Phil Roberts, A New History of Wyoming

    Chapter 9: History of Oil in Wyoming

     

      The oil industry has been a part of the Wyoming economy since the beginning days of statehood. In fact, explorers in what is now Wyoming in the early 19th century reported evidence of oil. Capt. B. L. E. Bonneville’s Adventures include reference to oil springs near present Dallas Dome, the location of what would be the state’s first drilled oil well in 1885. 

During the fur trade and Overland trails periods, mountain men commented on “oil springs” where oil bubbled to the surface of water pools. Native people seined off the oil for eons, using the greasy residues for war-paint, decoration on hides and teepees, as horse and human liniments, and for medications. An oil spring near Hilliard was well-known when Fort Bridger was established in 1842. The first recorded oil sale in Wyoming, however, happened along the Oregon Trail when, in 1863, enterprising entrepreneurs sold oil as a lubricant to wagon train travelers. The oil came from Oil Mountain Springs, some 20 miles west of present-day Casper.

Nationally, oil had a similar history.  Thirteen years after the world’s first oil well was drilled in Baku, Azerbaijan, America’s first gusher, was struck. Made by “Colonel” Edwin Drake, America’s initial discovery was at Titusville, Penn., in 1859. It led to an oil rush to western Pennsylvania. Initially, even the newly “drilled” oil had only nominal use in transportation—as axle grease for wagons and coaches or lubricant for steam engines powered by wood or coal.

In 1866, John C.Fiere, an employee of Fort Bridger sutler William A. Carter, reported to his boss that he had found oil near the fort. He had experience in the Pennsylvania oil fields and offered to develop the oil spring commercially. In the following years, the spring produced 150 barrels of oil, the entire amount sold to the Union Pacific Railroad. In the spring of 1867, Judge C. M. White dug a hole next to the oil spring where Carter’s employees had been skimming oil from the surface of the water.  White’s crew scooped oil from hand-dug trenches. He shipped modest amounts to Salt Lake City tanners until the transcontinental railroad passed nearby, giving him additional markets for lubrication.           

About the time of Drake’s Titusville discovery, scientists discovered that a petroleum by-product, kerosene, could provide superior lighting to candles. The newly developed kerosene lamps gave off even better light than the increasingly costly whale oil. Indeed, whales were  becoming scarce and, were it not for kerosene, their extinction could have been a possibility.

Cleveland merchant  John D. Rockefeller formed a company he called "Standard Oil." A purchaser of Rockefeller's kerosene, sold in one- or five-gallon blue cans, could be assured that the product contained no water or explosive gasoline that sometimes was dishonestly passed off as kerosene by other merchants.  Gradually, through sound business deals as well as anti-competitive practices, Rockefeller gained near monopoly over oil in the Northeast. When Edison invented the first practical incandescent light bulb in 1879, observers believed Rockefeller’s oil business would wither and die. Despite the seeming ruinous competition from electric lighting, Rockefeller persevered. In 1883, he formed the Standard Oil Trust.

That same year, out west, Mike Murphy brought in Wyoming’s first oil well at Dallas Dome, finding oil at 300 feet in the Chugwater formation.  Markets for the unrefined petroleum were limited. Apparently, like Carter and White two decades earlier, Murphy sold most of his production to Utah tanners and to the Union Pacific to lubricate railcar axles. Electricity generation proved impractical for tiny towns and ranches, particularly in Wyoming where distances between ranches were great. Kerosene continued its dominance in rural lighting. 

Soon after Murphy’s successful well, others entered the business.  Cy Iba, a former gold prospector, started drilling for oil around Casper. Several others attracted investment to possible oil strikes in the Big Horn Basin (Bonanza) and southwestern Wyoming (around Hilliard and Mountain View). Iba’s first strike, “Discovery Well” north of Casper, helped transform the newly established railhead for wool shipping into the “oil capital of the Rockies.” In the decade of the 1890s, significant oil strikes were made in northern Natrona County. Investors, comfortable with dependable nearby supplies of crude oil, underwrote construction of Wyoming’s first refinery in 1895. Pennsylvania investors headed by Philip Shannon formed the firm at Casper and named it the Pennsylvania Refinery. They also hit oil at what became known as the “Shannon field” north of Casper.

Kerosene and lubricating oils remained the primary petroleum-based products in demand, but it soon was about to change. In May 1898, Laramie bicycle shop owner Elmer Lovejoy ordered a one-cylinder, two-cycle marine engine. When it was delivered, Lovejoy assembled the combustion engine and mounted it and the frame on four bicycle wheels.  While American forces were winning the 14-week Spanish American War in Cuba and the Philippines, Lovejoy’s “toy” clattered along the unpaved streets of Laramie, doing five miles per hour in one forward gear and 10 mph in a second, but with no reverse.  Of course, the single-seat runabout engine was fueled by gasoline, formerly a waste product dumped by refiners into nearby streams in earlier years.

