Listen
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. Then we talk about World War II, and how the deal struck between Texas regulators and oil companies positioned the US to run the world of energy in the post-war era.
The full transcript of this episode of The Disconnect: Power, Politics and the Texas Blackout is available on the KUT & KUTX Studio website. The transcript is also available as subtitles or captions on some podcast apps.
Mose Buchele Previously on The Disconnect.
Helen Griffin Really? We had what they called our fever here.
Page Foshee Instead of having a cabal of big oil companies develop at East Texas field. You had farmers doing it.
Mose Buchele Small independent operators kept drilling and the price of oil kept plummeting.
Page Foshee Now it’s just unsustainable.
Speaker 4 The idea was that lowering production would stabilize prices.
Mose Buchele That’s when Governor Ross Sterling declared martial law.
Page Foshee Sterling sent two Ranger captains and about 1100 National Guards who turn off the pumps to turn off the oil rigs, shut everything down.
Mose Buchele 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 Texas oil men on the other side. Now, what happens next will set Texas on a course of global energy dominance.
Page Foshee It was regulated by the state of Texas because that’s where the oil was coming from.
Mose Buchele It’ll help defeat fascism and World War Two.
Announcer Today, oil is the most precious single substance the Earth produces.
Mose Buchele And ultimately it will give rise to a new global cartel that still calls the shots today.
Speaker 6 The glory days of the Railroad Commission ended in 1972.
Mose Buchele I Mose Buchele. This is the disconnect. Power, politics and 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. Hey, Audrey.
Audrey McGlinchy 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?
Mose Buchele 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 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 and minds of East Texas oil workers and independent producers when he sent in the National Guard.
Audrey McGlinchy 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 drillers pretty angry.
Mose Buchele Absolutely. But Walters was more than just a lawyer. He did have some experience doing this sort of thing as a National Guard leader.
Audrey McGlinchy He’d also been sent to establish order in other oil boomtowns.
Mose Buchele 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. So so this guy knew what he was doing, but in East Texas, they were ready for him.
Page Foshee Many small producers began laying their own pipelines.
Audrey McGlinchy Here’s Page Foshee again, Landman, and oil historian.
Page Foshee Crisscrossing the area and getting them to refineries that would accept their oil. And there was plenty of it flowing. A bunch of steel pipes under the surface, the East Texas field.
Audrey McGlinchy 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.
Mose Buchele That oil sometimes moved by truck, train or secret pipeline out of the area and often out of the state.
Joe Kinsey Back we we haul a lot of oil.
Audrey McGlinchy 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.
Joe Kinsey They little little refinery. They paid cash for the oil when it came in. They sold the gasoline for cash. There’s no record made.
Mose Buchele This was the system. The National Guard was sent in to shut down. And when they came in, things turned violent fast.
Audrey McGlinchy Within days of the troops arriving, arsonists started burning buildings.
Mose Buchele Remember those churches where the Texas Ranger, Lone Wolf Gonzalez, kept his prisoners?
Helen Griffin They call them trot line churches because they hid the prisoners in the church.
Audrey McGlinchy This is Helen Griffin again. We heard from her in the first episode.
Helen Griffin 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.
Mose Buchele 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.
Audrey McGlinchy Whatever was really going on, the arsons ended the use of the, quote, trot line churches and left locals with nowhere to pray.
Helen Griffin They had to have church in the city hall as well as their baptismal and all of it from the city hall
Mose Buchele 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. 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.
Audrey McGlinchy 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 themselves.
Mose Buchele Yeah, I mean, after all, was just really cheap.
Audrey McGlinchy Yeah, it makes sense.
Mose Buchele 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 Guard checkpoint. The gunmen were then able to escape into the woods.
Page Foshee The best thing that East Texas had going for it, at least East Texas, is scofflaws were the Pine Trees.
Audrey McGlinchy State troopers and regulators seemed completely helpless.
