THE OFFSHORE PETROLEUM INDUSTRY: THE FORMATIVE YEARS, 1945-1962 by

TAI DECKNER KREIDLER, B.A., M.A. A DISSERTATION IN HISTORY Submitted to the Graduate Faculty of Texas Tech University in Partial Fulfillment of the Requirements for the Degree of DOCTOR OF PHILOSOPHY Approved

August, 1997

. V97 * JO < ^

Copyright 1997, Tai Kreidler

ACKNOWLEDGEMENTS The author is indebted with grateful appreciation to the offshore pioneers who gave freely of their historical insight, and proved to the world that the oceans could be transformed into a productive petroleum arena.

These

pioneers include Jay Weidler of Brown and Root, Alan McClure (deceased) of Alan McClure and Associates, Bruce Collipp of Shell Oil Company, Robert Bauer, John Morgan Duke, and Curtis Crooke of Global Marine, Bill Clements, and John Rhea of Southeastern Drilling Company, Paul Endacott (deceased), Paul Wolff, and W. A. Roberts of Phillips Petroleum, Jim Steele, John Estes, Ralph Scales, and William Faucett of Bethlehem Shipyard, A. H. Glenn of A. H. Glenn and Associates, Alden J. Laborde of Offshore Drilling and Exploration Company, Griff Lee of McDermott, Inc., Bramlette McClelland of McClelland Engineers, Paul Romano of Transworld Drilling, Ralph Storm of Storm Drilling, and Hoyt Taylor of Zapata Off-Shore. The author could not have completed this project without the support of loyal and understanding colleagues, mentors, and recognizes the debt of gratitude he owes Ron Fritze of Lamar University, Peggy Ariaz, Lee Bradley, Janet Neugebauer, Patt Perry, and Joan Weidon of Texas Tech University.

Also, the author thanks the Texas Tech History

Department, and David Murrah of the Southwest Collection for

11

helping to fund the travel necessary for such an expansive study.

And a special thanks must be extended to the

supervising professor. Dr. Joseph King, for the initial suggestion to examine the offshore industry, and the guidance he provided. To the author's parents go the thanks of instilling into him the desire to learn and the appreciation for things historical.

The author's close friend Olivia Kendrick

Hastie is credited for prodding the author to final completion.

Using timely words of encouragement, Olivia

patiently held the author's hand while giving him a sound push forward. Most importantly, the author gratefully acknowledges that this project would not have been completed without the spiritual and financial support of Holle Humphries.

As a

full partner in life and scholarship, Holle has always believed in the project, and more importantly, believed in the author.

Ill

TABLE OF CONTENTS ACKNOWLEDGMENTS

11

ABSTRACT

iv

CHAPTER I. II. III. IV. V. VI. XII.

1

INTRODUCTION OFFSHORE ORIGINS

35

FIGHT FOR THE TIDELANDS

74

JOHN T. HAYWARD AND ALDEN J. LABORDE

119

SCIENCE AND THE OIL OFFSHORE INDUSTRY

157

THE OFFSHORE BUSINESS -- COMING OF AGE

193

CONCLUSION

242 248

SELECTED BIBLIOGRAPHY

IV

ABSTRACT This dissertation is the first to examine the offshore oil industry born in the calm waters of the Gulf of Mexico. The dissertation describes the offshore industry's origins and tracks its development as a consequence of a search for new oil frontiers.

In addition, it elaborates how the oil

industry moved into the marine province using available technology, and how economic urgency to compete and develop new oil territories fuel marine activity.

Enterprising

drilling contractors and operators seized the offshore gamble, finding it possible to lower the economic and technological threshold by drawing directly from wartime research and surplus equipment.

Though large oil companies

eventually placed its indelible stamp upon the industry, the smaller, independent oil operators set the initial pace to establish the offshore frontier. As a technological frontier, offshore development depended upon creative and unconventional engineering. Unfamiliar marine conditions tested the imagination of oil industry engineering.

The unorthodox methods of John

Hayward of Barnsdall Oil and R. G. LeTourneau of LeTourneau, Inc. among others transformed the industry by blending petroleum and marine engineering.

Grappling with alien

marine conditions and lacking formal training, Hayward and LeTourneau merged a century of practical oil field knowledge

v

and petroleum engineering with 2,000 years of shipbuilding experience. The Gulf of Mexico served as a fertile and protective environment for the development of a fledgling industry. With calm waters that lacked the tempestuous and stormy character of the Atlantic Ocean, with a gradual sea-floor slope, and with highly productive salt dome reservoirs, the Gulf became the birth place of the modern offshore oil industry.

Within the Gulf's protective sphere, companies

experimented and developed various technical and business adaptations.

In addition, regional academic research

institutions arose as a response to increasing work done for the offshore industry.

Such academic areas existed

previously, but matured during the formative development period.

They include oceanography, physical oceanography,

marine biology, marine geology, meteorology, and weather forecasting.

During the formative era that ended in 1962

the industry had formed its technological and economic foundation in the Gulf, and stood poised to seize an international initiative that included offshore drilling in the North Sea, the Middle East, the Far East, and Indonesia.

VI

CHAPTER I INTRODUCTION The offshore oil industry was born in the calm waters of the Gulf of Mexico.

In a search for new oil frontiers, the

oil industry, using available technology and driven by the economic urgency to compete and develop new territories, stretched into the marine province.

After the Second World

War, as petroleum demand increased, crude oil prices increased.

Enterprising drilling contractors and operators

seized the offshore gamble.

By lowering the economic and

technological threshold through the use of wartime research and surplus equipment, the industry pioneered offshore operations.

Though large oil companies had placed their

stamp upon the industry, the smaller, independent oil operators set the pace of early offshore development.

With

much of the land-based leases preempted, these pioneers risked everything and led the industry into the Gulf. As a frontier, offshore development depended upon creative and unconventional engineering.

The marine

environment presented unique difficulties.

High winds,

incessant wave forces, salt corrosion, and soft sea-floor foundation tested the genius of oil industry engineering. The unorthodox methods of John Hayward of Barnsdall Oil and R. G. LeTourneau of LeTourneau, Inc., among others,

transformed the industry by blending petroleum and marine engineering.

Grappling with unfamiliar marine conditions

and lacking formal training, Hayward and LeTourneau merged a century of practical oil field knowledge and petroleum engineering with 2,000 years of shipbuilding experience. The Gulf of Mexico served as a fertile and protective environment for the development of a fledgling industry. With relatively calm waters that lacked the tempestuous and stormy character of the Atlantic Ocean with a sea-floor slope that was more gradual and shallow than the Pacific, and with highly productive salt dome reservoirs, the Gulf became the birth place of the modern offshore oil industry. In the Gulf, companies experimented with and developed various technical and business adaptations.

As a high-risk

venture with a long-term investment pay back, operators used various technologies and devised risk strategies that increased the opportunity for success.

Technology such as

pile-supported platforms, drilling barges, semisubmersibles, drillships, and subsea completion equipment and techniques enhanced the offshore possibility for success. In addition, regional academic research institutes arose in response to increasing work done for the offshore industry.

Academic areas that developed included

oceanography, physical oceanography, marine biology, marine geology, meteorology, and weather forecasting.

Thus, during

the formative era that ended in the late 1950s, the industry had formed its technological and economic foundation in the Gulf, and stood poised to seize the initiative in the North Sea, the Middle East, the Far East, and Indonesia. Between the late nineteenth century and 1948, the offshore industry emerged.

Primitive pier-drilling on both

the Pacific and Gulf coasts at the turn of the century gave way by the 192 0s and 193 0s to the development of pilesupported platforms.

Companies had used simple adaptations

of land-based equipment.

In the 193 0s, however, the oil

industry began to modify the equipment enough so that its character and purpose adapted increasingly to the marine environment.

The shallow-draft drilling barge emerged and,

when used in conjunction with geophysical survey techniques, it represented a heightened technical sophistication and sparked an unprecedented drilling boom in the coastal shallows and river deltas. The boom stemmed from the relentless salt dome search, one that had characterized modern oil exploration after crews first drilled into the Spindletop Oil dome in 1901. By 1902, Spindletop had produced 17.5 million barrels of oil and had prompted a Gulf Coast oil exploration frenzy. Exploration crews found oil trapped along the edges of massive salt plugs that sedimentary rock layers had buried. Oil collected slowly around the perimeter.

Occasionally,

salt domes created a noticeable rise or hill making it easy for surface geologists to spot them.

The discovery of the

salt domes usually guaranteed financial success, and it became the focus of oil exploration for much of the twentieth century. The development of geophysical-search technology in the 1920s made the discovery of salt domes a certainty, particularly in locations where surface geology was impossible.

In the late 192 0s geophysical survey crews cut

through the south Texas and Louisiana swamps and identified some of the most prolific salt dome reservoirs.

In

addition, oil companies had been drilling actively in the relatively shallow, protected environment of Lake Maracaibo, Venezuela.

The technological and operational expertise

developed in both instances created an important foundation for Gulf Coast activity during the 1930s.

In 1938, off the

shore of Louisiana operators completed the first open-water oil well drilled in the Gulf of Mexico.

A year later, crews

drilled another well just offshore Sabine Pass, Texas. Meanwhile, on the Pacific Coast engineers built the first offshore platform.

Though none were commercially

successful, these efforts proved that such drilling was possible and symbolized growing interest in offshore exploration.

The Second World War temporarily interrupted offshore development.

However, the war established an important

technological and scientific base to the industry's postwar emergence and growth.

The war effort delved into and

illuminated hitherto obscure and neglected disciplines such as meteorology, oceanography, naval architecture, and marine engineering.

Such wartime research produced forecast data

and techniques, wave studies, new naval equipment, as well as the personnel who formed the scientific and technical basis for the postwar industry. After the war, in 1947, Kerr-McGee Industries, Inc. completed the first offshore well out of the sight of land just offshore southwest Louisiana.

The event signaled the

resumption of an offshore search for petroleum that World War II had interrupted.

Kerr-McGee's discovery well sparked

the beginning of the offshore age, and, for the first time, drew oil exploration resources away from domestic, landbased searches.

Growing petroleum demand from both Cold War

military expansion and civilian peacetime activities heightened offshore interest.

In addition, the declining

production from traditional onshore reservoirs, the development of drilling and marine technology, the escalating competition between oil companies for new reservoirs, and the lure of fertile and abundant offshore

salt dome structures, created a positive environment for the emergence of the offshore industry. The resultant offshore oil boom transformed the coastal economies of Louisiana and Texas.

With exploration and

production activities on the up-swing and construction projects increasing, the Texas and Louisiana Gulf coast became the beneficiary of accelerated economic growth, one marked by an increasing number of jobs and rising tax revenues.

Oil companies relocated, others added offshore

divisions to handle marine drilling, and entirely new companies appeared to service an emergent industry.

In

addition, shipyards and construction companies that had grown up during the Second World War building boom adapted to the offshore business without losing a step.

Oil

operators made immediate use of the excess shipbuilding and marine construction capacity.

Bethlehem Shipyard in

Beaumont, Texas: Levingston Shipyard in Orange, Texas: Todd Shipyards and Brown and Root Shipyard in Houston, Texas: Ingalls Shipyard in Pascagoula, Mississippi: and Alexander Shipyard of New Orleans became important offshore construction centers. As the offshore industry evolved, operators realized they knew almost nothing about working within a marine environment. forces.

They had no knowledge about wave and wind

Weather tendencies and conditions during hurricanes

were unknown.

Submarine geology was still a speculative

science for both oil exploration and for setting platform foundations.

Also, the industry lacked adequate answers to

the most basic marine engineering question--what kind of offshore platform was most economical and stable?

As a

result, the shipyards became important early centers for marine engineering.

They compiled the requisite data and

created the technology allowing oil operators to establish a tentative offshore foothold. So much of what awaited offshore operators was unknown and uncertain.

Questions about weather conditions, wave

forces, stress loads on fixed platforms, zealotry types, ocean currents, metallurgy, and other concerns would prevent operators from working safely and profitably.

As a result,

the oil industry quickly borrowed World War II oceanographic and meteorological work, while it also sponsored a vast array of new marine studies through colleges, universities, and research groups. In the process, the industry fostered the development of modern oceanography and marine engineering.

Companies hired an entire generation of

experts to unlock the "secret" of marine operations.

Naval

architects, marine engineers, and former U.S. Navy personnel became a "hot" commodity in the offshore business. people adapted war surplus equipment to offshore oil operations and elevated the industry's expertise.

7

These

The emergence of the offshore oil industry likewise renewed the scramble for oil leases and momentarily altered the power structure within the industry.

Kerr-McGee proved

the possibilities of drilling and completing wells in the open-water.

In 1947, Kerr-McGee brought in the first

offshore well beyond the sight of land.

In addition, the

Kerr-McGee offshore discovery revolutionized the industry by vaulting the smaller, independents into the forefront of exploration and development.

Previously, most of the land

leases had been purchased by the dominant large companies. It was generally assumed that offshore operations would be too costly, especially for small companies.

Smaller

operators quickly learned, however, that Gulf operations produced a higher discovery rate and many of these reservoirs produced enough oil to cover the higher operating costs.

Moreover, smaller firms learned that by forming

combines they could substantially lower the individual risk. Meanwhile, large companies that hesitated about marine drilling quickly found themselves rushing to catch up. Wildcatters pushed offshore, a movement that reaffirmed industry presumption that independent oil companies took most of the risks, while the larger, integrated companies played it safe.

Traditionally, independents had led in oil

discoveries and in the offshore province these bolder and

8

more aggressive companies, once again, set the direction and pace of development. Both major and independent companies moved into offshore operations answering the call for increased crude oil production for both domestic and military needs.

In the

victorious aftermath of the Second World War, U.S. leadership in the worldwide production of petroleum had ebbed, causing a number of unsettling oil shortages. Concern for national security and energy independence prompted the federal government to claim the potentially productive offshore lands.

As the federal government tried

to establish its "paramount rights" over the "tidelands," the states tried to retain ownership, and they maneuvered to ensure their position as the primary custodian of the public interest.

The tidelands conflict signaled the expanding

role of goverrunent in natural resource management and the regulation of an industry once widely recognized as the epitome of free enterprise. The interruption caused by the tidelands conflict temporarily suspended offshore drilling.

As a result, the

larger companies that had not participated in offshore activities had an opportunity to catch up.

Though wildcat

ventures and the gambling spirit continued to characterize offshore activity, the return of major companies to prominence stabilized the offshore business.

The majors

standardized safety regulations and platform construction standards, and them gave sound financial support to offshore research and development. As the business stabilized, operators more clearly understood the importance of offshore technology and, therefore, placed greater resources into its growth. Technology had always been a crucial prerequisite to offshore operations.

Without it operators could not have

established any profitable exploration and drilling programs.

The industry had no previous marine experience on

which to lean and, frequently, operators lacked enough funding to formulate new designs. engineering quality varied.

As a result, the

In the early 1950s integrated

companies took the lead in not only contracting for such research, but also creating their own internal programs. Such a trend meant a more systematic and well-financed development of offshore technology. After the conclusion of the tidelands conflict in 1953, the deep-water era began. even more important.

As a result, technology became

As competition intensified, the

offshore industry experienced something akin to a technological arms race.

The ability to find or develop

offshore equipment determined each company's level of offshore success.

As the technology became more

sophisticated and specifically dedicated to offshore

10

operations, what had been strictly a land-based industry took on a maritime character.

For deep-water exploration,

operators could no longer rely upon modified land-based technology.

As a consequence of intense competition, by the

late 1950s, the offshore business had solved the majority of the technical questions, invented much of the equipment, and, thereby, transformed the offshore oil industry into a full-fledged marine business. In 1956, the Suez Crisis sparked an industry boom that changed the personality of the offshore industry and helped to usher in the modern offshore age.

The political

confrontation between Britain and France with Egypt temporarily closed the Suez Canal, a major route for Middle Eastern oil making its way to the West.

As a result, oil

tankers could not get through and the situation temporarily forced oil prices upward.

But, with higher profits, the

offshore oil industry flourished.

Operating companies

capitalized on the Suez crisis by investing in additional cost-cutting technologies, by exploring for and buying additional leases, and by building a vast number of new drilling units.

As long as the oil demand stayed high and

the price held, the boom continued. As oil prices dipped, late in 1957, an industry-wide recession set in.

The economic collapse signaled a radical

change for the industry in a number of ways.

11

Many of the

operators borrowed heavily during the boom and mistakenly based the pay-out upon a temporary hike in oil prices.

As

prices dropped with the reopening of the canal, companies that lacked the financial reserves withdrew from marine activities.

Many that succumbed were the smaller,

independent companies that had pioneered the offshore. Meanwhile, the larger, more diversified companies that had lagged behind replaced them.

With many of the pioneers

gone, the personality of the industry became more conservative.

Nevertheless, the change had a stabilizing

effect upon an industry that had often experienced wasteful experimentation and imprudent investments. The recession also made it clear that domestic production as a whole was forever dependent upon the world oil price and the amount of foreign crude allowed into America.

The domestic offshore oil industry competed

directly with oil produced abroad, particularly in the Middle East.

Discovered in the late thirties concurrent

with the early offshore wells. Middle Eastern crude first streamed into the United States in 1947. Developed by major integrated oil companies, such highly productive fields challenged the emerging offshore oil province for the domestic market.

Though the federal goverrunent imposed a

succession of import quotas to protect domestic oil flow.

12

foreign crude effectively threatened the subsequent growth of the offshore oil business. Though henceforth the international market and production forces would determine its prosperity, the offshore oil industry had matured by 1960 and was ready to expand operations.

The engineers and scientists made

offshore activity possible by devising the essential technology and adapting it to the maritime setting.

In

addition, the increasing diversity of marine activity fostered the emergence of specialists, such as drilling contractors and other service companies, that had become crucial to offshore operators.

Still further, the

debilitating struggle between state and federal goverrunents over the tidelands had abated enough to encourage offshore activity.

Finally, the industry had recovered enough after

the recession for operators to consider new exploration and drilling programs. Such an in-depth study examines for the first time the history of the offshore petroleum industry, and it outlines the factors that led to its emergence.

The literature shows

that little has been written on the topic.

Though

individual subjects that include meteorology, offshore technology, the tidelands controversy, oil field equipment, Texas politics, and others have had some degree of coverage, a broad historical survey has not been done.

13

For a number

of reasons, professional historians have avoided the subject and written l i t t l e about offshore development.

Generally,

the oil industry has always been perceived as the •unknowable kingdom."

Operating beyond public

understanding, and often holding "outsiders" at arms-length, the industry consciously and unconsciously cultivated a sense of mystery about itself.^

Without access to industry

records and contacts, historians have had difficulty researching the topic.

Also, in the late 1960s and early

1970s, just when the offshore industry might have attracted scholarly attention owing to i t s achievements in the Gulf of Mexico and the North Sea, the Arab oil embargo and the Santa Barbara oil spill forced the industry to protect itself against charges of profiteering, environmental abuse, and ^The o i l i n d u s t r y has always been highly dependent upon technology. Since 1901, t h e beginning of t h e modern age, o i l companies not only d r i l l e d i n t o t h e ground, they used a myriad of a f f i l i a t e d equipment and p r o c e d u r e s . These included d r i l l i n g mud, mud r e c i r c u l a t i n g pumps, d r i l l p i p e , well c a s i n g s , well l o g s , water flood, d i r e c t i o n a l d r i l l i n g , and m u l t i - w e l l completions. Each of t h e s e , taken by i t s e l f , has a simple r o l e in o i l well d r i l l i n g . Taken c o l l e c t i v e l y , they become a t e c h n o l o g i c a l v e i l through which t h e p u b l i c could not e a s i l y p e n e t r a t e . J . E. B r a n t l y ' s book, The History of o i l Well D r i l l i n g (1971), i s a t r e a t i s e on t h e i n d u s t r y ' s t e c h n o l o g i c a l development and a measure of i t s dependency. To push through t h i s t e c h n o l o g i c a l v e i l and t o t h e d i s p e l p u b l i c p r e j u d i c e t h a t p e r c e i v e d t h e e n t i r e i n d u s t r y a s a monopoly, t h e American Petroleum I n s t i t u t e t r i e d t o change t h i s image with a d v e r t i s i n g . I t had learned from an opinion survey i n t h e s p r i n g of 1946 t h a t a high percentage of t h e p u b l i c was uninformed about t h e i n d u s t r y and held deep-seated antagonisms. As a r e s u l t , t h e API c r e a t e d t h e P u b l i c - r e l a t i o n s Committee of t h e Board of D i r e c t o r s , and t h e 01IC t h a t launched an a d v e r t i s i n g campaign. H. S. M. Burns, "Make t h e Most of Our Message!" Proceedings American Petroleum I n s t i t u t e . Section I (of 5 s e c t i o n s ) (pp. 206-209) General, 1952, p . 206, and 207. Edwin W. Esmay, "Exhibit 'G' Annual Report t o t h e Board of D i r e c t o r s of t h e Department of Information," Proceedings American Petroleum I n s t i t u t e . Section I (of 5 s e c t i o n s ) (pp. 351-357) General, 1952, p . 3 5 1 . 14

technological ineptitude.2

Lastly, the highly technical

nature of marine operations discouraged many from researching the topic.

While normal oil activities relied

upon technology to maintain production, the offshore industry was totally dependent upon highly advanced petroleum and marine engineering equipment.

Only the U.S.

Space Program rivaled the industry's technological creativity and innovation, so implied one observer.^ As a result, only a handful of books outside of the industrial publications referred substantively to the offshore industry.

A few have addressed offshore growth in

selected chapters of business histories, or alluded to i t in Gulf Coast economic surveys.

John Ezell, in two chapters of

^Rigs Back a t Work i n Santa Barbara," Offshore 29. n o . 5 (May, 1969), 98-105, 127-130. A blowout, f i r e and o i l s p i l l on a Chevron well i n Main Pass Block 41 offshore Louisiana on February 10, 1970 caused I n t e r i o r S e c r e t a r y Walter Hickel t o comment t h a t "If Santa Barbara was an a c c i d e n t , t h i s i s a d i s a s t e r . . . " Public c r i t i c i s m was i n t e n s e and some argued t h a t important s a f e t y equipment had not been r e q u i r e d by t h e f e d e r a l government. "Huge Cleanup Force Works on S p i l l i n Gulf," Offshore 30, n o . 4 (April 1970), 36-37; "Mobil K i l l s Wild well i n Gulf," Offshore 29, n o . 4 (April 1969), 2 8 . Growing move for governmental c o n t r o l of t h e offshore i n d u s t r y emerged with t h e USGS survey of t h e o f f s h o r e o i l i n d u s t r y . At t h e behest of t h e USGS a f i v e - p e r s o n NASA study team headed by Morris K. Dyer of t h e George C. Marshall Space F l i g h t Center a t H u n t s v i l i e , Alabama evaluated t h e o p e r a t i o n of a number of o f f s h o r e p l a t f o r m s . They a l l e g e d t h a t " i f t h e offshore i n d u s t r y were t h e space program, t h e United S t a t e s would s t i l l be t r y i n g t o g e t s i t s f i r s t a s t r o n a u t i n t o o r b i t . " statement by William A. R a d l i n s k i , USGS Acting D i r e c t o r , quoted i n Arthur H i l l , "Faster Reporting System Needed O f f s h o r e , " Offshore 32, n o . 3 (March 1972), 7 8 . ^Michael D. Reagan, From Mohole t o No Hole. (Syracuse, New York: The I n t e r - U n i v e r s i t y Case Program, I n c . , 1973), p . 4 2 . " . . . poor P r o j e c t Mohole had no p i z z a z z . I t had no h e r o s , no c o l o r , no danger; i t had no human a n g l e . [ I t was not l i k e t h e space program, which] has g r e a t r o c k e t s t h a t go whoosh on t h e c o l o r TV." Quote from James J . K i l p a t r i c k ' s Washington Evening S t a r column in Reagan, From Mohole t o No Hoifi/ P- 5 7 .

15

his 1979 Innovations in Enercry:

The Story of Kerr-McGee.

provided a contemporary examination of the offshore industry.

Using primary sources from Kerr-McGee's corporate

files and oral history collection, Ezell wrote a solid business history that reviewed the origins of the modern offshore era and argued that the independent wildcat spirit, combined with the shortage of lease acreage, forced companies offshore.'^ Recently, Joseph Pratt, a business historian at the University of Houston, has turned his research attention toward explaining the offshore oil industry.

In 1980 Pratt,

a Southeast Texas native, published his important book The Growth of a Refining Region which, for the first time, looked at the emergence of the Texas gulf coast economy, its politics, and the businesses that shaped its personality. Though he did not mention the offshore industry specifically, his description of the regional economy of the Gulf Coast was but a prelude to more specialized offshore studies of the future.^ Pratt's research into the economic growth of the Gulf Coast has shed new light upon banking, natural gas, and marine engineering.

Combining oral history with corporate

^John Ezell, Innovationc; in Energy: The Storv of Kerr-McGee (Norman: University of Oklahoma Press, 1979), pp. 75 and 76. ^Pratt mentioned shipbuilding and commented briefly on the construction of offshore equipment. Joseph Pratt, The Growth of a Refining Region (Greenwich. Conn.: JAI Press Inc., 1980), p. 136.

16

business records, Pratt also has co-authored Baker & Botts in thR Development Of Modern Houston, published in 1991, and guided Christopher Castaneda in completing a thesis published as Regulated Enterprise:

Natural Ga.s Pipelines

and Northeastern Markets. 1938-1954 in 1993.

Recently,

Pratt has begun a project to examine the offshore oil industry.^ Pratt is the most recent in a long tradition of scholars who have written business histories of the oil industry. But, as is so often the case, scholars have risked their objectivity by getting too close to the subject.

The oil

industry has been fraught with political conflict and economic crisis, thereby polarizing critics and defenders, and making any middle-ground hard to maintain.

As a result,

the conflict has generated a distinctive bibliography depicting the industry as either villain or savior. Since 1900, the dawn of the energy age, the public has always been suspicious of the oil industry.

Progressive

reformers had challenged the industry's excessive profits and monopolistic practices, and its supposed abuse of the public trust.

Muckraker Ida Tarbeli led the way with her

expose on the Standard Oil Trust published in 1912.

The

waste and over-production problems in the 1920s and 1930s

^Notes on conversation between Joseph Pratt and author, December 3, 1996; Notes on conversation between Roger Olien and author, April 3, 1997.

17

had revived public outrage and stimulated calls for industry federalization.

In the post-World War II period, shortages,

high prices, and concerns over national security have prompted new research that criticized the industry's selfserving attitudes, but did l i t t l e to reveal new historic information.

With the increased awareness of environmental

pollution during the late 1960s and the oil shortage of the mid-1970s, the industry fell under attack once again. As a result, after World War II, the petroleum industry came to i t s own defense.

Sponsoring a public relations

campaign that used the print and electronic media, the American Petroleum Institute (API) cultivated public confidence and appreciation.

The oil industry learned that

the public could not sympathize, much less identify, with corporations and operations of which they knew nothing.

The

industry that had always been perceived as a closed-empire warmed to the public."^ As a consequence, an increased number of company and industry histories appeared.

The API and i t s members

attracted academic authors to write about the industry. 1945,

In

Leonard Fanning, a reporter for the Oil and Gas

"^Interview C. D. Watson, Manager of t h e Public R e l a t i o n s Department of C a r t e r Oil Company, Tulsa, Oklahoma, April 10 and 14, 1945. by H e n r i e t t a M. Larson, Carl Coke R i s t e r Papers. Southwest C o l l e c t i o n , Texas Tech U n i v e r s i t y . Hereinafter c i t e d a s R i s t e r Papers, TTUSWC; L e t t e r from Robert H. Colley, Chairman, Finance Committee, API Public R e l a t i o n s Committee t o George A. H i l l , J r . , June 6, 1947, Folder 9 - API Board of D i r e c t o r s , Box 4 1 , George Alfred H i l l Papers, Houston M e t r o p o l i t a n Research Center. H i l l Papers, HMRC.

18

Journa1, defended the reputation of hard working companies that, in spite of political and economic difficulties had, supplied crude oil . His book Our Oil Resources (1945) showed how oil had stimulated the growth of many affiliated industries, including aviation, automobiles, and manufacturing.

Built upon the belief that public antipathy

stemmed from lack of knowledge. Fanning promoted industry achievements.

However, he deftly avoided reference to the

"economic consequences of the monopolistic control of the early industry," and wrote a treatise popularizing the industry, rather than a balanced study.^ Seeing the need for a more readable history, the President of Standard Oil of New Jersey, Eugene Holman, asked his childhood friend Carl Coke Rister of the University of Oklahoma to write Oil! Titan of the Southwest (1949).

With the industry peering over his shoulder, Rister

wrote a public relations' success. mediocre history.

Unfortunately it was a

Rister used the $30,000 subsidy to pen an

episodic adventure story that analyzed little and said even less about offshore drilling.

But, the book remained oft

quoted as a pioneering historical study, because of Rister's

^Walter Rundell, Jr., "Texas Petroleum History: A Selective Annotated bibliography," Southwestern Historical Quarterly 67, No. 2 (October, 1963), 270; Leonard M. Fanning, editor. Our Oil Resourreg, 1st edition (New York: McGraw-Hill Book Company, Inc., 1945), p. 109.

19

solid reputation and the lack of other books on the subject.^ By 1947, the API started i t s own publishing campaign. Within a couple of years the API launched i t s Yale University Writing Project that would produce three economic studies, and, by the mid-1950s, sponsored the publication of a broad history celebrating the industry's 100th anniversary.

The API spent $100,000 on the multi-volume The

American Petroleum Industry, authored and edited by Harold F. Williamson, an economist at Northwestern University.

The

volumes highlighted industry achievements and examined a l l areas, including production, refining, transportation and marketing.

Williamson's book examined the oil industry's

impact upon society and stressed i t s technological progress.^^

Nevertheless, the two-volume publication

disappointed many by becoming a ponderous and reliable chronicle that appealed to only the "bigger libraries of the country," but then was forgotten.^

^ L e t t e r , Carl Coke R i s t e r t o C. D. Watson of t h e C a r t e r Oil Company [Standard Oil Company s u b s i d i a r y ] , April 10, 1947, Correspondence t o and From Oil Companies, M a t e r i a l s for t h e Book, Oili T i t a n of t h e Southwest. 1946-1949. Box 15. R i s t e r Papers. TTUSWC. l^Harold Williamson, e t a l . The American Petroleum I n d u s t r y : The Age of Energy 1899-1959 (Evanston. 1 1 1 . : Northwestern U n i v e r s i t y P r e s s , 1963), p . 435; See a l s o , Harold Williamson and Arnold R. Daum, The American Petroleum I n d u s t r y : The Age of I l l u m i n a t i o n . 1859-1899 (Evanston, 1 1 1 . : Northwestern U n i v e r s i t y P r e s s , 1959), p . 476. ^ ^ L e t t e r from Carl Coke R i s t e r t o Frank Kelley, March 29, 1954, William Pearce Papers, Wallet - Oil History P r o j e c t , Southwest C o l l e c t i o n , Texas Tech U n i v e r s i t y . 20

Meanwhile, the industry produced a number of its own historians.

Rather than depending upon prickly and

occasionally difficult academics to write its history, the industry asked Charles Warner, James Clark, Michel Halbouty and others to capture the industry's essence and place it into historical context.

Of course, many of them were

independent operators who longed for the time when such freewheeling, spirited exploration and development had characterized the industry.

With the increasing power and

dominance of the major corporations, these authors defended independents and justify their importance to the court of public opinion. Charles Warner of the Houston Oil Company published a book and a number of articles that promoted the industry. Published in 1939, Warner's Texas Oil And Gas Since 1543 extended oil history back four centuries and praised Texas as the "real birthplace of the oil industry. "^2

;^s ^n

insider, Warner had industry access and first-hand knowledge of its history.

However, he betrayed his objectivity, when

he noted that the Gulf coast is truly a bulwark of oil reserves ready for the use of the nation in any emergency, and that the thousands of producers, transporters, refiners.

^^c. A. Warner, Texas Oil and Gas Since 1543 (Houston: Publishing Company, 1939), p. 1.

21

Gulf

and marketers in the district are ready and willing to exert every effort for the common good of all.^-^ Warner tried to placate growing public unhappiness with restraint of trade violations and forestall the federal move toward industry nationalization.

Increasingly, the industry-

had been accused of monopolistic practices in refining and transportation.

Many believed that the solution was to

impose more regulation, if not outright federal control. James A. Clark, in the post World War II period, argued similarly for the industry, but his writing and presentation were much more polished and understandable to the lay reader.

Clark was a Houston publisher and media relations

expert with close ties to the industry.

His first books.

Three Stars for the Colonel (1954), and SpindletQP (1952), co-authored with Houston oilman Michel Halbouty, were public relation exposes.

However, subsequent books. East Texas Oil

Field (1955) and The Chronological History of the Petroleum and Natural Gas Industries (1963) were good histories, comparable to Rister's, but, with more analysis and an insider's perspective. widely read.

Also, they were successful and

The most useful is The Chronological History,

in which Clark intended to "bridge a gap in the understanding of the petroleum and natural gas industries

l^C. A. Warner, "The Growth of the Oil Industry in the Gulf Coast," [c. 1950s] p. 24, Folder -- Historical Data, Texas, Box 7, C. A. Warner Papers, Houston Metropolitan Research Center, Houston, Texas. Hereinafter cited as Warner Papers, HMRC.

22

and the human family these industries serve."

Seemingly a

simple publication, Clark's book is a valuable reference tool that chronologically lists significant industry achievements, accompanied by factual explanations and descriptions.^^ More useful and certainly more scholarly. History of Humble Oil and Refining Company:

A Study in Industrial

Growth (1959), co-authored by Henrietta M. Larson and Kenneth Wiggins Porter, moved away from the blatant boosterism of its predecessors.

Following Rister's lead,

and paving the way for Pratt's business histories, historians Larson and Porter accumulated a vast amount of material, compiling one of the more interesting business histories.

Authoritative and scholarly, the authors

dissected Humble into its component activities.^^

Written

with Humble's cooperation, the book traced in encyclopedic fashion its corporate evolution and the impact of its business officers. operations.

It even commented briefly upon offshore

However, Larson and Porter missed an

l^The book spans the time from 6,000 B.C. to 1962. James A. Clark, The Chronological Historv of the Petroleum and Natural Gas jpdustries (Houston: Clark Book company, 1963), p. vi. l^Henrietta M. Larson and Kenneth Wiggins Porter, History of Humble Oil and Refining Company: A SCudy in Industrial GrOWth (New York: Harper and Brothers. 1959), pp. 135, 143, 193 and 219.

