywhere else, pumping more and
more crude.
The proration debate just became
less relevant.
Six hours after Great Britain
declared war on Nazi Germany,
the Republic of France followed.
(17:53):
For a lot of people, this huge need
for oil during the war prove that
capping oil production in the 1930s
had been a great idea.
Right. If these Texas people had
been kind of drained for pennies in
the early 30s, they said there just
would have been less oil
left when it was needed when war
broke out.
Production limits had ensured there
was this reserve capacity available
(18:14):
when regulators had to take their
fingers off the spigot.
And it's important to underline the
strategic part of this.
This is going to come up later in
our story. People are beginning to
understand how regulating oil
supply wasn't just good for business
or for the oil field.
It was a matter of national
security.
Today, oil is the most
precious single substance the Earth
(18:35):
produces, and the great oil
fields are the most vital strategic
centers of the globe.
Even after the war started, railroad
commissioners kept control over
production.
And they were not afraid to use that
leverage sometimes to give
their home state producers a hand
up.
Let me tell you a story about 1940.
Here's David Prindle.
Again in 1940.
World War Two has broken out in
(18:57):
Europe.
And he says Exxon, which is then
known as Humble oil, was one of
these big. Oil companies.
It went to the Railroad Commission
to ask for an increase in the amount
of crude that the company could pump
along the Gulf Coast.
Please give us this big increase in
our allowable so that we can
send the oil to Britain
to fight the Germans.
And the Railroad Commission says
(19:17):
no.
And the company says, What do you
mean, no?
We're going to help fight the Nazis.
And the railroad commissioner said,
you know what we've noticed?
We've noticed that there's a whole
bunch of unconnected wells
in the Permian Basin
and they can't get that oil to
market because there's no pipeline
there.
The oil company guy is shocked.
You can't make us
(19:38):
build a pipeline to West Texas.
You do not have the authority.
And the commission guy, he says.
Who said anything about making you
build a pipeline?
All we said was we would not
increase your allowable.
And we'd notice that there were a
whole bunch of unconnected wells in
West Texas.
He says the oil company guys thought
about this for a little bit
and built the pipeline to West
(20:00):
Texas.
And a whole bunch of small producers
out there got rich.
This pipeline was just one of many
built during World War Two,
especially after the U.S.
joined the fight.
Pipeline construction was a huge
part of the war effort at home.
Every U-boat and grader the German
Admiralty issues these instructions.
Your first objective will be the
tankers.
(20:20):
Before this, if you wanted to move
Texas oil up the East Coast, you
could put it on a train.
But a main way to do it was to
put it on a tanker ship.
But after the war started, those
ships became targets.
The U-boats must be battled to
the death.
The stuff of production must go
through.
Upon the Battle of the Atlantic,
depends the success of assaults
(20:41):
in the making.
German U-boat sneaking right off
the coast of the U.S.
started sinking.
Tankers torpedoed
and sunk off the North Carolina
coast. American tanker Alan
Jackson, 22, lost.
This part of the war doesn't get a
lot of attention nowadays, but it
was devastating for the allies.
Torpedoed and sunk off the Dutch
West Indies.
(21:02):
Norwegian Tanker Coast Guard,
39 dead.
Some historians have called this the
second Pearl Harbor.
It was that bad. Germans were
sinking hundreds of ships from
the Gulf of Mexico up the
coast of New England and beyond.
I could list 31 ships lost in the
Atlantic in the past five weeks.
So eventually the U.S.
government said this has to stop.
(21:23):
We should start moving some of that
oil by pipeline instead of boat.
So the government built two huge
lines. One, they called
the big inch and one they
called the little big inch.
These lines connected Texas
to the East Coast.
Constructing an oil pipeline
from the Midwest to eastern points.
In the United States, engineers
(21:44):
are forced to cross.
Many a mighty river.
The big inch the wider of the two
started in the same East Texas oil
fields, which are just ten years
earlier. But under martial law,
this pipeline move oil to New York
over 1200 miles away.
Big inch, as the line is called
now, has another whopper way to
hurdle.
So they plant tons of dynamite to
(22:05):
blast the bed for the pipe beneath
the river's bottom.
The little big inch,
which was, I gather, slightly
narrower, but actually longer.
It was 1400
miles long, and it brought refined
petroleum from the Gulf Coast
as far up as New Jersey.
Now, hold tight and watch for
the explosion.
(22:30):
It's incredible to think about this
nowadays, but both these projects
were completed in about a year.
So the result of this wartime
boom in pipeline building meant
that Texas came out of the war
linked more tightly, not
not even just with the rest of the
country, but with the rest
(22:51):
of the world.
And that would have all sorts of
consequences, including
for one Texas energy source
that hasn't really come up much
yet.
It's the cleanest fuel,
the most efficient fuel.
In fact, it's the perfect
fuel.
So far, our whole story has focused
(23:11):
on oil. Black, gold.
Right. It's the stuff that most
Texas drillers were looking for when
they dug into the earth.
But there was something else coming
out of the ground as the Texas
oil fields opened up to the world.
You couldn't see it.
You couldn't really smell it.
But it was potent stuff.
We're talking about natural gas.
But where does it all come from?
(23:32):
And most important, how
long will we have it?
And I'm so glad we're talking about
this, Mose, because what
is natural gas?
Something we talk about a lot.
But I think a lot of people still
don't have a full grasp on
what this stuff is, where it comes
from. It is basically
it's methane, right?
It's a gas that comes
(23:52):
about. It's created almost the
same way as oil.
It's made of the same stuff that oil
is made of. And, you know, like the
kind of elementary school version,
ancient organic plant
matter.
