Friday, January 10, 2014

JANUARY 10 = "Black Gold" is Found at Spindletop, Texas

"On January 10, the memorable happened: Mud began to bubble with great force from the well. In a matter of seconds, six tons of drill pipe catapulted out of the ground and up through the derrick, knocking off the top, and breaking at the joints as the pipe shot further upward. Then the world was silent again. The drillers , who had scattered for their lives and were not sure what they had seen, or even if they had actually seen it, sneaked back to the derrick to find a terrible mess, with debris and mud, six inches deep, all over the derrick floor . As they started to clean the mess away, mud began to erupt again from the well , first with the sound of a cannon shot and then with a continuing and deafening roar. Gas started to flow out; and then oil, green and heavy, shot up with ever increasing force, sending rocks hundreds of feet into the air (pictured above). It pushed up in an ever-more-powerful stream, twice the height of the derrick itself, before cresting and falling back to the earth. Captain Lucas was in town when he heard the news. He raced to the hill in his buckboard, pushing his horse at a dead run. As he got to the hill, he fell out of the buckboard and rolled onto the ground. He stood up, fighting to catch his breath, and ran to the derrick. “Al! Al! What is it?” he shouted through the din. “Oil, Captain!” replied Hamill. “Oil, every drop of it.” “Thank God,” said Lucas, “thank God.” "

- Daniel Yergin from his book "The Prize - The Epic Quest for Oil, Money and Power." 

On today's date, January 10, in 1901, oil was discovered at Spindletop Hill in Southeast Texas, near Beaumont.  This was what it was like at this moment at which the world of oil production was forever changed, making some into millionaires, others into losers, and signalling the start of the modern U.S. oil industry.  Texaco, Exxon, Gulf and Shell Oil companies all got their start from this.  But it was just a couple of small investors with a dream who started it!

Patillo Higgins and Anthony Lucas

Patillo Higgins (right) had lived in Beaumont, Texas and was a violent youth. He frequently harassed African Americans and in one incident got into trouble with a local sheriffs deputy after such harassment.  The deputy shot him in his left arm which he subsequently lost.  He worked at a lumber camp one-armed as he was when he attended a Baptist revival meeting and decided to mend his ways and become a proper christian gentleman.  So he moved back to Beaumont, and taught a Sunday School class which he one day took on an outing to Spindletop Hill. He became intrigued by a half-dozen little springs he found on the hill with gas bubbling up into them.  He knew nothing of geology, but he was curious, so he learned about the subject by reading the U.S. Geological Survey, and everything else on geology that he could lay his hands on.  He became convinced that Spindletop Hill was a salt dome beneath which there was oil to be found.  He partnered with some other local businessmen to form the "Gladys City Oil Company" named after one of the girls in his Sunday School Class in 1892.  He purchased the land, but try as he might, he was unable to interest trained geologists in his idea.. they basically told him he was mad to pursue this scheme.

Out of desperation, Higgins placed an ad in a local magazine casting about for possible investors to drill the land and he only got one answer: from a former officer in the Austrian Navy named Anthony Lucas (left).  Lucas, a Croatian who had emigrated to the United States in 1885 had studied Mechanical Engineering and had become an expert on the geological formations in the Gulf Coast area of the United States.  He was like Higgins, convinced that there was oil to be found beneath the salt deposits.  He formed a partnership with Higgins and began drilling in 1899.  But his hydraulic drill broke down.  He knew how to fix it and keep drilling, but his funds were exhausted. And local geologists were completely convinced that Higgins and Lucas were both crazy.

The Oil is Found as Beaumont Becomes a Boomtown

Lucas decided to go to Pittsburgh in search of funding from Standard Oil Co. but John D. Rockefeller and his giant monopoly wanted nothing to do with Texas. So Lucas visited with a bolder pair of investors in John H. Galey and James F. Guffey.  These two agreed to invest in the Spindletop idea, but at a very steep price. They were willing to let Lucas have 1/8 of the company, but Higgins was to get nothing, unless Higgins was willing to give him half of his portion.  So Lucas returned and recommenced his drilling, with the result described above... which became known as "the Lucas Gusher." Word of the discovery got out and within a few short months Beaumont was transformed into a heavily congested Boomtown.  Independent companies were set up overnight with drilling platforms being squeezed into every square inch of Spindletop Hill (above).  Ladies who owned a small plot of land on which to feed their pigs, or do their laundry found themselves being offered fabulous sums for their humble little plots. In fact, the Humble Oil Company was founded here, which later changed it's name to Exxon. Similarly was the Texaco Company.  Mssrs. Galey and Guffey found themselves being pushed out of control of their company by Andrew W. Melon and his brothers, who formed the Gulf Oil Company.

 And what of our two small investors with a dream who started the whole crazy business?  Patillo Higgins, who had been cut out by Lucas sued and was able with the suit, and various other investments to make a decent amount of money to go along with the satisfaction of knowing that he had been right all along.  And Anthony Lucas was able to negotiate a sizable amount for his 1/8 share of his original deal with Galey and Guffey. Upon seeing the over-produced Spindletop Hill, wherein the value of the oil had dropped precipitously, he commented: “The cow was milked too hard...Moreover, she was not milked intelligently.”


"The Prize. The Epic Quest for Oil, Money and Power" by Daniel Yergin, Simon & Schuster,
New York, 1991,

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