23

opportunity by not examining the oil industry as a whole, and assessing Humble's place within it.^^ In the early 1970s, Samuel D. Myres, noted political scientist from the University of Texas at El Paso, revived the effort to analyze the oil industry through sheer volume. Funded by the Abel-Hanger Foundation of Midland, Myres's two volume history of The Permian Basin (1973, 1977) examined its impact and its various facets that include geology, economics, sociology, politics, and other fields. ^'^ Reminiscent of Williamson's 1963 broad survey, Myres managed to do the same for the Permian Basin of West Texas.

After

eight years of research and writing, Myres produced a much more readable history that captured the sense of the region and the industry's influence upon it.

In spite of his links

to the industry, Myres's oil history was scholarly and synthesized a vast amount of research materials.^^ As Myres capped his career with his valuable petroleum study, other historians had joined in the hunt.

In the late

l^Larson and Porter, History of Humble Oil and Refining Company, pp. 657-658. I'^A Midland oilman and his wife, George and Gladys Abell subsidized the book through the Abell-Hanger Foundation. Samuel D. Myres, The Permian Basin: Petroleum Empire Of The Southwest. Era of Discovery. From The Beginning to the Depression (El Paso: Permian Press. 1973), p. xi. ^®Myres defended the subsidy by saying that "One consideration was that the author should be free at all times from pressure to present any determined point of view." Myres, The Permian Basin: Petroleum Empire Of The Southwest. Era of Discovery. From The Beginning to the pepression. pp. viii and 623.

24

1970s and early 1980s, a new generation of historians emerged.

More detached from industry subsidy and less

interested in participating in the villian/hero debate, these historians discussed a diverse range of topics that included exploration, production, conservation, and an examination of its social development and economic impact. Gerald Nash of the University of New Mexico published United States Oil Policy. 1890-1964:

Business and

Government in Twentieth Century America (1968).^^

Though a

broad, general survey of federal industry regulation, Nash's book gave a valuable glimpse into the evolution of federal and state energy policy.

His book had considerable impact

in that it was one of the first historically balanced overviews on the relationship between governmental policy and industry growth.

Published in the late 1960s when the

oil companies warned of shortages if the Alaskan North Slope were not developed and after the Arab oil embargo in 1976, Nash's book was widely read.

Nash described the political

mechanism of oil regulation and explained, within that context, how shortages occurred.

Nash's work also revived

interest in oil history and encouraged a new generation of scholars to follow his lead.

l^Gerald Nash, United States Oil Policy. 1890-1964: BUSingSS and (government in Twentieth Century America (Pittsburgh: University of Pittsburgh Press. 1968), p. x

25

A f l u r r y of s p e c i a l i z e d books appeared t h a t focused upon t h e complicated, but f r u i t f u l q u e s t i o n s of o i l r e g u l a t i o n . Writing about an i n d u s t r y t h a t imagined i t s e l f as the champion of f r e e - e n t e r p r i s e ,

t h e s e h i s t o r i a n s have c l e a r l y

shown t h a t t h e o i l i n d u s t r y has been bound by and o p e r a t e s within specific legal s t r i c t u r e s .

Notable works include

Norman E. Nordhauser's The Quest for S t a b i l i t y :

Domestic

Oil Regulation. 1917-1935 (1979) and David P r i n d l e ' s Petroleum P o l i t i c s and the Texas Railroad Commission (1981). J a c q u e l i n e Weaver's U n i t i z a t i o n of Oil and Gas f i e l d s in Texas (1986) and Nicholas M a i a v i s ' s Bless the Pure and Humble (1996) r e p r e s e n t useful l e g a l p e r s p e c t i v e s on the e v o l u t i o n of o i l i n d u s t r y r e g u l a t i o n . ^ 0 Diana and Roger Olien, h i s t o r i a n s a t the U n i v e r s i t y of Texas a t Permian Basin, have e s t a b l i s h e d themselves as s c h o l a r s e x p l a i n i n g the nature and method of the o i l i n d u s t r y , p a r t i c u l a r l y in West Texas.

The Oliens have

compiled i n - d e p t h b u s i n e s s and s o c i a l h i s t o r i e s by exploring t h e impact of p o l i t i c a l and economic f o r c e s .

In the

^^Malavis d e t e r m i n i s t i c a l l y views petroleum conservation and r e g u l a t i o n as " p r i m a r i l y a l e g a l problem t o be solved by lawyers." Nicholas Maiavis, Bless t h e Pure and Humble: Texas Lawyers and Oil R e g u l a t i o n . 1919-1936 (College S t a t i o n : Texas A&M P r e s s , 1996), p . xv. Weaver's book tends t o be more t e c h n i c a l , e s p e c i a l l y in t h e second h a l f , but i s p a r t i c u l a r l y v a l u a b l e for e x p l a i n i n g f i e l d u n i t i z a t i o n . In a d d i t i o n , i t i s an e x c e l l e n t primer on o i l f i e l d p r o d u c t i o n . For example i t g i v e s an understandable e x p l a n a t i o n of MER (maximum e f f i c i e n t r a t e of production) and o t h e r o i l i n d u s t r y terminology. J a c q u e l i n e Weaver, U n i t i z a t i o n of Oil and Gas f i e l d s in Texas: A Study Qt L e g i s l a t i v e . A d m i n i s t r a t i v e , and J u d i c i a l P o l i c i e s (Washington, D . C : Resources for t h e F u t u r e , 1986), p . 14.

26

p r o c e s s , they have described the d i v e r s e c h a r a c t e r of the i n d u s t r y and have linked i t s d i s t i n c t i v e s t y l e of doing business to a collective personality.

Most i m p o r t a n t l y ,

they have couched the dynamic of o i l f i e l d o p e r a t i o n s within t h e much broader context of r e g i o n a l and n a t i o n a l h i s t o r y . Their books i n c l u d e Oil booms: Towns (1982), W i l d c a t t e r s : Life in t h e Oil f i e l d s

Social Change in Five Texas

Texas Independent Oilmen (1984),

(1986), and Easy Money:

Oil

Promoters and I n v e s t o r s in the Jazz Age (1990). The Oliens have included important a n a l y s i s of independent o p e r a t o r s t h a t helped to promote the growth of t h e West Texas Permian Basin o i l province.

Important in

paving t h e way for the discovery of new o i l f r o n t i e r s and having t h e w i l l i n g n e s s to experiment with new techniques and p r o c e d u r e s , independent o p e r a t o r s sparked not only Permian Basin development, but a l s o pioneered marine e x p l o r a t i o n . As a r e s u l t , t h e Oliens have w r i t t e n books t h a t give v a l u a b l e information about the h i s t o r i c a l antecedents of marine o p e r a t i o n s . ^ 1 2lRoger M. Olien and Diana Davids Olien, W i l d c a t t e r s : Xezas Independent Oilmen (Austin: Texas Monthly P r e s s . 1984), pp. 87-95. Mac O. Boring, Sr. (Dixielynn), George Bush (Zapata), Hugh Liedtke (Pennzoil) were a few West Texas independents t h a t pushed i n t o t h e Gulf. The book. W i l d c a t t e r s , i s t h e most v a l u a b l e for information on i n d e p e n d e n t s . Lawrence Goodwyn's 1996 book, Texas O i l . American Dreams i s r e v e a l i n g , but he l i m i t s himself s t r i c t l y t o the problems and a c t i v i t i e s of t h e Texas Independent Producers and Royalty Owners A s s o c i a t i o n (TIPRO). Considering the importance of t h e Independent Producers A s s o c i a t i o n of America (IPAA) Goodwyn might have expanded h i s coverage of t h e i n t e r p l a y between TIPRO and t h e IPAA, and t h e schism t h a t appeared w i t h i n t h e American Petroleum I n s t i t u t e . Moreover, he f a i l e d t o mention s u b s t a n t i v e l y the National Petroleum Council, 27

However, these works and others like them were a prelude to Daniel Yergin's The Prize published in 1991.

Yergin's

book examined the entire history of the industry within the context of oil as an essential commodity and a key economic, and political determinate.

He wrote:

"... petroleum remains the motive force of industrial society and the biggest business, one that embodies the extremes of risk and reward, as well as the interplay and conflict between entrepreneurship and corporate enterprise, and between private business and the nation-state.22 The pursuit of oil and its production and marketing shaped not only the industry, but the entirety of the world economy and international politics.

Moreover, these activities

transformed humankind into a "Hydrocarbon Society."

A

balanced and authoritative achievement by Yergin, a government and business expert. The Prize was the historiographical synthesis of many antecedents including both industry defenders and detractors.

By painting a broad

mosaic of political maneuvering, both domestic and international, along with societal, economic, and national defense concerns, Yergin achieved that which Anthony Sampson had sought in his The Seven Sisters: The Great Oil Companies and the World They Shaped (1975).

Yergin wrote a credible

particularly in the early 1950s, when it was controlled by independents Lawrence Goodwyn, Texas Oil. American Dreams: A Study of the Texas Independent Producers and Royalty Owners Association (Austin: Texas State Historical Association, 1996), pp. 71, 81-82 and 148. 22Daniel Yergin, Thg Prjgg; The Epic Quest for Oil. Money and Power (New York: Simon and Schuster, 1991), p. 773.

28

discussion of the oil companies and their role in the search and development of oil.23 By his own admission, Yergin's history is a highly politicized account of petroleum economics within the national and international arena.

While busy chronicling

the oil business's pervasive impact, describing the economic determinism of oil as a pursued commodity, and arguing for the existence of "hydrocarbon man," Yergin does not break new ground in studying production, refining, and marketing sub-topics.

transportation

Moreover, marine drilling, in

spite of i t s impact, is relatively ignored.

Perhaps, the

Oliens, who have recently agreed to write a history of the industry, will move toward a definitive publication and include a treatment of offshore development.24 However, the most useful sources of offshore information stemmed from the work of economists, political scientists, sociologists, and engineers.

Though historians have been

important in preserving the chronology and outlining the basic factual framework of petroleum history, most have

23 Though Sampson begins h i s book by c a t e r i n g t o conspiracy buffs t h a t had accused t h e o i l i n d u s t r y of complicity i n t h e Arab o i l embargo. Sampson winds up contending t h a t t h e major o i l companies were merely v i c t i m s of an i n d u s t r y no longer c o n t r o l l e d e x c l u s i v e l y by them. However, Sampson makes c l e a r t h a t r e g a r d l e s s of who i s c o n t r o l , t h e consumer i s t h e v i c t i m . Anthony Sampson, The Seven S i s t e r s : The Great o i 1 Companies and t h e World They Shaped (New York: Viking P r e s s , 1975), p p . 308-309. ^^Notes on telephone conversation between Roger Olien and t h e a u t h o r , February 17, 1997.

29

neglected marine development.

Yergin gave offshore

exploration only a passing glance. mention it.

Nash did not even

Rister alluded to its potential.

and Ezell referred to it in a substantive way.

Only Pratt But, Pratt

only set the stage for offshore activity, he has not yet written anything.

Ezell, a previously noted, discussed it

within two chapters of his business history of Kerr-McGee. None of these writers adequately examined the offshore story that had such a powerful impact on the political, economic, and social evolution of the Gulf coast. In 1953, a legal historian, Ernest Bartley, published The Tidelands Oil Controversy.

To date, it represents the

most authoritative and scholarly research done related to the offshore industry.

Unfortunately, its value is tempered

by the narrow time frame, 1945 to 1953, and the exclusive focus on legal issues pertaining to tidelands ownership. Still, Bartley composed a tight narrative, incorporating a vast amount of historical information to illuminate the conflict, and he included important background data. Also, the book has considerable primary value, since Bartley wrote it during the controversy and included pertinent research correspondence.2 5

^^Ernest Bartley, The Tidelands Oil Controversy: A Legal and Historical Analysis (Austin: University of Texas Press, 1953), p. 93n,

30

Perhaps the most complete, and the closest to an industry history, is Robert Gramling's 1996 Oil on the Edge Gramling, a sociologist from the University of Southwestern Louisiana, surveyed offshore history from 1900 to the 1990s and described i t s technological, institutional, social, environmental, political, and international impact.

A long-

time industry observer, Gramling possesses a good grasp of the industry's growth and significance.

However, exclusive

use of secondary sources and a lack of depth in the discussions on technology, drilling history, and Gulf coast petroleum development, weakens i t s historical value.2 6 In some ways more valuable is David Fitch's "Economic Aspects of the Gulf Coast Offshore Oil Controversy," a 1956 dissertation completed in the University of Oklahoma's Department of Economics.

Fitch indicated that offshore

drilling could be tremendously profitable, given the high success rates.

But, he also learned that marine operations

required a large and long-term financial commitment, and therefore, only large companies could survive.27

Delving

into the economic intricacies of offshore operations, Fitch gave an in-depth evaluation of the industry and discovered ^^A cursory scan of Gramling's second chapter shows an i n o r d i n a t e dependence upon J . E. B r a n t l y ' s History Oil Well D r i l l i n g , Robert Gramling, Oil on t h e Edge: Offshore Development. C o n f l i c t . Gridlock (New York: S t a t e U n i v e r s i t y of New York P r e s s , 1996), p p . 3 3 - 5 1 . ^^Robin F i t c h , "Economic Aspects of t h e Gulf Coast Offshore Oil Controversy" (Ph.D. D i s s e r t a t i o n , U n i v e r s i t y of Oklahoma, 1956), p p . 165, 216-220.

31

that economic considerations, especially as they were linked to technology, fueled offshore development.28 The remaining three publications that discussed offshore history focused attention primarily upon technology and i t s impact on the growth of the industry.

Much of Fitch's work

certainly came directly from the important 1954 annotated bibliography. Offshore Summary, compiled by Emory Kemler for the offshore industry.

Working for the Southwest Research

Institute as Director of the Houston Center, Kemler, a petroleum researcher and production engineer, was in charge of a research and development program to aid offshore drilling.

In the process, Kemler produced a vast annotated

bibliography of technology that served as the industry's offshore reference manual.29 J. E. Brantly built upon that work with his broad technological narrative of equipment and procedures.

His

1971 book. The History of Oil Well Drilling, included an extensive chapter on offshore technology.

Tracing i t from

i t s earliest prototypes, the chapter comprehensively

^ ^ F i t c h , "Economic Aspects of t h e Gulf Coast Offshore Oil C o n t r o v e r s y , " p . 167. ^^The annotated bibliography had important h i s t o r i c a l notes on t h e o r i g i n s of equipment and p r o c e d u r e s . For example, Kemler and Rosencrants s t a t e d t h a t t h e offshore platform with accompanying t e n d e r which housed personnel q u a r t e r s , equipment, p o w e r - p l a n t s , and s u p p l i e s came t o t h e Gulf Coast from Lake Maracaibo p r o d u c t i o n . Emory N. Kemler and Edward W. Rosencrants, Offshore Summary (Spring Park, Minn.: Summary Reports, 1954), p . 6A3; Harold Vagtborg, The Story of Southwest Research Center: A P r i v a t e . Nonprofit. S c i e n t i f i c Research Adventure (San Antonio: Southwest Research I n s t i t u t e , 1973), p . 126. 32

followed the evolution of offshore equipment and how it addressed various needs.

Brantly's work served as the

touchstone for much of Gramling's discussion on technology.^^ Recently, the Society of Naval Architects and Marine Engineers (SNAME), celebrating the beginning of its second 100 years, published a history that further cited technology as the linchpin of offshore development.

Drawing from the

experience of petroleum and marine engineers and naval architects, the 1993 publication reinforced the technological thesis, arguing that technology made possible offshore development. •^-'Because of the scarcity of offshore studies, such a preliminary examination of the formative offshore age will draw attention to one of the most important economic and technological developments in the second half of the twentieth century.

The offshore industry has had a

pervasive influence considering its impact upon marine and petroleum engineering, the expansion of academic institutions and scientific inquiry. Gulf coast economic and

3° Raymond Lankford, "Marine Drilling," History of Oil Well Drilling by J. E. Brantly (Houston: Gulf Publishing, 1971), pp 13581444. 3^William duBarry Thomas, A Centennial History of the Society of Naval Architects and Marine Engineers. 1893-1993 (Jersey City, N.J.: The Society, 1993) .

33

social growth, and the widening breach between large and small companies. The emergence of the offshore oil industry was a product of various forces.

Economic, scientific, technological, and

political circumstances had by 1960 established the industry's parameters.

Supremely dependent upon

technological breakthroughs, the industry used them to make offshore operations profitable.

The postwar industrial and

scientific push helped the industry to develop the vast bulk of technological expertise necessary to operate offshore. Combined with industry sponsored research and development, operators shaped an economic environment conducive for marine operations.

As it gained greater understanding of

the physical world, the oil industry invented the technology and operating procedures that allowed it to survive there. Drawn by the possibility of profit and the wildcatting spirit the oil industry moved into the sea, "once a frontier, but now a future resource for generations to come."

34

CHAPTER II OFFSHORE ORIGINS The offshore oil industry began in the calm and relatively protected waters of the Gulf of Mexico.

From

1900 to World War II, the offshore oil industry developed as a direct result of rising consumer demand, the lure of fertile salt dome structures offshore, the development of offshore equipment and technology, and the diminishing reserves on land.

By World War II and immediately

afterward, petroleum demand had soared.

Though the high

cost of offshore operations had slowed development, science and technology made offshore operations affordable.

The

industry used cheaply bought World War II surplus equipment and scientific research, and used it to move into the marine environment.

World War II represented an important

technological and scientific point of demarcation for the development of offshore industry. The offshore age began at the turn-of-the-century with simultaneous marine activity offshore California and along the Gulf Coast.

The discovery of the Spindletop Field in

Texas in 1901 and the development of the Summerland Oil Field served as important historical antecedents for marine drilling.

By the late 1930s, decreasing amounts of

productive domestic oil lands, the increasing level of

35

industry competition, and rising oil prices, forced companies offshore.

With the acute shortages after World

War II, oil companies moved quickly to increase production from existing wells, and they started searching for new oil frontiers that included offshore regions. The offshore industry developed simultaneously in California and along the Gulf Coast.

As early as 1883 land-

based exploration wells in the Summerland Oil field of California confirmed the existence of offshore oil.

The

California State Mining Bureau in 1896 determined that the geology of the region suggested that the "oil play" extended offshore.-'-

Operators perfected directional drilling,

snaking drilling strings from onshore drillsites under the ocean. 2

Rigs crowded onto the beach until H. L. Williams, a

pioneer driller, built a wharf and drilled the first overthe-water well in 1897.

Others followed with some of the

piers extending 300 to 500-feet from shore.

When the oil

finders discovered that the most favorable production came farther offshore, wharves practically raced into the sea. In 1900, eleven wharves with six to twenty wells operated offshore.

The largest wharf measured 30 feet wide, 1,230

^ This phrase is used for oil reservoirs and the activity surrounding it. ^The term "whipstocking" was applied to this technique. Concurrent to the marine use, drillers used whipstock methods to drill relief wells for "runaway" wells.

36

feet long, with the surf end widened to accommodate steamer traffic.3 By 1902 California offshore expansion slowed.

Though

wells continued to dot the beach and the offshore wharves with derricks, production declined.

Nevertheless,

Summerland field gave an early inkling of the growing importance of offshore oil. Moreover, the wharves and directional technology drillers had developed to take advantage of the offshore oil became important parts of offshore procedure. Meanwhile, the discovery of the Spindletop Oil Field in 1901 marked the beginning of the Gulf Coast offshore oil industry.

The discovery well, located south of Beaumont,

Texas, claimed two firsts:

drillers used the rotary drill

bit for the first time, and drillers tapped into a major salt dome oil reservoir.

Spindletop's level of production,

reaching 15.5 million barrels in 1902, ensured petroleum abundance and facilitated the increased use of petroleum in the U.S. and worldwide.

In addition to ushering in the

modern petroleum age, Spindletop's success caused oil operators to begin a relentless search for salt dome formations.

Large salt domes, or plugs, buried in the rock

strata trapped oil along their perimeter.

^Brantly,

Salt domes

The History of Oil Well Drilling, pp. 1365-68

37

usually indicated oil and gas presence.

Though many domes

were buried deep and could not be found readily, a slight rise or h i l l pointed to others that were closer to the surface.

The coincidence of oil with salt domes prompted a

widespread search for salt domes and i t boosted industry optimism in the Gulf Coast's future as an oil province. 1919,

In

the industry cited the possibility of an enormous oil pool underneath the Coastal Plain and the continental Shelf of Louisiana and Texas which lies at a depth of more than 2000 ft. . . .^

Only cost slowed i t s development.^ Louisiana's oil history began concurrently with the one in Texas.

In August, 1901, oil searchers discovered the

Jennings Field, and like i t s more famous counterpart to the west, started the drilling of salt domes and helped bring in

^John P. Hogan, i n a p r e s e n t a t i o n t o t h e Board of D i r e c t o r s of t h e West Penn O i l and Gas Company i n Buffalo, New York, d e s c r i b e d t h e p r o l i f e r a t i o n of s a l t dome s t r u c t u r e s and other geologic c o n d i t i o n s t h a t p e r m i t t e d such a heavy incidence of petroleum, During t h e course of h i s d i s c u s s i o n he r e f e r r e d t o an a r t i c l e w r i t t e n by Navy L t . John C. Soley e n t i t l e d "The Oil F i e l d s of t h e Gulf of Mexico.'' I t l i s t e d a number of t h e o i l s l i c k s found i n t h e Gulf. He commented on one r e p o r t e d by S. S. Comedian t h a t bubbled t o t h e surface in t h r e e j e t s . Soley s p e c u l a t e d t h a t t h e water depth reached 600 fathoms. John P- Hogan, "Supplementary d i s c u s s i o n of t h e S a l i n e Domes of t h e gulf Coastal p l a i n submitted t o t h e Board of D i r e c t o r s of t h e West Penn Oil and Gas C o . , " January 16. 1919, p p . 2 - 3 , Box 127, Folder 5554, E v e r e t t e Lee DeGolyer Papers, DeGolyer L i b r a r y , Fikes Hall of Special C o l l e c t i o n s , Southern Methodist U n i v e r s i t y , D a l l a s . Texas. ^The o f f s h o r e o i l i n d u s t r y stemmed, i n p a r t , from t h e t u r n - o f - t h e c e n t u r y s e a r c h for s a l t . In 1862 p r o s p e c t o r s discovered rock s a l t i n t h e P e t i t e Anse b r i n e s p r i n g s on Avery I s l a n d of southern L o u i s i a n a . Part of a subsurface s a l t dome or plug. P e t i t e Anse became a p r o l i f i c source of s a l t , measuring t h r e e miles wide and five t o seven miles deep. The d i s c o v e r y of P e t i t e Anse prompted a f l u r r y of e x p l o r a t o r y d r i l l i n g . J . Ben Carsey, "Geology of Gulf Coastal Area and C o n t i n e n t a l Shelf," p u l l e t i n of t h e American Association of Petroleum G e o l o g i s t s 34, n o . 3 (March, 1950), 367. 38

the modern oil age.

In the ten years that followed the

Spindletop and Jennings discoveries, crews located four fields in Louisiana and nine in Texas with overall production reaching 174 million barrels.^ 1936,

From 1901 to

Louisiana experienced a high rate of activity, an

indication that many believed in a bright future for offshore operations.'^ Ironically, as Spindletop and other salt domes pointed to the Gulf, commercial drilling in a water environment began in 1906 around Caddo Lake in northern Louisiana. 1910,

In

Gulf Oil discovered oil and paid $30,000 for drilling

rights to 8,000 acres in the area.

The company then

transported drilling equipment by barge up the Mississippi and Red rivers.

Next, drilling crews fabricated platform

pilings from cypress trees growing along the lake front, and in the spring of 1911 Gulf drilled into the lake, finally completing the Ferry Lake No. 1, the first well drilled on inland waters.^

Drilling activity continued.

By 1926 Gulf

^This t o t a l exceeded t h e e n t i r e U . S . p r o d u c t i o n from 1859 t o 1 8 8 0 . C. A. Warner, "The Growth of t h e O i l I n d u s t r y i n t h e Gulf C o a s t , " [ c . 1950s] p . 1 5 . F o l d e r - - H i s t o r i c a l Data, T e x a s , Box 7 , Warner P a p e r s , HMRC. "^H. Lee F l o o d , "Growth of L o u i s i a n a ' s O i l I n d u s t r y , " i n The P e t r o l e u m E n g i n e e r 10 (May, 1939), 8 5 - 8 6 . ^Brantly, The H i s t o r y of Oil Well D r i l l i n g , p . 1 3 7 2 . T y p e s c r i p t of t h e a r t i c l e -Caddo Lake As a Producing O i l F i e l d , " p . 2 , C a r l Coke R i s t e r P a p e r s , Southwest C o l l e c t i o n , Texas Tech U n i v e r s i t y , Lubbock, T e x a s . H e r e i n a f t e r c i t e d a s R i s t e r P a p e r s , SWCTTU. T h i s was o r i g i n a l l y p u b l i s h e d i n S h r e v e p o r t 9 n o . 5 (May, 1 9 2 8 ) , p . 8 . T h i s a r t i c l e was b a s e d upon an i n t e r v i e w w i t h C. R. Minor, v i c e p r e s i d e n t of Gulf R e f i n i n g Company.

39

had assembled three tug boats, 10 barges, a marine pile driver and 36 auxiliary watercraft.

In addition, the field

had 250 producing wells, most of which were connected by an intricate pipeline system.^

Interest in drilling the

relatively calm, inland waters spread throughout the country.

In 1910, American drillers brought in a gas well

one mile offshore on Lake Erie.^^ On the Caspian Sea Russian engineers in 1909 filled portions of Bebe-Abiate Bay so they could d r i l l for submarine o i l .

By 1917 dredges had successfully filled 200

hectares, and by 1923, when dredging stopped, the area had expanded to 300 hectares.

In 1924, engineers built the

first wooden pile platform outside the f i l l area.H In the United States operators probed the oil potential of the Gulf Coast.

In 1908, the discovery of the Goose

Creek Field outside Houston, Texas, on the edge of San Jacinto Bay, came as a result of the search for salt

^ B r a n t l y , The History of Oil Well D r i l l i n g , p . 1372; "Caddo Lake As a Producing O i l F i e l d , " p p . 2 and 3 , R i s t e r Papers, SWC/TTU. l^Anderson, Fundamentals of t h e Petroleum I n d u s t r y , p . 145. The n o t i o n of marine o i l well d r i l l i n g f i r s t appeared i n 1869 when, according t o p a t e n t r e c o r d s , T. F. Rowland of New York designed t h e f i r s t o f f s h o r e d r i l l i n g platform with a t t e n d a n t s e r v i c e v e s s e l . Though p r i m i t i v e by c u r r e n t s t a n d a r d s , i t had h y d r a u l i c a l l y t e l e s c o p i n g legs and used an a t t a c h e d tender o u t f i t t e d with steam b o i l e r and h y d r a u l i c motor. J . E. B r a n t l y , The History of Oil Well D r i l l i n g (Houston: Gulf P u b l i s h i n g Company, 1971), p p . 1361-62. l^A. Asan-Nuri. The Development of Oil and Gas Deposits i n Deep V^y^^ers of t h e Caspian Sea. Seventh World Petroleum Congress, Proceedings nf t h e Seventh World Petroleum Congress: D r i l l i n g and ProdUgtion, v o l . 3 of 9. (New York: American E l s e v i e r Publishing Company, 1967), p . 286. 40

domes.-^2

In Louisiana, there was growing interest in the

virtually untapped southern portion of the state.

Most of

the industry activity had been focused in the north, but, in 1920 operators had come to believe that the area around Morgan City and Houma had potential. ^-^ As one observer noted, the entire section of Louisiana from Red River to the Gulf and from the high lands on the East of the Mississippi to those on the West side of Vermilion Bayou an area of some 10,000 miles, is literally seething with escaping gas.^^ In 192 0 Louisiana was on the verge of an unprecedented oil boom. After Spindletop Gulf Coast development had been steady. Exploration crews quickly surveyed and drilled the good prospects.

From the turn of the century to 1922, oil

exploration depended upon surface geology.

Though better

than pure guesswork, such exploration was a risky endeavor, more prone to failure rather than success. Nevertheless, operators discovered 24 fields.

Prospecting crews looked

for gas and oil seeps, sulphur water, paraffin dirt, oil and gas signs in water wells, and small knolls or hills.^^

In

l^Frank J. Gardner, Reference Report on the Oil and Gas Fields of the Texas Upper Gulf Coast, pp. 221-3. l^Morgan Citv Daily Review. June 8, 1920, Clippings - Folder 10. Box 7, Hill Papers, HMRC. l^ibid. l^C. A. Warner, "The Growth of the Oil Industry in the Gulf Coast." [c. 1950s] p. 18 and 20. Folder -- Historical Data, Texas, Box 7, Warner Papers, HMRC.

41

the marine environment, surface geology was not possible. Only the extrapolated data from onshore geologic evidence gave any sign of what lay offshore.

As a result, operators

were cautious, drilling only a handful of wells.

Humble Oil

and Refining in 1917 had drilled a few prospects from platforms in Black Duck Bay at Goose Creek.

However,

nothing of substance occurred until 1922, when Texas leased its first offshore tracts.^^ In the 1920s the industry moved into Lake Maracaibo, Venezuela.

A shallow inland sea averaging 20 feet deep.

Lake Maracaibo lacked the swift tidal currents and heavy wave action of the open sea.

Only an occasional

thunderstorm squall threatened the drilling platforms.

As a

result. Lake Maracaibo emerged as the perfect test area for offshore operating techniques and equipment. Also, attracted by the possibility of oil underneath the large, shallow salt water "lake," U.S. oil companies moved into the region just after World War I.

In 1922, Shell Oil brought

in the Los Barroso No. 2, a well that flowed 100,000 barrels a day.

In 1924 drilling crews completed Santa Rose No. 1.

It tapped into a rich reservoir only two meters from the

l^Gordon K. Shearer, "More Gulf Efforts Seen," United Press International report August 29. 1947, Tidelands Clippings, Vol. 1, January 1946 to December, 1947, Price Daniel Papers, Sam Houston Regional Library and Research Center, Liberty, Texas. Hereinafter cited as Daniel Papers, SHRRC. H. M. Larson and Kenneth Wiggins Porter, HJgtorv of Humble Oil: A Study in Industrial Growth (New York: Harper Brothers, 1959), p. 433.

42

shore.

The successes reaffirmed the growing notion that

offshore exploration might be viable for the industry. Crew and work-boat prototypes and posted and submersible drilling barges sprang from the work performed in Lake Maracaibo-

As the first large-scale drilling operation over

water, the operators developed heavy-duty transport boats that supported oil well operations.

Gulf and other

companies had imported the transportable drilling barge and the posted platform directly from Caddo Lake and the TexasLouisiana Gulf Coast.

Crews quickly adapted them and they

became important components of the Lake Maracaibo drilling program. 1*^ In addition, an inexpensive platform/tender system evolved on the lake.

Operators built small drilling

platforms and used a floating ship that housed personnel quarters, equipment, power plants, and supplies.

The unit

allowed operators to move quickly and to d r i l l both exploratory and full-fledged production wells.

Eventually,

operators transported the technology back to the Texas-

l'7"Caddo Lake As a P r o d u c i n g O i l F i e l d , " p . 2 , R i s t e r P a p e r s , SWC/TTU. A l s o , Caddo Lake t e c h n o l o g y was d e s c r i b e d i n Canada, R e p o r t p n e ; The Loss of t h e S e m i s u b m e r s i h l e D r i l l Rig Ocean Ranaer and I t s Crew (Canada: M i n i s t e r of Supply and S e r v i c e s Canada, 1 9 8 4 ) , p . 2 0 5 , I n t e r n a t i o n a l A s s o c i a t i o n of D r i l l i n g C o n t r a c t o r s L i b r a r y , Houston, T e x a s . Emory N. Kemler and Edward W. R o s e n c r a n t s , O f f s h o r e Summary ( S p r i n g P a r k , M i n n . : Summary R e p o r t s , 1 9 5 4 ) , p . 6A3. N a t i o n a l P e t r o l e u m C o u n c i l , Technology and U . S . P e t r o l e u m I n d u s t r y . 1946-1965 (Washington, D . C : N a t i o n a l P e t r o l e u m C o u n c i l , 1967), p . 2 0 4 .

43

Louisiana coast for subsequent use in the shallow bays and deltas.18 While drilling crews perfected marine operations on Lake Maracaibo, geophysical survey companies developed search equipment and procedures that allowed the retrieval of accurate subsurface geologic information.

Geologists

quickly used the new technology in 1924 to locate their first salt dome, and in 1927 Humble Oil and Refining developed the first oil field based entirely upon seismic surveys. •^^

I t d i d n ' t take too much looking with e x i s t i n g s e i s m o l o g i c a l methods to affirm t h a t the Gulf Coast s a l t dome type of geology extended well out i n t o the gulf i t s e l f . 2 0 In March 1927, Dr. David T. White of the National Research Council in Washington, D . C , p u b l i c l y announced t h a t the o i l i n d u s t r y could s e i s m i c a l l y find s a l t domes in the Gulf of Mexico.

From h i s study of the U.S. Coast and Geodetic

Survey c h a r t s White, as e a r l y as 1924, was convinced t h a t o i l e x i s t e d in the Gulf.

He recommended a s e a - f l o o r mapping

^^Emory N. Kemler and Edward W. Rosencrants, Offshore Summary (Spring Park, Minn.: Summary Reports, 1954), p , 6A3. National Petroleum Council, Technology and U.S. Petroleum I n d u s t r y . 1946-1965 (Washington, D . C : National Petroleum Council, 1967), p . 204. •^^Wallace P r a t t , noted g e o l o g i s t , had t o l d " a s s o c i a t e s t h a t geophysics chances of success were a l l but n i l . " He changed h i s mind when c o l l e a g u e s proved him wrong. L e t t e r , Wallace P r a t t t o E v e r e t t e DeGolyer, February 23, 1945, R i s t e r Papers, SWC/TTU. 2^James E. S t e e l e , "Mobile Offshore D r i l l i n g U n i t s : Notes on Design and O p e r a t i o n , " pp. 2 - 3 , [Draft chapter for SNAME h i s t o r y ] , 1991, Alan McClure Papers, Alan C McClure and A s s o c i a t e s , Houston, Texas. S t e e l e i s p i o n e e r naval a r c h i t e c t having worked for t h e shipyard in Beaumont, Texas. 44

project to mark the location of salt domes.

He was

optimistic that seismic shocks and magnetic scans would increase the chances of finding oil.21 In 1927, the high probability of finding oil encouraged marine geological and geophysical survey crews to resume exploring the coastal plain.