Maybe some dinosaurs mixed in there.
They all go underground and get
cooked underground for millions
and millions of years.
And that makes oil Well, that's the
(24:13):
same process that that
creates natural gas.
So it's not in liquid form yet.
And you usually find it in
oil reservoirs, often kind
of almost like floating on top of
the oil.
And during the early years of oil,
natural gas is really kind of seen
as a hazard.
Really. It was it was poisonous.
If you breathe too much of it, it
(24:33):
could kill you.
It was flammable.
Cool. Cool. So
what is natural gas.
Is it's gas you can set on fire.
Got it.
Obviously people eventually realized
it was useful, otherwise we wouldn't
be talking about it.
Absolutely right. Yeah.
You could use natural gas
first as lighting and a heat
(24:55):
source.
You could use it to power machinery.
And people, you know, pretty quickly
started doing this, but only if
you are close enough to have a
pipeline that could bring it to
you.
Right. This was the real challenge
of gas. You couldn't move it or
store it like with oil.
So the 1940s in Texas, people
were using a lot of gas in
the state like most had for heating,
(25:17):
lighting and starting to use more
of it for generating electricity.
Yeah, but there was so much of it
coming from the ground in Texas that
the rest of the gas that was coming
up was just getting
set on fire, like just getting
set on fire and burned off in the
oil fields, mostly at oil wells
just to stop it from spewing into
the atmosphere.
There's still happens today.
(25:38):
It's called flaring.
And just like today, back
then, a lot of people hated
it. They hated flaring.
And in these archival interviews
with people from the Railroad
Commission, it comes up a
lot.
And I used to drive from Austin
and Corpus.
They used to always make me sick.
This is a man named Jack Bommel.
He was the head of the oil and gas
(25:59):
division at the Railroad Commission.
That read the newspaper.
At night.
He says the flaring was so bright
you could read the newspaper at
night.
Yeah, you know.
So for Bommel and others,
flaring was wasteful and
bad for the environment.
But it happened because it
was the cheapest way of
getting rid of gas that nobody
(26:20):
wanted.
There was no market.
You couldn't sell it, couldn't give
it away.
And they literally tried to give it
away.
At one point, the city of Amarillo
promised 25 years
of free natural gas
for any industry that
wanted to move there.
No takers.
Until this moment we described
(26:41):
after World War Two.
Now hold tight and watch for the
explosion.
Now these new huge
pipelines can move Texas gas
all over the country.
The big and little inch lines
were completed in the
technical transformation company
(27:01):
build their lines up to the Tenneco.
That was a huge natural gas
pipeline.
We've found that there is some
outlet for gas which could be
used.
Texas natural gas could go to the
Midwest to power factories,
the Northeast to heat homes.
Suddenly there was this big
market.
Not surprisingly, the Railroad
Commission thought this was their
(27:21):
chance to start controlling
that market like they did with oil.
But there was a problem.
The pipeline companies had already
taken control of the gas market.
The pipelines, after all, were the
ones with the power to divvy
up the market in the oil field,
decide which well got which
cut in whatever field
they controlled.
Like that story about the driller in
Wyoming, they.
(27:42):
Were kind of pro raiding the gas
field.
There were stories of pipeline
companies strong arming gas.
Producers, telling them they
wouldn't be able to sell their gas.
If they went to the commission with
complaints.
This is one reason the commission
never really regulated gas
(28:02):
like it did for oil.
Oversight of gas was
basically outsourced to the
pipelines.
And that's going to come back to
haunt us later in this story.
So maybe they fumbled the ball with
gas.
But, boy, were they on top
of oil.
They were killing.
It. Essentially, the Railroad
Commission was the most important
(28:24):
institution in the world of
oil.
Here's David Prindle again.
And since oil was so important to
the American economy, you could
make a case that the Railroad
Commission was the most important
governmental institution in the
United States, at least in regard
to the economy.
You could even say it was one of the
most important agencies in the
world, at least as
(28:44):
far as it influenced the price of
oil around the world.
Because if it had
taken its thumb off the spigot, as
it were, Texas would have flooded
the oil market.
And there being so much supply, the
price would have gone down.
Other countries took notice.
They wanted the same control over
their oil fields.
And soon after the end of World War
Two, Jacques Bommel, the guy from
(29:06):
the Railroad Commission, went down
to Venezuela to start showing them
how.
They wanted to set up a railroad
there, just exactly like we have
here.
And like we said,
Texas influence over oil
was not just economically
important.
It became strategically
indispensable.
(29:29):
Into Egypt's Sinai Peninsula
a barren stretch of dunes, plateaus
and lifeless mountains.
Roll the spearheads of an Israeli
army of 50,000.
In 1956, there was a big fight
over the Suez Canal that disrupted
the flow of crude oil from the
Middle East.
So when oil from the Middle
East stopped coming, the railroad
commission just took the lid off.
(29:51):
And allowed Texas wells
to produce more.
And so there was no crisis.
About ten years later, the six day
war between Egypt, Syria and Israel
again shook global
supply.
War in the Middle East.
Israeli forces drive spearheads
across the Sinai Peninsula.
Again, the Rhetoric commission
reacted.
(30:11):
They take their thumb
off the spigot for a while and
produce more oil.
Then that war stops.
Things more or less go back to
normal. They put the thumb back on
the spigot and try
and keep everything
more or less stable.
This ability to manage global supply
is the reason the 50s and 60s
(30:32):
have been called the power years
of the Texas Railroad Commission.
It was the height of the agency's
influence.
But it would not last.
It turns out Jack Bombshell's 1948
visit to Venezuela was not
his only trip down there.