Mose Buchele Decades later, former Texas Senator Ralph Yarborough remembered visiting the East Texas field as a young assistant attorney general
Ralph Yarborough who went over there to help. Build some of this railroad commission, had National Guard. Out.
Mose Buchele Researcher David Prindle interviewed Yarborough back in the 1970s and told me the problem is.
Audrey McGlinchy 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 Guardsmen, were
Ralph Yarborough 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.
Audrey McGlinchy 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 Washington.
Mose Buchele 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.
Audrey McGlinchy And it turns out it wasn’t. In December of 1932, the U.S. Supreme Court ruled that the martial law orders were invalid. Jacob Walters left East Texas and he gave oversight of the oil field to the Texas Railroad Commissioner, Ernest Thompson.
Mose Buchele 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.
Audrey McGlinchy Walters had set up his National 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.
narrator Do you have a name for your headquarters?
Mose Buchele Thompson is said to have asked.
narrator I thought of naming it, Hell replied Walters. If you have no objection, sir, I’ll call it proration, Hill.
Mose Buchele said Thompson.
narrator They both mean the same thing.
Audrey McGlinchy But right as the commission began to claim full authority over the oil field, there would be one more bloody fight
Mose Buchele In Austin small independent producers had been lobbying lawmakers since martial law was declared they wanted to remove the Railroad Commission’s authority over the Texas oil fields. They wanted production limits gone.
Audrey McGlinchy 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.
Ralph Yarborough Undercover agents.
Unidentified From whom? Well, they were undercover agents from Maine. And the local he knew.
Ralph Yarborough 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.
Mose Buchele 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 and create a new agency to regulate oil.
Audrey McGlinchy It would be an appointed board that small time drillers thought would be more on their side.
Mose Buchele 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 that approved the measure, and the next day it would head to the Senate.
Audrey McGlinchy Former Railroad Commissioner Kent Hance picks up the story from there.
Kent Hance The night of the vote, some of the old men were celebrating that they had defeated the regulation, oil and gas.
Mose Buchele Everyone had been drinking. And that’s when one group of 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.
Kent Hance And they got an argument, got in a fight over and got to arguing, and somebody hit somebody and they hit the ground.
Audrey McGlinchy Other accounts, including from Ralph Yarborough, make it sound more like a beating than a fight with at least three men setting on Burns.
Ralph Yarborough In fact, on the floor and stomped him and beat him and crippled him.
Audrey McGlinchy The next day as the state Senate was set to vote on the measure. Burns was brought into Senate chambers, badly bruised in a wheelchair.
Kent Hance The legislature was outraged about it.
Mose Buchele 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.
Kent Hance It’s a fascinating part of the history that that happened the way it did. Had they not acted foolishly and got in a fight, they would not have had the regulation.
Audrey McGlinchy 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.
Mose Buchele In answer, Yarborough asks Prindle.
Ralph Yarborough Well, did you ever see the motion picture.
Mose Buchele 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 kill him now. He’s too big. If you’re going to get in that.
Ralph Yarborough You should have killed him when he was a poor, cowboy.
Mose Buchele 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.
Ralph Yarborough They were too big 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 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 the industry.
Audrey McGlinchy 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.
Mose Buchele 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 are turned on their head and there needs to be some kind of state intervention.
Audrey McGlinchy Who ends up benefiting? Is it the small time drillers or the big oil companies?
Mose Buchele And one group that really has not come up is, you know, the consumer for.
Audrey McGlinchy 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.
Mose Buchele 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.
Audrey McGlinchy This does not mean that enforcing the rules came any easier at the outset.
Mose Buchele I mean, like we said, opponents of these production controls, they basically fought a war over them in East Texas.
Audrey McGlinchy 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.
Mose Buchele The main reason that these rebellious Texas oilmen came to accept state regulation was really they decided they liked it.
Audrey McGlinchy It turned out it really worked for them.