Previously, Southern

Louisiana, fraught with bayous, swamps and marshes, had been inaccessible and had attracted scant industry attention. The high cost also had kept many out, but with the new seismic tools, industry interest quickly increased.

The

Louisiana Land and Exploration Company (LLE) and the Texas Company secured the first leases and arranged for Amerada, Gulf, and Superior to search for the salt domes that everyone had believed were there.22 Geophysical Research Corporation (GRC), a subsidiary of Amerada Oil, surveyed the submerged oil lands of Louisiana. To do so it converted shallow draft barges, skiffs, and other water craft to haul personnel and seismographic equipment through swamps and bayou, and across the coastal plain.

Crews pushed into the thick undergrowth of the vast

Atchafalaya estuary where previously only Louisiana "Cajuns" had dared to go. 21charles E. Kern, "Possibility of Oil Structures Out in the Gulf of Mexico," Oil and Gas Journal 25. no. 42 (March 10. 1927), 80, 225. 226. 2^K. Marshall Fagin, "Gulf Leasing foreshadows much drilling," The petroleum Engineer (May, 1947), 49-52.

45

LLE had option on 1.8 m i l l i o n a c r e s of southern Louisiana swamp and bayou country.

Eager to s t a r t o i l

e x p l o r a t i o n , LLE c o n t r a c t e d with GRC for e x p l o r a t o r y work.23 Two survey p a r t i e s in 1927 discovered the Vermilion Bay s a l t dome, which r e p r e s e n t e d the f i r s t such dome discovered by geophysical survey of an underwater region.24

within a

y e a r , GRC had explored and l o c a t e d eight s a l t domes, most of which were developed l a t e r - - i n the 1930s and 1940s.25 The survey success ensured the future of Louisiana o i l . F i r s t , i t confirmed notions t h a t s a l t domes e x i s t e d throughout southern Louisiana and s t a r t e d L o u i s i a n a ' s ascendancy as a l e a d i n g o i l producing s t a t e .

In a d d i t i o n ,

i t revived d i s c u s s i o n s about finding o i l f u r t h e r i n t o the Gulf and launched geophysical surveys to the edge of the open s e a . 2 6

^^George E l l i o t Sweet, The History of Geophysical P r o s p e c t i n g . Volume one, E v e r e t t e Lee DeGolyer Memorial E d i t i o n (Los Angeles: Science P r e s s , 1966), pp. 158-9 and 160. 2^E. E. Rosaire and O. C L e s t e r , J r . , "Seismological Discovery and P a r t i a l D e t a i l of Vermilion Bay S a l t Dome, L o u i s i a n a , " B u l l e t i n of t h e American A s s o c i a t i o n of Petroleum Geologists 16, no. 12 (December 1932), 1221. 25sweet, The History of Geophysical Prospecting, pp. 158-9 and 160. In 1927 t h e Bay Marchand s a l t dome was discovered by r e f r a c t i o n seismograph survey of t h e r e g i o n . According t o g e o l o g i s t s t h e Bay Marchand s a l t dome ranks as one of the w o r l d ' s l a r g e s t , and i s e s t i m a t e d t o c o n t a i n 56 cubic miles of s a l t . In the ensuing y e a r s nine onshore w e l l s had been d r i l l e d with no s u c c e s s . F i n a l l y , t h e C a l i f o r n i a Company made t h e dome a producer when the discovery well was brought in March 3, 1949. "Salt Mountain," The Oil and Gas Journal 48, no. 45 (January 5, 1950) : 33, p . 3 3 . ^^Rosaire and L e s t e r , "Seismological Discovery and P a r t i a l D e t a i l of Vermilion Bay S a l t Dome, Louisiana," B u l l e t i n of t h e American A s s o c i a t i o n of Petroleum Geologists 16, no. 12 (December 1932), 1222.

46

By 1929 survey crews had discovered fourteen salt domes as revealed through sound wave refraction of the subsurface rock strata.

GRC expanded its operations and soon had four

crews in the field.27

in 1930, southern Louisiana oil

production approached 10 million barrels.28

About the same

time, the Texas Company established a major operations center 20 miles south of Houma, Louisiana, where it could properly direct salt dome exploration.29 Drilling in the Louisiana swamps was a logistical challenge.

Crews built pile-supported platforms for the

drilling equipment and transported everything into remote areas.

Roads were nonexistent, and the region was nothing

more than a continuous swamp.

An oil field worker, writing

in a poem, suggests the difficulties that crews faced.

He

wrote: We was through bogs And over logs. We wade through brush and briars. And if old Herb Just said the word. We'd wade through all Hell's fire -Fight bugs and bees. Cut twelve-inch trees, In mud up to our ears. And say, "Oh, well. So what the Hell? We are the Engineers." 27sweet, The History of Geophysical Prospecting, p. 26. ^^Donald C Barton, "Petroleum Potentialities of Gulf Coast Petroleum Province of Texas and Louisiana," Bulletin of the American Association of Petroleum Geologists. 14, no. 11 (November 1930), 1380 29"Interesting Treating Plant Installation," in The Petroleum Fngineer 3 (April, 1932), 109.

47

-with wet, cold feet. And not much sleep. We don't feel any sorrow. Forget the bugs. And set more hubs. It may be clear tomorrow.^^ While crews could not use trucks and automobiles because of the mud, they also could not use ships because of the shallow-water.

As a result, dredges cleared a path for

shallow draft ships and barges specifically designed for the region. Oil companies used these mobile and self-contained, light-duty barges in remote areas for exploratory drilling. Crews towed them to location, loaded the equipment on board, and began drilling.

After each well, crews then moved the

barge to a new site and the process would begin again.^1 However, the transformation of the floating, light-duty barge to a heavy-duty submersible platform came from a need to find an economical means of completing the well--making it a producing well.

The process required a heavy-duty

platform and rigging that could handle the required drillpipe and casing.

Also, by sinking it to the bottom of

the bay or swamp, the barge could drill deeper cores and lift the necessary pipe and bits. In 1928, Louis Giliasso, an Italian merchant marine ship captain, invented a heavy duty, submersible drilling barge.

30"Liquid Land,- Philnews (June, 1940), 12. ^^Brantly,

The History of Oil Well Drilling, pp. 1378-79

48

In the 1920s Giliasso was the marine superintendent for the Mexican Seaboard Company at Puerto Lobos, Mexico.

In 1927,

after a trip to Lake Maracaibo, Giliasso saw the need for a shallow-water drilling barge resistant to teredos-^2 and easier to move than the pile-supported platforms.

Giliasso

patented the design, hoping the platform would drill "oil wells in lake bottoms and other submerged lands, which will afford a firm, stable base for the drilling operations and which can be transported by floating from one location to another."^^ In the Giliasso design, crews water flooded the barge so the hull rested on the bottom giving the platform the necessary heavy-lift support for deep wells.

Fully loaded

with crew quarters, drilling equipment and supplies, the "submarine drill" or "sunken barge" revolutionized the industry.

Crews could easily move it and the unit cut the

operational cost of fixed platforms by 50% Drilling crews used a prototype in 1931 to drill a series of sulphur wells on Jefferson Island, Louisiana, in water ten to 15 feet deep.^^

One company built a twin-hulled welded-steel

•^2 Sea worms. ^^Kemler and Rosencrants, offshore Summary, p. 4-P-2. ^'^The submersible barge had been developed for use in South America and was purchased by Texaco in 1934. H. Lee Flood, "Submersible Steel Barge Supports Rig and Equipment For Marine Drilling," in The Petroleum Engineer 10 (April, 1939), 29; Giliasso patented the idea and then disappeared in Central America. By the time the Texas Company and others decided to use his method, he could not be found. Eventually, he surfaced, tending bar in Panama. Kemler and

49

submersible barge, with each of the h u l l s measuring 24 x 110 feet.

Many v a r i a t i o n s on the design emerged with some

o p t i n g for t h e s i n g l e h u l l scheme.^^ The Texas Company performed much of the d r i l l i n g for LLE and, in 1932 s u c c e s s f u l l y placed i n t o o p e r a t i o n i t s own p r o t o t y p e , t h e McBride.^^

The next year Texaco purchased

from G i l i a s s o permission for exclusive use and f u l l licensing rights.

In 1934, the f i r s t bona fide submersible

d r i l l i n g barge, the G i l i a s s o entered s e r v i c e .

By 1935 the

company had seven barges a t work and had completed 25 w e l l s . The equipment's p o r t a b i l i t y n e t t e d the Texas Company a "cash saving of $600,000" over p i l e - s u p p o r t e d p l a t f o r m s . ^'^

In

terms of l a b o r s a v i n g s , the barges required only 2% of the t o t a l l a b o r on n o n - d r i l l i n g a c t i v i t y (moving) compared t o fixed p l a t f o r m s which r e q u i r e d 21% of the labor for non-

R o s e n c r a n t s , Offshore Summary, p . 4-P-2; Larson and P o r t e r , History of Humble Oil and Refining Company, p . 433; Pennsylvania Shipyards, I n c . a d v e r t i s e m e n t in The Petroleum Engineer 5 (September, 1934), 60. The Texas Company placed i n t o o p e r a t i o n i t s f i r s t barge in 1932. By 1935 t h e company completed 25 w e l l s . Because of the equipment's r e l a t i v e p o r t a b i l i t y , t h e Texas Company claimed a "net cash saving of $600,000" in 1935 u s i n g seven b a r g e s . G. I . McBride, " D r i l l i n g Barges," D r i l l i n g and Production P r a c t i c e . 1935. Division of Production, API: 40-46 (New York: API, 1936), p . 40. ^^"Modern Maritime D r i l l i n g P r a c t i c e , " The Petroleum Engineer 5 (September, 1934), 62. ^^Annual Report. The Louisiana Land and Exploration Company, 1933, Folder - - Louisiana, Box 185, Warner Papers, HMRC ^'^G. I. McBride, " D r i l l i n g Barges." D r i l l i n g and Production P r a c t i c e . 1935, Division of Production, API: 40-46 (New York: API. 1936), p . 40. B r a n t l y , The History of Oil Well D r i l l i n g , p . 1381. 50

drilling activity.^8

They became so popular that several

companies began manufacturing finished oil exploration barges.

Manufacturers included McClintic-Marshall of

Leesdale, Pennsylvania, and Pennsylvania Shipyards of Beaumont, Texas.-^^

Giliasso's invention, coupled with the

emergence of geophysical-search techniques sparked exploration and development activity in the Gulf. Texas offshore activity had been relatively subdued, but the technical innovations revived exploration activity. 1933,

In

the Petroleum Engineer magazine reported that the

Texas Gulf Coast had the highest concentration of salt domes in the Western Hemisphere.

Speculation on Gulf Coast oil

potential had prevailed since Spindletop, and almost a l l oil companies recognized i t s potential future.^^

But, the

•^^G. 1. McBride, " D r i l l i n g Barges," D r i l l i n g and Production P r a c t i c e . 1935, D i v i s i o n of Production, API: 40-46 (New York: API, 1936), p . 44. -^^Pictorial Petroleum: Monthly Rotogravure Feature of t h e Petroleum Engineer, The Petroleum Engineer 2 (October, 1930), R l l . The Texas Company c o n t a c t e d McClintic-Marshall Corporation of Leesdale, Pennsylvania t o b u i l d t h e b a r g e . Brantly, The History of Oil Well D r i l l i n g , p p . 1378-79.Pennsylvania Shipyard a t Beaumont b u i l t i t s f i r s t d r i l l barge for Texaco i n 1934. William T. F a u c e t t , The Shipyard At Beaumont (Beaumont, Texas: Ivy Lane P u b l i c a t i o n ) , p . 390. Faucett produced t h i s book himself and intended only a l i m i t e d p r i n t i n g . ^^The Petroleum Engineer in 1933 observed t h a t t h e Texas Gulf Coast was t h e s i t e of t h e h i g h e s t c o n c e n t r a t i o n of s a l t domes i n t h e Western Hemisphere. John P. Hogan, i n a p r e s e n t a t i o n t o t h e Board of D i r e c t o r s of t h e West Penn Oil and Gas Co. in Buffalo, NY, d e s c r i b e d t h e p r o l i f e r a t i o n of s a l t dome s t r u c t u r e s and other geologic c o n d i t i o n s which p e r m i t t e d such a heavy incidence of petroleum. John P- Hogan, supplementary d i s c u s s i o n of t h e Saline Domes of t h e gulf Coastal p l a i n submitted t o t h e Board of D i r e c t o r s of t h e West Penn Oil and Gas Co, January 16, 1919, p p . 2 - 3 , Box 127, Folder 5554, E v e r e t t e Lee DeGolyer Papers, DeGolyer L i b r a r y , Fikes Hall of Special C o l l e c t i o n s , Southern Methodist U n i v e r s i t y . J . Ben Carsey noted i n 1950 t h a t t h e r e were 190 known s a l t domes i n t h e Gulf and "many more s t r u c t u r e s a r e p r e s e n t which probably have s a l t c o r e s , " Carsey, "Geology of Gulf Coastal Area and

51

promotional report coupled with the improvements in mobile drilling and subsurface geological techniques, sparked a resurgent interest in the Texas offshore, especially with exploratory drilling in the bays and estuaries.

There had

been some search activity around Smith Point in Chambers County, Texas,41 but nothing substantial.

At the same time,

Amerada Petroleum Corporation launched exploration of southern Brazoria County.

The interest spread to Wharton,

Matagorda, Galveston, Chambers, and Jefferson counties. Within the next few years other companies started seismic exploration of 60,000 acres in Galveston Bay.42

From 1934

to 1937 the Salt Dome Company and the California Company performed various seismic surveys of the Galveston Bay region.^^ By 193 5, Trinity and Turtle Bays had been leased. Stanolind Oil Company successfully bid on the entirety of Turtle Bay and secured the majority of Trinity Bay.

Texaco

bought some of the leases in Trinity, and in 1936, the State of Texas awarded leases for Galveston Bay that included East

Continental Shelf," Bulletin of the American Association of Petroleum Geologists 34, no. 3 (March, 1950), p. 363. ^^Gardner, Reference Report on the Oil and Gas Fields of the Tev^s Upper Gulf Coast, p. 105. ^^"Review of Petroleum Development in coastal Texas," The Petroleum Engineer 7 (July 1, 1936), 48. ^•^The California Company was the Texas subsidiary of Standard Oil Company of California, otherwise known as SOCAL, and presently known as Chevron. Gardner, Reference Report on the Oil and Gas Fields of th^ Texas Upper Gulf Coast, p. 89.

52

Bay and the Gulf side of Bolivar Peninsula.^^

In 1938, the

industry brought in Texas' first submarine well, one located a mile from Cedar Point in Galveston Bay.^^

jn 1941,

British Petroleum completed Texas' first offshore well near Sabine Pass.^^ State leasing, either by Texas or Louisiana, was reflective of the increased interest by oil companies to open new areas for exploration and development.

Dropping

reserves and rising crude oil prices revitalized interest in opening new oil fields and encouraged companies to explore the "available unexploited areas."^^

At the end of the

prewar era Gulf Coast operators generally believed that their onshore exploration success would continue into the open-water.

Texas Attorney General Bill McCraw testified

^^Neil Williams, "Awarding of Leases in Galveston Bay S t a r t s Extensive E x p l o r a t i o n Program," The Oil and Gas Journal 34, no. 45 (March 26, 1936), 24; Additional bids were l e t for t h e t i d e l a n d s o f f s h o r e Bolivar P e n i n s u l a . Extending t h r e e miles offshore and measuring one-half mile i n width, t h i r t y - f i v e p a r c e l s were surveyed. The s t a t e r e s e r v e d every f i f t h p a r c e l and leased t h e remaining 28 t o S a l t Dome O i l , S t a n o l i n d Oil and Gas, Sun, and Humble Oil and Refining. Williams, "Awarding of Leases in Galveston Bay S t a r t s Extensive E x p l o r a t i o n Program," p . 24. ^^Gardner, Reference Report on t h e Oil and Gas F i e l d s of t h e Texas Upper Gulf Coast, p . 89. ^^"Oil and Mineral P o s s i b i l i t i e s on t h e Continental Shelves of t h e United S t a t e s and Alaska," Statement of W. E. Wrather, D i r e c t o r of t h e Geological Survey. U.S. Congress, Senate, Special Committee I n v e s t i g a t i n g Petroleum Resources, I n v e s t i g a t i o n of Petroleum Resources: New Sources of Petroleum in t h e United S t a t e s . Hearings, 7 9th Congress, 1st Session, June 1945 (Washington, D . C : Government P r i n t i n g Office, 1945), p . 9. ^^Williams, "Awarding of Leases in Galveston Bay S t a r t s Extensive E x p l o r a t i o n Program," p p . 23 and 24. 53

before a Congressional committee in 1938 that the offshore lands were

p o t e n t i a l l y r i c h in d e p o s i t s of petroleum . . . . Competent g e o l o g i s t s p r e d i c t t h a t the p o t e n t i a l mineral development in the area off the coast w i l l e a s i l y run i n t o the hundreds of m i l l i o n s of dollars.48 By t h e l a t e 1930s, t h e i n d u s t r y canvassed both Texas and Louisiana a t an unprecedented l e v e l , sending out 107 geophysical crews.49

As onshore o p p o r t u n i t i e s diminished,

o f f s h o r e i n t e r e s t i n c r e a s e d and drove o i l companies t o the open-water.

As e a r l y as 1934, Gulf Oil Company had d r i l l e d

a number of e x p l o r a t o r y wells in the M i s s i s s i p p i D e l t a . At the same time, the Independent Exploration Company ran t h e f i r s t geophysical surveys in the Gulf of Mexico. The company discovered and p r o f i l e d the f i r s t offshore

salt

dome in t h e Creole Oil F i e l d , Block 2, one mile o f f s h o r e , and t e n m i l e s e a s t of Cameron, Louisiana.

On October 6,

1937, Superior and Pure o i l companies completed a well i n t o t h e dome, making i t t h e f i r s t o i l well completed in t h e open-waters of t h e Gulf.

By 1938, the discovery had

produced 5 m i l l i o n b a r r e l s of o i l . ^ ^ 48pi-ess Release, Attorney G e n e r a l ' s Office, October 28, 1952, Folder - Press R e l e a s e s , 1952, Box 22a, Daniel Papers, SHRRC ^^Neil Williams, "Present Rate of Gulf Coast E x p l o r a t i o n may Find All Reserves in Two Y e a r s . " Oil and Gas Journal 34, no. 21 (October 10. 1935), 1 1 . ^^Craig Thompson, Since Spindle Top: A Human Storv of G u l f ' s p-jrst Half Century ( P i t t s b u r g h : Gulf Oil Corporation, 1951), pp. 33-38, B r a n t l y ' s History of Oil Well D r i l l i n g c a u t i o n s a g a i n s t i n a c c u r a c i e s i n t h i s a c c o u n t . C Walter Dobie, "Creole," in L a f a y e t t e Geological S o c i e t y , Offshore Louisiana Oil and Gas F i e l d s (Lafayette, L a . : 54

The sheer number of new wells revealed a broad i n t e r e s t in o f f s h o r e o p e r a t i o n s and generated a f l u r r y of marine activity.

In response, the S t a t e of Louisiana extended i t s

o f f s h o r e claim t o twenty-seven miles from the low t i d e mark.51

By 1938, o p e r a t o r s had d r i l l e d 3,300 wells in

p a r i s h e s adjacent t o the Gulf. surrounded by w a t e r .

Of those, 700 w e l l s were

The h e a v i e s t c o n c e n t r a t i o n of a c t i v i t y

occurred in Terrebonne Parish t h a t included Lake Barre, Terrebonne Bay, P e l t o Bay, and Timbalier Bay.52 companies continued with geophysical surveys.

oil In 1938, 49

t o 7 5 survey teams worked in southern Louisiana.53 In December 7, 1941, the t h r e a t of war ended t h e s e t e n t a t i v e offshore probes.

Axis submarines a t t a c k e d U.S.

shipping o f f s h o r e the West and Gulf Coasts and reminded companies t h a t offshore platforms were a l s o v u l n e r a b l e . a r e s u l t , t h e o i l companies ended any f u r t h e r

As

exploration

and development.54 L a f a y e t t e Geological S o c i e t y , 1973), p . 4 1 . K. Marshall Fagin, "Gulf Leasing foreshadows much d r i l l i n g , " The Petroleum Engineer (May, 1947), 49. ^•'•Testimony of B. A. Hardey, Chairman of the Louisiana S t a t e Mineral Board. U.S. Congress, House, Committee on Armed Services S p e c i a l Subcommittee on Petroleum, Petroleum for National Defense^ Hearings, 80th Congress, 2nd Session, March 10. 1948. (Washington, DC: Government P r i n t i n g Office, 1948), p . 742. ^^H. Lee Flood, "Marine D r i l l i n g Forms Large Part of L o u i s i a n a ' s Gulf Coast D r i l l i n g A c t i v i t y , " The Petroleum Engineer 10 (May 1939), 98. ^^Ralph H. King, "Geophysics Has Played Important Role in Oil D i s c o v e r i e s , " The Petroleum Engineer 10 (May, 1939), 94. ^'^U-Boat a c t i v i t y along t h e Gulf Coast remained a t a high l e v e l from 1942 t o 1944. Moreover, Southwest Louisiana myth held t h a t outlaw fishermen p e r i o d i c a l l y r e - s u p p l i e d U-boats. 55

Also, precluding offshore work were federal restrictions against new reservoir development, especially those requiring additional construction material, equipment and human resources.

The Petroleum Administrator for War

increased the flow from existing reservoirs and wells. Equipment shortages "placed a severe strain on the industry to maintain production" without advocating new exploration and development programs of new oil

frontiers.55

Although the technology for open-water drilling was available, both the Cameron and Sabine Pass offshore wells failed as commercial oil producers.56 industry perceived events as anomalies.

AS a result, the Uncertain Gulf

currents, constantly changing weather, and not enough seafloor information, convinced many that offshore development was risky.57

However, petroleum geologists were guardedly

optimistic. . . . i t may be tentatively assumed that the Gulf of Mexico is a potential source of salt-dome o i l . . . . Whether or not i t will ever be economically feasible

5^A H i s t o r i c a l Record of t h e Committee of t h e P e t r o l e u m I n d u s t r y yj^r C o u n c i l Appointed by t h e P e t r o l e u m A d m i n i s t r a t o r f o r War (Washington, D . C : Government P r i n t i n g O f f i c e , 1945), p . 6, PAW H i s t o r i c a l R e c o r d s , F i l e "Appendix, F o r e i g n O p e r a t i o n s Committee, P e t r o l e u m I n d u s t r y War C o u n c i l , T e c h n i c a l Advisory Committee, M i s c e l l a n e o u s , " N a t i o n a l A r c h i v e s , Washington, D . C i n R i s t e r P a p e r s , SWC/TTU. 5^K. M a r s h a l l F a g i n , "Gulf L e a s i n g foreshadows much d r i l l i n g , " The P e t r o l e u m E n g i n e e r (May, 1 9 4 7 ) , 49 ^'^Ibid., p . 49-52.

56

to explore these waters for the domes that must exist is a question for the future to answer.58 Some of the doubts had been allayed by the practical success of the first open-water platforms, and it served as the historical antecedent for the high-level of offshore activity that would emerge after World War II. As the allies in the war neared victory in 1944, the oil companies returned to the Gulf.

Kerr-McGee probed the

Mississippi Sound with seismographic surveys.59

Early in

1944 Superior Oil Company began a survey 2 6 miles offshore Cameron Parish.

Late in 1944 Magnolia Petroleum launched

surveys just off the mouth of Atchafalaya River. The threat of U-boat attack and material shortages had prevented offshore operations.

However, with the allied

victory in the Atlantic and successes in the European and Asiatic Theaters, U-boat activities decreased and companies revived their offshore programs.

The resurgent activity

signaled a return of industry interest in the Gulf and the beginning of the modern offshore era. An unexpected oil shortage after World War II caused consumer panic and prompted governmental concern.

Almost

all expected a postwar oil glut since military demand had declined.

As America returned to peacetime, however.

5^0. L. Brace, "Gulf Coastal Developments in 1940," Bulletin of fhe American Association of Petroleum Geologists 25, no. 6 (June 1941), 1007. 59-Gamble In The Gulf," Kermac News (December 1972), 2.

57

experts had not anticipated such a high level of consumer use.

Crude prices in 1945 had totaled $1.25 a barrel, but

by 1948, the price doubled, reaching $2.65 a barrel.^^

In

response, the oil industry accelerated exploration and development of known reservoirs and sped up preparations for marine operations in the Gulf. Even though offshore wells cost three times as much as similar operations on land, crews fanned out into offshore areas shortly after the end of World War II.

Such activity

symbolized the industry's move from the shallow swamps and coastal mud flats to a real marine environment.

Prospects

appeared lucrative as most petroleum geologists expected to find as many profitable offshore reservoirs as had been found onshore in the past fifty years. In 1945, Magnolia had surveyed the area offshore Terrebonne Parish, Louisiana.^1

Eventually, it leased

129,022 acres that involved five separate projects.

By the

end of the 1946, the company had begun construction of a large drilling platform.

Experts estimated that Magnolia

^OFortune 38 (July, 1948), 160. ^^Geophysical techniques were so successful that by 1945, the Gulf Coast region held one-fifth of the U.S. proven oil reserves. "Oil and Mineral Possibilities on the Continental Shelves of the United States and Alaska," Statement of W. E. Wrather, Director of the Geological Survey. U.S. Congress, Senate, Special Committee Investigating Petroleum Resources. Investigation of Petroleum Resources: New Sources nf Petroleum in the United States. Hearings, 79th Congress, 1st Session, June 1945 (Washington, D.C: Government Printing Office, 1945), pp. 9 and 14; O. W. Noland and Roy M. Huffington, "Development and Outlook for the Continental Shelf of Texas and Louisiana," Transactions of the Gulf Cnast Association of Geologic Societies. 4 (November, 1954), 3.

58

spent nearly $1 million before drilling i t s first test well.62 Magnolia's pioneering offshore effort attracted attention from other companies and prompted the lease of 1.1 million acres of Louisiana offshore property.

Estimates

revealed that oil companies had spent more than $20 million on exploration and leasing up to that time.63

By 1948 the

industry had gathered large amounts of geological information, and a frenzy of offshore leasing ensued. Various companies started offshore drilling programs that flourished until 1950.^4 Though Texas operators had leased 82 offshore tracts amounting to 54,000 acres from 1922 to 1947, the state had lagged noticeably behind Louisiana.

Only a handful of

operators had drilled on their leases and in 1947 the State of Texas claimed only three wells on three leases.

The low

level offshore activity in Texas was attributable to two ^ ^ D i r e c t l y quoted from t h e i n t r o d u c t o r y remarks for t h e Louisiana Southeast s e c t i o n . National Oil Scouts & Landmen's A s s o c i a t i o n , Oil and Gas F i e l d Development in United S t a t e s year Book 1947 (Review of 1946), Volume XVII (Austin: National Oil Scouts & Landmen's A s s o c i a t i o n , 1947), p . 366. ^•^Magnolia staged much of i t s offshore e f f o r t s i n Berwick and Morgan C i t y , L o u i s i a n a . At one point Magnolia was spending more than $1 m i l l i o n a month on offshore development. K. Marshall Fagin, "Gulf Leasing foreshadows much d r i l l i n g , " The Petroleum Engineer (May, 1947), 49-52. ^'^In 1948. R. D. Wyckoff noted t h a t t h e geophysical q u e s t i o n s had been answered. Production engineers would have t o f i g u r e out a way t o g e t t o t h e o i l . R. D. Wyckoff, "Geophysical E x p l o r a t i o n , " Proceedings American Petroleum I n s t i t u t e . Section IV (of 5 s e c t i o n s ) Production, 1948, p . 7 6 . Noland and Huffington, "Development and Outlook for t h e C o n t i n e n t a l Shelf of Texas and L o u i s i a n a , " p . 3 .

59

important circumstances.

First, Texas offshore leases had

only a twenty-five year limit.

Given the considerable

expense of offshore operations, many operators did not think that the twenty-five year time limit was long enough to recoup investments.

Second, in 1947 Texas, in response to

protests from the fishing industry, had suspended geophysical surveys on both leased and unleased land.

The

seismic explosions had reduced the size of the catches.

In

response, oil operators had refused to d r i l l on unsurveyed parcels.

Companies also had refused to bid on state leases

without geophysical confirmation of the t r a c t ' s potential. After the November 1947, authorities had postponed all lease sales.65 By 1948, Texas had eliminated such road blocks.

As for

terminal offshore leases, the legislature established provisions that allowed for lease extension of producing reservoirs.

In addition, the state passed legislation that

regulated geophysical surveys of unleased land and permitted the same for leased property.^6

The actions revived

^ ^ S h e a r e r , "More Gulf E f f o r t s S e e n , " U n i t e d P r e s s I n t e r n a t i o n a l r e p o r t August 2 9 , 1947 and Margaret Mayer, "Blue Chips Down i n B a t t l e f o r O i l L e a s e s i n Texas T i d e l a n d s A r e a , " A u s t i n S t a t e s m a n O c t o b e r 1 8 , 1947, A u s t i n American. August 2 9 , 1947, T i d e l a n d s C l i p p i n g s . V o l . 1, J a n u a r y 1946 t o December, 1947, D a n i e l P a p e r s , SHRRC Newspaper c l i p p i n g . D a t e l i n e G a l v e s t o n , TX, October 2 , Box 2 1 , Gulf Seismograph f i l e . G e n e r a l F i l e s a s A t t o r n e y G e n e r a l , 1947-1952, D a n i e l P a p e r s , SHRRC. ^ ^ S h e a r e r , "More Gulf E f f o r t s S e e n , " U n i t e d P r e s s I n t e r n a t i o n a l r e p o r t August 2 9 , 1947 and M a r g a r e t Mayer, "Blue Chips Down i n B a t t l e f o r O i l L e a s e s i n Texas T i d e l a n d s A r e a , " A u s t i n S t a t e s m a n O c t o b e r 1 8 , 1947, D a n i e l P a p e r s , SHRRC.

60

offshore activity.

By June, 1949, the State Land Office had

issued thirteen permits for geophysical surveys.

Offshore

crews spread out into the Gulf spanning an area from the Rio Grande to the Sabine River.67 In 1948, the U.S. Navy's Office of Naval Research in cooperation with the U.S. Geological Survey (USGS) launched a magnetic search to obtain a better subsurface picture of offshore possibilities.

Using boat or airplane, crews swept

the region registering the magnetic variance of various rock types of areas not yet included in commercial surveys.

The

USGS wanted information concerning oceanographic data, continental shelf topography, and sea-floor composition. Both agencies were curious about the salt dome possibilities between Sabine Pass and Grand Cheniere, Louisiana, 20 to 75 miles offshore.

In 1949, they completed the project.

Using

an airborne magnetometer, the USGS and the military surveyed 9,000 square miles of offshore lands.

Though the equipment

could not outline salt domes specifically, searchers thought the method had potential in finding oil.68 Much of the reason for offshore interest in both Texas and Louisiana arose from industry realization that America had hovered near 100 percent of productive capacity.

After

^'^ Dal las Morning News June 25. 1949, Tidelands Clippings, Vol. 4, March 1949 to June 1949, Daniel Papers, SHRRC ^^Austin American-Statesman May 20, 1949. Joint Navy and Department of Interior Press Release, April 18, 1948, Folder #24, National Petroleum Council - Releases, Hill Collection, HMRC.

61

World War I I , as the n a t i o n geared for peacetime, domestic demand soared unexpectedly, c r e a t i n g spot s h o r t a g e s . 6 9

Much

of t h e s h o r t a g e was a t t r i b u t a b l e to the increased use of automobiles and farm equipment, new defense requirements, and a c c e l e r a t i n g i n d u s t r i a l production.

Since the 1930s the

market had not encouraged the i n d u s t r y to develop a d d i t i o n a l reservoirs.

The o i l g l u t and low p r i c e s brought on by the

runaway East Texas f i e l d had forced the i n d u s t r y to solve t h e problem of crude o i l waste from e x i s t i n g w e l l s , than t o search for new ones.

Also, wartime p o l i c i e s had

emphasized production and discouraged e x p l o r a t i o n . r e s u l t , the

rather

As a

U.S. emerged from the war without any excess

producing c a p a c i t y .

Both i n d u s t r y and government recognized

t h a t o i l e x p l o r a t i o n and development a c t i v i t i e s had to i n c r e a s e . '^^ Unfortunately, declined. toll.'^l

the production of U. S. w e l l s had

The high output during the war had taken i t s The number of wells and f i e l d s with r e s e r v o i r

^ ^ I t was commonly b e l i e v e d a t t h e time t h a t with t h e r e t u r n of peace reduced m i l i t a r y demand would ease o i l demand. Though most expected domestic consumption t o e v e n t u a l l y f i l l t h e void, i t happened more q u i c k l y than anyone imagined. "^"^Oil I n d u s t r y Public R e l a t i o n s Committee, Press r e l e a s e , August 23, 1947, Folder 9 - API Board of D i r e c t o r s , Box 4 1 ; Statement of Walter S. Hallanan P r e s i d e n t of Plymouth Oil Company before Subcommittee of House J u d i c i a r y Committee," Folder 8 - National Petroleum Council, Box 53, H i l l Papers, HMRC. ^•'•Wartime production exceeded maximum e f f i c i e n t recovery by 300,000 b a r r e l s a day. A H i s t o r i c a l Record of t h e Committee of t h e Petroleum I n d u s t r y War Council Appointed by t h e Petroleum Administrator for War (Washington, D . C : Government P r i n t i n g Office, 1945), p . 5, PAW H i s t o r i c a l Records. F i l e "Appendix, Foreign Operations Committee,

62

pressure had dropped dramatically.'^2

-po compensate, the

industry resorted to pump jacks, repressurization, water flood, and various other methods to revive production. the methods were expensive and time consuming. the industry looked to the untapped Gulf.

But,

As a result,

In spite of the

exorbitant offshore costs, companies knew that offshore wells would have plenty of production pressure.

Moreover,

operators increasingly understood that improved marine technology would help them to reach large, productive offshore reservoirs in a virtually untapped oil province.'^^ Geological and oceanographic surveys confirmed the vast potential of the Gulf and showed the similarity between onshore and offshore geology.

Experts argued, with

justification, that the prolific oil fields discovered on land would continue offshore.