He actually went back again in
the 50s to keep training
people about the Texas way
(30:52):
of controlling oil production.
During this time, oil demand in the
U.S. was surging and more
oil fields were being opened up in
the Middle East by big oil
companies.
It's interesting, but one reason
Prindle says a lot of these
companies were going over there is
because it got them away from
the pesky Texas regulators.
There was always resentment
by the big integrated
(31:13):
corporations that the Railroad
Commission was making
rules that favored the small guys.
And that's what caused them
to turn so strongly toward
importing cheap oil.
This rise in global oil production
and imports threatens smaller U.S.
companies with lower prices.
So in the 50s, U.S.
producers got a law passed
(31:35):
limiting oil imports from most
countries.
And it turns out Venezuela, the
country that had done more than any
other country to learn the Texas way
of controlling supply was one
of the country's most hurt by these
new trade laws.
First, the Venezuelan oil minister
hoped he could patch things up with
the states he went to Washington to
pitch a partnership between
(31:56):
countries, kind of an international
railroad commission that would let
them regulate supply together.
But the U.S. government had no
interest in that.
I mean, why share the power?
So the Venezuelan oil minister paid
a visit to the Middle East looking
for a more sympathetic.
Audience, an OPEC,
the Organization of Petroleum
Exporting Countries, was born.
(32:17):
OPEC was explicitly modeled
on the Texas Railroad Commission.
At first, the birth of this young
upstart oil cartel
didn't really concern federal
and Texas energy officials
too much.
The U.S. still had the capacity to
flood the market if needed.
It could still produce or withhold
enough oil to set prices.
You know, the way they kept the
(32:38):
price of oil steady is
they say, well, here's how much you
can produce in this well,
theoretically, and you can produce
30%. That's what you can do next
month.
But as demand grew, the U.S.
started importing more oil again.
And as the global supply
of oil grew, the Texas
share of that market shrunk.
The allowable sales that the
(32:59):
Railroad commission is permitting
starts going up and up and up.
They figured they needed to let
Texas companies pump more to keep
a grip on the oil market.
They keep raising the allowable.
70% to 80%.
Of course, there's a point at which
this strategy stops working.
That point was reached
in 1972.
The amount they allowed the
allowable for each well went
(33:21):
to 100%.
With no more reserves to withhold.
No extra capacity to use to
manipulate prices.
The Railroad commission lost its
power over the world of oil.
So the glory days
of the Railroad Commission, when it
was truly, hugely important
in the economy of the country, ended
in 1972.
(33:43):
And soon after that, a new
power emerged.
OPEC, a group modeled explicitly
on this weird state railroad
agency in Austin,
came to manage the global
supply of oil.
That would send a shock wave through
Texas and the whole U.S.
that ended up changing the energy we
use, how much we pay for
(34:05):
it, and who calls
the shots.
Next time on the disconnect, the
energy crisis, deregulation,
and what happens when Texans
tell the Railroad Commission the
bills are too damn
(34:26):
high.
This episode was reported by me
and produced by Audrey McGlinchey,
Matt Largey and myself.
We had technical support from Renee
Chavez and Jake Perlman.
Thanks to Jimmy Moss and Andrew
Weber for their old timey voice
acting.
I say, Do you have a name for your
headquarters?
Thanks again to the Digital Archives
(34:47):
of the East Texas Research Center at
Steven Austin University for
archival tape.
All of this reporting can only be
done thanks to support from our
listeners. You can help to go
to support this podcast.org
to chip in whatever you can.
The disconnect is a production of
Cut and Tech Studios in Austin.
I'm Mose Buchele.
See you next time.
Previously on The Disconnect.
Really?
We had what they called our fever
here.
Instead of having a
cabal of big oil companies
develop at East Texas field.
You had farmers doing it.
Small independent operators kept
drilling and the price of oil
kept plummeting.
Now it's just unsustainable.
(00:20):
The idea was that lowering
production would stabilize prices.
That's when Governor Ross Sterling
declared martial law.
Sterling sent two Ranger captains
and about 1100 National Guards
who turn off the pumps to turn off
the oil rigs, shut everything down.
(00:42):
So when we left off last time,
East Texas was in
revolt.
Small time oil drillers were
upset about the government coming in
to try to control their business.
The battle pitted big
oil companies on one side against
these small time Texas.
You know what they sometimes call
wildcatters? You know, old school
(01:03):
Texas oil men on the other
side.
Now, what happens
next will set Texas
on a course of global
energy dominance.
It was regulated by the state
of Texas because that's where the
oil was coming from.
It'll help defeat fascism and World
War Two.
Today, oil is the most
(01:23):
precious single substance the Earth
produces.
And ultimately
it will give rise to a new
global cartel that still
calls the shots today.
The glory days of the Railroad
Commission ended in 1972.
I Mose Buchele.
This is the disconnect.
Power, politics and
(01:45):
the Texas blackout.
So today we pick the story back up
as National Guard troops are
sent into East Texas
to confront these rogue oil
men who are opposed to government
control.
And again, joining me to help tell
this story is Audrey McGlinchey.
(02:05):
Hey, Audrey.
Hey, Mose.
So you were just saying that the
governor declared martial law and
sent all these troops to East Texas?
What did the people there think of
this?
Not very highly.
They didn't like it.
They did not like it.
And they didn't like it for a bunch
of reasons. But one of them was
that the Texas governor at the time,
this guy, Ross Sterling, was himself
(02:28):
one of the founders of a big
Texas oil company called Humble
Oil, which was actually
kind of a local subsidiary
of the company, Standard Oil,
you know, which we heard about last
episode is called was called The
Octopus, this big bad oil
company that the people in East
Texas didn't like.