Mose Buchele It did. And to understand how we’ve got to get a little more into detail about this thing called proration, what was essentially a system of price control.
Audrey McGlinchy Yeah, it’s a form of rationing. Rationing of oil supply.
Mose Buchele 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 what supply of oil was available and to try to figure out what they thought oil demand would be.
Audrey McGlinchy 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.
Speaker 6 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.
Mose Buchele 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.
Speaker 6 That everybody makes money and then they can do the same thing the next month.
Audrey McGlinchy And for the small time independent oil guys, this was the important part. After they agreed upon the amount of oil that was going to be produced, the commission would give each producer a slice of that pie.
Mose Buchele So you can pump this much from this oil well. You can pump this much from that oil well.
Audrey McGlinchy The amount of oil each company was allowed to produce was called their allowable.
Mose Buchele During the East Texas oil boom. The little independent oil men, they hated this system because it set a cap on their production.
Audrey McGlinchy 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.
Mose Buchele Yeah. I mean, after all, these commissioners needed to stay friendly with the local guys. These are the people that are voting them in.
Audrey McGlinchy So they made sure smaller Texas drillers got more than their fair share of allowable versus the big companies.
Kent Hance And the smaller you were, the more the rules favored you.
Mose Buchele They kept the prices up, which made the big guys happy.
Kent Hance And they made rules that favored the little guys, which made them profitable. And therefore, everybody began to love the Railroad commission.
Mose Buchele This system helped the little guys in other ways, too. There’s this one story about a 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.
Audrey McGlinchy But then he realized there was only one pipeline connected to his wells, and that pipeline didn’t want any of his oil.
Mose Buchele In Texas, where the state guaranteed every producer a share of the market and allowable, some of this guy’s crude would have made it down that pipeline and.
Audrey McGlinchy He would have gotten paid. Maybe regulation wasn’t so bad.
Mose Buchele 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.
Audrey McGlinchy Yeah, a really, really big one.
Ralph Yarborough On September the 1st, 1939, the Nazi army smashed into Poland.
Mose Buchele 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.
Ralph Yarborough Six hours after Great Britain declared war on Nazi Germany, the Republic of France followed.
Audrey McGlinchy 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.
Mose Buchele 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.
Audrey McGlinchy Production limits had ensured there was this reserve capacity available when regulators had to take their fingers off the spigot.
Mose Buchele 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.
Announcer Today, oil is the most precious single substance the Earth produces, and the great oil fields are the most vital strategic centers of the globe.
Audrey McGlinchy Even after the war started, railroad commissioners kept control over production.
Mose Buchele And they were not afraid to use that leverage sometimes to give their home state producers a hand up.
David Prindle Let me tell you a story about 1940.
Mose Buchele Here’s David Prindle.
David Prindle Again in 1940. World War Two has broken out in Europe.
Mose Buchele 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.
David Prindle Please give us this big increase in our allowable so that we can send the oil to Britain to fight the Germans.
Mose Buchele And the Railroad Commission says no.
Audrey McGlinchy And the company says, What do you mean, no? We’re going to help fight the Nazis.
David Prindle 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.
Mose Buchele The oil company guy is shocked.
David Prindle You can’t make us build a pipeline to West Texas. You do not have the authority.
Audrey McGlinchy And the commission guy, he says. Who said anything about making you build a pipeline?
David Prindle 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.
Mose Buchele He says the oil company guys thought about this for a little bit and built the pipeline to West Texas.
David Prindle And a whole bunch of small producers out there got rich.
Audrey McGlinchy 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.
Announcer Every U-boat and grader the German Admiralty issues these instructions. Your first objective will be the tankers.
Mose Buchele 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.
Audrey McGlinchy But after the war started, those ships became targets.
Announcer 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 in the making.
Mose Buchele German U-boat sneaking right off the coast of the U.S. started sinking.
Announcer Tankers torpedoed and sunk off the North Carolina coast. American tanker Alan Jackson, 22, lost.