By 1948 and 1949, the

industry had come to appreciate the oil potential of the continental shelf, which extended from 50 to 140 miles from shore with i t s depth increasing only gradually, on average

P e t r o l e u m I n d u s t r y War C o u n c i l , T e c h n i c a l Advisory Committee, M i s c e l l a n e o u s , " N a t i o n a l A r c h i v e s . Washington, D . C i n R i s t e r P a p e r s , SWC/TTU. ^ ^ I n 1943, t h e E a s t Texas F i e l d was r e p r e s s u r i z e d by s a l t w a t e r injection. E x p e r t s e s t i m a t e d t h a t w i t h o u t i t t h e y would have had t o add 6,000 pumping u n i t s i n 1943 and 5,000 pumping u n i t s i n 1944 t o meet demands. Memorandum, R. E. A l l e n [ A s s i s t a n t Deputy P e t r o l e u m A d m i n i s t r a t o r ] t o Donald B. Davis D i r e c t o r of Program B u r e a u ] , F e b r u a r y 2 5 , 1 9 4 3 , C h r o n o l o g i c a l F i l e , J a n u a r y - - F e b r u a r y , E. DeGolyer, P e t r o l e u m A d m i n i s t r a t i o n f o r War R e c o r d s , S-195, Box 1 0 5 . Item 3 0 , N a t i o n a l A r c h i v e s , Washington, D.C. found i n R i s t e r P a p e r s , SWC/TTU. "^3 "Gamble I n The G u l f , " Kermac News (December 1 9 7 2 ) , 2 .

63

12 feet per mile.

The slope continued until the water depth

reached 600 feet and then dropped off dramatically."^4

The

offshore oil frontier measured approximately 277,500 square miles or roughly equivalent to the land area of Texas."^5 In spite of the offshore promise, the industry understood little about the Gulf.

Moreover, oceanography

and meteorology had not yet emerged as fully developed academic disciplines.

Therefore, many companies started

their own research and development programs.

Humble Oil and

Refining created an offshore study program that included submarine geology, meteorology, platform technology, and naval architecture. "^6 jn 1946, it contacted the Scripps Institute of Oceanography for information on Gulf marine and weather.'^'^

In the meantime. Shell and Union Oil companies

studied West Coast submarine geology and experimented with floating drilling methods.'^8

Even drilling contractors and

^^Carsey, "Geology of Gulf Coastal Area and Continental Shelf," Bulletin of the American Association of Petroleum Geologists 34, no. 3 (March, 1950), 368 and 369. "^^Ibid., 372. ''^A. H. Glenn [meteorologist and owner/operator of A. H. Glenn and Associates] interview by author [telephone], Tape recording. New Orleans, Louisiana, March 26, 1992. "^"^Humble's initial contact is outlined in a letter from S. W. Oberg [Chief Engineer, Humble] to F. P- Shepard, August 9, 1946. F. P. Shepard authored the Humble report entitled "Current and Wave Action on Shallow Sea Floor West of Mississippi Delta [report for Humble Oil and Refining Company], August 21, 1946." Folder: 47 (Humble Oil Company, 1946), Box 13, Francis Shepard Papers, (MC 7) Scripps Institution of Oceanography Archives, UCSD, La Jolla, California. Hereinafter cited as Shepard Papers, SIO. "^^Daniel Behrman, The New World of the Oceans: Men and oreanooraphv (Boston: Little, Brown and Company, 1969), pp. 226-7. Memorial Tribute, William Bradford Whitehill Rand by Elmer P. Wheaton,

64

s h i p y a r d s gathered information and consulted academic sources such as Texas A&M U n i v e r s i t y . "^9 At f i r s t ,

t h e companies most i n t e r e s t e d in offshore

development proved t o be the smaller, independent firms t h a t d i d not have v a s t onshore h o l d i n g s .

Kerr-McGee and P h i l l i p s

Petroleum, hungry and a g g r e s s i v e , were two such companies. They had performed some e a r l y seismic soundings of the Gulf in 1944 and 1945.

Under the bold l e a d e r s h i p of Dean McGee,

Kerr-McGee I n d u s t r i e s and P h i l l i p s Petroleum pushed the o i l i n d u s t r y i n t o the offshore age.80

Trained as a mining

engineer, McGee e v e n t u a l l y became the chief g e o l o g i s t Phillips.

for

He j o i n e d Kerr in 1937 and helped to spark the

company's i n t e r e s t in the o f f s h o r e .

McGee turned the

company's i n t e r e s t from the mid-continent, where r e s e r v o i r s were " t h i n " and recovery p o s s i b i l i t i e s "small" to the offshore.81

As one long time employee of Kerr-McGee

remarked.

pp. 1-2. W. W. Rand, " D r i l l i n g From F l o a t i n g Vessels As Applied To Petroleum E x p l o r a t i o n of C a l i f o r n i a ' s T i d e l a n d s , " p r e p r i n t - - Society of Petroleum Engineers of AIME, 1958, p . 3 . "^^In 1947 Texas A&M U n i v e r s i t y and Texaco held p r e l i m i n a r y d i s c u s s i o n s on f u t u r e c o n t r a c t r e s e a r c h . Brief of Persons I n v i t e d t o Attend F i r s t Meeting with R e p r e s e n t a t i v e s of the Texas Company, February 18, 1947, College S t a t i o n , Folder 5-3. Sewell H. Hopkins C o l l e c t i o n , Oyster M o r t a l i t y Reports, U n i v e r s i t y Archives, Texas A&M U n i v e r s i t y . SO^lLLeld 1984, 19. ^^Video I n t e r v i e w with Dean McGee, S-113 P h i l l i p s H i s t o r i c a l P r o j e c t , January - March, 1979, Reel 2 (of 2 ) . Corporate Archives, P h i l l i p s Petroleum Company, B a r t l e s v i l l e , Oklahoma. "Gamble In The Gulf," Kermac News (December 1972), 2. Shield 1984, 19. John Samuel E z e l l , Innovations in Energy: The Story of Kerr-McGee (Norman, OK: U n i v e r s i t y of Oklahoma P r e s s , 1979), pp. 75. 76.

65

I think companies like Kerr-McGee looked out there because they realized there was something there and they might be able to get it where they didn"* t have as good a chance of getting a real nice piece of acreage on land.82 Dean McGee believed that large reserves of oil existed in the Gulf waters and directed the company's operations there.83 Kerr-McGee and Phillips were interested in offshore exploration and development, but wavered at the prospect of being "alone and sinking in the Gulf of Mexico."

They added

Stanolind to their partnership and they pushed ahead when survey crews located two promising salt domes offshore southwest Louisiana.84

xn addition, an industry-wide

meeting in 1947 discussed marine development at length and convinced Kerr-McGee that offshore development was imminent.85

Kerr-McGee drilled a discovery well on the

first of the salt domes, thus completing the first well drilled beyond the sight of land.

The achievement bolstered

the offshore fortunes of Kerr-McGee.

As McGee phrased it,

"Kerr-McGee really took off."86

82Ezell, Innovations In Energy, p. 154. 83ibid. S^Ibid., p. 155. Dean McGee in a video interview, S-113 Phillips Historical Project. January - March, 1979, Reel 2 (of 2), Corporate Archives, Phillips Petroleum Company, Bartlesville, Oklahoma. S^Ezell, Innovations In Energy, p. 156. ^^Dean McGee in a video interview, S-113 Phillips Historical Project, January - March, 1979, Reel 2 (of 2), Corporate Archives, Phillips Petroleum Company, Bartlesville, Oklahoma.

66

To guarantee s u c c e s s , Kerr-McGee employed t h e technology and procedures t h e i n d u s t r y had developed p r e v i o u s l y a t Caddo Lake, Lake Maracaibo, and t h e bayous of southern Louisiana.

Such items included t h e small p l a t f o r m / t e n d e r

technology, d i r e c t i o n a l d r i l l i n g , and m u l t i p l e - w e l l completions from a s i n g l e platform.87

Also, war s u r p l u s

equipment became an important p a r t of Kerr-McGee's offshore o p e r a t i o n s and allowed 100% cost savings.88

After i t s 1947

o f f s h o r e discovery w e l l , i t bought a i r / s e a rescue b o a t s , landing c r a f t s , yard f r e i g h t e r s , and a tugboat, a l l of which Kerr-McGee converted t o offshore use.89 In t h e e a r l y offshore period, o p e r a t o r s had used technology drawn d i r e c t l y from land-based o p e r a t i o n s . Companies t r a n s f e r r e d equipment and personnel t o t h e o f f s h o r e environment.

Though t h e i n d u s t r y adapted t o marine

c o n d i t i o n s , o p e r a t i n g procedures and a t t i t u d e s r e t a i n e d a d e f i n i t e shore-based c h a r a c t e r .

But, t h e impact of World

^^George P a r k s , " D i r e c t i o n a l D r i l l i n g In O f f s h o r e O p e r a t i o n s , " World O i l 129, n o . 2 ( J u n e , 1949), 9 5 . A r t h u r S. D a v e n p o r t , " K e r r McGee's V e n t u r e i n t h e G u l f , " The D r i l l i n g C o n t r a c t o r ( A p r i l , 1 9 4 8 ) , 5 4 55. ^®In 1947, w a r - s u r p l u s c o n v e r s i o n crew b o a t s had c o s t $ 1 8 - 2 1 , 0 0 0 . w h e r e a s i n 1954 i t c o s t $ 8 0 , 0 0 0 . W a r - s u r p l u s c o n v e r s i o n w o r k b o a t s ( w o r k b o a t s ) had c o s t $ 3 0 , 0 0 0 , b u t i n 1954 i t c o s t $ 1 2 5 , 0 0 0 . The t u g had c o s t $ 1 3 9 , 0 0 0 . b u t i n 1954 i t c o s t $ 2 5 0 , 0 0 0 . The t e n d e r (YF b a r g e ) had c o s t $ 3 2 5 , 0 0 0 . b u t i n 1954 i t c o s t $ 1 . 1 m i l l i o n . Dean McGee, "Economics of O f f s h o r e D r i l l i n g i n t h e Gulf of Mexico," p p . 1 9 8 - 1 9 9 . American petroleum I n s t i t u t e : D r i l l i n g and p r o d u c t i o n P r a c t i c e . 1954. McGee g o t t h e i d e a t o u s e YF b a r g e s from a t r i p t o New O r l e a n s . "Gamble I n The G u l f , " Kermac News (December 1 9 7 2 ) , p . 4 . ®^Arthur S. D a v e n p o r t , "Kerr-McGee*s V e n t u r e i n t h e G u l f , " The p r i l l i n g C o n t r a c t o r ( A p r i l , 1948), 5 6 .

67

War II marine equipment and Kerr-McGee's entry into the open-water environment signaled the beginning of the industry's full adaptation to marine conditions. The offshore industry flourished.

Lease sales led to 35

oil companies spending $200 million, discovering eleven oil fields with a total output of 16,500 barrels a day.

In

addition, eighteen gas or gas condensate fields were found.90 Unfortunately, by 1950 the tidelands controversy effectively suspended open-water operations.

In 1947,

coinciding with Kerr-McGee's success in completing its first well, the federal government filed suit against California, Texas, and Louisiana claiming the tidelands as part of the public domain.

The government argued that it had the

responsibility of administering this new oil frontier for the national welfare.

With the military importance of

petroleum fresh in its mind, the Truman Administration sought to ensure national security by maintaining a dependable supply of oil.

The oil producing states defended

its rights by arguing that the offshore lands had always fallen under its control.

The U.S. Supreme Court in 1948

and 195 0 confirmed the paramount rights of the federal

^^Leigh S. McCaslin, Jr., Drilling and Producing Oil and Gas In the Gulf of Mexico. Third World Petroleum Congress. The Hague. 1951 pynreedings: Section TI Drilling and Production (Leiden, Holland: E, J.. Brill, 1951), p. 169.

68

government over the tidelands.

The states appealed the

decision and the controversy raged on until 1953. Meanwhile, the oil industry suspended offshore operations pending final settlement.

Not wanting to risk further

investment and unsure whether the federal or state government would guarantee the leases, the oil companies waited. Although tidelands operations stopped, coastal exploration and development activity exploded.

Operators

focused drilling programs in the shallow bays and estuaries of Texas and Louisiana.

Corpus Christi Bay, the South Texas

coast, and similar areas along the Texas and Louisiana coast received much industry attention, and they became a focal point of talented oil field personnel and testing ground for new equipment.91 For the second time within six years external forces interrupted offshore development.

The threat of Nazi

submarine attack had forced a suspension in 1942.

The

federal and state legal dispute stopped i t again in 1950. In both cases, operators halted operations.

Yet, by 1948,

^ ^ U n t i t l e d - Barnsdall Research Corp [Ostensibly authored by J . T. Hayward], Folder - "old t o be c u l l e d , " and A. J . Laborde, Notes on Offshore D r i l l i n g , January 1, 1953. p . 3, Folder: Laborde General Info On, John T. Hayward Papers. Manuscripts Section, Howard-Tilton Memorial L i b r a r y , Tulane U n i v e r s i t y . H e r e i n a f t e r c i t e d as Hayward Papers, Tulane U n i v e r s i t y . Hoyt Taylor [ r e t i r e d Chief Engineer Zapata Off-Shore], i n t e r v i e w by a u t h o r . Tape r e c o r d i n g . Hale Center, Texas, June 2 3 , 1993; E z e l l , Innovations in Energy, p . 192; "Mushrooming Mustang," D r i l l i n g 13, n o . 4 (February, 1952), 74-78.

69

the push for offshore development was strong, and many knowledgeable people predicted that the delay would be only temporary.

Experts accurately gauged the vast potential of

the continental shelf and thought it would meet the postwar oil shortages and unexpected postwar defense demands.

The

national and strategic interests dictated that a rapid solution be found.92

The tidelands disagreement also served

as an important demarcation point between the formative and modern phase of offshore development.

Once settled, its

conclusion not only answered the important question of tidelands control, but set the stage on how the oil industry as a whole would be integrated into a cooperative federal and state regulatory framework. From 1900 to 1947, the offshore oil industry passed through its formative years.

Initially stimulated by the

search for shore-based salt domes, the oil industry eventually realized that salt domes existed both onshore and offshore.

The development of geophysical-search technology

permitted geologists an accurate window upon subsurface geology.

Previously, surface signs gave only a limited view

of the subsurface zone.

Perfected in the southern Louisiana

^^Letter (copy) from Oscar Chapman [Interior Department Secretary] to Spressard Holland [U.S. Senator], June 4, 1952, Folder - Tidelands S. J. Res. 13, Box 295, Lyndon Baines Johnson Sponsored Legislation, 19491960, United States Senate, 1949-1961, Papers of Lyndon Baines Johnson, The Lyndon Baines Johnson Library. Austin, Texas. Hereinafter cited as LBJ Papers, LBJ Library.

70

swamps, such surveys helped to find salt domes, and they lured exploration into the Gulf proper.

From 1923 to 1945

the success of geophysical surveys in finding new oil reservoirs bolstered the proven reserves of the Gulf Coast region to one-fifth of the national total.93 Progressive technological change, the use of drilling barges, and development of pile-supported platforms permitted the industry to edge i t s way into the Gulf. As one engineer stated, This recent progress was not the result of new ideas or new concepts. It has been the result of a stepby-step improvement in existing technology. Many of the "new" ideas have been around for a long time.94 Starting first along the shallow bays and coastal inlets, inland lakes, and eventually into the open-waters of the Gulf, the industry gradually developed the equipment i t needed from onshore antecedents.

World War II and war-

surplus equipment helped the oil industry solve much of i t s

^^"Oil and Mineral P o s s i b i l i t i e s on t h e Continental Shelves of t h e United S t a t e s and Alaska," Statement of W. E. Wrather, D i r e c t o r of t h e Geological Survey, Reprint from U.S. Congress, Senate, Special Committee I n v e s t i g a t i n g Petroleum Resources, I n v e s t i g a t i o n of Petroleum Resources: New Sources of Petroleum in t h e United S t a t e s . Hearings, 79th Congress, 1 s t Session, June 1945 (Washington, D . C : Government P r i n t i n g Office, 1945), p . 9. ^^Griff Lee, "Design and Construction of Deep Water Jacket Platforms for Third I n t e r n a t i o n a l Congress on t h e Behavior of Offshore S t r u c t u r e s (BOSS) ' 8 2 , " p . 2, Massachusetts I n s t i t u t e of Technology, Cambridge, Massachusetts, August 2 - - 5 . 1982. Courtesy Griff Lee.

71

operational and logistical problems, and lowered offshore operating costs.95 Marine operations was expensive.

High equipment and

operating costs in an unfamiliar environment kept many operators out.

From 1900 to 1930, offshore operations was

possible, but because of low oil prices activity was low. With enough oil available on-shore, operators saw no need to expend the effort.

With increasing oil prices, declining

on-shore discoveries, and operator over-competition in the remaining oil provinces, companies, in the late 1930s and immediately after World War II, moved offshore. From 1948 to 1952, the industry was poised on the cusp of the modern offshore era.

With the lull in offshore

activity, the oil industry took advantage of this interlude to catch up, retool, test new equipment, and momentarily redirect drilling activity.

As operators readied for the

offshore surge, the offshore industry began to emerge as a separate operation, distinct and unique from any other.

The

rigors of deep-water operations and heightened offshore

^^War surplus equipment became an important part of Kerr-McGee's offshore operations and allowed it a cost savings of 100%. Dean McGee, -Economics of Offshore Drilling in the Gulf of Mexico," pp. 198-9. fiynorican Petroleum Institute: Drilling and prodUCtiQn Practice, 1954.

72

competition of the 1950s would eventually complete the transformation of oil companies into offshore companies

73

CHAPTER III FIGHT FOR THE TIDELANDS In 1946 President Harry Truman announced that the offshore lands extending to the edge of the continental shelf remained under the control and ownership of the United States.

The Truman administration claimed the lands in

anticipation of increasing worldwide interest in ocean mining and mineral resources.

Besides its international

implications, the proclamation asserted federal control of the tidelands, thus ending eight years of speculation on whether the states would or could keep jurisdiction.1 In 193 8 the federal government first announced its ownership of the submerged lands next to the U.S. coast. Previously, the coastal states administered them without interference.

As the tidelands emerged as the next oil

frontier, however, the federal government moved to assert control.

The federal claim on the tidelands, declaring it

as part of the national domain, stemmed from a long held interest to regulate the industry and regulate oil production in the national interest.

Instead of ending

strife and speculation, and insuring timely and efficient oil development, Truman's 1946 proclamation served as a

^Letter, Price Daniel to Drew Pearson, March 26. 1948. Folder Drew Pearson, Daniel Papers, SHRRC.

74

prelude to an intense debate over the nation's energy future, one that continued for the next seven years with after shocks reverberating into the mid 1960s. In spite of the Truman proclamation, California, Texas, and Louisiana continued to lease offshore lands. Previously, the key coastal oil producing states had administered the tidelands.

Prior to 1938 the federal

government had conceded to the states control of the offshore lands.

By the late 193 0s, however, the federal

government had changed its policy and moved to absorb the tidelands within a broad industry wide regulatory stratagem. After the Second World War, the U.S. Justice Department took legal action against, California, Texas and Louisiana. Arguing that the federal government held paramount rights to administer the tidelands for the national good, the U.S. Attorney General succeeded in winning U.S. Supreme Court decisions in 1948 and 1950. The states did not give up easily.

They sensed growing

opposition to federal control of any kind and argued for Congressional quit-claim legislation that would give them clear ownership of the lands.

Though many bills were

sponsored and heard in Congress, none passed Truman's veto. The states and the federal government reached an impasse.

75

As a result, the fractious and unstable political climate arrested offshore development.2 Offshore companies discontinued operations with the federal and state governments in disagreement, even though both sides tried to prevent any interruption of oil development.

Many companies waited for a final settlement.

With no guarantee that leases granted during the dispute would be honored, companies were hesitant to invest.

Not

until the 1952 election of President Dwight Eisenhower and the fulfillment of his pledge to acknowledge the Louisiana and Texas offshore claims did operations resume.-^ At its core, the tidelands controversy focused upon the ownership, control, and development of the offshore tidelands.

Extending three miles offshore from the low tide

mark, most experts expected submarine oil to be the next oil bonanza.

California, Texas, and Louisiana had already

pushed tentative drilling platforms offshore and had confirmed the predictions.

But, the tidelands debate

involved much more than a struggle for offshore oil.

The

tidelands discussion arose from issues about states' rights.

^Letter (copy), Oscar Chapman to Spressard Holland, June 4, 1952, Folder - Tidelands S. J. Res. 13, Box 295, Lyndon Baines Johnson Sponsored Legislation, 1949-1960. United States Senate, 1949-1961, LBJ Papers, LBJ Library. ^Letter, Alden J. Laborde to John T. Hayward, November 15. 1952, Laborde File - Folder, Hayward Papers, Tulane University; Alden J. Laborde [ODECO founder. President and CEO. retired], interview by author. Tape recording. New Orleans, Louisiana, July 31, 1991.

76

national security, and oil industry federalization.4

in

addition, the tidelands debate pitted state and federal governments against one another and delineated the battle lines between large and small oil companies.

Such factors

exacerbated the conflict. The r i f t s and various issues prevented the development of a cogent national energy policy.

Within the oil

industry, internal schisms between large integrated companies and the smaller independents threatened to tear i t apart.

Smaller companies felt, with some justification,

that the larger companies were using the federal government and i t s policies against them.

Such policies included oil

price controls, importation of foreign oil, lease policies, and other measures that government and business cooperatively developed.

Independents felt the policies

made offshore operations more expensive or at least made covering investments more difficult.5

^ I n t e r - o f f i c e Communication Attorney G e n e r a l ' s Office from P r i c e Daniel t o Beauford J e s t e r , December 2 3 , 1947, Daniel Papers, SHRRC P r e s i d e n t Truman r e i t e r a t e d i n 1949 t h a t "We must adopt a program for t h e planned u s e of t h e petroleum r e s e r v e s under t h e sea which a r e - - and must remain - - v e s t e d i n t h e f e d e r a l government." Joseph H u t t l i n g e r , " P r e s i d e n t Brings Tidelands Issue t o F o r e , " World Petroleum 20 (February, 1949), 37. ^Though few sources mentioned i t s p e c i f i c a l l y , t h e Beaumont fTp^prprise i n an 1947 e d i t o r i a l mentioned t h e f e d e r a l government's i n t e n t i n e s t a b l i s h i n g a n a t i o n a l o i l p o l i c y and, w i t h i n t h a t , an o f f s h o r e o i l p o l i c y . A l l of t h i s stemmed from t h e prewar move for i n d u s t r y f e d e r a l i z a t i o n . Beaumont E n t e r p r i s e . June 25. 1947. Also, i n 1949 I n t e r i o r S e c r e t a r y J . A. Krug mentioned a " n a t i o n a l o i l p o l i c y " and noted t h a t t h e c o n t i n u i n g f i g h t between t h e s t a t e and f e d e r a l governments and t h e o i l i n d u s t r y prevented i t s formulation. 77

The tidelands controversy signaled the beginning of a new era in the federal management of the oil industry. first,

At

the federal presence in the tidelands conflict caused

fear that i t would bring legal action, revoke leases, and impose financial penalties against oil companies with state leases.

As a result, tidelands exploration and development

stopped completely.6

Offshore development, however, resumed

when oil companies realized that the federal government sought to manage offshore operations, not suspend them.'^ Though i t maintained that i t owned and controlled the "tidelands," the federal government compromised with the coastal states, thus, allowing Texas, Louisiana, and California partial control of the immediate coastline. Moreover, the federal government forged cooperative linkages to private industry that set up workable lease procedures and field regulations.

Many of them drew from

industry recommendations, and suggested growing federal government and oil industry cooperation in determining

^ L e t t e r (copy), Oscar Chapman [ I n t e r i o r S e c r e t a r y ] t o Spressard Holland [U.S. S e n a t o r ] , June 4, 1952, Folder - Tidelands S. J . Res. 13, Box 295, Lyndon Baines Johnson Sponsored L e g i s l a t i o n , 1949-1960. United S t a t e s Senate, 1949-1961, LBJ Papers, LBJ L i b r a r y . "^Frank M. P o r t e r , Petroleum Has Served t h e Public Well. A speech p r e s e n t e d t o t h e API Production Division, Mid-Continent D i s t r i c t Meeting, Oklahoma C i t y , OK, March 30. 1950, Unprocessed Box 91A, Southwest C o l l e c t i o n , Texas Tech U n i v e r s i t y , Lubbock, Texas. Hereafter c i t e d a s SWCTTU. 78

n a t i o n a l o i l p r o d u c t i o n , development and e x p l o r a t i o n policies.8 The U.S. claim on t h e c o n t i n e n t a l shelf extended t h e t e r r i t o r i a l waters from the t h r e e mile l i m i t to upwards of sixty miles.9

The claim was sparked by the r e c o g n i t i o n of

o i l ' s c r u c i a l importance to n a t i o n a l defense.

In 1946 the

n a t i o n r e a l i z e d , more than ever, the d i r e c t l i n k between n a t i o n a l defense and petroleum.

U.S. production, by i t s e l f ,

had guaranteed an a l l i e d v i c t o r y in the Second World War. Of t h e petroleum used, the U.S. provided 80%. In t h e postwar p e r i o d , U.S. production waned. Domestic flow r a t e s d e c l i n e d and the i n d u s t r y r e s o r t e d t o a r t i f i c i a l l i f t methods t o improve production.

Also, wartime measures

t h a t s t r e s s e d maximum production and discouraged e x p l o r a t i o n f u r t h e r over loaded the system and caused a temporary o i l shortage.

The s h o r t a g e paralyzed c i t i e s , urban

t r a n s p o r t a t i o n and forced Washington, D . C , t o impose energy c o n s e r v a t i o n measures.

The most embarrassing moment came

when t h e s h o r t a g e s t r a n d e d the U.S.S. Missouri.

The

Japanese had been unable to stop the b a t t l e s h i p in World War

^January 13, 1949 Minutes, Folder #34, National Petroleum Council - Minutes of t h e Meetings, Box 52, H i l l Papers, HMRC 9In p a r t , t h e United S t a t e s extended i t s p r o t e c t i v e c o a s t a l zone a s a b u f f e r a g a i n s t enemy submarines. M i l i t a r y e x p e r t s f e l t t h a t a t h r e e - m i l e zone was an i n s u f f i c i e n t b a r r i e r . L e t t e r , ( r e s t r i c t e d ) Roger R e v e l l e [Acting SIO D i r e c t o r ] t o Rear Admiral T. A. Solberg, December 5, 1950. Folder 36. Box 3, F r a n c i s Shepard Papers. Scripps I n s t i t u t e of Oceanography. H e r e i n a f t e r c i t e d as Shepard Papers, SIO.

79

II, but the oil shortage left the Missouri stranded in New York Harbor. Reeling from the embarrassment, the Truman administration moved to rectify the problem.

Perceiving

that Texas, Louisiana, and California had claimed the last domestic oil frontier, the administration launched a court fight to win back control of the tidelands.

Max Ball, the

Director of the Oil and Gas Division of the Interior Department, noted the urgency of the situation. Obviously, neither the Government nor the industry, which made such a magnificent wartime record, can permit this situation, with its alarming implications to the national security.1^ The federal tidelands interest extended back to the late 1930s.

Though awash with East Texas crude, prices at an all

time low, and new production a low priority, several companies, particularly on the West coast, began filing on the tidelands.

Interior Secretary Harold Ickes at first

believed that the lands fell within state jurisdiction.H But by 1937 he had reversed his position and spearheaded the drive for Congressional legislation confirming federal tidelands ownership.12

Considering oil's strategic

importance and the unreliable performance of the oil

l^Letter, Max Ball to Walter S. Hallanan, April 15. 1947, Folder 1 - National Petroleum Council - Agenda Committee, Box 53, Hill Papers, HMRC l^Hearings on S.J. Res. 83 & 92 (1939) Importune 38:68-71, July, 1948, p. 161.

80

industry and the states, Ickes felt that discovery and development of petroleum had to be controlled by the federal government.

Working under the regulatory atmosphere of the

New Deal, Ickes had worked for federalization of the entire industry since the early 1930s.

Eventually, he realized

that by controlling the tidelands the government could achieve industry regulation.

By 1939, the Interior

Department moved toward earmarking the tidelands as petroleum reserves. 1-^ The U.S. Navy jumped into the fray, honestly professing an interest in "wherever we can get oil. "14

The navy

testified in 1938 that i t needed additional reserves because of output limitations in existing ones.

Even with the

appropriate technology and ideal conditions, operators could only produce 60 to 75 percent of the oil in a given reservoir.

Fearing a possible oil shortage and i t s threat

to national security, the Navy pushed for the federal

l^U.S. Congress, Senate, Special Committee I n v e s t i g a t i n g Petroleum Resources, Hearing, 78th Congress, 1 s t . Session, 1945 (Washington, D . C : Government P r i n t i n g Office, 1945), p . 257; I n t e r s t a t e Oil Compact Commission, The Compact's Formative Years. 1931-1935 (Oklahoma C i t y , OK.: I n t e r s t a t e Oil Compact Commission, 1954; 2nd p r i n t i n g , 1968), p . 32; U . S . Congress. House, Subcommittee of t h e Committee on I n t e r s t a t e and Foreign Commerce, H. Res. 290 and H. RES. 7372. Hearing, Seventys i x t h Congress, Third Session, 1940 (Washington, D . C : Government P r i n t i n g Office, 1940), p p . 1866-1875. I'^Testimony of Captain H. A. S t u a r t , United S t a t e s Navy, D i r e c t o r of Naval Petroleum S e r v i c e . U.S. Congress, House, Committee on t h e J u d i c i a r y , S . J . Res. 208 R e l a t i v e t o t h e establishment of t i t l e of t h e ynji-^t^ S t a t e s t o c e r t a i n Submerged lands c o n t a i n i n g Petroleum D e p o s i t s . Hearing, 75th Congress, 3d s e s s i o n , February 23, 24, and 25 (Washington, D . C : Government P r i n t i n g Office, 1940), p p . 4 0 - 4 1 .

81

control of the tidelands.

It claimed that the parcels were

public lands, and, therefore, the government had the right to administer them for national defense.15 The various Congressional measures to impose federal control did not pass.

Senate Bill 2164 that designated all

"marginal seas" as part of the public domain and Senate Joint Resolutions 83 and 92 that claimed the California tidelands to fall under federal auspices met stiff resistance in Congress.16

Roosevelt's pre-war presidency

saw an increasing antipathy toward government control over the private sector.

The federal tidelands "land grab"

generated significant opposition among the coastal states. In addition, a wide cross section of pressure groups that included public corporations, service groups, and even interior states criticized the action. 1'^

The distraction of

World War II and the cooperative war effort in oil exploration and production temporarily prevented any pre-war confrontation. After the war, heightened domestic demand, coupled with the realization of crude o i l ' s importance to national

^^Testimony of Captain H. A. S t u a r t , United S t a t e s Navy, D i r e c t o r of Naval Petroleum S e r v i c e . U.S. Congress, House, Committee on t h e J u d i c i a r y , S . J . Res_ 208 R e l a t i v e t o t h e establishment of t i t l e of t h e ynf-ted S t a t e s t o c e r t a i n Submerged lands c o n t a i n i n g Petroleum D e p o s i t s . Hearing, 75th Congress, 3d s e s s i o n , February 2 3 , 24, and 25 (Washington, D . C : Government P r i n t i n g Office, 1940), p . 37 and 3 9 . l ^ B a r t l e y , The Tidelands Oil Controversy, p p . 101 and 110. l ^ i b i d . , p . 121. 82

s e c u r i t y revived the push for f e d e r a l ownership. c o a s t a l s t a t e s challenged the f e d e r a l move.

Still,

the

California,

Louisiana, and Texas, the prime o i l producing s t a t e s with c o a s t l i n e s , had long claimed the t i d e l a n d s a r e a . 1 8

But,

w i t h t h e r i s i n g p o t e n t i a l of offshore o i l by 1938, Louisiana claimed ownership out t o a twenty-seven mile l i m i t .

By

1941, Texas did the same.19 Though wartime seismic surveys gave promising offshore s i g n s , t h e o i l companies had l i t t l e i n c e n t i v e to explore and develop.

Low crude o i l p r i c e imposed by p r i c e c o n t r o l s

dampened enthusiasm.

Coupled with unknown offshore c o s t s

and problems, the i n d u s t r y moved c a u t i o u s l y . 2 0

Both Texas

and Louisiana s t a t e governments countered by spreading word t h a t they would be w i l l i n g to arrange for as many l e a s e s as t h e companies could handle.21 b i d d e r s descended t h e c o a s t .

A v e r i t a b l e avalanche of From 1945 to 1950 f o r t y o i l

companies i n v e s t e d $100 m i l l i o n in l e a s e s , with an a d d i t i o n $100 m i l l i o n for marine equipment and platforms.22

But, the

l^The d i s t a n c e r e p r e s e n t e d t h e maximum r a n g e of heavy cannon. l ^ T e s t i m o n y of B. A. Hardey, Chairman of t h e L o u i s i a n a S t a t e M i n e r a l B o a r d . U . S . C o n g r e s s , House, Committee on Armed S e r v i c e s House of R e p r e s e n t a t i v e s , S p e c i a l Subcommittee on P e t r o l e u m , P e t r o l e u m f o r [vf^^jnnal D e f e n s e . H e a r i n g , 8 0 t h C o n g r e s s , 2nd S e s s i o n , March 10, 1948 (Washington, D . C : Government P r i n t i n g O f f i c e , 1 9 4 8 ) , p . 742; Fort YfrsrV^ S t a r - T e l e g r a m . March 20, 1949. 20Kermac News. December, 1972, p p . 2 and 4 - 5 . 21ibid.

22j. E. Kastrop, "56 Years of Gulf Coast Oil," World Oil 130. no. 7 (June, 1950), 58-59; Houston Press, August 26, 1949.

83

June 1947 U.S. Supreme Court decision in United States v. Califnrni;=i derailed the offshore push.

With the federal

government claiming jurisdiction over offshore lands, state claims became suspect.23

The dispute destabilized the

drilling environment and persuaded offshore operators to suspend operations. Without lease guarantees from the federal government, companies courted disaster.