So this is a fact that did not help
Ross Sterling kind of win the hearts
(02:49):
and minds of East Texas
oil workers and independent
producers when he sent in the
National Guard.
And Sterling chose Brigadier General
Jacob Walters to put down the
so-called insurrection
in civilian life.
Walters was a lawyer for Texaco
in Houston.
So another connection to those big
oil producers, the fact that,
again, made the small time oil
(03:09):
drillers pretty angry.
Absolutely.
But Walters was more than
just a lawyer.
He did have some experience
doing this sort of thing as a
National Guard leader.
He'd also been sent to establish
order in other oil boomtowns.
Yeah, In fact, he was so well known
for that. He actually wrote a book
about martial law.
Kind of, I guess, like a how to
manual, how to do martial law.
(03:30):
So so this guy knew what he was
doing, but in East Texas,
they were ready for him.
Many small producers began laying
their own pipelines.
Here's Page Foshee again, Landman,
and oil historian.
Crisscrossing the area
and getting them to refineries that
would accept their oil.
And there was plenty of it flowing.
(03:51):
A bunch of steel pipes under
the surface, the East Texas field.
These Texas guys came up with
ingenious ways of evading detection.
They built fake houses around oil
wells, set up field refineries,
kind of like whiskey stills in hard
to reach places.
They even installed hidden bypass
valves to secretly divert oil
to storage tanks.
That oil sometimes moved by truck,
(04:13):
train or secret pipeline out of the
area and often
out of the state.
Back we we haul a lot of oil.
This is Joe Kinsey, whose interview
can also be found at the oral
history collection at Steven F
Austin University.
He worked as a hot oil smuggler in
1931.
They little little refinery.
They paid cash for the oil when it
came in.
(04:34):
They sold the gasoline for cash.
There's no record made.
This was the system.
The National Guard was sent in to
shut down.
And when they came in, things
turned violent fast.
Within days of the troops arriving,
arsonists started burning buildings.
Remember those churches where the
Texas Ranger, Lone Wolf Gonzalez,
(04:54):
kept his prisoners?
They call them trot line churches
because they hid the prisoners in
the church.
This is Helen Griffin again.
We heard from her in the first
episode.
And soon after, the
arsonists.
And we assume that they were
boomers
set fire to all the three
main churches and burn them to
the ground.
(05:14):
On one night, Helen
blamed disgruntled oil workers.
Local police, maybe improbably
blamed communist agitators,
and other people suggested the fires
were themselves set by pro
regulation forces
as a kind of a false flag
to justify the martial law.
Whatever was really going on, the
arsons ended the use of the, quote,
(05:36):
trot line churches and
left locals with nowhere to pray.
They had to have church in the city
hall as well as their
baptismal and all of it from
the city hall
You know, hearing about this now,
you've got to wonder if martial law
might have actually increased the
criminality. Right?
It created this massive black market
for hot oil.
(05:57):
And that meant that thievery,
extortion, bribery, all these things
could kind of flourish around
this black market.
And really, there was no way for the
victims to report the crimes
without implicating themselves.
And I think it's important to add
that while the big oil companies
publicly opposed oil smuggling,
they were active producers and
especially purchasers of hot oil
(06:19):
themselves.
Yeah, I mean, after all, was just
really cheap.
Yeah, it makes sense.
So as martial law continued,
oil producers attacked each other.
People dynamited oil wells.
People took pot shots at state
troopers.
Gunfights were breaking out in one
of the most serious ones, gunmen
clashed with troops at a National
(06:39):
Guard checkpoint.
The gunmen were then able to escape
into the woods.
The best thing that East Texas had
going for it, at least
East Texas, is scofflaws were
the Pine Trees.
State troopers and regulators seemed
completely helpless.
Decades later, former Texas
Senator Ralph Yarborough
remembered visiting the East Texas
field as a young assistant attorney
(06:59):
general
who went over there to help. Buildsome of this railroad
commission, had National Guard.
Out.
Researcher David Prindle interviewed
Yarborough back in the 1970s
and told me the problem is.
Running hot oil.
What he's saying is that he went out
to an oil field and started talking
to one local guy who was running
hot oil, and this guy
was laughing about how clueless the
Railroad Commission and National
(07:20):
Guardsmen, were
They didn't do anything with them
around. And then it's nice to have
them around. It looks like they're
enforcing the law and you're not
questioned.
It was it was an interesting time.
While all this was going on.
There were other types of fights
over oil field regulations
playing out in courtrooms and
legislatures in Austin and
(07:41):
Washington.
At times, it wasn't even clear
whether the rules the National
Guard was imposing were
themselves legal, or even
if the National Guard's presence
in East Texas was legal.
And it turns out it wasn't.
In December of 1932, the U.S.
Supreme Court ruled that the martial
law orders were invalid.
(08:03):
Jacob Walters left East Texas
and he gave oversight of the oil
field to the Texas Railroad
Commissioner, Ernest Thompson.
So this is how it was.
The Railroad Commission, you know,
an agency that was originally
formed to regulate trains
now running the basically
the occupation of this rogue
oil field.
Walters had set up his National
(08:23):
Guard headquarters on a hill outside
of Kilgore.
In the book The Last Boom, there's
a description of the moment when
Thompson arrives to take command.
Do you have a name for your
headquarters?
Thompson is said to have asked.
I thought of naming it, Hell replied
Walters.
If you have no objection, sir,
I'll call it proration, Hill.
(08:46):
said Thompson.
They both mean the same thing.