Audrey McGlinchy This part of the war doesn’t get a lot of attention nowadays, but it was devastating for the allies.
Announcer Torpedoed and sunk off the Dutch West Indies. Norwegian Tanker Coast Guard, 39 dead.
Mose Buchele 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.
Announcer I could list 31 ships lost in the Atlantic in the past five weeks.
Audrey McGlinchy So eventually the U.S. government said this has to stop. We should start moving some of that oil by pipeline instead of boat.
Mose Buchele 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.
Unidentified Constructing an oil pipeline from the Midwest to eastern points. In the United States, engineers are forced to cross.
Announcer Many a mighty river.
Audrey McGlinchy 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.
Announcer Big inch, as the line is called now, has another whopper way to hurdle. So they plant tons of dynamite to blast the bed for the pipe beneath the river’s bottom.
Mose Buchele 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.
Announcer Now, hold tight and watch for the explosion.
Audrey McGlinchy It’s incredible to think about this nowadays, but both these projects were completed in about a year.
Mose Buchele 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 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.
Announcer It’s the cleanest fuel, the most efficient fuel. In fact, it’s the perfect fuel.
Audrey McGlinchy So far, our whole story has focused on oil. Black, gold. Right. It’s the stuff that most Texas drillers were looking for when they dug into the earth.
Mose Buchele 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.
Announcer But where does it all come from? And most important, how long will we have it?
Audrey McGlinchy And I’m so glad we’re talking about this, Mose, because what is natural gas?
Mose Buchele 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 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 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 could kill you. It was flammable.
Audrey McGlinchy Cool. Cool. So what is natural gas.
Mose Buchele Is it’s gas you can set on fire.
Audrey McGlinchy Got it. Obviously people eventually realized it was useful, otherwise we wouldn’t be talking about it.
Mose Buchele Absolutely right. Yeah. You could use natural gas first as lighting and a heat 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.
Audrey McGlinchy 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, lighting and starting to use more of it for generating electricity.
Mose Buchele 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. 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.
Jack Bommel And I used to drive from Austin and Corpus.
Audrey McGlinchy They used to always make me sick. This is a man named Jack Bommel. He was the head of the oil and gas division at the Railroad Commission.
Jack Bommel That read the newspaper.
Audrey McGlinchy At night. He says the flaring was so bright you could read the newspaper at night.
Jack Bommel Yeah, you know.
Mose Buchele 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 wanted.
Jack Bommel There was no market. You couldn’t sell it, couldn’t give it away.
Audrey McGlinchy And they literally tried to give it away.
Mose Buchele At one point, the city of Amarillo promised 25 years of free natural gas for any industry that wanted to move there. No takers.
Audrey McGlinchy Until this moment we described after World War Two.
Announcer Now hold tight and watch for the explosion.
Mose Buchele Now these new huge pipelines can move Texas gas all over the country.
Announcer The big and little inch lines were completed in the technical transformation company build their lines up to the Tenneco.
Mose Buchele That was a huge natural gas pipeline.
Announcer We’ve found that there is some outlet for gas which could be used.
Audrey McGlinchy Texas natural gas could go to the Midwest to power factories, the Northeast to heat homes. Suddenly there was this big market.
Mose Buchele Not surprisingly, the Railroad Commission thought this was their chance to start controlling that market like they did with oil.
Audrey McGlinchy But there was a problem. The pipeline companies had already taken control of the gas market.
Mose Buchele 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.
Audrey McGlinchy Like that story about the driller in Wyoming, they.
Mose Buchele Were kind of pro raiding the gas field.
Audrey McGlinchy There were stories of pipeline companies strong arming gas.
Mose Buchele Producers, telling them they wouldn’t be able to sell their gas.
Audrey McGlinchy If they went to the commission with complaints.
Mose Buchele This is one reason the commission never really regulated gas like it did for oil. Oversight of gas was basically outsourced to the pipelines.