Humble Oil and Refining's Board

of Directors had given approval for and completed the construction of a "million-dollar drilling rig designed for deepwater operations."24

But, upon receiving the news of

the court dxxxecision Humble impounded the rig at the New Orleans construction yard until the company could get clear guarantee of i t s offshore investment.25 The federal legal offensive scared off investors and disrupted lease sales.26 The smaller, independent companies hesitated, because they stood to lose everything if the

^^Larson and P o r t e r , History of Humble Oil and Refining Company, p p . 657 and 658; Allan Shivers [former Governor of Texas], i n t e r v i e w by Lindsy Escoe Pack, Tape r e c o r d i n g . May 22, 1978. Courtesy of Lindsy Escoe Pack. Pack interviewed Yarborough for h i s Ph. D. d i s s e r t a t i o n , "The P o l i t i c a l Aspects of t h e Texas Tidelands Controversy" (Texas A&M U n i v e r s i t y , 1979) . Pack loaned t h e interviews t o t h e a u t h o r . Bartley, The Tidelands Oil Controversy p . 118. 24since 1946, Humble had made p r e p a r a t i o n s t o o p e r a t e up t o 30 m i l e s o f f s h o r e , f a r exceeding Texas' 10.5 mile claim. L e t t e r , S. W. Oberg [Chief Engineer, Humble] t o F. P. Shepard, August 9, 1946, Folder 47 (Humble Oil Company, 1946), Box 13, Shepard Papers. SIO. 25«The Tidelands Question," The Humble Way 3, n o . 3 (SeptemberOctober, 1947), 5 . 26port Arthur News. June 25, 1947; Larson and P o r t e r , H i s t o r y of H^imhle O i l , p p . 657 and 658. 84

federal government revoked state leases.27

Moreover,

shallow-water operators feared that the federal government might try to expand i t s claims by also appropriating oil lands in the state controlled bays and estuaries.

With so

much confusion and uncertainty, one operator said that ". . . the only thing for us to do is shut down our rigs and wait until we know more about where we stand."28 After the California decision, alarmed Texans protested and some revived the call for secession.29

Texas Attorney

General Price Daniel calmed anxious operators by asserting Texas' legal claim to the offshore.

Daniel, elected to

office in 1946, rose to the federal challenge.

Basing his

argument upon Spanish historic boundaries, treaty, and Texas' special statehood admission circumstance, Daniel 2'These companies and i n d i v i d u a l s were extremely angered by t h e f e d e r a l a c t i o n . During t h e war and postwar period they argued t h a t they had n e a r l y been destroyed by e x p l o r a t i o n and production r e s t r i c t i o n s , and p r i c e c o n t r o l p o l i c y . L e t t e r , C R. Starnes t o Harold I c k e s , April 26. 1943, Folder 1, O i l Problems - National & Texas. Box 43, H i l l Papers, HMRC; Port Arthur News. June 25, 1947; Larson and P o r t e r , H i s t o r y of Humble Oil and Refining Company, p p . 657 and 658. ^^Port Arthur News. June 25, 1947; Larson and P o r t e r , History of Humble Oil and Refining Company, pp. 657 and 658. 2^After t h e C a l i f o r n i a d e c i s i o n had been handed down Bascom G i l e s , t h e Texas Land Commissioner, recommended t h a t Texas secede from t h e union i f t h e f e d e r a l government t r i e d t o extend t h e d e c i s i o n t o Texas. 7'.=>ylor Times. June 24, 1947, Tidelands C l i p p i n g s , Vol. 1, January 1946 t o December, 1947, Daniel Papers, SHRRC According t o some observers G i l e s ' pronouncements was motivated by h i s g u b e r n a t o r i a l ambition. Of c o u r s e , h i s was not t h e only s e l f - s e r v i n g announcement. Governor Beauford J e s t e r and Attorney General Price Daniel scrambled t o respond t o G i l e s ' s t a t e m e n t . An e d i t o r i a l s t a t e d t h a t J e s t e r and Daniel "sent t h e i r p r e s s a g e n t s p e d a l i n g t o t h e newsrooms with s t a t e m e n t s , hoping t o r e c a p t u r e t h e p u b l i c i t y s t o l e n by Bascom"s a s t u t e l o y a l t y t o t h e N i n e t e e n t h Century." "Tidelands, My T i d e l a n d s , " The Texas S p e c t a t o r . J u l y 7, 1947, Tidelands C l i p p i n g s . Vol. 1, January 1946 t o December, 1947, Daniel Papers, SHRRC 85

claimed ownership of the continental shelf out to the threeleague limit (10.5 miles).

He felt that law and history

sided with Texas, and, therefore, he believed that the Texas School Land Board was within i t s rights to lease offshore properties.

Traditionally land rich, Texas, through the

sale or lease of i t s lands, subsidized education, veterans affairs,

the University of Texas and the public debt.

The

board administered the lands.3 0 Daniel emerged as the most prominent Texas political figure involved in the tidelands fight.

Daniel's position

was a popular one, and defying the federal government for the sake of Texas school children increased his stature. A strong advocate for state control and defender of states' rights, Daniel fought for the 10.5 mile boundary and refused any compromise or deal that infringed on that legacy.

In

addition, he organized support from a variety of national organizations.31

^^Ron T y l e r , The New Handbook of Texas. Vol. 5 (Austin: Texas S t a t e H i s t o r i c a l A s s o c i a t i o n , 1996), p . 926. ^ I p r e s s Release, Attorney G e n e r a l ' s Office August 8, 1951, Folder - P r e s s R e l e a s e s , 1951, Box 22a, Daniel Papers, SHRRC. These included The Council of S t a t e Governments, The Governors Conference, National A s s o c i a t i o n , of Attorneys General, National Association of Public Land O f f i c i a l s , National A s s o c i a t i o n of County O f f i c i a l s , National Conference of Mayors, American A s s o c i a t i o n of Port A u t h o r i t i e s . American T i t l e A s s o c i a t i o n , U . S . Chamber of Commerce, U.S. J u n i o r Chamber of Commerce, N a t i o n a l Water Conservation A s s o c i a t i o n , American Municipal A s s o c i a t i o n , N a t i o n a l I n s t i t u t e of Municipal Law O f f i c e r s . P r i c e Daniel, "Submerged Lands L e g i s l a t i o n : Brief i n Support of S t a t e Ownership and Supporting Source M a t e r i a l , " p . 4, Daniel General F i l e s as Attorney General, 19471952, Box 23a - Speeches, SHRRC P r i c e Daniel sent t h e b r i e f along with a cover dated August 12, 1952.

86

with solid legal claim and widespread support, Texas' position seemed unassailable.

In addition, U.S. Attorney

General Tom Clark was a native Texan.

Moreover, Clark

supposedly had strong oil industry connections.

Hopeful

Texans reassured themselves that he would not commit political suicide by taking legal action against Texas. Undoubtedly, the "California" case had already done considerable damage to his political career and pressing the case against Texas could end it. A political page commented that His friends are rich men, oil-rich men; they will not soon forget or forgive Tom's encroactiment upon their rights.32 Plainly, Clark's announcement bolstered the feelings that the administration had no intention of claiming Texas' tidelands.33

Experienced and pragmatic politicians in both

Texas and Louisiana, however, predicted that Clark had already targeted the two states' tidelands.34 Both states continued with a business-as-usual attitude. In 1948 Texas audaciously extended its offshore boundaries

32The Texas Spectator. July 7, 1947. Daniel concurred and felt that these "roots" would make Clark more cautious. Gainsville Register. June 24, 1947. ^^Ralph Yarborough [former U.S. Senator from Texas], interview by Lindsy Escoe Pack, Tape recording, April 1, 1978. Courtesy of Lindsy Pack. The Texas Spectator. July 7, 1947 ^^Apparently, Clark had delayed bringing suit against California giving rise to Ickes suspicion that "Texas oil interests" were are work. Nevertheless. Truman pushed Clark to action. Bartley, The Tidelands Oil rr>pt rover sv. p. 138.

87

to the deep-water edge of the continental shelf, thereby adding two million acres to the lands i t could potentially lease.35 Louisiana, with i t s appetite whetted for oil revenues, tried to forestall an offshore shut down.

Offshore

development had been a veritable bonanza for Louisiana. Unlike Texas that claimed only a few operating wells, Louisiana's actual production netted i t $13,106,343 in bonuses and rentals from 1,739,901 acres under lease. Refusing to give that up, Louisiana proclaimed that i t would continue to lease "offshore water bottoms" in spite of the California decision.

In 1947 Louisiana held two lucrative

lease sales.36 At f i r s t , oil companies backed state claims.

In Texas

oil companies enjoyed reasonable royalty and rental payments.

Operators paid one-eighth royalty on the life of

the production.

To encourage drilling, the state charged

$l/year rental until drilled.

Moreover, operators were

3 5Ralph Yarborough [former U.S. Senator from Texas], i n t e r v i e w by Lindsy Escoe Pack, Tape r e c o r d i n g , April 1, 1978. Courtesy of Lindsy Pack. The Texas S p e c t a t o r , July 7, 1947. Austin / ^ e r J c a n , August 29, 1947. Port Arthur News. June 24, 1947. Dallas Morning News. June 25. 1949. Ernest B a r t l e y d e s c r i b e d t h e boundary e x t e n s i o n s a s nothing more than a "land g r a b . " B a r t l e y , The Tidelands Oil Controversy, p . 88 and fn 44. 3^Beaumont E n t e r p r i s e . June 24, 1947. 88

familiar with state control and opposed changing the system. 37

Arguing

. . . that state control, being closer to operations, is more practical and that proposed federal controls will discourage tidelands development. Secondly, state lease contracts were considerably cheaper. Also, any interruption in offshore production would raise costs.38 The industry was suspicious of federal meddling and felt that the federal government's continued use of postwar price controls, the push for natural gas regulation, and the federalization of the tidelands were part of a revived effort to nationalize the industry.

Many feared the

insidious nature of the federal government and supported the feeling that even "A l i t t l e Federal oil authority is like being a l i t t l e pregnant.

It grows and nothing can stop

it."39 But, the oil industry grew fearful of being too closely identified with the state governments.

If the states lost,

the industry might become the next target.

As a result, the

oil industry distanced itself from the struggle. ^ ^ B e a u f o r d J e s t e r , "The T h r e a t of t h e T i d e l a n d s D e c i s i o n t o T e x a s , " November 1 7 , 1947 R a d i o A d d r e s s o n t h e T e x a s S t a t e N e t w o r k , F o l d e r - B e a u f o r d J e s t e r , Box 3 5 . P r i c e D a n i e l P a p e r s a s A t t o r n e y G e n e r a l , SHRRC. 3 8 - o i l Development E n t e r s T i d e l a n d s I s s u e , " N a t i o n a l ]sjews 4 0 , n o . 10 (March 1 0 . 1 9 4 8 ) , 1 6 .

PetrQleuIH

3 9 B . A . H a r d e y , "Would Our P e t r o l e u m P r o b l e m s B e s t Be S o l v e d U n d e r f e d e r a l o r S t a t e R e g u l a t i o n , " "IPAA M o n t h l y 1 9 , n o . 2 ( J u n e , 1 9 4 8 ) , 4 4 , 4 8 , 5 0 , 5 3 , p . 4 8 . T h e q u o t e i s from a l e t t e r from E r n e s t O. Thompson [Chairman of t h e Texas R a i l r o a d Commission] t o W a l t e r S. H a l l a n a n [ C h a i r m a n o f t h e N a t i o n a l P e t r o l e u m C o u n c i l ] , May 1 2 , 1 9 4 7 , F o l d e r D e p a r t m e n t o f t h e I n t e r i o r - O i l a n d Gas D i v i s i o n , Box 5 3 , H i l l P a p e r s . HMRC.

89

Also, revived public suspicion of political meddling by the oil industry, heightened by the "Pauley Incident," convinced oil companies to stay out of the fight.

In 1946

Edwin Pauley, a California oil operator, received Truman's appointment, to become Navy Secretary.

But, Pauley's

nomination failed to pass the Senate, when Interior Secretary Harold Ickes revealed that Pauley had earlier tried to guarantee California tidelands ownership by offering a $300,000 "campaign contribution" to the Democratic National Party.

Pauley, who held West coast

offshore investments, lobbied as early as 1944 for state control, and in 1945, supported quit-claim legislation giving California ownership of its offshore lands. Ickes' revelation and the subsequent political furor blocked Pauley's appointment.40

in addition, the dispute forced

Ickes' resignation from the cabinet.

In protesting Pauley's

nomination and making his displeasure known to the press, Ickes had compromised his tenuous relationship with President Truman.41 As a result, the oil industry found itself battling a public relations crisis.

The tidelands conflict had burst

upon the scene as national news and revived the negative stereotype.

Throughout its history the oil industry had

^^Port Arthur News, February 1, 6, and 13, 1946. 4lBartley, The Tidelands Oil Controversy, pp. 140-141

90

never enjoyed much public trust.

The negative images of

John D. Rockefeller, the Standard Oil Trust, and the scandal-fraught Teapot Dome and Elk Hills oil reserves remained vivid in the public mind.

A skein of Congressional

antitrust hearings in the late 1930s and the postwar oil shortage stemming from perceived price and market manipulation, revived public suspicions.42

in spite of

industry attempts to improve i t s tarnished image,43 the public remained wary. The involvement of Pauley and the "oil lobby" in California tidelands politics revived public outrage against the oil industry.

In 1945 California oil money backed the

passage of House Joint Resolution 225 that would quit-claim the land to the states.

Pauley, then president of Petrol

Oil Corporation; William C. Clary, Special Assistant Attorney General of California; and California Attorney

^^Humble Oil and Refining Company, Texas-Louisiana Oil Tour: Newsmen's V i s i t September 29 through October 5. 1946. p . i . " E d i t o r i a l l y Speaking," National Petroleum News 40, no. 9 (March 3 , 1948), 2 1 . Port Arthur News. February 1, 6. and 13, 1946. ^^The i n d u s t r y scrambled t o r e h a b i l i t a t e i t s p u b l i c image and, i n 1947, launched a media b l i t z , employing r a d i o , movies, documentaries, and p r i n t a d v e r t i s e m e n t s . Edwin W. Esmay, "Exhibit 'G' Annual Report t o t h e Board of D i r e c t o r s of t h e Department of Information," Proceedings ftm*^riran Petroleum I n s t i t u t e . Section I (of 5 s e c t i o n s ) [351-357] G e n e r a l , 1952, p . 3 5 1 . Edwin W. Esmay, "The OIIC Reports t o t h e O i l I n d u s t r y , " Proceedings American Petroleum I n s t i t u t e . Section I (of 5 s e c t i o n s ) [199-201] General, 1952, p . 199. Also, Humble Oil and Refining Company of Houston began giving annual p r e s s t o u r s of i t s o p e r a t i o n s i n 1946. "Newsmen's Tour," The Humble Way. 4 no. 1, (MayJ u n e , 1948), 6. F t . Worth Star-Telegram. March 20. 1949. Humble Oil and Refining Company, Texas-Louisiana Oil Tour: Newsmen's V i s i t g^^ptember 29 through October 5. 1946. p . i .

91

General Robert W. Kenny joined forces.44

The St. Louis Post

Dispatch revealed the connection and that Clary's salary was partly subsidized by the oil lobby.

The revelation created

widespread public discontent and prompted a U.S. Congressional hearing to determine the extent to which the oil industry and state officials were cooperating.45

AS a

result, for the remainder of the tidelands disagreement, oil companies refrained from openly supporting legislation or lobbying Congress.46

one industry executive observed that

Caught in the middle between the state and the federal government in the prolonged controversy, the companies operating in the Gulf have not cared to openly fix the blame for their troubles."47

^^David Robnett F i t c h , "Economic Aspects of t h e Gulf Coast Offshore O i l Controversy" (Ph. D, D i s s e r t a t i o n , U n i v e r s i t y of Oklahoma, 1956), p . 4 1 . ^ ^ F i t c h , "Economic Aspects of t h e Gulf Coast Offshore Oil C o n t r o v e r s y , " p . 42. ^^From a v a i l a b l e evidence o i l o p e r a t o r s , companies, and s e r v i c e companies voiced no p r e f e r e n c e for e i t h e r federal or s t a t e c o n t r o l . See s t a t e m e n t by H. Jack P o r t e r [ o i l operator and Republican Party o f f i c i a l ] , i n t e r v i e w by Lindsy Escoe Pack, Tape r e c o r d i n g . May 16. 1978. Courtesy of Lindsy Pack. P o r t e r was a long time independent o i l o p e r a t o r , and Republican Party a c t i v i s t . Also, i n 1949, Hines Baker, P r e s i d e n t of Humble Oil and Refining, r e a c t e d vehemently t o charges t h a t t h e o i l companies were major p a r t i c i p a n t s i n t h e t i d e l a n d s c o n t r o v e r s y . Baker s t a t e d t h a t t h e Governors and t h e Attorneys General and land commissioners and o t h e r r e p r e s e n t a t i v e s of t h e s t a t e s a r e t h e people who have t a k e n , assumed, and c a r r i e d t h e lead i n t h i s f i g h t for t h e recovery of t h e t i d e l a n d s by t h e s t a t e s . January 13. 1949 Minutes, Folder #34, N a t i o n a l Petroleum Council - Minutes of t h e Meetings, Box 52, H i l l Papers, HMRC. ^'^Statement by Walter S. Hallanan of Plymouth O i l Company. He was t h e Chairman of t h e National Petroleum Council. Houston Post. October 7, 1951.

92

Instead, the offshore companies channeled their interests in Washington, D.C. through the low-profile Offshore Lessees Committee.48 Though the industry kept a low profile, public suspicion persisted.49

Price Daniel and other state leaders denied

that oil industry money was in anyway involved in the tidelands fight.

"Knowledgeable" insiders, however,

reported a lot activity occurring beneath the surface.50 Less cautious sources accused the so-called "oil lobby" of supporting state control and allying itself with Texas governmental leaders.

Such oil politicians included Price

Daniel, Allan Shivers, Beauford Jester, and Bascom Giles, all Democrats.51

Critics, like Democratic State Chair

^^Fitch, "Economic Aspects of the Gulf Coast Offshore Oil Controversy," p. 43. ^^The fuel oil shortage in the winter of 1947-48 did much to destroy public opinion. "Editorially Speaking," National Petroleum News 40, no. 9 (March 3, 1948), 21. Harold Ickes and others had done much to spread unfavorable information about the industry to the public and among members of Congress. 50pj-om his research, Fitch discerned that there were indications of considerable behind the scenes activity. Unfortunately, Fitch was not specific. Fitch, "Economic Aspects of the Gulf Coast Offshore Oil Controversy," pp. 40-41. One source claimed that Price Daniel and Allan Shivers "should be exposed for what they are - public officials intrusted to look after the school children of Texas, who had a chance to get the Texas tidelands for Texas but who were persuaded by big oil interests with shady claims in Louisiana and California to tie Texas' valid claim- and it was still a valid claim in the Summer of 1949 - with the shady claims of Louisiana and California." Letter from Creekmore Fath to Drew Pearson, October 31, 1951, "Tidelands Oil #7", Drew Pearson Papers, The Lyndon Baines Johnson Library. Hereinafter cited as Pearson Papers, LBJ Library. ^^Shivers had alleged links to "big money in Houston where they raised it - big gobs of it." Ralph Yarborough [former U.S. Senator from Texas], interview by Lindsy Escoe Pack, Tape recording, April 1, 1978. Courtesy of Lindsy Pack. After his retirement from politics. Shivers' close oil industry connection was further exposed by his board

93

Robert W. Calvert of Hillsboro charged that the oil industry controlled state politics and the state government.52 Price Daniel's untainted image and denials failed to quell charges of oil lobby complicity.

Political enemies

claimed that he had sold-out to Ed Pauley and other California oil interests.

Apparently, California oil had

tried to bolster i t s position by attaching itself to Texas' strong offshore claims.53

insiders said that Daniel

supported the move, clearly willing to dilute Texas' claim with California's, to show a united front to the federal government.

Though he vowed to fight to the end, angry

critics and political enemies argued that Daniel worked to enhance his public reputation, at the expense of several viable Congressional compromise measures that might have ended the fractious dispute.54 c h a i r m a n s h i p of W e s t e r n P i p e L i n e , I n c . of A u s t i n , T e x a s . I n 1958, h e j o i n e d t h e Board of D i r e c t o r s of t h e Texas Gulf Sulphur Company t h a t was c i t e d i n Texas Gulf S u l p h u r Company, Annual R e p o r t . 1958, p . 3 and t h e Houston P o s t . November 6, 1 9 5 8 . I n t h e e a r l y 1960s, h e s a t on t h e b o a r d of G l o b a l M a r i n e Company, an o i l e x p l o r a t i o n company. L a t e r , S h i v e r s became a d i r e c t o r of D r e s s e r I n d u s t r i e s 1964-1972, a c o r p o r a t i o n w i t h c l o s e t i e s t o George H. W. Bush. Darwin Payne, I n i t i a t i v e i n E n e r g y : D r e s s e r I n d u s t r i e s . I n c . . 1880-1978 (New York: Simon and S c h u s t e r , 1979), p . 388. 5 2 I t was h i n t e d t h a t t h e "major o i l companies" a n d / o r t h e " o i l l o b b y " h a d t h e e a r of Governor Beauford J e s t e r , A t t o r n e y G e n e r a l P r i c e D a n i e l , a n d Land Commissioner Bascom G i l e s . Meanwhile, unconfirmed r e p o r t s a r g u e d t h a t t h e "push" b e h i n d t h e Texas 1948 o f f s h o r e boundary e x t e n s i o n h a d come o u t of Houston. " T i d e l a n d s , My T i d e l a n d s , " The Texas c : p p r t a t o r . J u l y 7 , 1947, T i d e l a n d s C l i p p i n g s , V o l . 1, J a n u a r y 1946 t o December, 1 9 4 7 , D a n i e l P a p e r s , SHRRC. ^ ^ T e l e p h o n e c a l l t r a n s c r i p t between Drew P e a r s o n and P r i c e D a n i e l , p . 3 , F o l d e r - Drew P e a r s o n , Box 3 7 , D a n i e l P a p e r s a s A t t o r n e y G e n e r a l , SHRRC. ^ ^ L e t t e r , Creekmore F a t h t o Drew P e a r s o n , October 3 1 , 1 9 5 1 , • T i d e l a n d s O i l # 7 " , P e a r s o n P a p e r s , LBJ L i b r a r y . Aided by t h e

94

Supposedly in 1949 Attorney General Daniel and Texas Land Commissioner Bascom Giles had negotiated a legislative compromise with the Tom Clark, the U.S. Attorney General. According to unconfirmed sources the Truman Administration was willing to compromise and recognize Texas' special circumstance.

The conditions granted Texas the tidelands

out to the three mile limit and 50% of the revenue found outside the limit.

On balance the deal was lucrative,

because Texas had not found much oil within its three mile zone.

But, Daniel balked, because it meant the Texas

Congressional delegation which might sponsor the bill would reap the political credit.

Austin attorney and member of

the Democratic Party leadership. Creekmore Fath stated that He wanted to win Texas' Tidelands Claim in the Supreme Court and get all the glory for himself as the lawyer who had saved the Texas Tidelands for the school children of Texas.55 But, Commissioner Giles and Governor Beauford Jester out voted Daniel committing Texas to the compromise.

But,

before the deal could be signed. Jester in July 1949 died. In the political scramble afterwards, Daniel swung the new

tremendous visibility of Texas Attorney General's Office during the tidelands controversy Price Daniel successfully ran for the U.S. Senate in December 21, 1951. Address of Price Daniel Candidate for U.S. Senator, January 31, 1952 on the Texas Quality Network, Box 23a Speeches, Daniel Papers as Attorney General, SHRRC ^^Letter, Creekmore Fath to Drew Pearson, October 31, 1951, "Tidelands Oil #7", Pearson Papers, LBJ Library.

95

Governor Allan Shivers to h i s view p o i n t , thus p u t t i n g an end t o an e a r l y compromise.56 The rumors a t t r a c t e d the i n t e r e s t of Drew Pearson, the Washington, D.C. p o l i t i c a l pundit and gossip hound, who launched h i s own i n v e s t i g a t i o n .

Pearson accused Daniel of

working for t h e i n t e g r a t e d o i l companies, e s p e c i a l l y those with "Arabian" o i l t i e s . 5 7

i r o n i c a l l y , Pearson's charges

were more c u r i o u s than damaging, because such companies were p o l i t i c a l p a r i a h s and never cut much of a swath in Texas. T e x a s ' s anti-monopoly laws and i t s s a n c t i o n s a g a i n s t Standard Oil in the e a r l y 19 00s c r e a t e d an unwelcome environment for v e r t i c a l l y i n t e g r a t e d o i l c o r p o r a t i o n s . Under such c o n d i t i o n s , Standard Oil of New J e r s e y and Standard Oil of C a l i f o r n i a stayed out, or operated in the s t a t e behind the v e i l of n o n - i n t e g r a t e d s u b s i d i a r i e s .

As a

r e s u l t , a cadre of "home-grown" independent o i l o p e r a t o r s emerged.

With t h e "majors" locked out during the e a r l y

y e a r s , Texas independent o p e r a t o r s t h r i v e d in a hot-house environment. 58

Some of the more successful soon r i v a l e d the

majors in p r o f i t s and power.

Moreover, "Texas" i n t e g r a t e d

^ ^ L e t t e r , Creekmore F a t h t o Drew P e a r s o n , October 3 1 , 1951, " T i d e l a n d s O i l # 7 " , P e a r s o n P a p e r s , LBJ L i b r a r y . ^^Telephone c a l l t r a n s c r i p t p . 3 , F o l d e r - Drew P e a r s o n , Box SHRRC. 58john S. S p r a t t , The Road T^X'''^- 187 5-1901 ( D a l l a s , T e x a s : 1955), p . 15.

between Drew P e a r s o n and P r i c e D a n i e l , 37, D a n i e l P a p e r s a s A t t o r n e y G e n e r a l , t o S p i n d l e t o p ; Economic Change i n Southern Methodist U n i v e r s i t y P r e s s ,

96

companies such as Texaco and Gulf operated with greater latitude having been perceived as possible "counterweights" to Standard Oil encroachment.59

if Daniel was the "lackey"

of "Big Oil," it had to have been the "home-grown" Texas variety.

But, Price Daniel denied any oil connection, and

he pointed out that he and Standard Oil Company of New Jersey disagreed as to whom should control the tidelands.60 Although the independent operators and the smaller integrated companies opposed the federal government's involvement in the tidelands, the major corporations, such as Standard Oil of New Jersey, Texaco, Standard Oil of California, and others stood by refusing to commit themselves either way.

Espousing vague comments in support

of national security, petroleum abundance, and U.S. economic growth, the majors stood by the flag and made it known that they wanted only what was good for the country. Daniel, in the meantime, counter-attacked.

He revealed

that "Big Oil," far from being disinterested, had forged a cooperative arrangement with the federal government. Daniel's charges were generally correct.

During World War

II the federal government had become business partners with Texaco, SOCAL, and Standard Oil of New Jersey in the 59joseph A. Pratt, The Growth of a Refining Region (Greenwich. Conn.: JAI Press, Inc., 1980), p. 199. ^^Letter, Price Daniel to Drew Pearson, March 31, 1948, and Phone Transcript, Drew Pearson and Price Daniel, Folder - Drew Pearson, p. 3, Box 37, Daniel Papers as Attorney General, SHRRC.

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Petroleum Reserves Corporation.61

Recognizing the intense

need to safeguard national security interests by guaranteeing oil supplies. President Roosevelt had tried to augment strategic reserves through the development of Middle Eastern oil fields.

The specter of a wartime oil shortage

had scared the federal government into the oil business and stimulated the formation of a government/oil industry business combine.

Though Roosevelt backed away from such

private sector encroachment, the U.S. Navy, the Department of Defense, and the Department of the Interior continued to support Middle Eastern oil development, reasoning that i t was better to use foreign oil first and set aside domestic crude for the future.

Though not acknowledged uniformly by

a l l federal agencies and departments, the U.S. government treated Middle Eastern crude as a strategic resource.

As a

result, the government linked itself closely to the operating companies that had Middle East access.62 Daniel and others perceived that the federal government viewed the tidelands as i t s last chance to create a federal

^ ^ L e t t e r , P r i c e Daniel t o Drew Pearson, March 3 1 , 1948, and Phone T r a n s c r i p t , Drew Pearson and P r i c e Daniel, p . 3 , Folder - Drew Pearson, Box 37, Daniel Papers as Attorney General, SHRRC ^ ^ L e t t e r , P r i c e Daniel t o Drew Pearson, March 3 1 , 1948, and Phone T r a n s c r i p t , Drew Pearson and P r i c e Daniel, p . 3 , Folder - Drew Pearson, Box 37, Daniel Papers as Attorney General, SHRRC. James Clark, noted petroleum h i s t o r i a n , s t a t e d t h a t t h e U.S. would pursue an expedient p o l i c y , u t i l i z i n g any source of o i l i n a n a t i o n a l emergency, e i t h e r domestic or f o r e i g n . J . Stanley Clark, The Oil Century; From t h e Drake y^o] 1 t o t h e Conservation Era (Norman: U n i v e r s i t y of Oklahoma, 1958), p p . 247 and 249.

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oil reserve.

The government wanted to hold the tidelands as

an undeveloped reserve, or as a federally regulated production field.

In the meantime, federal government would

encourage the increased importation of Middle Eastern crude. Everette L. DeGolyer, world-renown geologist and oil operator from Dallas argued in support of the policy, and helped to formulate much of the federal legislation appropriating the tidelands.

Far from being a disinterested

party, DeGolyer's links to major oil corporations and support of imported oil were strong, and he perceived imports as guaranteeing the long-term national security of the country.63 The formulation of an oil policy as i t referred to national defense hinged upon whether the nation should use ^-^DeGolyer had been t h e PRC's advance-man t o t h e Middle E a s t . Testimony of E v e r e t t L. DeGolyer. U.S. Congress, Committee on Armed S e r v i c e s , S p e c i a l Subcommittee on Petroleum, Petroleum for National Defense. Hearings, 80th Congress. 2nd Session, February 6, 1948 (Washington, D . C : Government P r i n t i n g Office, 1948), p p . 367, 374; Testimony of James F o r r e s t a l , Defense S e c r e t a r y . U.S. Congress, Committee on Armed S e r v i c e s , Special Subcommittee on Petroleum, Petroleum for National Defense. Hearings. 80th Congress, 2nd Session, January 19, 1948 (Washington, D . C : Government P r i n t i n g Office, 1948), p . 1 9 . U . S . c o n g r e s s . House, Committee on I n t e r s t a t e and Foreign Commerce, Subcommittee, House Resolutions 290 and 7372. Hearings, 76th Congress. 3rd Session (Washington, D . C : Government P r i n t i n g Office, 1945), p . 2018. C o n f i d e n t i a l d r a f t Report t o t h e P r e s i d e n t on Foreign Economic P o l i c i e s , p . S-8, Box 6 1 , Folder 3692; L e t t e r , E. L. DeGolyer t o Gordon Gray, Special A s s i s t a n t t o t h e P r e s i d e n t , November 7, 1950, Box 61 Folder 3 692, DeGolyer Papers. DeGolyer L i b r a r y , Southern Methodist U n i v e r s i t y . DeGolyer commented on one occasion t h a t he p r e f e r r e d f e d e r a l development of t h e t i d e l a n d s i f t h a t meant a more g r a d u a l development. He wanted t o avoid any r e c k l e s s n e s s t h a t would r u i n t h e province a s an o i l producing a r e a . Also, l e t t e r , E. L. DeGolyer t o Marx Leva (Special A s s i s t a n t t o t h e S e c r e t a r y of t h e Defense), January 20, 1948. Box 60, Folder 3676, DeGolyer Papers, DeGolyer L i b r a r y . L e t t e r , Price Daniel t o Drew Pearson, March 26, 1948, Drew Pearson Folder, Box 37, Daniel Papers as Attorney General, SHRRC

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domestic reserves and save foreign crude, or vice versa. By saving domestic reserves, the federal government could guarantee the existence of a permanent oil reserve that it would use for national defense.

In the meantime, it could

use foreign resources for daily needs.

Because it was

plentiful and cheap, it made sense to import.

Using

domestic reserves first would leave the U.S. vulnerable. Saving Middle Eastern crude would be impractical.

Long-term

lease subsidies, oil field maintenance costs and high defense costs for unused foreign oil reserve was out of the question.

Also, purchasing foreign oil during peacetime

kept the fields flowing so they would be available when the emergency arose.64 As a result, the U.S. developed foreign crude oil reserves and added those imports to domestic production.

In

1949 the National Petroleum Council, a cooperative industry/business organization, argued that foreign oil should supplement domestic production.65

The administration

concurred and pursued a policy where imported crude augmented declining domestic production.

Considering the

quantity, the accessibility, and the cheap production cost

64«The Need for Oil Imports," The Lamp 35, no. 2 (June 1953), 4-5 65clark, The Oil Century, p. 247.

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of Middle Eastern crude, arguing against importation would have been impossible.66 As the Truman Administration developed i t s thirst for foreign crude, the industry tried to boost domestic exploration and production, especially in the tidelands.67 Nevertheless, the increased importation of foreign oil slowed the growth of the domestic oil industry, and dampened tidelands development.

Imports limited domestic production

and making a profit became more difficult,

particularly in

area already known for high production costs.68 The import situation further encouraged industryinterest abroad.

Enticed by inexpensive leases and an

absence of production quotas the industry flourished in the Middle East, South America, Canada, Africa, and Indonesia.69 Though domestic fields were s t i l l productive, they required more expensive and time-consuming secondary production."^0 ^^ Harold F . Williamson e t a l . The American Petroleum I n d u s t r y : The Age of Energy. 1899-1959 (Evanston, 1 1 1 . : Northwestern U n i v e r s i t y P r e s s , 1963), p . 819. ^^Testimony of James F o r r e s t a l , Defense S e c r e t a r y . U.S. Congress, Committee on Armed S e r v i c e s , Special Subcommittee on Petroleum, Petroleum for National Defense. Hearings, 80th Congress, 2nd Session, January 19, 1948 (Washington, D . C : Government P r i n t i n g Office, 1948), p . 7 . "Oil Development Enters Tidelands I s s u e , " National Petroleum News 40 n o . 10, (March 10, 1948), 16; Joseph H u t t l i n g e r , "President Brings T i d e l a n d s I s s u e t o F o r e , " World Petroleum 20 (February, 1949), 3 7 . ^ ^ L e t t e r , James A. Madden t o George H. Mahon, July 18, 1947, T i d e l a n d s Folder, George H. Mahon Papers, SWCTTU. 69williamson e t a l . The American Petroleum I n d u s t r y : The Age pf yrn^rgV 1899-1959. p . 818. '^'^Secondary production r e f e r s t o t h e u s e of a r t i f i c i a l means t o i n i t i a t e o i l flow. I d e a l l y , n a t u r a l r e s e r v o i r p r e s s u r e i s t h e l e a s t expensive means of p r o d u c t i o n .

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The flush production days in East Texas, and even in West Texas were beginning to fade.