But right as the commission began to
claim full authority over the oil
field, there would be one more
bloody fight
In Austin small independent producers
had been lobbying lawmakers since
martial law was declared they wanted
to remove the Railroad Commission's
(09:07):
authority over the Texas oil
fields. They wanted production
limits gone.
This was getting a ton of attention
from all over the country.
Ralph Yarborough, the young
assistant attorney general, later
remembered how Austin was crawling
with undercover agents.
Undercover agents.
From whom?
Well, they were undercover agents
from Maine.
(09:27):
And the local he knew.
From everybody everywhere had his
own intelligence file.
You didn't have any CIA then?
The remember, 1931.
And the FBI was one might
know.
Opponents of the Railroad
Commission, including a lot of
these small time independent
oilmen, finally got a bill
before the state legislature to
gut the commission's authority
(09:49):
and create a new agency to
regulate oil.
It would be an appointed board that
small time drillers thought would be
more on their side.
So on April 24th, 1933,
Railroad Commissioner Ernest
Thompson returned
to Austin from that proration
hill to be present for the vote.
He did not have high hopes the very
day he arrived, the Texas House
(10:11):
that approved the measure, and the
next day it would head to the
Senate.
Former Railroad Commissioner Kent
Hance picks up the story from there.
The night of the vote,
some of the old men
were celebrating that they had
defeated the regulation,
oil and gas.
Everyone had been drinking.
And that's when one group of
(10:33):
Texas oil men, small
time wildcatter types, started
harassing supporters of
the commission.
And one of those supporters was
State Senator Gordon Byrnes.
And this group of independent oil
men confronted him in the lobby
of the Steven F Austin Hotel.
And they got an argument, got in a
fight over and got to arguing, and
(10:54):
somebody hit somebody and
they hit the ground.
Other accounts, including from Ralph
Yarborough, make it sound more like
a beating than a fight with
at least three men setting on Burns.
In fact, on the floor and stomped
him and beat him and crippled him.
The next day as the state Senate was
set to vote on the measure.
Burns was brought into Senate
chambers, badly bruised
(11:15):
in a wheelchair.
The legislature was outraged
about it.
The anger among state politicians
over the attack on one of their own.
Was so great that they killed the
new legislation.
The Railroad Commission survived.
It maintained its authority over
oil and gas.
It's a fascinating part of the
history that that happened
(11:35):
the way it did.
Had they not acted
foolishly and got
in a fight, they would
not have had the regulation.
In his interview with Ralph
Yarborough. David Prindle asked
what happened to the independent
oilman who beat the state senator
at that hotel in Austin.
In answer, Yarborough asks
(11:56):
Prindle.
Well, did you ever see the motion
picture.
Jail? Did you ever see the movie
Giant? No, I didn't.
He says. In the movie, there's a
scene where a poor cowboy
who has become a rich oil man makes
a pass at a wealthy rancher's
wife. The rancher pulls
his gun to try to shoot the cowboy,
and his friends say, No, you can't
(12:16):
kill him now.
He's too big.
If you're going to get in that.
You should have killed him when hewas a poor, cowboy.
By this time, he said, the Texas
oilman had just gotten too
big for the law.
They were let off with a reprimand,
which was quickly followed up by an
apology from several supportive
state senators for inconveniencing
them.
They were too big
(12:37):
and they were about to get a
lot bigger.
More coming up after the break.
So before we move forward, here is
maybe a good place to point out, you
know, what we've been looking at so
(12:57):
far in this story.
And I think it's important to point
out that so far, even
though this has all been about
regulation and about
big, massive fights between
regulators and industry,
the Railroad Commission's role is
also kind of to protect
the industry from itself.
It's really working to support
(13:18):
the industry.
Yeah, the Railroad Commission is not
against oil and gas.
What it's doing is trying to support
the industry by forcing these
different factions, Big Oil
and little Texas producers, to
get along.
And we're going to see a lot more of
that as we keep telling this story.
And you see it a lot in these
kind of crisis moments in the Texas
energy industry when suddenly things
(13:38):
are turned on their head and there
needs to be some kind of
state intervention.
Who ends up benefiting?
Is it the small time drillers or the
big oil companies?
And one group that really has not
come up is, you know, the consumer
for.
The Railroad Commission.
The question is what faction of the
industry is the government going to
support?
And we're going to see how that
shakes out.
(14:01):
So now the Texas Railroad Commission
has finally come into its own thanks
to this bar fight in downtown
Austin.
It has kept its power
to enforce the rules over Texas oil
and gas.
This does not mean that enforcing
the rules came any easier at
the outset.
I mean, like we said, opponents of
these production controls, they
basically fought a war over them in
East Texas.
(14:21):
But within a matter of years, the
issue was pretty much settled.
The commission not only set the
rules, but oil companies,
big and small, followed them.
The main reason that these
rebellious Texas oilmen came
to accept state regulation
was really they decided they liked
it.
It turned out it really worked for
them.
It did. And to understand how
(14:42):
we've got to get a little
more into detail about this thing
called proration,
what was essentially a system
of price control.
Yeah, it's a form of rationing.
Rationing of oil supply.
So how this would work is that all
the different kind of parts of the
oil industry and the Railroad
Commission would sit down every
month to agree on
(15:02):
what supply of oil was available
and to try to figure out what they
thought oil demand would be.
Once these two factor supply and
demand were determined, the
commission would tell producers how
much crude they could pump from each
oil field to meet that set
demand.
And this was all a friendly meeting.
I mean, there were conflicts under
the surface, but everybody knew that
they had to keep the ship afloat.
(15:24):
Author David Prindle says that
balancing of supply and demand
was basically how prices were fixed.