Audrey McGlinchy And that’s going to come back to haunt us later in this story.
Mose Buchele So maybe they fumbled the ball with gas. But, boy, were they on top of oil.
Audrey McGlinchy They were killing.
David Prindle It. Essentially, the Railroad Commission was the most important institution in the world of oil.
Mose Buchele Here’s David Prindle again.
David Prindle 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.
Mose Buchele You could even say it was one of the most important agencies in the world, at least as far as it influenced the price of oil around the world.
David Prindle 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.
Audrey McGlinchy 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 the Railroad Commission, went down to Venezuela to start showing them how.
Announcer They wanted to set up a railroad there, just exactly like we have here.
Mose Buchele And like we said, Texas influence over oil was not just economically important. It became strategically indispensable.
Announcer Into Egypt’s Sinai Peninsula a barren stretch of dunes, plateaus and lifeless mountains. Roll the spearheads of an Israeli army of 50,000.
Audrey McGlinchy In 1956, there was a big fight over the Suez Canal that disrupted the flow of crude oil from the Middle East.
David Prindle So when oil from the Middle East stopped coming, the railroad commission just took the lid off. And allowed Texas wells to produce more. And so there was no crisis.
Mose Buchele About ten years later, the six day war between Egypt, Syria and Israel again shook global supply.
Announcer War in the Middle East. Israeli forces drive spearheads across the Sinai Peninsula.
Mose Buchele Again, the Rhetoric commission reacted.
David Prindle 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.
Audrey McGlinchy This ability to manage global supply is the reason the 50s and 60s have been called the power years of the Texas Railroad Commission.
Mose Buchele It was the height of the agency’s influence.
Audrey McGlinchy But it would not last.
Mose Buchele 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 of controlling oil production.
Audrey McGlinchy 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.
Mose Buchele 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.
David Prindle There was always resentment by the big integrated 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.
Audrey McGlinchy This rise in global oil production and imports threatens smaller U.S. companies with lower prices.
Mose Buchele So in the 50s, U.S. producers got a law passed limiting oil imports from most countries.
Audrey McGlinchy 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.
Mose Buchele First, the Venezuelan oil minister hoped he could patch things up with the states he went to Washington to pitch a partnership between countries, kind of an international railroad commission that would let them regulate supply together.
Audrey McGlinchy But the U.S. government had no interest in that.
Mose Buchele I mean, why share the power?
Audrey McGlinchy So the Venezuelan oil minister paid a visit to the Middle East looking for a more sympathetic.
Mose Buchele Audience, an OPEC, the Organization of Petroleum Exporting Countries, was born.
David Prindle OPEC was explicitly modeled on the Texas Railroad Commission.
Mose Buchele At first, the birth of this young upstart oil cartel didn’t really concern federal and Texas energy officials too much.
Audrey McGlinchy The U.S. still had the capacity to flood the market if needed. It could still produce or withhold enough oil to set prices.
David Prindle You know, the way they kept the 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.
Mose Buchele 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.
David Prindle The allowable sales that the Railroad commission is permitting starts going up and up and up.
Audrey McGlinchy They figured they needed to let Texas companies pump more to keep a grip on the oil market.
Mose Buchele They keep raising the allowable.
David Prindle 70% to 80%.
Mose Buchele Of course, there’s a point at which this strategy stops working. That point was reached in 1972.
David Prindle The amount they allowed the allowable for each well went to 100%.
Audrey McGlinchy 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.
David Prindle So the glory days of the Railroad Commission, when it was truly, hugely important in the economy of the country, ended in 1972.
Mose Buchele And soon after that, a new power emerged.
Audrey McGlinchy OPEC, a group modeled explicitly on this weird state railroad agency in Austin, came to manage the global supply of oil.
Mose Buchele 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 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 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.
David Prindle I say, Do you have a name for your headquarters?
Mose Buchele Thanks again to the Digital Archives 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.
This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.