In addition, the legal

wrangling between state and federal government muddied the prospects of tapping into enticing offshore prospects. Moreover, offshore work required a large financial investment.

As a result, the major operators focused

increasing amounts of capital investment abroad.'^1 The federal government tried to preserve the integrity of domestic production by imposing "voluntary controls" on imports from 1955 to 1958.

The federal government imposed

an import limit of 9 percent of domestic demand,'^2 or 16.6 percent of domestic production.

The voluntary program

failed with oil companies importing more.

As a result, the

domestic oil industry found its production limited.

In

March, 1957 Texas oil production was limited to eighteen days a month.

A year later production was limited to eight

days. "7 3 The rift between independent and major operators widened.

The independents, feeling betrayed by price

controls and production quotas, created the Texas Independent Producers and Royalty Owners Association (TIPRO)

OK:

^Iwilliam C Wertz, Phillips: The First 66 Years (Bartlesville, Phillips Petroleum Corporation, 1983), p. 106.

72Harold F. Williamson et al, The American- Petroleum Industry: Th^ Age of Energy. 1899-1959, p. 818. "^^ibid., end note 24 on page 890; Clark, The Oil Century, p. 251

102

in 1946.

For TIPRO the quotas s i g n a l e d a r e t u r n of

governmental meddling and c o n t r o l reminiscent of World War II.

Those c o n d i t i o n s f o s t e r e d the growth of l a r g e companies

and f i n a n c i a l l y handicapped the smaller independents.

In

1945 small companies only accounted for 37.1% of the n a t i o n ' s p r o d u c t i v e c a p a c i t y compared to 46.4% in 1941. After t h e war, small company productive capacity inched back t o 39.3%.

Understandably, independent o i l o p e r a t o r s were

wary of t h e f e d e r a l government.

They claimed t h a t the

f e d e r a l government moved too slowly and without d i r e c t i o n , and f e d e r a l p o l i c i e s b e n e f i t e d the major o i l companies.'^4 As t h e independent p r o d u c e r s ' p r o t e s t gained momentum, Daniel argued t h a t h i s advocacy for s t a t e c o n t r o l b e n e f i t e d t h e independent o i l o p e r a t o r as opposed to the i n t e g r a t e d o i l companies. aggressively.

Daniel did not have to lobby too He a l r e a d y had t h e i r support.

The

independents understood t h e i r r e l a t i o n s h i p with s t a t e government, and they had no o b j e c t i o n to the way t h a t the s t a t e s had l e a s e d and monitored the tidelands.'^5

^^TPAA Monthly 2 1 , no. 7 (November, 1950), 2 1 . IPAA Monthly 16, no. 5 (September, 1945), 17. J . Ed Warren, "The Threat To Competitive O p p o r t u n i t y , " IPAA Monthly 23, no. 3 (July 1952), 13. Jake Hamon, prominent D a l l a s , Texas o i l o p e r a t o r , t e s t i f i e d in 1940 t h a t with t h e f e d e r a l government's i n s i s t e n c e t o allow t h e import of foreign o i l , i t "keeps t h e p r i c e of t h e s t r i p p e r w e l l s ' product down almost on a l e v e l with t h e c o s t of p r o d u c t i o n . . . " As a r e s u l t the independent producer f e e l s abandoned in Washington." U.S. Congress, Committee on I n t e r s t a t e and Foreign Commerce, Subcommittee, Hearing, H. Res. 29 0 and H. RES. 7372 (Washington, D . C : Government P r i n t i n g Office, 1940), p . 1802. "^^Fortune noted t h a t the o i l i n d u s t r y in g e n e r a l supported s t a t e c o n t r o l . The s t a t e s had managed t h e lands in the b e s t i n t e r e s t s of t h e

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. . . s m a l l e r independent o p e r a t o r s would have no more chance t o compete with the major companies than they do now in Arabia, Elk H i l l s , Tea Pot Dome or by p r e s e n t Department of I n t e r i o r Leases."^6 The open p r o t e s t of economic c o n d i t i o n s and support for s t a t e c o n t r o l of the t i d e l a n d s drew p u b l i c suspicion and criticism.

Accused of manipulating the fight for

financial

advantage, t h e companies weathered a ferocious a t t a c k from t h e media, p o l i t i c i a n s , and o t h e r s who lumped them t o g e t h e r with t h e major o i l companies and accused them of t r y i n g t o rob an unsuspecting p u b l i c .

The independents, l i k e the

majors, had l e a r n e d to duck and s t a y out of the fight.'^'^ Inasmuch as the independents would have supported s t a t e c o n t r o l , t h e i n d u s t r y as whole favored a f a i r t h a t included even f e d e r a l c o n t r o l .

resolution

The lengthy delay in

e x p l o r a t i o n and development had dug deeply i n t o o p e r a t i n g budgets.

Although c o s t l y , the cost of the delay paled in

comparison with the p o t e n t i a l f i n a n c i a l damage t h a t would

s t a t e s and t h e i n d u s t r y . By s h i f t i n g t o federal c o n t r o l t h i s r e p r e s e n t e d a uncomfortable s i t u a t i o n for the i n d u s t r y . I t faced t h e p o s s i b i l i t y of reduced p r o f i t . Under s t a t e c o n t r o l , t h e i n d u s t r y paid a f l a t fee of 12.5%, whereas, under f e d e r a l c o n t r o l the companies had t o pay a minimum 12.5% r o y a l t y , plus a d d i t i o n a l r o y a l t y fees on p r o d u c t i o n . Fortune 38 ( J u l y , 1948) 68-71xxx?, p . 162. Moreover, t h e S t a t e of Texas through t h e Texas Railroad Commission p r o t e c t e d the i n d u s t r y . Pratt, The Growth of a Refining Region, pp. 212 and 243-244. Ralph Yarborough s t a t e d t h a t t h e o i l i n d u s t r y f e l t comfortable with s t a t e c o n t r o l because i t " a c t u a l l y they c o n t r o l l e d s t a t e government." Ralph Yarborough, i n t e r v i e w by Lindsy Escoe Pack, Tape r e c o r d i n g , March 1, 1978. Courtesy of Lindsy Pack. ^ ^ L e t t e r , P r i c e Daniel t o Drew Pearson, March 26, 1948, Box 37, Folder - Drew Pearson, P r i c e Daniel Papers, F i l e s as Texas Attorney G e n e r a l , SHRRC '^'^Fitch, "Economic Aspects of the Gulf Coast Offshore Oil C o n t r o v e r s y , " p . 42.

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have come with complete l e a s e r e v o c a t i o n .

Both Texas and

Louisiana s t a t e governments had continued l e a s i n g , with companies continuing t o buy l e a s e s and proceeding with e x p l o r a t i o n programs.

In s p i t e of the looming chance of

f e d e r a l l i t i g a t i o n , many had continued with offshore o p e r a t i o n s for fear of being excluded.'^8 Though " b i g - o i l " appeared ambivalent on the continued l e a s i n g of Texas lands,'^9 many feared t h a t the f e d e r a l government might win i t s s u i t s and thereby impound or confiscate the p r o p e r t i e s .

Sensing opportunity, many

p r o d u c t i v e l e a s e s were c o u n t e r - f i l e d by s p e c u l a t o r s who hoped t o c a s h - i n on a federal t i d e l a n d s v i c t o r y .

After the

C a l i f o r n i a d e c i s i o n the federal government had announced i t s i n t e n t i o n of c a n c e l i n g a l l offshore l e a s e s and recovering a l l l e a s e money c o l l e c t e d by Louisiana and Texas.80 Meanwhile, o p e r a t o r s suspended a l l offshore l e a s i n g and

"^^According t o S h i v e r s , many years hence, Texas o i l companies and i n v e s t o r s did not c a r e whether s t a t e or federal government gained c o n t r o l of t h e t i d e l a n d s . A c t u a l l y , some companies purchased l e a s e s from both s t a t e and f e d e r a l government simultaneously. Of course, t h i s was done only a f t e r t h e f e d e r a l government guaranteed t h a t l e a s e s would not be i n t e r f e r e d w i t h . Allan Shivers [former Governor of Texas], i n t e r v i e w by Lindsy Escoe Pack, Tape r e c o r d i n g , May 22, 1978. Courtesy of Lindsy Pack. 79Rrownwood B u l l e t i n . March 5. 1948. S^The l e g a l complaints d e a l i n g with the recovery of l e a s e funds were signed by Tom Clark, U.S. Attorney General and P h i l l i p B. Perlman, S o l i c i t o r General Joseph H u t t l i n g e r , "President Brings Tidelands Issue t o F o r e , " World Petroleum 20 (February, 1949), 37.

105

drilling operations81 until they obtained a lease guarantee.82 The Truman Administration amended i t s position by announcing that i t would recognize prior state leases.

The

shift placated industry fears and helped reduce industry antipathy to federal control.

Moreover, i t served notice to

the oil companies that the administration had no intention of impaling them upon the horns of the tidelands battle. Rather the administration asserted its primacy in offshore matters, and thereby, they were able to ensure continued oil field development as the Cold War emerged.

As a result,

from 1948 to 1951 all the proposed federal and state tidelands ownership b i l l s guaranteed leases.83 ^^Austin American-Statesman. September 12, 1947, Tidelands C l i p p i n g s , V o l . 1, January 1946 t o December, 1947, P r i c e Daniel Papers, SHRRC. The l e g a l complaints dealing with t h e recouping of l e a s e funds were signed by Tom Clark, U.S. Attorney General and P h i l l i p B. Perlman, S o l i c i t o r GeneralJoseph H u t t l i n g e r , "President Brings Tidelands I s s u e t o F o r e , " World Petroleum 20 (February, 1949), 37-38. L e t t e r , P r i c e Daniel t o Drew Pearson, July 10, 1951, Folder - Drew Pearson, Box 37, Daniel Papers. F i l e s a s Attorney General, SHRRC. "Humble Company a l o n e h a s spent some $50,000,000 in i t s offshore o p e r a t i o n s i n t h i s a r e a and up t o January 1, 1950, had recovered l e s s than one-half m i l l i o n d o l l a r s . Current income i s not adequate t o meet c u r r e n t expenses. Nothing s h o r t of t h e r a t i f i c a t i o n of l e a s e s w i l l offer an inducement t o t h e l e s s e e s t o r i s k f u r t h e r sums i n c a r r y i n g on a d d i t i o n a l development." Copy of a L e t t e r , Hines Baker t o Senator Joseph C O'Mahoney, August 1, 1950. U . S . Congress, Senate, Committee on I n t e r i o r and I n s u l a r A f f a i r s . c:^^]~,jnprged Lands. Hearings, 81st Congress, 2nd Session, August 14, 15, 16, 17, 18, and 19, 1950 (Washington, DC: Government P r i n t i n g Office, 1950), p p . 365-366. 82The l e g a l complaints d e a l i n g with t h e recouping of l e a s e funds were signed by Tom Clark, U.S. Attorney General and P h i l l i p B. Perlman, S o l i c i t o r General Joseph H u t t l i n g e r , "President Brings Tidelands I s s u e t o F o r e , " World Petroleum 20 (February, 1949), 37-38. L e t t e r , P r i c e Daniel t o Drew Pearson, J u l y 10. 1951, Folder - Drew Pearson, Box 37, Daniel Papers, F i l e s as Attorney General, SHRRC ^•^The l e g a l complaints d e a l i n g with t h e recouping of l e a s e funds were signed by Tom Clark, U.S. Attorney General and P h i l l i p B. Perlman,

106

Tom Clark's announcement, federally guaranteeing a l l state leases, allayed fears and prompted the oil companies to abandon their support from the states.84 federal lease program had become

Moreover, the

favorable.

Provisions

called for options to "prospect first" and then lease, and not having to pay "cash-in-advance" and annual rentals. short, federal leases proved cheaper.

In

Compared to the state

policies, the federal criterion was much more amenable.

As

a result, the industry drifted toward federal control.85 At the same time, the Texas and Louisiana state governments pushed for the passage of quit-claim legislation that would give them out right ownership of oil lands. Since 1945, the states had supported Congressional quitclaim legislation.

But, with the federal victories in the

Texas and Louisiana Supreme Court decisions, many believed that quit-claims was the only solution.86

Nevertheless, the

S o l i c i t o r General. Joseph H u t t l i n g e r , "President Brings Tidelands I s s u e t o F o r e , " World Petroleum 20 (February, 1949), 37-38. L e t t e r , P r i c e Daniel t o Drew Pearson, J u l y 10, 1951, Folder - Drew Pearson, Box 37, Daniel Papers, F i l e s a s Attorney General, SHRRC ^ ^ I t was r e p o r t e d t h a t by t h e summer of 1949 t h e " o i l companies ha^^ long s i n c e abandoned t h e S t a t e s ' s i d e in t h i s f i g h t . They switched over when Tom Clark s a i d p r e s e n t S t a t e l e a s e s w i l l be recognized. Under F e d e r a l l e a s i n g p o l i c y , companies can prospect f i r s t and then l e a s e i f they choose, without t h e cash-in-advance and annual r e n t a l p r i c e s s e t by t h e School Land Board. N a t u r a l l y they would p r e f e r t o have Federal l e a s e s , s i n c e they come cheaper." Austin Report. J u l y 16, 1949. Q^Austin Report. July 16, 1949. 86press Release, Attorney G e n e r a l ' s Office, June 10, 1950 Folder Press Release 1950, Box 22a, Daniel Papers, SHRRC.

107

Pauley scandal had linked the plan to the "oil lobby."87 Renewed efforts to pass quit-claim legislation revived public suspicion that the oil lobby and state governments were working together to "steal" the tidelands.

Such was

the impact that even seven years later, in 1952, President Truman vetoed a quit-claim b i l l , arguing that i t was the product of the "oil lobby."88 Truman's adamant position, and the potential i t had of hardening the attitude of Congress against a quit-claim solution compelled various political and business leaders to fear that the tidelands impasse would never end.

States'

rights hard-liners returned the favor and pinned the oil lobby "tail" on Truman, saying that federal opposition to quit-claim sprang from i t s close connection to the "oil lobby."89

Meanwhile, moderate forces formulated various

compromise plans, including Senate Bill 940 for the resumption of offshore operations.^0 ^"^Fitch, "Economic Aspects of t h e Gulf Coast Offshore Oil Controversy," p . 4 1 . S^Joseph H u t t l i n g e r , "Compromise on Tidelands Being Urged," MoiLLd Pf^troleum 20 (June 1949), 4 5 . President Truman charged t h a t q u i t - c l a i m measures were sponsored by t h e " o i l lobby." Statement of Attorney General P r i c e D a n i e l ' s Response t o President Truman's t i d e l a n d s speech b e f o r e Americans for Democratic Action, Attorney G e n e r a l ' s Office, 1952, F o l d e r - Press R e l e a s e s , 1952, Box 22a, Daniel Papers, SHRRC S^statement, Attorney General Price D a n i e l ' s Response t o P r e s i d e n t Truman's t i d e l a n d s speech before Americans for Democratic Action, Attorney G e n e r a l ' s Office, 1952, Folder - Press Releases, 1952, Box 22a, Daniel Papers, SHRRC. ^ ^ L e t t e r , Hines Baker [President of Humble Oil and Refining Company] t o Lyndon Baines Johnson, March 20. 1952, Folder - T i d e l a n d s , Box 241, L e g i s l a t i v e F i l e s . 1950-1952, United S t a t e s Senate, 1949-1961, LBJ Papers, LBJ L i b r a r y .

108

Texas political leaders found themselves in an uncomfortable bind.

On a practical level, they supported

some sort of compromise that would resolve the dispute and revive offshore operations.91

But, public sentiment held

that any "retreat" from the historic three league offshore boundary was unacceptable and accused compromise supporters of being "disloyal to the State of Texas."92 In the meantime, Sam Rayburn, John Lyles, and other members of the Texas Congressional delegation hoped to resolve the dispute before i t politically splintered Texas and irrevocably retarded offshore development.

The oil

industry, particularly the independents, pressured the

^^Both Sam Rayburn, Democratic Speaker of t h e House, and Lyndon J o h n s o n , U . S . S e n a t o r s u p p o r t e d t h i s move. However, i n 1948, Rayburn had been adamant a b o u t t h e t h r e e l e a g u e c l a i m . Longview N e w s - J o u r n a l . December 5 , 1 9 4 8 . I n 1951, Johnson t o l d a Houston a u d i e n c e t h a t C o n g r e s s h a d f a i l e d t o p r o d u c e a q u i t - c l a i m b i l l t h a t gave o w n e r s h i p t o t h e s t a t e s , b u t was p o s i t i v e t h a t he and o t h e r l i k e - m i n d e d l e g i s l a t o r s would e v e n t u a l l y s u c c e e d . Johnson endeavored t o e s t a b l i s h a compromise between a d v o c a t e s of s t a t e and f e d e r a l o w n e r s h i p . As a r e s u l t , o f f s h o r e e x p l o r a t i o n a n d development c o u l d resume. Telegram, Robert Lee B o b b i t t t o Lyndon J o h n s o n , September 2 0 , 1 9 5 1 , F o l d e r - T i d e l a n d s , Box 2 4 0 , L e g i s l a t i v e F i l e s , 1950-1952, U n i t e d S t a t e s S e n a t e , 1949-1961, LBJ P a p e r s , LBJ L i b r a r y . Lyndon J o h n s o n , "The Working 82nd C o n g r e s s , " IPAA Monthly 2 2 , n o . 9 ( F e b r u a r y 1952), 5 2 . Amon C a r t e r , p u b l i s h e r of t h e F t . Worth S t a r - T e l e g r a m , r a n an e d i t o r i a l s u p p o r t i n g t h e Rayburn compromise. F t . Worth S t a r - T e l e g r a m . J u l y 2 4 , 1949. ^^Noted o i l o p e r a t o r Hugh Roy C u l l e n of Houston v o i c e d h i s d i s t a s t e of t h e compromise move and f e l t t h a t i t r e p r e s e n t e d n o t h i n g more t h a n t h e l a r g e r push toward s o c i a l i s m . Telegram, H. R. C u l l e n [Houston o i l p r o d u c e r ] t o George H. Mahon, May 3 1 , 1949, T i d e l a n d s F o l d e r , George H. Mahon P a p e r s , SWCTTU. D a n i e l who had done much t o o r c h e s t r a p u b l i c o p i n i o n a g a i n s t f e d e r a l encroachment reminded p r o p o n e n t s of compromise t h a t t h e S t a t e of Texas, t h e l e g i s l a t u r e , t h e g o v e r n o r a n d t h e p e o p l e were committed t o a " l a s t d i t c h " f i g h t i n b o t h t h e C o u r t and t h e C o n g r e s s . P r e s s R e l e a s e , A t t o r n e y G e n e r a l s O f f i c e , J u n e 1 0 . 1950 F o l d e r - P r e s s R e l e a s e 1950. Box 2 2 a , D a n i e l P a p e r s , SHRRC.

109

d e l e g a t i o n for a s o l u t i o n . 9 3

in the 1930s Rayburn had

helped Texas o i l o p e r a t o r s by blocking Harold I c k e s ' push t o federalize the o i l industry.

As House Speaker, Rayburn

wielded c o n s i d e r a b l e power and l e a d e r s h i p , and he was one of t h e few i n d i v i d u a l s t h a t could end the t i d e l a n d s controversy.94

Rayburn formulated a plan t h a t gave Texas 50

p e r c e n t ownership both w i t h i n and o u t s i d e the 10.5 mile boundary.95

Texas o i l and gas development i n s i d e the zone

had been meager, amounting to a handful of producing wells.^6

Whereas, according to r e l i a b l e evidence, huge o i l

^•^The Mel-Ben Oil Company, a d m i n i s t e r i n g the offshore l e a s e s "held by f i v e of Mike Benedum's o i l companies," placed p r e s s u r e upon Attorney General Tom Clark and Sam Rayburn for compromise. Austin Report. J u l y 16. 1949. ^^Rayburn s t a t e d t h a t "I'm for Texas ownership for the t i d e l a n d s out 10 and a h a l f m i l e s . . . . My voting record in Congress has shown t h a t . Although I might be Speaker of t h e House in the next s e s s i o n and not supposed t o v o t e , my a t t i t u d e w i l l remain the same." Longview NewsJ o u r n a l . December 5, 1948. In 1947 Rayburn took charge of t h e Congressional f i g h t a g a i n s t federal c o n t r o l . The Dallas News, no d a t e , Tidelands C l i p p i n g s , Vol. 1, January 1946 t o December, 1947, Daniel Papers, SHRRC In 193 5 Rayburn worked c l o s e l y with Texas independent p r o d u c e r s such as James Abercrombie, J . R. Parten and Sid Richardson t o f i g h t f e d e r a l i z a t i o n of t h e o i l i n d u s t r y . D. B. Hardeman, and Donald C Bacon, Rayburn: A Biography (Austin, Texas: Texas Monthly P r e s s , 1987) p . 350. ^^Meanwhile, Congressman John E. Lyles, Democrat of Texas, g u a r a n t e e d Texas' claim t o paramount r i g h t s in the t i d e l a n d s . Texas r e t a i n e d ownership of t h e 10.5 mile offshore zone, while the f e d e r a l government owned t h e lands beyond. Revenues from a r e a s in d i s p u t e would be d i v i d e d 50-50. A r e g u l a t o r y and l e a s i n g board would be s t a f f e d j o i n t l y 50-50 by f e d e r a l and s t a t e a p p o i n t e e s . S t a t e agencies could c o n t i n u e t o r e g u l a t e t h e i r immediate t i d e l a n d s . All p r e s e n t l e a s e s would be v a l i d a t e d . Joseph H u t t l i n g e r , "Compromise on Tidelands Being Urged," World Petroleum 20 (June 1949), 45. ^^Dallas Morning Neyy? r June 25, 1949.

110

and gas r e s e r v o i r s lay j u s t o u t s i d e the 10.5 mile boundary.97 At t h a t time, most of the well-known g e o l o g i s t s who had s t u d i e d the offshore lands f e l t t h a t the g r e a t bulk of the o i l and gas to be discovered was o u t s i d e of 10 1/2 mile - - 3 marine leagues.98 The compromise plan had the p o t e n t i a l of ensuring the p r o s p e r i t y of offshore companies and extending s t a t e control.

Rayburn's plan a l s o s e t the maximum r o y a l t y a t

1/8, p e r m i t t e d open seismic surveys, and s e t up a five year primary l e a s e p e r i o d with a five year extension.

Rayburn's

scheme i n c r e a s e d the l e a s e s i z e to 2560 a c r e s , and those on proven s t r u c t u r e s could t o t a l 7680.99 Governor Beauford J e s t e r ' s death in the summer of 1949 ended d i s c u s s i o n of the Rayburn plan and concluded any r e a l hope for a compromise.

The Truman a d m i n i s t r a t i o n , the Texas

d e l e g a t i o n , and t h e Texas Land Commission had n e a r l y ^^Austin Report. J u l y 23, 1949. Subsequent Gulf development proved t h i s f o r e c a s t . By 1983, Federal OCS o i l and condensate p r o d u c t i o n has surpassed s t a t e flow by almost four t o one. With n a t u r a l g a s , t h e p r o d u c t i o n r a t i o has been two t o one. U.S. Department of I n t e r i o r and Minerals Management S e r v i c e , Regional Studies Plan. F i s c a l Year 1986: Environmental Studies Program for the Gulf of Mexico OCS Region ( M e t a i r i e , La., 1985), p . 50. As of 1986, f e d e r a l o i l production t o t a l e d 90% and gas production t o t a l e d 95%. U.S. Department of I n t e r i o r and Minerals Management Service, I n d i c a t o r s of the D i r e c t o r Economic Impacts Due t o Oil and Gas Development in the Gulf of Mexico: Results nf Year I (Washington, D. C : MMS Gulf Region, 1986), p . 9. ^^Texas S t a t e House Reporter: Oil Regulation Report. 17 no. 37, (May 23, 1949), Folder - L t . Governor S h i v e r s , Box 35, P r i c e Daniel Papers as Attorney General, SHRRC. Reconfirmed n e a r l y 30 y e a r s l a t e r in an i n t e r v i e w . Allan Shivers [former Governor of Texas], i n t e r v i e w by Lindsy Escoe Pack, Tape r e c o r d i n g , May 22, 1978. Courtesy of Lindsy Pack. 9^This p l a n favored the l a r g e r o p e r a t o r with i t s l a r g e r l e a s e s i z e . Joseph H u t t l i n g e r , "Compromise on Tidelands Being Urged," World petroleum 20 (June 1949), 45.

Ill

completed a compromise agreement.

After the re-shuffling of

power, the opportunity for compromise disappeared,1^0 and the Texas political leadership splintered.

Both Bascom

Giles and Price Daniel re-embraced Texas' claim to the three league limit,1^1 and the offshore income that it rightfully deserved.1^2

Price Daniel reminded compromise advocates

that the state legislature, the governor, and the people were committed to a "last ditch" fight in both the Court and the Congress.

Shivers, in the meantime, continued to

embrace the Rayburn plan as a potential economic bonanza.1^3 Pressing national security issues, stemming from heightening Cold War concerns and the growing intensity of the Korean War, exerted pressure to resolve the tidelands dispute.

By 1952, federal administrators, in particular

Interior Secretary Oscar Chapman, supported any action that might revitalize Gulf oil production.

Chapman became

Interior Secretary in 1949 and advocated federal control. But, as a pragmatist he realized that an oil production suspension would adversely affect national security. Moreover, business leaders frustrated at the impasse pleaded

lO^Letter, Creekmore Fath to Drew Pearson, October 31, 1951, "Tidelands Oil #7", Pearson Papers. LBJ Library. 101 Allan Shivers [former Governor of Texas], interview by Lindsy Escoe Pack, Tape recording. May 22, 1978. Courtesy of Lindsy Pack. 102Beaumont Enterprise. July 20, 1949. 103pj-ess Release, Attorney General's Office, June 10. 1950 Folder - Press Release 1950. Box 22a, Daniel Papers, SHRRC.

112

for some sort of interim system that would better serve Texas, until a more permanent one could be constructed.1^4 By 1952, the U.S. Senate submitted Senate Resolution 20 that called for the resumption of offshore leasing, and the ratification and validation of existing leases.

Instead of

a final settlement, the agreement permitted the federal government and the Interior Department to control the tidelands and issue new leases.

Texas received 37% of the

royalties within the three mile limit and an impoundment of the balance for five years.

Though the federal government

would take care of the daily business of administration, the states retained final approval on any leases let.1^5 But, the actual end to the conflict came in 1953 with President Dwight Eisenhower's Tidelands proclamation, and

lO^Earl Brown, General counsel of Magnolia, wrote t h a t an " i n t e r i m b i l l r a t i f y i n g and v a l i d a t i n g our l e a s e s i s but an a c t of simple j u s t i c e . " L e t t e r , Earl A. Brown [General Counsel - Magnolia Petroleum Co.] t o Lyndon Baines Johnson, March 14, 1952, Folder T i d e l a n d s , Box 241, L e g i s l a t i v e F i l e s , 1950-1952, United S t a t e s Senate, 1949-1961, LBJ Papers, LBJ L i b r a r y . In a l e t t e r t o t h e s t o c k h o l d e r s by W. Alton J o n e s . P r e s i d e n t of C i t i e s Service Company, 42th Annual Report. 1951. p . 6, Box 18, C i t i e s Service Oil and Gas Corporation C o l l e c t i o n , D i v i s i o n of Manuscripts. Western History C o l l e c t i o n s , U n i v e r s i t y of Oklahoma. lO^Letter (copy), Oscar Chapman [ I n t e r i o r S e c r e t a r y ] t o Spressard Holland [U.S. S e n a t o r ] , June 4, 1952, Folder - Tidelands S. J . Res. 13. Box 295, Lyndon Baines Johnson Sponsored L e g i s l a t i o n , 1949-1960. and L e t t e r , Earl A. Brown [General Counsel of Magnolia Petroleum Company] t o Lyndon Baines Johnson, March 14, 1952, Folder - Tidelands, Box 241, L e g i s l a t i v e F i l e s , 1950-1952, United S t a t e s Senate, 1949-1961, LBJ P a p e r s , LBJ L i b r a r y . There was s t r o n g f e e l i n g t h a t s t a t e c o n t r o l of t h e t i d e l a n d s would not e f f e c t i v e l y provide for n a t i o n a l s e c u r i t y . Defense S e c r e t a r y James F o r r e s t a l , in 1948. was concerned t h a t t i d e l a n d s s e t t l e m e n t provide for s e c u r i t y r e s e r v e s . "Oil Development Enters Tidelands I s s u e , " National Petroleum News 40, no. 10 (March 10, 1948), 16.

113

the passage of the Submerged Lands Act.

In 1952

presidential-candidate Eisenhower had promised to end the tidelands fight in favor of Texas and its three league offshore claim.

The promise stimulated hope and optimism

for an industry that had languished for four years.

In what

many perceived as a parting shot. President Truman on January 15, 1953 threatened to transfer the offshore tidelands to the United States Navy by executive order.1^6 Though it did not happen, it served as an unfriendly reminder of the atmosphere of acrimony that had done much to dampen offshore operations and the strained relationship between state and federal governments. Eisenhower's election and the passage of the Submerged Lands Act in May, 1953 confirmed state ownership of the tidelands and ended the tidelands dispute.

The measure

guaranteed the state leases that had been in force and operation through June 5, 1950.

In addition to compensating

the lease holders for interrupted drilling operations during the height of the tidelands fight, the plan extended lease terms "from May 22, 1953, equal to the term remaining unexpired on December 11, 1950."

Companies had ninety days

to pay the rentals and royalties.1^^ 106-Truman Tidelands Order Raises Hubbub," World Petroleum 24 (February, 1953), 67. lO'^Clayton L. Orn, "Operations on the Tidelands," Proceedings fijnftrican Petroleum Institute. Section IV (of 6 sections) Production, 1953 (13-19), p. 15.

114

Eisenhower made good on his promise to guarantee the state claims to the offshore lands and to aid in the resumption of offshore development.

Though ownership issues

and claims on escrowed offshore royalties lingered in the courts through the late 1950s and early 1960sl08^ the states' rights debate had played itself out.

Oil production

was guaranteed, lessors were assured of investments, and both federal and state governments were resigned to their piece of the offshore pie.

Moreover, as offshore production

accelerated, both within the tidelands and on the continental shelf, federal and state governments had enhanced offshore administrative tasks.

It soon became

clear that the pivotal point of the tidelands debate hinged upon efficient offshore regulation rather than any connection to ownership.1^9 Though the states' rights emphasis captured press and public attention, the tidelands controversy centered upon governmental and private sector control of the offshore frontier and the oil industry as a whole.

Since the 1930s,

108pj^gss Release, Department of J u s t i c e , November 7, 1957, Folder - "Natural Resources - T i d e l a n d s , " Box 606, 1958 Subject F i l e s , United S t a t e s Senate, 1949-1961, LBJ Papers, LBJ L i b r a r y . lO^Joseph H u t t l i n g e r , petroleum j o u r n a l i s t , r e a l i z e d t h a t t h e key t o o f f s h o r e development was r e g u l a t i o n . He s t a t e d t h a t "If t h e f e d e r a l government owns t h e l a n d s , congress probably w i l l be c a l l e d upon t o s e t up t h e r u l e s for l e a s i n g and t h e l i k e . If t h e s t a t e s own t h e l a n d s . Congress very l i k e l y w i l l have t o e s t a b l i s h r e g u l a t i o n s governing t h e i r e x p l o i t a t i o n . " Joseph H u t t l i n g e r , "Compromise on Tidelands Being Urged," World Petroleum 20 (June 1949), 4 5 .

115

the federal government had tried periodically to impose direct regulatory control.

Frustrated with destructive

overproduction, price fixing, monopolization of oil transport networks, destructive competition, and spot shortages, the federal government tried to stabilize an industry that had experienced destructive "boom" and "bust" cycles.

Industry resistance to federal intrusion and the

unpopular New Deal measures, however, generated enough political opposition that prevented such a take over.

But

the exploration and production emergency of the Second World War II finally ushered in the level of federal control that Ickes had been advocating. After the war, the federal government slowly lifted wartime constraints, but it remained committed to national security through the control of oil exploration and production and outright ownership of potentially fruitful oil lands.

The tidelands symbolized the future of domestic

oil production and was the key to national security.

The

struggle between the states and the federal government focused only partly upon tidelands control.

Rather debate

sought to determine the most effective custodian for oil reserves. The conflict interrupted offshore development just as the Cold War was escalating.

The U.S. Supreme Court

decisions against both California, Louisiana, and Texas,

116

severely dampened offshore interest.

Oil companies feared

that if they continued to lease and operate in the offshore the federal government would take legal action against them. Possible sanctions included lease repeal, loss of all accrued profit, and financial penalties.

The threat

arrested lease development and additional seismic exploration.

But, when the federal government supported

lease guarantees, oil operators no longer feared federal control and supported compromise efforts ending the struggle. The conflict did much to illuminate the various relationships that prevailed within the oil industry and government and between the two.

In the heightened

atmosphere of the tidelands struggle, motivations and hidden agendas became more clear.

Both state and federal

governments allied themselves in varying degrees with various portions of the oil industry.

The states had

developed a comfortable and cooperative relationship with "home grown" companies producing oil domestically.

In the

meantime, the federal government and large integrated companies had allied themselves with the hope and promise of foreign crude oil production.

Each denied an "oil lobby"

connection, and both spent an inordinate amount of time denying it.

117

Though the tidelands conflict fostered considerable acrimony and discord, the struggle helped to usher in an age of cooperation in the management of the nation's oil resources.

Federal and state governments brought an end to

the disruptive agony of the tidelands struggle.

Though the

federal government did not retreat from its position that it owned and could control the "tidelands" in the national interest, it accepted Texas' ownership of its offshore lands out to its 10.5 mile claim, and facilitated a workable compromise with Louisiana and other coastal states in the development of oil lands.

In addition, the federal

government and the oil industry worked together closely to construct a framework for offshore operations.

The

framework drew from oil industry experience and expertise, and pushed the creation of an offshore management program that supervised exploration, production, and safety guidelines, and administered offshore lease procedures. Such factors laid the foundation for the emergence of the modern offshore industry.

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CHAPTER IV JOHN T. HAYWARD AND ALDEN J. LABORDE In 1953, President Dwight Eisenhower announced that the federal government would retain ownership of the tidelands, thus, effectively ending the federal-state stalemate over offshore development.

In the settlement, Texas won its

claim to the three league strip, and the states secured ownership of the three mile zone surrounding the shoreline. The federal government would administer everything lying outside that boundary.

Though far from satisfying everyone

it did reopen the offshore regions for development.