They needed to find this kind of
Goldilocks just right amount
of crude to produce
to keep the prices stable so.
That everybody makes money and then
they can do the same thing the next
month.
And for the small time independent
oil guys, this was the important
part. After they agreed upon the
(15:45):
amount of oil that was going to be
produced, the commission would give
each producer a slice of that
pie.
So you can pump this much from this
oil well. You can pump this much
from that oil well.
The amount of oil each company was
allowed to produce was called their
allowable.
During the East Texas oil boom.
The little independent oil men,
they hated this system because it
set a cap on their production.
(16:08):
But now that the system was in
place, they realized that they were
getting special treatment from the
Railroad Commission.
They were getting an oversize slice
of that pie.
Yeah. I mean, after all, these
commissioners needed to stay
friendly with the local guys.
These are the people that are voting
them in.
So they made sure smaller Texas
drillers got more than their fair
share of allowable versus the big
(16:29):
companies.
And the smaller you were,
the more the rules favored you.
They kept the prices up, which made
the big guys happy.
And they made rules that favored
the little guys, which
made them profitable.
And therefore, everybody
began to love the Railroad
commission.
This system helped the little guys
in other ways, too.
There's this one story about a
(16:50):
driller who struck oil in
Wyoming. The guy bragged to the
Railroad Commission about how he
could pump as much oil as
he wanted because he wasn't in
Texas.
But then he realized there was only
one pipeline connected to his wells,
and that pipeline didn't want any
of his oil.
In Texas, where the state guaranteed
every producer a share of the market
and allowable, some of this guy's
(17:12):
crude would have made it down that
pipeline and.
He would have gotten paid.
Maybe regulation wasn't so bad.
Finally, there was one other really
big reason this fight over proration
was pretty quickly settled in Texas.
It turned out there was another much
bigger fight on the horizon.
Yeah, a really, really big
one.
(17:32):
On September the 1st, 1939,
the Nazi army smashed into Poland.
The start of the Second World War
sent oil demand soaring with
producers in Texas and basically
everywhere else, pumping more and
more crude.
The proration debate just became
less relevant.
Six hours after Great Britain
declared war on Nazi Germany,
the Republic of France followed.
(17:53):
For a lot of people, this huge need
for oil during the war prove that
capping oil production in the 1930s
had been a great idea.
Right. If these Texas people had
been kind of drained for pennies in
the early 30s, they said there just
would have been less oil
left when it was needed when war
broke out.
Production limits had ensured there
was this reserve capacity available
(18:14):
when regulators had to take their
fingers off the spigot.
And it's important to underline the
strategic part of this.
This is going to come up later in
our story. People are beginning to
understand how regulating oil
supply wasn't just good for business
or for the oil field.
It was a matter of national
security.
Today, oil is the most
precious single substance the Earth
(18:35):
produces, and the great oil
fields are the most vital strategic
centers of the globe.
Even after the war started, railroad
commissioners kept control over
production.
And they were not afraid to use that
leverage sometimes to give
their home state producers a hand
up.
Let me tell you a story about 1940.
Here's David Prindle.
Again in 1940.
World War Two has broken out in
(18:57):
Europe.
And he says Exxon, which is then
known as Humble oil, was one of
these big. Oil companies.
It went to the Railroad Commission
to ask for an increase in the amount
of crude that the company could pump
along the Gulf Coast.
Please give us this big increase in
our allowable so that we can
send the oil to Britain
to fight the Germans.
And the Railroad Commission says
(19:17):
no.
And the company says, What do you
mean, no?
We're going to help fight the Nazis.
And the railroad commissioner said,
you know what we've noticed?
We've noticed that there's a whole
bunch of unconnected wells
in the Permian Basin
and they can't get that oil to
market because there's no pipeline
there.
The oil company guy is shocked.
You can't make us
(19:38):
build a pipeline to West Texas.
You do not have the authority.
And the commission guy, he says.
Who said anything about making you
build a pipeline?
All we said was we would not
increase your allowable.
And we'd notice that there were a
whole bunch of unconnected wells in
West Texas.
He says the oil company guys thought
about this for a little bit
and built the pipeline to West
(20:00):
Texas.
And a whole bunch of small producers
out there got rich.
This pipeline was just one of many
built during World War Two,
especially after the U.S.
joined the fight.
Pipeline construction was a huge
part of the war effort at home.
Every U-boat and grader the German
Admiralty issues these instructions.
Your first objective will be the
tankers.
(20:20):
Before this, if you wanted to move
Texas oil up the East Coast, you
could put it on a train.
But a main way to do it was to
put it on a tanker ship.
But after the war started, those
ships became targets.
The U-boats must be battled to
the death.
The stuff of production must go
through.
Upon the Battle of the Atlantic,
depends the success of assaults
(20:41):
in the making.
German U-boat sneaking right off
the coast of the U.S.
started sinking.
Tankers torpedoed
and sunk off the North Carolina
coast. American tanker Alan
Jackson, 22, lost.
This part of the war doesn't get a
lot of attention nowadays, but it
was devastating for the allies.
Torpedoed and sunk off the Dutch
West Indies.
(21:02):
Norwegian Tanker Coast Guard,
39 dead.
Some historians have called this the
second Pearl Harbor.
It was that bad. Germans were
sinking hundreds of ships from
the Gulf of Mexico up the
coast of New England and beyond.
I could list 31 ships lost in the
Atlantic in the past five weeks.
So eventually the U.S.
government said this has to stop.
(21:23):
We should start moving some of that
oil by pipeline instead of boat.
So the government built two huge
lines. One, they called
the big inch and one they
called the little big inch.