Wyomingites began purchasing automobiles in 1900 and by the end of the decade, cars were commonplace throughout the state.  Medical doctors often were the first people in towns to buy cars. In Rawlins, Dr. John Osborne brought a car to town in 1900. Two years later, Dr. W. W. Crook became the first Cheyenne resident to own a car. Dr. J. L. Wicks had Evanston’s first car in 1906. Several sheep ranchers were owners of early cars. In Fremont County, J. B. Okie pioneered motor vehicles at his ranch, “Big Teepee,” at Lost Cabin. John Sedgwick brought the first car to Weston County, driving his Model N Ford to and from his sheep ranch in about 1905. Sheepman William Ayers owned Platte County’s first car.  Cars had become so widespread in the following decade that a state speed limit was imposed for the first time in 1913 (12 mph maximum in towns).and, in the same year, the state required that all cars be licensed for the first time.

Wyomingites became vitally concerned with road improvements in order to be able to drive the rather primitive motor vehicles around the state. As a consequence, counties started grading roads. “Good roads associations” formed nationwide and lobbied for better highways. The “Lincoln Highway” (US Highway 30) became the nation’s first designated transcontinental automobile route. (Read the Kris White article in Readings in Wyoming History).  In 1917 the Wyoming legislature created the Wyoming Highway Department and designated various routes as “state highways.”  Years later, in the 1950s, Congress authorized interstate highways and, eventually, Interstate Highway 80 followed roughly the route of the Lincoln highway across Wyoming.

During those early years, car owners purchased gasoline in gallon or two-gallon cans from general stores. The date of Wyoming’s first gasoline station is not known, but refineries produced gasoline in abundance by the late ‘teens. In 1917, five refineries were operating in the state, including small operations at Greybull and Cowley. By 1923, Casper alone boasted five refineries—the tiny Pennsylvania Oil and Gas Company facility on South Center Street built in 1895; the Belgo-American refinery (later known as the Midwest Refinery) built east of Highland Cemetery in 1903; the giant Standard Oil refinery in southwest Casper, opened in March 1914 and expanded in 1922 into the largest gasoline-producing refinery in the world;  the Texaco refinery, three miles east of Casper that opened in 1923; and the small White Eagle refinery opened the same year. 

The early 1920s were the heyday of Wyoming oil production and refining. Numerous wells were in production in the Big Horn Basin—Oregon Basin, Elk Basin, Greybull, Garland, Grass Creek fields. In eastern Wyoming, the Lance Creek oil field near Lusk was one of the state’s largest, causing the town of Lusk to grow to an estimated population in excess of 5,000 people by the early 1920s. In 1916 oil had been found on part of the University of Wyoming’s land grant near Glenrock. Royalties from the production from the “University well” in the Big Muddy oil field made it possible for the university to stave off the bad economic conditions of the 1920s and build the Half Acre Gymnasium and the university library (now the Aven Nelson Building). Important  refineries popped up throughout the state. The Producers and Refiners Company (PARCO) built a refinery and a complete town for its employees that was completed in 1923. When the firm went into bankruptcy in the early 1930s, Harry Sinclair bought the town on April 12, 1934, and renamed it “Sinclair.” 

An active stock exchange, known as the “Midwest Oil Exchange,” operated in Casper. There, on the corner of 2nd and Center streets, speculators could trade in “penny stocks”—cheap shares from fledgling companies anxious to attract sufficient investors with shares of stock worth a few cents each that they could buy the equipment and lease likely lands where they could “strike it rich.” Close to the stock exchange and numerous oil company offices, a “red-light district,” known as the Sandbar, flourished in the 1920s. Wide-open gambling and prostitution operated around the clock, punctuated by an occasional police raid or homicide. Casper was Wyoming’s “oil city.”

But the biggest, most significant oil field in Wyoming in the early 20th century was in northern Natrona County—the Salt Creek oil field. One early speculator, William Fitzhugh, later donated his collection of fishing and hunting books (along with cash) to the American Heritage Center. It is said that Fitzhugh gained his oil claims in the Salt Creek area by trading some gold mining prospects in the Snowy Range to Stephen W. Downey, the Laramie lawyer who was largely responsible for UW locating in Laramie. Downey made nothing off the Centennial area prospects, but Fitzhugh gained a fortune from the Salt Creek oil.