The

proclamation unleashed three years of pent-up energy and operators scurried for leases and drillers vied for contracts. The proclamation not only effectively signaled the end of the tidelands controversy, but also marked the beginning of a new era of offshore activity.

Starting in 1953 the

offshore industry saw the emergence of mobile drilling units (MODUS) that revolutionized offshore operations.

Easy to

move, largely self-sufficient, and extremely stable even in foul weather, mobile drilling units stimulated offshore activity.

Such platforms substantially reduced operating

costs and allowed operators to prove leases quickly and easily.

As a result, many companies, especially the smaller

independents, invested in such equipment and it helped

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dramatically to expand the size of lease sales. When oil companies discovered how rapidly leases could be explored and brought into production, resistance to deepwater mobile drilling units evaporated quickly.

Finally,

the emergence of a serviceable and dependable mobile drilling technology prompted the rise of offshore drilling contractors who would sell the service to the industry. In 1949 the Barnsdall Oil Company of Tulsa, Oklahoma, designed and built the first modern open-water mobile drilling barge--The Seadrill. industry.

The platform transformed the

By linking the upper drilling deck to the lower

submersible hull with pile supports Barnsdall incorporated the wave transparency feature of stationary platforms. Moreover, the company made the barge self-sufficient,

with

substantial storage room and built-in crew quarters.

In

spite of intense industry criticism and even outright suggestions to scrap the idea, Barnsdall finished the project, and successfully used the rig in i t s offshore leases.1

Rival companies feared that the barge might out

mode platform-tenders, and the thought of moving into the deep-water scared others.2

Specifically designed for

^ L e t t e r , F r a n c i s A. Gallery (New York City) t o John T. Hayward, March 16, 1949, Folder: D r i l l i n g Barge-Correspondence, Hayward Papers, Tulane U n i v e r s i t y . ^ L e t t e r , John T. Hayward t o Richard J . Howe ( D r i l l i n g & Completion D i v i s i o n of Esso Production Research Co) February 26, 1966, F o l d e r : [ l o o s e p a p e r s on t h e t o p of one box], Hayward Papers, Tulane U n i v e r s i t y .

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shallow-water exploratory drilling in the Breton Sound area offshore Louisiana, the mobile submersible drilling barge spawned many imitators. 3

The Seadrill took the

possibilities of offshore drilling to a more advanced level, prompted serious industry re-evaluation of existing methods, and precipitated an offshore technology race that allowed access to deep-water operations.

In addition, the companies

that used the Seadrill. or a design variation of it became pioneers in offshore operations and set the tempo for offshore rig design and drilling operations.

Finally, the

Seadrill marked the beginning of the industry's transformation as a marine business, leaving behind its shore-based antecedents. Since the 1930s the industry used the submersible drilling barge along the shallow-water bayous and estuaries of Louisiana and Texas.

It was an efficient means of marine

drilling and was the Seadrill's technological antecedent. Designers mounted aboard the barges an assortment of service equipment that included drilling machinery, equipment, crew quarters, and even mud pits and pumps.

Drillers moved them

to different locations quickly and easily.

However, the

water depth never exceeded 12 to 15 feet.

Anything deeper

required more expensive and permanent pile supports.

By the

^Letter, John T. Hayward to R. Werlin, June 21, 1949, Folder R. Werlin-General, Hayward Papers, Tulane University.

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late 1940s the interest had shifted to the deeper and more open-water of the Gulf.

Because of much harsher weather,

and the commensurate increase in wave force, the industry abandoned the drilling barge and adopted the small tubular platform instead.

Much more transparent to wave forces and

costing much less, the small platform proved an economical success.

Coupled with an inexpensive tender, that was

nothing more than a converted World War II surplus utility freighter, companies like Kerr-McGee, Magnolia, and Humble established offshore operations for a reasonable price. Even with the more inexpensive, small platform-tender method, offshore operations remained an expensive endeavor. The small platform was a permanent structure that companies could remove, but only at considerable expense.

Also, after

completing a well, crews moved the tender to other sites leaving behind the small platform for production purposes. Moreover, the tender itself was not inexpensive.

Though

companies saved a considerable sum by converting war surplus equipment, tender conversions still cost nearly $1 million per unit.

As a result, even a small utility platform was a

hefty investment.

In addition, companies involved in marine

operations buy or hire a fleet of service boats for platform maintenance to assist with the transfer and positioning of the tender. A technological breakthrough, the Barnsdall Seadrill

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seemed a solution to the problems and exorbitant costs usually associated with offshore operations.

Incorporating

the traditional barge design for the lower hull, Barnsdall added an upper deck supported by piles.

Such a simple

modification increased the depth range.

When the unit

submerged with its lower hull resting on the sea-floor, the upper hull extended above the water.

The added height gave

the Seadrill greater range and allowed it to operate in water up to 40 feet deep. transparent.

The pile supports were wave

Unlike the single deck barges that suffered

from wave action and currents, the Seadrill rode above the waves.

Many including Barnsdall's corporate partners

thought that the rugged open-water conditions would destroy the Seadrill.

The lingering shallow-water swamp barge

appearance "doomed" the semisubmersible in the minds of many who believed it to be a failure before it drilled a single hole.4 However, the Seadrill's strength was its mobility.

For

companies battling a lease dead line or a runaway well, the Seadrill was a viable solution.

The contractor could float

the unit to another location and make hole a within a couple of days.

The mobility compared favorably against months of

construction needed to erect even the most rudimentary pile^Letter, John T. Hayward to Richard J. Howe (Drilling & Completion Division of Esso Production Research Co) February 26, 1966, Folder: [loose papers on the top of one box], Hayward Papers, Tulane University.

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supported and prefabricated jacketed platforms.5

in 1952

Sun Oil Company faced such a deadline and used the Seadrill for emergency drilling offshore Texas.6

Operational

successes made i t clear that MODUS had an over-powering advantage in operational flexibility.

Moreover, the

Seadril1'H ability to work larger acreage and a greater number of leases tantalized operators and drilling contractors. In spite of i t s potential, the Seadrill received a lukewarm reception.

The $1 million price, and i t s odd and

ungainly appearance scared many.

Also, heightened concern

about tidelands ownership precluded any real interest in the unit. U.S.

Shortly after the construction of the Seadrill the Supreme Court issued i t s decision confirming federal

ownership of the tidelands.

The legal struggle ended

subsequent exploratory and developmental drilling.

Also, in

1951 Barnsdall fell victim to a corporate take over and found itself merged with Sunray Oil Company that had no interest in maintaining a drilling department.

Sunray sold

the unit to Kerr-McGee, a company that used the rig for shallow-water drilling work in Corpus Christi Bay.

There

^Jacketed platforms were s i m i l a r t o t h e p i l e supported t y p e . The former had interweaved l a t e r a l s t r u t s l i n k i n g t h e i n d i v i d u a l p i l e s . Most o f t e n companies p r e f a b r i c a t e t h e s e and t r a n s p o r t them t o t h e s i t e . J . Ray McDermont Company of Louisiana pioneered them. ^ L e t t e r , John T. Hayward t o Rubin Werlin (Hayward's p a t e n t a t t o r n e y ) , October 2, 1952, Folder: Werlin-General-1952, Hayward Papers, Tulane U n i v e r s i t y .

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the drilling unit slipped into relative obscurity, seemingly another forgotten bit of offshore technology. However, its significance was not lost on everyone. Alden Laborde, working as Kerr-McGee's marine superintendent, appreciated the ingenuity of the unit and believed that it could facilitate Gulf development once the tidelands dispute ended.

With Dwight Eisenhower's election

as President in 1952, Laborde anticipated an end to the tidelands debate.

Eisenhower had promised to guarantee

Texas' historic offshore boundaries and would move the federal government into a proper settlement with Louisiana. In 1951, every indication pointed to an Eisenhower victory and the re-opening of offshore development .'^ Laborde, from Marksviile, Louisiana, had considerable marine experience.

A graduate from the U.S. Naval Academy

and a veteran of World War II, he spent three years gaining experience in the swamps of Southern Louisiana.

He hauled

seismic equipment, and worked as a swamp barge maintenance roustabout.

For a time, he worked for Sid Richardson, a

prominent Texas independent producer of considerable reputation.8 operations.

Laborde learned all he could about drilling Though he did not have the technical

"^Alden J. Laborde [ODECO founder. President and CEO, retired], interview by author, Tape recording. New Orleans, Louisiana, July 31, 1991. ^Laborde amused himself with the thought that Richardson needed someone with navy experience to work on those barges.

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proficiency of a petroleum engineer, Laborde reasoned that his naval experience and training coupled with his practical oil field work would land him a job.

In 1949 he became

marine superintendent of Kerr-McGee Industries of Oklahoma City.9 Though a pioneering offshore company, Kerr-McGee, like many other companies, encountered "a lot of marine-type problems which Oklahoma people didn't know much about."1^ Kerr-McGee had pushed marine operations as a convenient means of adding oil leases.

Shore-based competition was

intense, and for smaller, independent companies offshore development was attractive.

However, Kerr-McGee soon

discovered the difference between drilling on land and on an offshore platform.

The company wrestled with structural

difficulties, rampant metal corrosion and logistical headaches.

Normally, tool pushers and roughnecks responded

by simply making it bigger and welding it stronger. However, such tactics no longer worked.

The industry

learned from former navy personnel and marine engineers that offshore equipment and structures had to give, but not break.

They understood that no one could build any vessel

or structure strong enough to withstand the power of nature.

^Alden J. Laborde [ODECO founder. President and CEO, retired], interview by author. Tape recording, New Orleans, Louisiana, July 31, 1991. lOlbid.

126

Rather, s a i l o r s and naval a r c h i t e c t s had learned how t o adapt t o t h e ocean environment.

As an unknown f r o n t i e r ,

the

oceans forced t h e o i l i n d u s t r y to develop new equipment, p r o c e d u r e s , and d e s i g n s . H Therefore, Laborde understood the S e a d r i l l ' s p o t e n t i a l and soon developed "a p r e t t y good feel" for Hayward's S e a d r i l l while working for Kerr.

After buying the S e a d r i l l

for $500,000, Kerr renamed i t the Kerr-McGee No. 40.

Far

from p e r c e i v i n g i t as a wild-eyed product of two "eggheaded" e n g i n e e r s , Laborde and a few o t h e r s r e a l i z e d t h a t t h e S e a d r i l l symbolized the t e c h n o l o g i c a l future of the offshore industry. efficient,

D r i l l i n g crews found i t easy t o use,

and r e l a t i v e l y t r o u b l e - f r e e .

Laborde knew t h a t

such a mobile platform would give a huge competitive edge in t h e o f f s h o r e l e a s e scramble.

With the p o s s i b i l i t y t h a t

Eisenhower might end the t i d e l a n d s d i s p u t e and reopen o f f s h o r e o p e r a t i o n s , Laborde prepared the S e a d r i l l

for

^^Alden J . Laborde [ODECO founder. President and CEO, r e t i r e d ] , i n t e r v i e w by a u t h o r . Tape r e c o r d i n g . New Orleans, Louisiana, J u l y 3 1 , 1991; Statement by Laborde quoted from h i s statement t o New Orleans Time-Picavune. December 3 1 , 1975. Laborde was not t h e only ex-Navy man t o e n t e r o f f s h o r e o p e r a t i o n s . The e n t i r e h i s t o r y of t h e offshore b u s i n e s s i s fraught with i n s t a n c e s of ex-Navy personnel moving i n t o marine d r i l l i n g o p e r a t i o n s . George Bush who founded Zapata Off-Shore in 1955 had been a U.S. Navy p i l o t . Alfred Glenn t h e offshore m e t e o r o l o g i c a l expert though assigned t o the U.S. Army Air Corps during World War I I had worked c l o s e l y with the U.S. Navy. Roy Huffington an Houston-based independent o p e r a t o r and founder of Huffco had been with t h e U.S. Navy during World War I I . Naval e x p e r t i s e did much t o h e l p pave t h e way for t h e o i l i n d u s t r y ' s march i n t o t h e Gulf and assuaged a n t i p a t h y toward marine o p e r a t i o n s .

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renewed work and argued for the c o n s t r u c t i o n of a d d i t i o n a l units.12 Kerr-McGee had led the i n d u s t r y in offshore o p e r a t i o n s , and Laborde's mobile d r i l l i n g ideas could have cemented K e r r ' s lead over the competition when the t i d e l a n d s reopened.

With a f l e e t of b a r g e s , Kerr-McGee could have

cornered t h e offshore d r i l l i n g b u s i n e s s . In a d d i t i o n ,

the

company could have gained important deep-water d r i l l i n g e x p e r i e n c e , f u r t h e r enhancing Kerr-McGees offshore reputation.13 In 1952 Laborde shared h i s ideas with Dean McGee.

McGee

had been a p r e s c i e n t o i l i n d u s t r y pioneer and had sparked Kerr-McGee's e a r l y offshore i n t e r e s t . s u r p r i s e , McGee d e c l i n e d .

To Laborde's

Apparently, McGee worried about

t h e b u s i n e s s slump caused by the t i d e l a n d s f i g h t , and he had some r e s e r v a t i o n s about s t r e t c h i n g a shallow-water barge

12A. J . Laborde, Notes on Offshore D r i l l i n g , p . 4. January 1, 1953. F o l d e r : Laborde General Info On, Hayward Papers. Tulane U n i v e r s i t y . J a c k i e Cochran and Maryann Bucknum Brinley, J a c k i e Cochran: /\P Autobiography (New York: Bantam Books, 1987), pp. 340-341. D e t a i l s of t h e B a r n s d a l l s a l e a r e included in the Cochran autobiography because C o c h r a n ' s husband, Floyd Odium, bought c o n t r o l of t h e undervalued company in 1948. In 1950 Sunray paid Odium $44.3 m i l l i o n , g i v i n g Odium a $12 m i l l i o n p r o f i t ; U n t i t l e d - B a r n s d a l l Research Corp. Ostensibly a u t h o r e d by J . T. Hayward, Folder: old t o be c u l l e d . A. J . Laborde, Notes on Offshore D r i l l i n g , p . 3 . January 1, 1953. Folder: Laborde General Info On. Hayward Papers. E z e l l , Innovations in Energy, p . 192. l ^ I n 1954, J . Ray McDermott & Company b u i l d s the f i r s t platform in 100 f e e t of w a t e r . James Clark, The Chronological History of t h e petroleum and Natural Gas I n d u s t r i e s (Houston: Clark Book Company, 1963), p . 247.

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design for deep-water use.

Laborde was disappointed and

commented that . . . . progress or lack of same, with Kerr-McGee is typical. There is little use in trying to outguess them, I assure you. They are good operators in a sense, and may come through when you least expect it, but their methods are always confusing, their policies vague and inconsistent, and relations with them can be most exasperating.14 Laborde grew irritated with Kerr's reticence.15

Frustrated,

disgruntled, and disillusioned, he left Kerr-McGee.

Laborde

believed that the Seadrill represented the future of offshore drilling.

With the reopening of the tidelands, he

sensed opportunity and felt that a properly positioned company could become a major offshore force.

Since Kerr-

McGee was not interested, he searched for another company. Ironically, Laborde was turned down by Kerr-McGee which had pioneered offshore operations.

Kerr-McGee's decision to

go offshore, in 1947, had arisen from the low level of available lease acreage.

Over-competition had saturated

West Texas with operators, and companies had explored, drilled and probed much of the continental U.S.. As a result,

We decided t o explore the a r e a s where the r e a l l y p o t e n t i a l p r o l i f i c production might be - - s a l t domes - - t h e good ones on land were gone, but we could move out in t h e shallow water and, in e f f e c t , get i n t o a

l ^ L e t t e r , Alden J . Laborde t o John T. Hayward, November 22, 1952, L a b o r d e F i l e - F o l d e r , Hayward P a p e r s , T u l a n e U n i v e r s i t y . l^New O r l e a n s Time-Picayiine, December 3 1 , 1975.

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v i r g i n area where we could find the r e a l c l a s s - o n e type s a l t dome p r o s p e c t . 1 6 Going offshore had been a way of circumventing the c o m p e t i t i v e logjam and r e v i t a l i z i n g a domestic d r i l l i n g program. plan.

However, Kerr-McGee wanted no p a r t of Laborde's

I n s t e a d , i t wanted to proceed c a u t i o u s l y .

did not want t o w a i t .

Laborde

He r e a l i z e d t h a t he would have t o

find another company t o sponsor new r i g c o n s t r u c t i o n based upon t h e S e a d r i l l d e s i g n .

Running short on funds and i d e a s ,

Laborde c o n t a c t e d John T. Hayward, the inventor of the S e a d r i l l . 1'^ John Hayward, an English t r a i n e d marine and petroleum e n g i n e e r , worked for Barnsdall Oil Company of Tulsa, Oklahoma.

Before h i s a r r i v a l in the U . S . , h i s c a r e e r was

f i l l e d with adventure and daring e x p l o i t s . person he was i n t e r e s t e d in engineering.

As a young He attended

Liverpool U n i v e r s i t y and he l a t e r worked as an e n g i n e e r ' s a p p r e n t i c e in a B e l f a s t ,

I r e l a n d , shipyard, and before World

War I , he gained v a l u a b l e experience as a c o n s t r u c t i o n e n g i n e e r , t o o l p u s h e r , and o i l f i e l d superintendent in the Rumanian Oil F i e l d s .

In 1913 he pioneered the use of r o t a r y

l^Dean McGee, i n t e r v i e w . September 4, 1971, in E z e l l , Innovations in Energy, p . 154. The author was unable t o l o c a t e t h e 61 i n t e r v i e w s t h a t E z e l l used. The Kerr-McGee Corporate l i b r a r y was unable t o l o c a t e t h e s e i n t e r v i e w s in i t s f i l e s . The l i b r a r y presumed t h a t t h e s e o r a l h i s t o r i e s were cared for by Bette Brenz. After her death they could not be found. I'^Alden J . Laborde [ODECO founder. P r e s i d e n t and CEO, r e t i r e d ] , i n t e r v i e w by a u t h o r . Tape r e c o r d i n g . New Orleans, Louisiana, J u l y 3 1 , 1991.

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d r i l l i n g technology in Europe.

In World War I he j o i n e d

B r i t i s h government s e r v i c e where he worked c o v e r t l y t o d e s t r o y t h e Rumanian o i l f i e l d s he helped t o develop.18 A f t e r t h e war he r e t u r n e d to Eastern Europe and resumed working in t h e o i l b u s i n e s s .

In 1929 he had moved t o t h e

United S t a t e s and in 193 0 had j o i n e d Barnsdall as Chief Engineer and l a t e r became Vice President for Research a t B a r n s d a l l Oil Company.19 Though having some formal t r a i n i n g in marine and petroleum e n g i n e e r i n g Hayward had taught himself.

His

a n a l y t i c a l powers and a b i l i t y to s y n t h e s i z e v a s t amounts of d i s p a r a t e information made him a p r o f i c i e n t engineer.

He

possessed a s p e c i a l blend of t r a i n i n g and the n a t u r a l t a l e n t for problem-solving t h a t gained him the r e s p e c t of t h e entire industry.

By the mid-1930s he emerged as a r e s p e c t e d

a u t h o r i t y on r e s e r v o i r p r e s s u r e s , mud logging, and o t h e r a s p e c t s of o i l f i e l d p r o d u c t i o n .

He held numerous United

^^According t o t h r e e s o u r c e s , Hayward and other A l l i e d s o l d i e r s were t r a p p e d by t h e advance of t h e German and Turkish Armies. Supposedly Hayward led a dramatic t r a i n escape t o the White Russian l i n e s . Among t h e n o t a b l e s along for t h a t r i d e was t h e French General B e r t h e l o t . The s t o r y of t h e escape i s o u t l i n e d in t h e book John T. Hf^yw.=>rd; C r e a t i v e Engineer (New Orleans: ODECO. 1975). Also, Alden Laborde, i n an i n t e r v i e w , t o l d a s i m i l a r v e r s i o n . In a d d i t i o n , a more d e t a i l e d v e r s i o n of t h e s t o r y i s included in a Hayward biography t h a t was used with for h i s Anthony Lucas Award nomination in 1958. J . J . Arps, "Biography - - John T. Hayward," June 10, 1958. Lucas Gold Medal Award-Folder, Hayward Papers, Tulane U n i v e r s i t y . ^^Testimony of John T. Hayward-James P. Burns. Attorney. October 18, 1949. John T. Hayward and Barnsdall Research Corporation v s . Core L a b o r a t o r i e s , I n c . , p . 2, Folder: Hayward-Works Correspondence, Hayward Papers, Tulane U n i v e r s i t y .

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States Patents, and authored many technical articles.

In

1938 on the strength of his research and development talents, the Barnsdall organized a research division around him--the Barnsdall Research Corporation. After the war, Hayward focused his attention on developing a mobile offshore drilling platform.

In the

postwar offshore excitement Barnsdall, along with its partners Seaboard and Gallery and Hurt, secured six offshore leases in Breton Sound, just offshore eastern Louisiana. The estimated price for static platforms for each site totaled $1 million, or $6 million for all six.

Barnsdall

and its partners quickly realized that offshore operations were costily.

Barnsdall asked Hayward to find a solution

and he developed the Seadrill as a result.

Hayward cut the

cost of the six lease drilling program to $1 million.20 Barnsdall had benefited from and understood Hayward's inventive ways, its partners, however, thought Hayward was reckless and the Seadrill an inappropriate solution.

They

ordered the project stopped pending further study.21

The

whole notion of mobile drilling platform capable of

^^Letter, John T. Hayward to Richard J. Howe (Drilling & Completion Division of Esso Production Research Co) February 26, 1966, Folder-[loose papers on the top of one box], Hayward Papers, Tulane University. ^^Francis Gallery and some of the other partners had the project stopped altogether after Gallery and Hurt saw the plans. Instead of an improved pile platform, the partners learn that they were paying for an unusual drilling barge.

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operating in 30 feet of water seemed impossible.22

Hayward

ignored telephone orders to halt construction and turned his "deaf ear to the phone."

Meanwhile, outside marine

consultants who evaluated the design found nothing to suggest that i t was unstable.23

AS a result, construction

resumed and the unit began service in 1949. Hayward's rig proved efficient and operationally sound. Barnsdall and i t s partners drilled the six leases without mishap, despite the occasional 6-ft seas and 55-MPH winds that buffeted the unit.24 everyone.

The Seadrill's success surprised

Barnsdall, though, understood i t s ' potential and

contemplated building a second unit. Hayward managed to compile only preliminary designs when Barnsdall's sale precluded further work.2 5 Though i t intrigued some in the industry, the Seadrill unsettled many with i t s unconventional design. like nothing the oil industry had ever used.

It looked Bizarre, and

22He c u t i t down t o 20-ft because he wanted " t o f r i g h t e n people a s l i t t l e a s n e c e s s a r y . " L e t t e r , John T. Hayward t o Richard J . Howe ( D r i l l i n g & Completion Division of Esso Production Research Co.) February 26, 1966, Folder: [loose papers on t h e top of one b o x ] , Hayward Papers. 2 3 L e t t e r , F r a n c i s A. Gallery (New York office) t o Dale R. Snow ( B a r n s d a l l O i l ) , April 27, 1948, Folder: Barge H i s t o r y . L e t t e r , John T. Hayward t o Richard J . Howe ( D r i l l i n g & Completion Division of Esso Production Research Co) February 26, 1966, Folder: [loose on t h e t o p of one b o x ] , Hayward Papers, Tulane U n i v e r s i t y . ^ ^ L e t t e r , F r a n c i s A. Gallery (New York City) t o John T. Hayward, March 16. 1949, F o l d e r : D r i l l i n g Barge-Correspondence, Hayward Papers, Tulane U n i v e r s i t y . ^ ^ L e t t e r , John T. Hayward t o Dean McGee February 7, 1953, KerrMcGee-Barge-Folder, Hayward Papers, Tulane U n i v e r s i t y .

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seemingly clumsy, i t had hints of being more marine vessel than a drilling platform.

To oil field traditionalists who

had been transferring land-based engineering structures to the marine environment, i t appeared more sacrilege than a solution to offshore drilling.

As a result, Hayward

encountered considerable criticism. I then went through months of being met on the street by engineers who would say ^John, I understand you really pulled a boner this time and that a lot of people are going to get drowned.' McDermott and somebody from Humble Oil I forget who, visited Barnsdall and tried to stop the thing, stating that the catastrophe would be a terrible black eye for the oil industry.26 Though Hayward's submersible mobile barge represented a complete departure from conventional thinking, he believed that in order for the oil industry to succeed in the offshore arena, i t had to embrace new and different ways of doing things.27 Hayward was impervious to such criticism, but the doubt and acrimony coming from a land-based industry and from within Barnsdall itself convinced Hayward that petroleum

^ ^ L e t t e r , John T. Hayward t o Richard J . Howe ( D r i l l i n g & Completion D i v i s i o n of Esso Production Research Co) February 26, 1966. F o l d e r : [loose papers on t h e t o p of one box], Hayward Papers. I t i s r e a s o n a b l e t o presume t h a t McDermott and Humble blocked t h e " S e a d r i l l " s i n c e both stood t o l o s e . McDermott had carved for i t s e l f a niche a s t h e l e a d i n g f a b r i c a t o r of small p i l e - p l a t f o r m s . Meanwhile, Humble Oil and Refining had invested most of i t s money in p l a t f o r m - t e n d e r technology. ^'^John T. Hayward: C r e a t i v e Engineer, p p . 14 and 36. One noted o i l i n d u s t r y engineer was amused when t h e author d e s c r i b e d t h e i n d u s t r y as i n v e n t i v e , c r e a t i v e and w i l l i n g t o t a k e r i s k s . Marvin Jones [ o i l i n d u s t r y e n g i n e e r ] , i n t e r v i e w by a u t h o r . Tape r e c o r d i n g , Houston, Texas, A p r i l 29, 1993.

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p e r s o n n e l had minimal understanding of marine p r i n c i p l e s . He noted t h a t the S e a d r i l l was nothing more than a simple e x t r a p o l a t i o n of the shallow-water barge.

Ironically,

Hayward found t h a t only o t h e r marine engineers and naval a r c h i t e c t s were sympathetic and understood the S e a d r i l l . 2 8 Hayward encountered a d d i t i o n a l "land-based" p r e j u d i c e . During sea t r i a l s , Hayward learned t h a t "making l o c a t i o n " was a d e l i c a t e maneuver and t h a t the platform could e a s i l y capsize.

As a r e s u l t , Hayward imposed s t r i c t

guidelines.

operational

Regardless, the barge nearly flipped on a

number of o c c a s i o n s .

Hayward s t a t e d t h a t

Contrary t o the opinion held in some q u a r t e r s , the moving of t h i s barge even in shallow water i s far from the simple o p e r a t i o n of pumping out some water and l e t t i n g i t back in.29 He concluded t h a t petroleum engineers were incapable of u n d e r s t a n d i n g marine p r i n c i p l e s and, t h e r e f o r e , could not handle t h e u n i t s a f e l y .

As a r e s u l t , he recommended a g a i n s t

moving t h e u n i t u n l e s s he or one of h i s a s s o c i a t e s were aboard.3 0

^ ^ L e t t e r , John T. Hayward t o Richard J . Howe ( D r i l l i n g & Completion Division of Esso Production Research Co) February 26, 1966, F o l d e r : [loose papers on t h e top of one b o x ] , Hayward Papers, Tulane University. 2 ^ I n t e r - o f f i c e Correspondence, John T. Hayward t o D. R. Snow September 30, 1949, F o l d e r : D r i l l i n g Barge-Correspondence, Hayward P a p e r s , Tulane U n i v e r s i t y . ^ ^ I b i d . L e t t e r , John T. Hayward t o L. Durant, September 11, 1952, F o l d e r : New D r i l l i n g Barge (Type IV), Hayward Papers. Tulane U n i v e r s i t y .

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Far from being merely a personal dispute between Hayward and petroleum engineers, the conflict reflected a struggle between drilling crews and marine specialists about offshore operations.

As a petroleum engineer, Hayward understood

drilling procedure and the history of the industry, but, the cavalier attitude among oil industry traditionalists toward the difficulty in making offshore location disturbed Hayward.

Hayward, as a naval architect, grew concerned

about industry antipathy to marine problems which probably stemmed from a wide-spread industry prejudice against marine engineers and naval architects.31

As marine specialists

became important to offshore activities, operators like Humble Oil and Refining, Shell Oil, and others added them to their engineering teams.

In turn, the relationship between

oil industry traditionalists and marine engineers remained abrasive, over time a more positive competitive attitude replaced it.32 -^^This h o s t i l e r e a c t i o n was a l s o experienced by Bruce Collipp one of t h e e a r l y naval a r c h i t e c t s h i r e d by Shell Oil i n t h e e a r l y 1950s. He remembered some of h i s f i r s t encounters with Shell e x e c u t i v e s who remarked t h a t they d i d not need any naval a r c h i t e c t s . Bruce C o l l i p p . S h e l l O i l Company naval a r c h i t e c t ( r e t i r e d ) and inventor of t h e semisubmersible, Houston, Texas, August 1, 1991. C u r t i s Crooke [Global Marine Chief engineer and GMEC P r e s i d e n t , r e t i r e d ] , i n t e r v i e w by author [ t e l e p h o n e ] . Tape r e c o r d i n g , Templeton, C a l i f o r n i a , November 9, 1992. ^^Ralph Scales [Bethlehem Shipyard in Beaumont e n g i n e e r ] , i n t e r v i e w by a u t h o r . Tape r e c o r d i n g , Beaumont, Texas, June 15. 1992. Hoyt Taylor [Zapata Off-Shore engineer, r e t i r e d ] , i n t e r v i e w by a u t h o r . Tape r e c o r d i n g , Hale Center, Texas, July 23, 1993. Far from being an i s o l a t e d problem, a p p a r e n t l y t h e o i l i n d u s t r y has always had an i n h e r e n t r e s i s t a n c e t o new ideas and i n n o v a t i o n s . This c o n t r a s t s s t a r k l y with t h e p o p u l a r notion t h a t t h e o i l i n d u s t r y has always been open t o i n n o v a t i o n . Marvin Jones [petroleum engineer, r e t i r e d ] , i n t e r v i e w by a u t h o r . Tape r e c o r d i n g . Houston, Texas, May 1993.

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Though the S e a d r i l l and marine o p e r a t i o n s as a whole encountered i n d u s t r y c r i t i c i s m , a g g r e s s i v e o i l companies seeking a competitive edge contacted Hayward for a d d i t i o n a l information.

Hayward's success prompted a f l u r r y of marine

d e s i g n e r s , a r c h i t e c t s , and shipyards t h a t came up with t h e i r own deep-water barge d e s i g n s .

Hayward remained open and

forthcoming about the S e a d r i l l and shared h i s i d e a s .

As a

r e s u l t , o t h e r d e s i g n e r s b u i l t on Hayward's work.33 Jerome Goldman, a New Orleans-based naval a r c h i t e c t ,

toured

t h e shipyard during S e a d r i l l ' s c o n s t r u c t i o n and i t i n f l u e n c e d him in the design and c o n s t r u c t i o n of h i s own mobile d r i l l i n g u n i t in 1949.34

Later, in 1950 I n g a l l s

Shipyard of Pascagoula, M i s s i s s i p p i asked Hayward for a s s i s t a n c e while developing i t s u n i t . 3 5

At the same time,

a g g r e s s i v e companies l i k e Stanolind, Noble D r i l l i n g Company of Ardmore, Oklahoma, Stanolind Oil and Gas of Houston, and P h i l l i p s Petroleum contacted Hayward about the p r o j e c t , i n q u i r e d about h i r i n g the u n i t .

and

The i n t e r e s t became so

3 3 i n t e r - o f f i c e Correspondence, G. E. McClatchey (New Orleans) t o John T. Hayward February 28, 1948, Folder: D r i l l i n g BargeCorrespondence, Hayward Papers. Tulane U n i v e r s i t y . 3 4 L e t t e r , John T. Hayward t o R. Werlin, June 21, 1949. McClatchey, January 26, 1950, Folder: R. Werlin-General, Hayward Papers Goldman would become one of t h e leading offshore a r c h i t e c t s . His n o t a b l e achievements include design work on t h e SEDCO s e r i e s semisubmersibles. ^ ^ L e t t e r , Jerome L. Goldman (Friede & Goldman, Inc.) t o John T. Hayward December 6, 1949, Folder: D r i l l i n g Barge-Correspondence. L e t t e r , John T. Hayward t o R. Werlin, June 2 1 , 1949. McClatchey, January 26, 1950, F o l d e r : R. Werlin-General. L e t t e r , Richard M. Adler ( I n g a l l s Shipbuilding Corporation) t o G. E. McClatchey, January 26, 1950, F o l d e r : Barge-Licensing, Hayward Papers, Tulane U n i v e r s i t y .

137

i n t e n s e t h a t Hayward planned a second barge and considered working as a c o n s u l t a n t on o t h e r s . 3 6 A number of events in 1950, however, ended t h e s e p l a n s . B a r n s d a l l ' s takeover by Sunray Oil Company stopped any f u r t h e r d i r e c t experimentation with the S e a d r i l l . R e g a r d l e s s , Hayward forged ahead with h i s plans for a second d r i l l i n g barge.

The dampening e f f e c t of the t i d e l a n d s

argument precluded any renewed i n t e r e s t in the S e a d r i l l . 3 7 During t h e i n t e r i m , Hayward dabbled in offshore r e s e a r c h , f u r t h e r r e f i n i n g and improving the design.

With B a r n s d a l l ' s

p u r c h a s e , Hayward bought up the remnants of the Research Corporation and s e t up h i s own engineering firm.

Interest

i n t h e S e a d r i l l ebbed, and he had no motivation in t r y i n g t o s e l l t h e idea t o an i d l e i n d u s t r y . 3 8 When t h e e n t h u s i a s t i c Alden Laborde contacted Hayward about r e v i v i n g i n t e r e s t in the S e a d r i l l . Hayward l e n t h i s

^ ^ L e t t e r , John T. Hayward t o R. Werlin, March 17, 1948, Folder: Submergible D r i l l i n g Barge. L e t t e r s from William L. Horner (Chief Production E n g i n e e r - e n g i n e e r i n g s e c t i o n ) t o Gene Rosser (Noble D r i l l i n g Company) May 11, 1950. John T. Hayward t o Guy H. Johnston (Stanolind Oil and Gas Co.) April 18, 1950. John T. Hayward t o S. T. Walker ( P h i l l i p s , Houston, Texas) May 12, 1949. William L. Horner (Chief P r o d u c t i o n Engineer-engineering s e c t i o n ) to Gene Rosser (Noble D r i l l i n g Company) May 11, 1950, F o l d e r : Barge-Licensing, Hayward Papers, Tulane U n i v e r s i t y . At one p o i n t t h e S e a d r i l l almost became t h e f i r s t mobile d r i l l i n g platform in foreign o p e r a t i o n . Aramco was i n t e r e s t e d in i t for t h e P e r s i a n Gulf, but decided a g a i n s t i t owing t o s e a - f l o o r irregularities. ^"^Sunray was only i n t e r e s t e d B a r n s d a l l ' s production r e s e r v e s . ^ ^ U n t i t l e d - B a r n s d a l l Research Corp. Ostensibly authored by J . T. Hayward, F o l d e r ; old t o be c u l l e d , Hayward Papers, Tulane U n i v e r s i t y . After t h e s a l e of B a r n s d a l l , Hayward purchased t h e Barnsdall Research C o r p o r a t i o n a t f a c e - v a l u e , and with Paul Wolff transformed i t i n t o t h e Hayward-Wolff Research Corporation.