These lines connected Texas
to the East Coast.
Constructing an oil pipeline
from the Midwest to eastern points.
In the United States, engineers
(21:44):
are forced to cross.
Many a mighty river.
The big inch the wider of the two
started in the same East Texas oil
fields, which are just ten years
earlier. But under martial law,
this pipeline move oil to New York
over 1200 miles away.
Big inch, as the line is called
now, has another whopper way to
hurdle.
So they plant tons of dynamite to
(22:05):
blast the bed for the pipe beneath
the river's bottom.
The little big inch,
which was, I gather, slightly
narrower, but actually longer.
It was 1400
miles long, and it brought refined
petroleum from the Gulf Coast
as far up as New Jersey.
Now, hold tight and watch for
the explosion.
(22:30):
It's incredible to think about this
nowadays, but both these projects
were completed in about a year.
So the result of this wartime
boom in pipeline building meant
that Texas came out of the war
linked more tightly, not
not even just with the rest of the
country, but with the rest
(22:51):
of the world.
And that would have all sorts of
consequences, including
for one Texas energy source
that hasn't really come up much
yet.
It's the cleanest fuel,
the most efficient fuel.
In fact, it's the perfect
fuel.
So far, our whole story has focused
(23:11):
on oil. Black, gold.
Right. It's the stuff that most
Texas drillers were looking for when
they dug into the earth.
But there was something else coming
out of the ground as the Texas
oil fields opened up to the world.
You couldn't see it.
You couldn't really smell it.
But it was potent stuff.
We're talking about natural gas.
But where does it all come from?
(23:32):
And most important, how
long will we have it?
And I'm so glad we're talking about
this, Mose, because what
is natural gas?
Something we talk about a lot.
But I think a lot of people still
don't have a full grasp on
what this stuff is, where it comes
from. It is basically
it's methane, right?
It's a gas that comes
(23:52):
about. It's created almost the
same way as oil.
It's made of the same stuff that oil
is made of. And, you know, like the
kind of elementary school version,
ancient organic plant
matter.
Maybe some dinosaurs mixed in there.
They all go underground and get
cooked underground for millions
and millions of years.
And that makes oil Well, that's the
(24:13):
same process that that
creates natural gas.
So it's not in liquid form yet.
And you usually find it in
oil reservoirs, often kind
of almost like floating on top of
the oil.
And during the early years of oil,
natural gas is really kind of seen
as a hazard.
Really. It was it was poisonous.
If you breathe too much of it, it
(24:33):
could kill you.
It was flammable.
Cool. Cool. So
what is natural gas.
Is it's gas you can set on fire.
Got it.
Obviously people eventually realized
it was useful, otherwise we wouldn't
be talking about it.
Absolutely right. Yeah.
You could use natural gas
first as lighting and a heat
(24:55):
source.
You could use it to power machinery.
And people, you know, pretty quickly
started doing this, but only if
you are close enough to have a
pipeline that could bring it to
you.
Right. This was the real challenge
of gas. You couldn't move it or
store it like with oil.
So the 1940s in Texas, people
were using a lot of gas in
the state like most had for heating,
(25:17):
lighting and starting to use more
of it for generating electricity.
Yeah, but there was so much of it
coming from the ground in Texas that
the rest of the gas that was coming
up was just getting
set on fire, like just getting
set on fire and burned off in the
oil fields, mostly at oil wells
just to stop it from spewing into
the atmosphere.
There's still happens today.
(25:38):
It's called flaring.
And just like today, back
then, a lot of people hated
it. They hated flaring.
And in these archival interviews
with people from the Railroad
Commission, it comes up a
lot.
And I used to drive from Austin
and Corpus.
They used to always make me sick.
This is a man named Jack Bommel.
He was the head of the oil and gas
(25:59):
division at the Railroad Commission.
That read the newspaper.
At night.
He says the flaring was so bright
you could read the newspaper at
night.
Yeah, you know.
So for Bommel and others,
flaring was wasteful and
bad for the environment.
But it happened because it
was the cheapest way of
getting rid of gas that nobody
(26:20):
wanted.
There was no market.
You couldn't sell it, couldn't give
it away.
And they literally tried to give it
away.
At one point, the city of Amarillo
promised 25 years
of free natural gas
for any industry that
wanted to move there.
No takers.
Until this moment we described
(26:41):
after World War Two.
Now hold tight and watch for the
explosion.
Now these new huge
pipelines can move Texas gas
all over the country.
The big and little inch lines
were completed in the
technical transformation company
(27:01):
build their lines up to the Tenneco.
That was a huge natural gas
pipeline.
We've found that there is some
outlet for gas which could be
used.
Texas natural gas could go to the
Midwest to power factories,
the Northeast to heat homes.
Suddenly there was this big
market.
Not surprisingly, the Railroad
Commission thought this was their
(27:21):
chance to start controlling
that market like they did with oil.
But there was a problem.
The pipeline companies had already
taken control of the gas market.
The pipelines, after all, were the
ones with the power to divvy
up the market in the oil field,
decide which well got which
cut in whatever field
they controlled.
Like that story about the driller in
Wyoming, they.
(27:42):
Were kind of pro raiding the gas
field.
There were stories of pipeline
companies strong arming gas.
Producers, telling them they
wouldn't be able to sell their gas.
If they went to the commission with
complaints.
This is one reason the commission
never really regulated gas
(28:02):
like it did for oil.
Oversight of gas was
basically outsourced to the
pipelines.
And that's going to come back to
haunt us later in this story.
So maybe they fumbled the ball with
gas.
But, boy, were they on top
of oil.
They were killing.