Oil wells were already in production at Salt Creek in 1908 when H. L. “Dad” Stock took a chance on drilling in a nearby formation just northwest of the company-owned town of Midwest. The result was the “Stock gusher,” that spewed oil high above the derrick, covering the prairie for hundreds of feet around when it rumbled in. Stock made a fortune from the strike, lost it, regained another one in oil in the southwest, before turning operations over to his son, Paul Stock. The younger Stock, mayor of Cody in the 1940s, was said to have been the largest individual shareholder of Texaco after he sold his firm to the giant multinational. The Stock Foundation remained one of the state’s largest philanthropic foundations for many years.

Most of these first oilfields in Wyoming were discovered on public lands. Under the federal government laws at the time, an oil “prospector” could locate a “provable” oil claim on federal lands, pay a minimal filing fee, and hope for a strike. If he had struck oil on private land, he would have had to pay the land owner a royalty, but if he found oil on a federal claim, it belonged entirely to him and he paid the government nothing.  Congress changed the law, however, and with passage of the Oil and Gas Leasing Act in 1920, oil men no longer could “claim” oil on federal lands. They could lease such lands, paying royalties for production to the federal government as though it were any other landowner.  Through the influence of several Wyoming members of Congress, the federal government was required to turn back part of the royalties from oil produced on federal lands to the state where the oil was produced. For many years, Wyoming state government enjoyed federal mineral royalty payments for oil found on federally-owned land in the state. (Federal mineral royalties, now from coal and trona, as well as oil production,  remain an important source for state revenues in 2007).

During the Theodore Roosevelt presidency, Department of the Navy officials aspired for an American navy that could sail around the world, demonstrating the country’s newly found imperial powers. The U. S. Navy, bound by weight limitations with coal-fired ships, resorted to building coal fueling stations around the world.   They watched carefully as other nations began development of petroleum-powered ships. In the Taft administration, the Navy officials decided to convert its fleet to the more efficient petroleum. Ships would have no need for “coaling stations.” Once fueled, the petroleum-powered ships had far greater range.

The U. S. S. Wyoming, initially launched in 1900 (and later renamed the U. S. S. Cheyenne when the new battleship U. S. S. Wyoming was launched in 1910), became the first ship in the fleet to be converted to oil-power in 1909. As more ships were converted to oil, Navy officials grew more concerned about he long-term availability of oil. What would happen if oil were to “run out”?  The Navy would be paralyzed.

Consequently, the Department of the Navy asked Congress to set aside federally-owned lands in places where known oil deposits likely existed. These “naval petroleum reserves” would not be drilled unless a national emergency made it necessary. One of the three petroleum reserves set aside was near Salt Creek in northern Natrona County. It was in a place named for an unusual rock formation nearby—Teapot Dome.

Oil men throughout the West coveted the opportunity to drill within these federally-owned “oil reserves.” Soon after Republican Warren G. Harding was elected President in 1920, he appointed his poker-playing friend, U. S. Senator Albert Fall, to be his Secretary of the Interior. Fall, a rancher and New Mexico’s first U. S. Senator, accepted the Cabinet post.  Within a few weeks, he convinced President Harding to allow transfer of the “naval petroleum reserves” from the Department of the Navy to his Interior Department, arguing that Interior was “better able” to oversee the protection of these areas where oil was not to be produced, but kept in case of emergency.

What resulted from that is what became known as the “Teapot Dome scandal.” It was the most serious Presidential scandal in American history until Watergate in the Nixon administration in the 1970s. Even though the scandal gained its name from a Wyoming place, the wrongdoers in the scandal were from elsewhere.

Interior Secretary Fall, once the Teapot Dome oil field was under his control, made secret deals with two prominent oil men, Edward Doheny and Harry Sinclair. Both men, close friends of Fall, paid him bribes to authorize them to drill in the three “naval petroleum reserves”—contrary to the letter and spirit of the law.

Back in Wyoming, independent oilman Leslie Miller became suspicious when he saw trucks with the Sinclair company logo hauling drilling equipment into the Teapot Dome naval petroleum reserve. He asked Democratic U. S. Senator John B. Kendrick to look into the matter. Kendrick, sensing wrongdoing, turned the question over to a special Senate investigating committee.

Meanwhile, President Harding took a summer trip west, stopping in Wyoming, enjoying Yellowstone, and continuing on to Alaska and, eventually, to San Francisco. While there, the President died suddenly. (Some historians believe Harding escaped impeachment for his role in Teapot Dome by having the “good fortune” of dying as the scandal was unfolding. Of course, such a conclusion can not be proven).  Fall was not so lucky. Following a lengthy Senate investigation, Fall went on trial for accepting bribes. He was convicted and sent to federal prison, the first Cabinet-level officer in American history to go to jail for crimes committed while serving in office. Both Sinclair and Doheny were exonerated of the main charge—giving bribes to Fall. As a newspaper reporter observed when the two wealthy oil men were found not guilty, “you can’t convict a million dollars.”

