Friday, January 10, 2014
JANUARY 10 = "Black Gold" is Found at Spindletop, Texas
- 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.
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