It. Essentially, the Railroad
Commission was the most important
(28:24):
institution in the world of
oil.
Here's David Prindle again.
And since oil was so important to
the American economy, you could
make a case that the Railroad
Commission was the most important
governmental institution in the
United States, at least in regard
to the economy.
You could even say it was one of the
most important agencies in the
world, at least as
(28:44):
far as it influenced the price of
oil around the world.
Because if it had
taken its thumb off the spigot, as
it were, Texas would have flooded
the oil market.
And there being so much supply, the
price would have gone down.
Other countries took notice.
They wanted the same control over
their oil fields.
And soon after the end of World War
Two, Jacques Bommel, the guy from
(29:06):
the Railroad Commission, went down
to Venezuela to start showing them
how.
They wanted to set up a railroad
there, just exactly like we have
here.
And like we said,
Texas influence over oil
was not just economically
important.
It became strategically
indispensable.
(29:29):
Into Egypt's Sinai Peninsula
a barren stretch of dunes, plateaus
and lifeless mountains.
Roll the spearheads of an Israeli
army of 50,000.
In 1956, there was a big fight
over the Suez Canal that disrupted
the flow of crude oil from the
Middle East.
So when oil from the Middle
East stopped coming, the railroad
commission just took the lid off.
(29:51):
And allowed Texas wells
to produce more.
And so there was no crisis.
About ten years later, the six day
war between Egypt, Syria and Israel
again shook global
supply.
War in the Middle East.
Israeli forces drive spearheads
across the Sinai Peninsula.
Again, the Rhetoric commission
reacted.
(30:11):
They take their thumb
off the spigot for a while and
produce more oil.
Then that war stops.
Things more or less go back to
normal. They put the thumb back on
the spigot and try
and keep everything
more or less stable.
This ability to manage global supply
is the reason the 50s and 60s
(30:32):
have been called the power years
of the Texas Railroad Commission.
It was the height of the agency's
influence.
But it would not last.
It turns out Jack Bombshell's 1948
visit to Venezuela was not
his only trip down there.
He actually went back again in
the 50s to keep training
people about the Texas way
(30:52):
of controlling oil production.
During this time, oil demand in the
U.S. was surging and more
oil fields were being opened up in
the Middle East by big oil
companies.
It's interesting, but one reason
Prindle says a lot of these
companies were going over there is
because it got them away from
the pesky Texas regulators.
There was always resentment
by the big integrated
(31:13):
corporations that the Railroad
Commission was making
rules that favored the small guys.
And that's what caused them
to turn so strongly toward
importing cheap oil.
This rise in global oil production
and imports threatens smaller U.S.
companies with lower prices.
So in the 50s, U.S.
producers got a law passed
(31:35):
limiting oil imports from most
countries.
And it turns out Venezuela, the
country that had done more than any
other country to learn the Texas way
of controlling supply was one
of the country's most hurt by these
new trade laws.
First, the Venezuelan oil minister
hoped he could patch things up with
the states he went to Washington to
pitch a partnership between
(31:56):
countries, kind of an international
railroad commission that would let
them regulate supply together.
But the U.S. government had no
interest in that.
I mean, why share the power?
So the Venezuelan oil minister paid
a visit to the Middle East looking
for a more sympathetic.
Audience, an OPEC,
the Organization of Petroleum
Exporting Countries, was born.
(32:17):
OPEC was explicitly modeled
on the Texas Railroad Commission.
At first, the birth of this young
upstart oil cartel
didn't really concern federal
and Texas energy officials
too much.
The U.S. still had the capacity to
flood the market if needed.
It could still produce or withhold
enough oil to set prices.
You know, the way they kept the
(32:38):
price of oil steady is
they say, well, here's how much you
can produce in this well,
theoretically, and you can produce
30%. That's what you can do next
month.
But as demand grew, the U.S.
started importing more oil again.
And as the global supply
of oil grew, the Texas
share of that market shrunk.
The allowable sales that the
(32:59):
Railroad commission is permitting
starts going up and up and up.
They figured they needed to let
Texas companies pump more to keep
a grip on the oil market.
They keep raising the allowable.
70% to 80%.
Of course, there's a point at which
this strategy stops working.
That point was reached
in 1972.
The amount they allowed the
allowable for each well went
(33:21):
to 100%.
With no more reserves to withhold.
No extra capacity to use to
manipulate prices.
The Railroad commission lost its
power over the world of oil.
So the glory days
of the Railroad Commission, when it
was truly, hugely important
in the economy of the country, ended
in 1972.
(33:43):
And soon after that, a new
power emerged.
OPEC, a group modeled explicitly
on this weird state railroad
agency in Austin,
came to manage the global
supply of oil.
That would send a shock wave through
Texas and the whole U.S.
that ended up changing the energy we
use, how much we pay for
(34:05):
it, and who calls
the shots.
Next time on the disconnect, the
energy crisis, deregulation,
and what happens when Texans
tell the Railroad Commission the
bills are too damn
(34:26):
high.
This episode was reported by me
and produced by Audrey McGlinchey,
Matt Largey and myself.
We had technical support from Renee
Chavez and Jake Perlman.
Thanks to Jimmy Moss and Andrew
Weber for their old timey voice
acting.
I say, Do you have a name for your
headquarters?
Thanks again to the Digital Archives
(34:47):
of the East Texas Research Center at
Steven Austin University for
archival tape.
All of this reporting can only be
done thanks to support from our
listeners. You can help to go
to support this podcast.org
to chip in whatever you can.
The disconnect is a production of
Cut and Tech Studios in Austin.
I'm Mose Buchele.
See you next time.
Popular Podcasts
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.