The federal government brought suit in federal court in Wyoming to cancel the bribery-induced leases to Teapot Dome that Fall had given to Sinclair. Wyoming’s U. S. District Judge T. Blake Kennedy ruled against the government, but the leases were cancelled when the Supreme Court overturned the Kennedy decision.

Throughout the rest of the 1920s, when Wyoming agriculture was in economic ruin, the oil industry remained a bright spot in the state’s economy. Oil company profits began to falter when the rest of the country was plunged into the Great Depression, in wake of the stock market crash of October 1929. A report from northern Wyoming soon after the stock market crash noted that a customer could buy an entire BARREL of crude oil at Salt Creek for 19 cents! 

Oil companies agreed on various measures to alleviate “ruinous” competition, in light of declining oil prices. One of their more successful strategies was to introduce a pricing system that became known as “Tulsa-plus.”  Gasoline, regardless of where it was refined, had to be sold with the additional cost that the wholesaler would have had to pay if the gasoline had been produced in Tulsa, Oklahoma. Wyomingites were furious with the system and high gasoline prices generally—higher in oil refinery towns like Casper than in other places far from oil refineries.

 In the early 1930s, gasoline pricing became a campaign issue in races for governor of Wyoming. State attorneys-general began a series of suits against companies for inflating gasoline prices to Wyoming consumers.  The suits were unsuccessful although the adverse publicity apparently served as a brake on price increases.

As the 1930s continued, the economic depression extended into the oil fields of Wyoming, not lifting until Allied demands for oil brought price rebounds just before World War II. In the meantime, consumers welcomed having natural gas piped to their homes in many Wyoming towns. (Laramie’s first natural gas line opened in February 1933, but Greybull residents had been enjoying such service since 1908. It was the first town in the state to have home furnaces fueled by natural gas, piped in from nearby wells). The first interstate oil pipeline from Wyoming was built from Lance Creek to Denver in 1938.

By the beginning of World War II, oil refineries of various sizes operated in many Wyoming towns, including Cody, Lusk, Thermopolis, Newcastle, Laramie, and Cheyenne. It was in the latter city that the oil refinery played a key role in production of aircraft fuel. Frontier Refinery’s “100-octane” fuel plant helped supply American airplanes with the needed high-quality gasoline. (Read the Mike Mackey article in Readings in Wyoming History, pp. 125-131).

Existing refineries and fields, along with other producing fields established during the war, supplied American ships, planes, and tanks with petroleum products that would help win the war. After the war, another strong decade of production brought expansion of existing company operations. Company towns of Hamilton Dome, Grass Creek, Lance Creek, Bairoil, Midwest, and Sinclair either diminished in population or became independent incorporated towns by the 1950s.

While the industry since World War I always had multinational players (two firms, Standard and Ohio Oil controlled 95 percent of the production statewide in 1923), more multinationals bought existing smaller companies or expanded operations into the Wyoming oil scene.  Production continued strong, peaking both nationally and in Wyoming in 1970. All but a handful of refineries closed in the 1970s and 1980s. These included Husky’s refinery at Cody and Empire State Oil Company’s Thermopolis refinery. In the early 1980s, even the Standard Oil (Amoco) refinery at Casper, once the world’s largest,  had closed, the land later converted into a municipal golf course and office park.

Various schemes proposed to boost oil production made no headway in the 1970s.  One was a jointly sponsored proposal by the Atomic Energy Commission (now the Nuclear Regulatory Commission) and El Paso Natural Gas to use nuclear weapons to release gas and petroleum “locked” into tight formations under Sublette County. The so-called Project Wagon Wheel met with considerable local opposition and was eventually shelved. (Read the Adam Lederer article in Readings in Wyoming History, pp. 214-227).

Epilogue

Although the fields in Wyoming, for the most part, are aging, oil production remains important to the state in 2009. Oil no longer is the primary energy mineral produced in the state. Coal-bed methane, once considered a waste product until economic means of recovery and distribution were developed in the 1980s, has caused economic boom in several areas of Wyoming, including Sublette County in southwest Wyoming and throughout the Powder River Basin in northeastern Wyoming.. Even with the new value in natural gas and coal-bed methane, coal remains “king” just as it was in Wyoming in the 19th century before the invention of the automobile and diesel locomotive. Since the late 1980s, Wyoming has led the nation in coal production. The state’s ranking in oil, while still in the top dozen, has slipped since the heyday of Wyoming oil in the ‘teens and 1920s and the years of the “second oil boom” after World War II.