138

support.39

Laborde r e p r e s e n t e d the means through which

Hayward could r e f a m i l i a r i z e the i n d u s t r y about the S e a d r i l l . Moreover, with the t i d e l a n d s on the verge of reopening, Hayward b e l i e v e d t h a t the S e a d r i l l would again a t t r a c t attention.

As a r e s u l t , Hayward and Laborde, beginning on

November 1, 1952, e n t e r e d i n t o a three-month c o n t r a c t u a l arrangement in where Laborde agreed to40 devote h i s f u l l time and e f f o r t to b r i n g the Haywardc o n t r o l l e d submersible barge inventions t o the a t t e n t i o n of o i l companies, d r i l l i n g c o n t r a c t o r s and o t h e r p r o s p e c t i v e l i c e n s e e s . . . .41 In r e t u r n Hayward funded the e n t i r e e f f o r t with $3,000 operating capital42 Laborde, armed with working sketches and offshore

facts

and f i g u r e s obtained from various sources, s e t out t o find a buyer.

Laborde knew t h a t he could generate i n t e r e s t if he

had s o l i d offshore d a t a , a firm p r i c e , and a workable design.

The designs t h a t Laborde c a r r i e d showed an improved

S e a d r i l l - - a h y b r i d of ideas from Alexander Shipyard of New

3^Agreement, John T. Hayward and Alden J . Laborde, Laborde F i l e F o l d e r , L e t t e r , John T. Hayward t o Rubin Werlin, October 2, 1952, F o l d e r : Werlin-General-1952, Hayward Papers, Tulane U n i v e r s i t y . 4%emo. J . J , Arps t o H. H. Kaveler (Lucas Medal Committee member), June 10, 1958, Lucas Gold Medal Award Folder, Hayward Papers, Tulane U n i v e r s i t y . ^1Agreement, John T. Hayward and Alden J . Laborde, Laborde F i l e F o l d e r , Hayward Papers, Tulane U n i v e r s i t y . ^ ^ L e t t e r , John T. Hayward t o Alden J . Laborde, October 13, 1952, Laborde F i l e - F o l d e r , Hayward Papers. Apparently, Laborde was not as o p t i m i s t i c as Hayward and wanted t o s t r e t c h the appointment t o s i x months, Hayward would not budge; however, he s a i d coyly t h a t e x t e n s i o n s might be a p o s s i b i l i t y .

139

Orleans, Louisiana (builder of the original Seadrill), Hayward, and the designs of the improved Seadrill.

Also, as

an additional selling point, Laborde had Alexander Shipyard standing by ready to begin construction.

L. B. Durant of

Alexander quoted Laborde a $500,000 price tag for a 180' x 68' X 14' "turtle back" drilling barge without drilling equipment.

All they had to do was find a client.43

Laborde spent the fall of 1952 educating potential clients about marine operations, and revitalizing interest in a business that had been written-off two years before. Also, he had the thankless task of convincing hesitant oil company engineers and executives that the new Seadrill design was not just another shallow-water drilling barge. Rather i t was a new unit that Hayward designed specifically for deep-water drilling, and engineered to handle heavier wave and wind forces. 44

Almost all were only familiar with

swamp barges that operated along the coast.

Convincing them

that the new Seadrill could survive in the hurricane prone Gulf was difficult.45

^^Telegram, Les Durant t o John T. Hayward, November 6, 1952, and L e t t e r , Alden J . Laborde t o John T. Hayward, 10/20/52. Laborde F i l e F o l d e r , Hayward Papers. Tulane U n i v e r s i t y . While Laborde was making h i s rounds of t h e i n d u s t r y , Durant a l s o t r i e d t o find c l i e n t s along t h e L o u i s i a n a Gulf Coast. ^ ^ L e t t e r , John T. Hayward t o Alden J . Laborde November 22, 1952, Laborde F i l e - F o l d e r , L e t t e r , John T. Hayward t o Dean McGee February 7, 1953, Kerr-McGee-Barge-Folder, Hayward Papers, Tulane U n i v e r s i t y . ^ ^ I n t e r - o f f i c e Correspondence, John T. Hayward t o R. E. S h u t t , March 1, 1948, Folder: Barge History, Hayward Papers. I t was t r u e t h a t Hayward had not even considered t h e h u r r i c a n e s in h i s e a r l y computations

140

At f i r s t ,

Laborde received a lukewarm r e c e p t i o n .

However, in mid-November 1952, President Eisenhower's e l e c t i o n s t i m u l a t e d i n t e r e s t and a l l the o p e r a t o r s were •eager t o a t l e a s t t a l k about i t . " 4 6

The S e a d r i l l ' s unusual

appearance and unconventional design scared away almost a l l companies.

No one wanted t o r i s k company money in something

t h a t looked as odd as the S e a d r i l l .

One experienced

o f f s h o r e person noted t h a t t h r e e t h i n g s could happen while d r i l l i n g in t h e ocean, and two of them were bad.

Aside from

s t r i k i n g o i l , companies ended up with a dry h o l e , or a capsized r i g .

Moreover, the general unease about marine

o p e r a t i o n s stemmed from the s u p e r s t i t i o n and mystery t h a t had always surrounded the oceans.

I t was a foreign and

unknowable p l a c e , beyond human comprehension and c o n t r o l . 4 7 In t h e f a l l of 1952, Kerr-McGee expressed a renewed i n t e r e s t in t h e Hayward barge.48 Hayward and Laborde.

The prospect e x c i t e d

They hoped Kerr a c o r p o r a t i o n t h a t had

for t h e S e a d r i l l . At t h a t time (1948) no mobile u n i t or p i l e platform had been designed t o withstand t h e d i r e c t impact of a h u r r i c a n e . ^ ^ L e t t e r , Alden J . Laborde t o John T. Hayward, November 15, 1952, Laborde F i l e - F o l d e r , Hayward Papers. Tulane U n i v e r s i t y . ^"^R. C u r t i s Crooke [Global Marine Chief engineer and GMEC P r e s i d e n t , r e t i r e d ] , i n t e r v i e w by author [ t e l e p h o n e ] . Tape r e c o r d i n g , Templeton, C a l i f o r n i a , November 9, 11, 13, 1992. Bruce C o l l i p p . r e t i r e d S h e l l naval a r c h i t e c t and acknowledged inventor of t h e semisubmersible, Houston, Texas, May 5, 1993. One of t h e former members of t h e Technical Panel of AMSOC noted t h a t crews expressed i n i t i a l r e t i c e n c e a t being on t h e ocean, b u t , as they concentrated on d r i l l i n g o p e r a t i o n s , they q u i c k l y s e t t l e d down. 4®Letter, Rubin Werlin t o John T. Hayward September 4, 1952, F o l d e r : Werlin-General-1952. Hayward Papers. Tulane U n i v e r s i t y .

141

pioneered offshore operations with the Seadrill. would lead a return to the Gulf.

Unfortunately for Hayward and

Laborde, Kerr planned to complete the project internally with i t s own engineers.

Kerr hired Hayward's long-time

partner Paul Wolff who would evaluate offshore platform systems and tailor them for i t s own operations.49 Laborde's inability to find a client generated considerable self-doubt. I am s t i l l in the category of a traveling salesman who has never made a sale, so a l i t t l e advice or coaching might be in order.50 Laborde even solicited consulting work, but was unsuccessful.51

At one point, he considered going back to

work as a marine superintendent, and shelving his hopes of "becoming a more important part of a drilling contracting organization."52

Regardless, Laborde and Hayward retained a

modicum of hope that their offshore system would s e l l .

It

was only a matter of waiting for the period of uncertainty, fear, and frugality to pass.

Then, once again, the oil

'^^Letter, Alden J . Laborde t o John T. Hayward, December 10. 1952, Alden J . Laborde t o John T. Hayward, November 22, 1952, Laborde F i l e F o l d e r , Hayward Papers, Tulane U n i v e r s i t y . ^ ^ L e t t e r s , John T. Hayward t o Alden J . Laborde November 16, 1952, and Alden J . Laborde t o John T. Hayward, January 22, 1953, Laborde F i l e F o l d e r , Hayward Papers, Tulane U n i v e r s i t y . ^ ^ L e t t e r , Alden J . Laborde t o John T. Hayward, February 13, 1953, Laborde F i l e - F o l d e r , Hayward Papers, Tulane U n i v e r s i t y . 52ibid.

142

companies would "go hay-wire financially and start to spend money like drunken sailors."53 Laborde's difficulties were in part attributable to errors in strategy.

The offshore industry experienced a

shortage of capital.

It already had invested substantial

sums in platform-tenders and platforms that had yet to be used fully.

Investing additional sums in a different and

unusual technology seemed a mistake.

The hesitation of

companies like Gulf Oil, Stanolind, Humble, and Magnolia reflected such an attitude.

Especially, Magnolia, with i t s

large fleet of platform-tenders, could not justify the purchase.

It had equipment that i t needed to use. 54

Many

wanted to wait until offshore activity resumed enough to put the tenders back to work.

Until then, none had plans for a

wildcatting program.55

^ ^ L e t t e r , John T. Hayward t o Paul F. Barnhart (Houston, TexasCommercial Bldg) May 7, 1954, Folder-General F i l e -1953-1954, Hayward Papers, Tulane U n i v e r s i t y . ^ ^ L e t t e r , Alden J . Laborde t o John T. Hayward, January 22, 1953, Laborde F i l e - F o l d e r , Hayward Papers, Tulane U n i v e r s i t y . ^ ^ L e t t e r , Alden J . Laborde t o John T. Hayward, December 10, 1952, Laborde F i l e - F o l d e r , Hayward Papers, Tulane U n i v e r s i t y . However, Laborde noted t h a t Humble q u i e t l y had taken out permits for seismographic surveys i n u n t r i e d a r e a s from Galveston, Texas t o New O r l e a n s , L o u i s i a n a . See l e t t e r , Alden J . Laborde t o John T. Hayward, December 13, 1952, Laborde f i l e - F o l d e r , Hayward Papers. Also, Bethlehem S t e e l Company Shipyard d i d some p r e l i m i n a r y design recommendations f o r a s u b m e r s i b l e d r i l l i n g mat-barge for Humble Oil and Refining. See - S p e c i f i c a t i o n s for Construction of 185' x 3 8 ' x 12' Submersible D r i l l i n g Mat-Barge for t h e Humble Oil and Refining Company, October 3 , 1952 (Revised by Bethlehem, November 30, 1956), p p . 7 and 8, Folder #2Submersible D r i l l i n g Mat Barge, 1952, Jim S t e e l e Naval A r c h i t e c t u r a l Drawings (MS 131) T y r r e l l Library, Beaumont, Texas.

143

Also, the industry had no confidence that the mobile drilling unit could survive Gulf weather conditions. uncertainty made selling the barge difficult.

That

Petroleum

engineers charged that the Hayward barge lacked the simplicity of the platform-tender system.

Also, many

wondered whether the barge could survive heavy storms and hurricanes.

Still others doubted that the rig had solved

the nagging problem of foundation-scour that had plagued shallow-water submersible barges.

The doubts and fears

stemmed from either misinformation or not enough understanding.

Then, there were those intractable people

who saw no good reason to change and criticized the Seadrill as a complication of a simple problem.

Letting his

frustration show Laborde stated that such people had a lot to learn about the offshore business.56 Irvin Alcorn of Pure Oil Company did not believe in the mobile drilling platform and argued against it.

Under

Alcorn's direction Pure Oil had pushed into the Gulf and had become one of the industry leaders.

Pure had built its

offshore lead with economical jacketed platforms and the platform-tender system.

It had further enhanced the cost

efficiency of its program by completing numerous wells from one platform.

Alcorn's opposition carried substantial

^^Letter, Alden J. Laborde to John T. Hayward, February 13, 1953, Laborde File-Folder, Hayward Papers, Tulane University.

144

weight with the offshore community. influential. sell.

His success made him

If he opposed the Seadrill. the unit might not

Alcorn, who vaulted Pure into the forefront of

offshore operations by pioneering multi-well completions and other technologies, considered the mobile platform nothing more than a "gadget."57 On balance, arguing against the small platform-tender method was difficult.

When compared to the mobile unit, the

platform-tender system cost less because of cheaper financing.

Therefore, the platform-tender system was

popular throughout the industry, particularly among the smaller companies.

In addition, platform-tenders had

greater operational range--extending to 103-feet of water, and because of the high percentage of success in striking offshore oil, drillers could use i t for exploration.

With

multiple-well capability i t further distributed the cost.58 Operators also could convert i t to a self-contained unit if the field proved itself. risky s i t e s .

The costs even remained low on the

In the case of a dry hole, crews reused

portions of the structure.

In dangerous weather, they

removed the tender from the platform so i t could survive the storm. ^ ^ L e t t e r , Alden J . Laborde t o John T. Hayward December 10, 1952, Laborde F i l e - F o l d e r , Hayward Papers, Tulane U n i v e r s i t y . ^^United S t a t e s S t e e l Corporation, Offshore D r i l l i n g in t h e Gulf r.f Mexico: A Forecast of Future S t e e l Requirements ( P i t t s b u r g h : U.S. S t e e l , 1957), p p . 12 and 13.

145

In an industry otherwise known for its high stakes gambling attitude, Laborde found a pervasive streak of conservatism.

Entrepreneurs such as Sid Richardson, Clint

Murchison, Sr., H. L. Hunt, and others, had made and lost numerous fortunes on their willingness to gamble. many pushed into the offshore province.

Indeed

However, Laborde's

trouble came from the so-called "hired help"--oil company executives, research groups, insurers, financial investors, and company engineers who played it safe.

They hesitated to

endorse something they did not understand, and much less some contraption that would get them fired.

Such cautious

thinking also crept into research groups and consultants that produced the nascent oceanographic and meteorological studies.

Laborde found design specifications far exceeding

any potential environmental conditions.

The conservative

attitude dampened engineering innovation and precluded offshore expansion.59 Perhaps Laborde's most difficult hurdle came from lacking proof that he and Hayward were correct.

Undoubtedly

he had tangible proof in the Seadrill.

Its performance

record supported Laborde's arguments.

The critics argued

correctly that Hayward had designed the barge for shallow-

^^Letter, Alden J. Laborde to John T. Hayward, November 22, 1952, Laborde File-Folder, Hayward Papers. In subsequent press interviews, Laborde was particularly harsh with unimaginative and stodgy corporate thinking that hindered offshore development. New Orleans Time-Picayune. December 31, 1975.

146

water operation of not more than 40 feet of water.

Laborde

needed scientific information on Gulf oceanographic and meteorological conditions so that he could compare that data to the design configuration of the advanced Seadrill.

Only

in such a fashion could he convince potential clientele that the unit could work.

There existed few oceanographic and

engineering studies that supported his assertions.60 Laborde managed to find an early Texas A&M wave and weather report that had some of the data he sought.

In addition, he

consulted with A. H. Glenn, one of the imminent pioneer oil industry meteorologists.

Glenn had been a military

meteorologist during the Second World War and would go on to establish one of the first private weather consulting companies catering to the oil industry.61 From such sources Laborde estimated the operational limits for his offshore mobile platform.

To operate safely

in approximately 40 feet of water, he needed a platform 18 feet above mean water level.

From sea-floor to platform the

unit had to measure 60 feet.

During hurricane, season the

operating deck needed to be at least 62 feet from the seafloor.

Wave theorists based their estimates upon

60Letter, Alden J. Laborde to John T. Hayward, December 10, 1952, Laborde File-Folder, Hayward Papers, Tulane University. ^iLetter, Alden J. Laborde to John T. Hayward, March 9, 1953, Laborde File-Folder; Southern Production Company, Inc. (P. H. Timothy), r:»pneral Characteristics of Waves off the Louisiana Coast (1/25/54), Southern Production Technical Data-Folder, Hayward Papers, Tulane University.

147

p r e d i c t i o n s for a 32 foot maximum wave of which 70% would be above t h e mean water l e v e l . expect 28 foot waves.

However, in r e a l i t y crews could

By c o l l e c t i n g such data Laborde

c o n t r a c t e d for some of the e a r l i e s t Gulf storm, and used t h a t information t o convince o p e r a t o r s t h a t deep-water d r i l l i n g was p o s s i b l e .

However, a b s t r a c t f a c t s ,

figures,

and s c i e n t i f i c data f a i l e d t o assuage a l l the doubts and fears.62 The c r i t i c a l t u r n i n g point for mobile barge acceptance came with a massive "blowout" and f i r e aboard a Pure Oil p r o d u c t i o n platform in January 1953.

Two of five well heads

on t h e m u l t i - w e l l platform ran wild and caught f i r e .

With

t h e p r o d u c t i o n " t r e e s " a jumbled mess on the deck, emergency crews were unable t o e x t i n g u i s h the b l a z e .

Finally,

in

dramatic fashion, a U.S. Army gun crew with a r e c o i l l e s s r i f l e shot off the tops of the mangled w e l l - h e a d s , thus making i t e a s i e r t o snuff out the f i r e . 6 3 ^ ^ L e t t e r , Alden J . Laborde t o John T. Hayward, February 7, 1953, Laborde F i l e - F o l d e r . Southern Production Company, Inc (P. H. Timothy) Hurricane S t a b i l i t y of D r i l l i n g Barge (Interim Report) 3/13/54, Southern Production Technical Data-Folder. "Comments and Notes on c o n v e r s a t i o n with A. H. Glenn of A. H. Glenn and Associates on March 11, 1953. A. J . Laborde, Wind and Waves-Hayward Barge Data-Folder, Hayward Papers, Tulane U n i v e r s i t y . Griff Lee noted t h a t t h e 32 foot f i g u r e had been f i r s t proposed in 1947 by a "oceanographer, who was ' b r a v e ' enough t o make a p r e d i c t i o n . " The a u t h o r b e l i e v e s t h a t t h e oceanographer might have been A. H. Glenn. Griff Lee, "Offshore S t r u c t u r e s Past, P r e s e n t , F u t u r e , and Design C o n s i d e r a t i o n s , " Offshore (June 5, 1968), r e p r i n t , p . 7. ^^Department of Oceanography, Wave Force Experiments At fitchafalava Bay. Louisiana (Pure Oil Company P l a t f o r m ) , p . 1. Technical Report 3 8 - 1 , Texas A&M Research Foundation, February, 1954, Folder 1-67, Oceanography Department r e s e a r c h Reports, 1950-1979, Evans L i b r a r y , Texas A£cM U n i v e r s i t y .

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Though emergency crews extinguished the fire. Pure s t i l l had to cap the "runaway well."

Crews usually drilled an

offset well that tapped into the "runaway" and diverted the oil flow.

On land i t was a simple and speedy operation. A

second drilling unit set up operation a short distance away, and the crews drilled the offset.

With the platform located

20 miles offshore Louisiana, Pure had nothing from which to d r i l l the offset. taken weeks.

Installing a second platform would have

In the meantime, the unchecked oil and gas

would have flowed into the Gulf, creating a huge safety problem, not to mention the financial loss. problem by bringing in the Seadrill.

Pure solved the

The unit made location

and drilled the relief well.64 The accident and the difficulty in putting out the blaze had a considerable impact.

Many operators reevaluated the

safety of multi-well platforms and forced them to reassess offshore safety procedures.

The accident shook industry

confidence in the small operating platform, and, at least, one company suspended i t s use.65

^'^Alden Laborde s a r c a s t i c a l l y commented "I suppose Alcorn was happy t o have such a t h i n g a v a i l a b l e on s h o r t n o t i c e , i n s t e a d of having t o s t a r t b u i l d i n g a new platform with h i s s u p e r - e f f i c i e n t methods." L e t t e r , Alden J . Laborde t o John T. Hayward, 1/31/53, Laborde F i l e F o l d e r , Hayward Papers. Tulane U n i v e r s i t y . ^ ^ L e t t e r s , Alden J . Laborde t o John T. Hayward, February 7, 1953, and Alden J . Laborde t o George J e t t , 2 / 6 / 5 3 , Laborde F i l e - F o l d e r , Hayward Papers, Tulane U n i v e r s i t y .

149

In a b i t of p o e t i c j u s t i c e , the emergency showcased the Hayward barge a t the expense of A l c o r n ' s small platformt e n d e r system.

The S e a d r i l l d i s p l a y e d an a b i l i t y to make

l o c a t i o n q u i c k l y and o p e r a t e in the open Gulf without mishap.

Such success prompted a s e r i e s of subsequent

p o s i t i v e r e - e v a l u a t i o n s of the b a r g e .

One observer went so

f a r as t o p r e d i c t t h a t i t could re-shape the future of t h e offshore industry.66

j ^ Arps, chief engineer of the

British-American Oil Producing Company, r e p o r t e d t h a t t h e Hayward mobile d r i l l i n g barge had the cheapest o p e r a t i n g costs.

The barge compared favorably with the small

p l a t f o r m - t e n d e r and the comparable Humble platform. Hayward's barge cost only $2500 a day, whereas, Rumble's s e l f - c o n t a i n e d platform cost $7000 a day, and Pure O i l ' s p l a t f o r m - t e n d e r cost $4,000 a day.67 Also, in January 1953, the Offshore Operators Committee, a c o o p e r a t i v e i n d u s t r y clearinghouse for

offshore

i n f o r m a t i o n , observed t h a t the mobile barge had r e v o l u t i o n i z e d the i n d u s t r y .

0. W. Crisman of Gulf Oil

Company c i t e d Kerr-McGee's successful South Texas d r i l l i n g program in 1951 and i t s c u r r e n t open-water d r i l l i n g activities.

Crisman s t a t e d t h a t t h e mobile barge offered

^ ^ L e t t e r , William K. Whiteford t o John Arps, J u l y 8, 1958, Lucas Gold Medal Award-Folder, Hayward Papers, Tulane U n i v e r s i t y . Cos ^"^J. J . Arps, "Offshore D r i l l i n g C o s t s , " Folder: Laborde General Info On, Hayward Papers, Tulane U n i v e r s i t y

150

the "simplest and most economical approach to the problem of offshore drilling the shallow-waters of the Gulf of Mexico."68 Owing to the Seadrill's success in capping the runaway well, its reaffirmation by serious reports, and the approaching end of the tidelands controversy, the mobile drilling barge received considerable attention. By March 1953, Murphy Oil Company of El Dorado, Arkansas entered offshore drilling operations and signed up with Laborde and Hayward.

Murphy oil had first delved into marine operations

going back to the Caddo Pool in 1907.69 Murphy had returned.

NQW, in the 1950s

Charles Murphy, Jr., President of

Murphy Oil believed that the mobile drilling barge could find oil reserves in an already over competitive postwar drilling climate.

In the scramble to expand production,

attractive leases disappeared.

The offshore frontier

created an alternative for companies that had been less successful, but were willing to gamble.

Much like Kerr-

McGee before it. Murphy Oil understood that technology gave them momentary advantage over much larger and financially secure companies.

As a result. Murphy's construction of a

Hayward-type mobile drilling barge, and the formation of an

68o. W. Crisman, "A Study of Offshore Drilling With a Submersible Barge, January 16, 1953, Folder: Laborde General Info On, Hayward Papers, Tulane University. 69ciark, The Chronological History of the Petroleum and Natural rzy^cj Industries, p. 234.

151

o f f s h o r e d r i l l i n g company. Offshore D r i l l i n g and Exploration Company (ODECO), helped Murphy shoulder i t s way i n t o o f f s h o r e e x p l o r a t i o n and development."^0 S h e l l Oil Company, a l s o l e a s e poor, became the f i r s t h i r e ODECO d r i l l i n g u n i t s .

to

Though Shell was a major o i l

c o r p o r a t i o n , i t had been a c t i v e abroad and t h e r e f o r e lagged behind U.S. companies in domestic e x p l o r a t i o n and development.

S h e l l ' s d e c i s i o n to h i r e ODECO u n i t s

guaranteed i t s success as a d r i l l i n g c o n t r a c t o r .

Like

Murphy O i l , Shell was i n t e r e s t e d in pushing i n t o deepwater and had been probing the Gulf with seismic crews in l a t e 1952.'71

By 1954, Shell had c r e a t e d a s p e c i a l r e s e a r c h

program t o develop offshore technology.

However, Shell

remained s k e p t i c a l about the Hayward barge.

Conservative

S h e l l e n g i n e e r s had doubts about i t s r e l i a b i l i t y and advised against using i t .

Regardless, Bouwe Dykstra, S h e l l ' s Vice

P r e s i d e n t in New Orleans, gave the barge a t r i a l run. b a r g e ' s success in d r i l l i n g a discovery well on i t s

The first

l o c a t i o n prompted Shell to sign a long-term d r i l l i n g contract.

In a d d i t i o n . Shell encouraged ODECO t o b u i l d

"^^Letter, Alden J . Laborde t o John T. Hayward, 2 / 2 3 / 5 3 , Laborde F i l e - F o l d e r . Speech, Alden J . Laborde t o S t . Louis S e c u r i t y Analysts Meeting, 6 / 1 4 / 6 1 , p . 7, Laborde F i l e - F o l d e r . Minutes of Meeting of Executive Session, Board of D i r e c t o r s , Ocean D r i l l i n g and Exploration Company, January 22, 1974, ODECO Board of D i r e c t o r s Meeting-Folder, Hayward Papers, Tulane U n i v e r s i t y . "7^Letter, Alden J . Laborde t o John T. Hayward December 10, 1952, Laborde F i l e - F o l d e r , Hayward Papers, Tulane U n i v e r s i t y .

152

a d d i t i o n a l r i g s for upcoming d r i l l i n g p r o j e c t s . "^2

shell's

commitment guaranteed ODECO's investment, sparked a d d i t i o n a l barge c o n s t r u c t i o n , and l e g i t i m i z e d the d r i l l i n g barge t o t h e r e s t of t h e i n d u s t r y . From an i n i t i a l $16 m i l l i o n investment and the c o n s t r u c t i o n of four d r i l l i n g u n i t s , ODECO became one of the l e a d e r s i n offshore d r i l l i n g .

With such advanced equipment

capable of deep-water d r i l l i n g , ODECO became a major force in o f f s h o r e development.'^ 3

ODECO o u t f i t t e d the new

g e n e r a t i o n of Hayward barges with the l a t e s t equipment and design f e a t u r e s i n c l u d i n g a cementing u n i t and hinged pontoons for added s t a b i l i t y .

Rated for 40 feet of water

and beyond, ODECO owned some of the f i r s t t r u e deepwater u n i t s t h a t were r e l a t i v e l y r e s i s t a n t to the G u l f ' s most s e v e r e weather c o n d i t i o n s and helped to expand the offshore f r o n t i e r . "74 ^^Offshore Magazine r e p r i n t , by Sean Conner, "ODECO's 20th A n n i v e r s a r y : Rig Design Sparked Company's Growth." Newspaper ClippingF o l d e r ; ODECO, Notes on Executive Committee Meeting Held in New Orleans, J u l y 9, 1953. ODECO Board of D i r e c t o r s Meeting-Folder, Hayward Papers, Tulane U n i v e r s i t y . Alden J . Laborde [ODECO founder. President and CEO, r e t i r e d ] , i n t e r v i e w by a u t h o r . Tape r e c o r d i n g . New Orleans, Louisiana, J u l y 3 1 , 1991. "^-^A. J . Laborde, "Notes on Offshore D r i l l i n g , " p . 4. January 1, 1953. F o l d e r : Laborde General Info On, Hayward Papers, Tulane University. "^^Hayward d e s c r i b e d t h e e a r l y u n i t s as a problem a t every t u r n . ODECO e v e n t u a l l y permanently fixed t h e pontoons t o t h e h u l l , but only a f t e r they became damaged, and i n f l i c t e d damage upon t h e s u p e r - s t r u c t u r e and t h e main h u l l decking. By a t t a c h i n g them t o t h e h u l l , t h e barge took on a "dumbbell" shape." L e t t e r , John T. Hayward t o Paul Wolff, August 6, 1955; ODECO, Notes on Executive Committee Meeting Held in New O r l e a n s , J u l y 9, 1953. ODECO Board of D i r e c t o r s Meeting-Folder. Offshore Magazine r e p r i n t , by Sean Conner, "ODECO's 20th Anniversary: Rig Design Sparked Company's Growth." Newspaper C l i p p i n g - F o l d e r , Hayward

153

By June, 1954, ODECO's success had helped to spark an industry-wide "boom." contractors soared.

The number of new offshore Operators, seeing Shell's advantage,

clamored for drilling contractors with mobile rigs.

Kerr-

McGee, that had declined Laborde's original recommendation to build a mobile drilling barge, followed through with i t s own deepwater barge.

Other companies followed.

The speed

and inexpensiveness of drilling programs increased the possibility of profits and transformed a slow-moving business into a frenzy of offshore activity. "75 The corresponding race for drilling equipment complemented the race for offshore leases.

With mobile

drilling units available from a variety of shipyards, any company could become a contractor.

A flurry of new offshore

drilling companies like Zapata Off-Shore, Glasscock Drilling, American Tidelands, Delta Drilling, and others emerged.

With the entire industry gearing up for offshore

work available shipyards, equipment, and construction materials became scarce.^6

P a p e r s , Tulane U n i v e r s i t y . The l a t e r u n i t s featured what Hayward c o n s i d e r e d t h e most important design c h a r a c t e r i s t i c - s i m p l i c i t y . Letter, Alden J . Laborde t o Operating Committee (Special Report on New Barge P r o j e c t ) , 1 1 / 1 6 / 5 3 . ODECO # l - F o l d e r , Hayward Papers, Tulane U n i v e r s i t y . "^^Speech, Alden J . Laborde t o S t . Louis S e c u r i t y Analysts Meeting, June 14, 1961, p . 5, Laborde F i l e - F o l d e r , Hayward Papers. Tulane University. "7Minutes, Special Meeting of t h e Board of D i r e c t o r s of Ocean D r i l l i n g and E x p l o r a t i o n Company, September 30, 1953. ODECO Board of D i r e c t o r s Meeting-Folder, Hayward Papers, Tulane U n i v e r s i t y .

154

The emphasis upon marine expertise and specialization characterized the offshore industry that emerged in the mid1950s.

Previously, the offshore business operated with

technology and methods that were land based.

However, as

the industry pushed into deep-water, technology became a more important ingredient, thus requiring a change in attitude and methods.

Oil companies effectively adapted

World War II naval veterans and surplus marine equipment to the offshore oil frontier.

The oil industry used such

expertise to create the offshore industry. However, the offshore industry did not emerge without a bit of cajoling.

Having a modicum of stodginess and

intractability borne out of tradition, complacency, and fear, the oil industry reacted slowly to the offshore challenge.

Left to its own device, the oil industry might

not have moved offshore.

However, "hungry" oil companies

like Murphy, Shell, and Kerr-McGee led the way into the offshore frontier.

Their interest prompted the development

of technology and economical drilling methods, both of which were crucial in lowering the cost of marine drilling.

Such

companies pulled the rest of industry in behind them, and reaffirmed that vigorous thinking, a willingness to gamble, and effective technology would unlock the door to offshore success. ODECO understood that deepwater offshore operations

155

represented a completely new environment and therefore required new methods and technology.

ODECO represented the

emergence of a new breed of company that fully integrated offshore operations, and pushed the frontier into ever deeper water.

Laborde, Hayward and others realized that the

re-emergent offshore industry had to fully adapt to the marine environment or be restricted to shallow-water operations.

As a result, ODECO expanded its expertise not

only into contract drilling and marine engineering, but actively pursued offshore leases and implemented a program of lease production.

Combined with the wildcatting spirit

of Kerr-McGee, Shell Oil and others, ODECO set the tempo of offshore operations and ushered in the marine age of the offshore petroleum business.

156

CHAPTER V SCIENCE AND THE OIL OFFSHORE INDUSTRY The offshore industry faced a difficult challenge in 1945.

Besides converting a wartime industry to a peacetime

footing, oil companies had to change the way in which it searched for, developed and transported oil to market. Committing its resources to offshore petroleum, the industry soon realized the unknown character of the ocean environment.

Moreover, it had no guaranteed method for

operating in the offshore zone.

Drilling crews had been

using wooden pile platforms in the bays and riverine deltas. But, would they work in the open-waters of the Gulf? sort of waves would they find? have to be?

What

How strong would the piles

How high would they get in a severe storm?

What was the frequency of storms?

Such questions circulated

throughout the industry and seemed a formidable hurdle to offshore operations. Moreover, working and living in a marine setting was an unsettling psychological prospect among drilling crews. Even among industry leadership, a strong reticence prevailed against pushing into the offshore province.

Oceans still

conjured imagery of the unknown where sea monsters, giant catastrophic waves, and unfathomable depths remained. Undoubtedly, in 1945 the open sea remained a mystery even

157

among scientists, and the Gulf of Mexico had not yet seen a fully developed scientific investigation of i t s physical and biological limits.

Oceanography was s t i l l in i t s infancy.

The offshore oil industry dealt with the new frontier by relying upon existing knowledge drawn from Gulf coast shipyards and naval architects.

In addition i t hired

scientists who aided in meeting such challenges and helped formulate effective responses.

But, because so much was

unknown, the industry subsidized scientific studies performed by commercial and academic research institutes, and in the process, virtually invented modern oceanography, meteorology, commercial diving, and other fields, not only in the Gulf, but worldwide.

Because of the offshore

interest, in the early 1960s the oil industry emerged as the world's preeminent marine specialists.1 After World War II, the oil industry knew nothing about marine operations.

But, that not enough knowledge did not

prevent i t from considering offshore operations.

The oil

industry had helped set the economic tempo of American society for the last one hundred years, and on the eve of

^By the early 1960, the o i l industry surpassed the U.S. Navy's diving c a p a b i l i t i e s and helped to e s t a b l i s h the navy's deep sea recovery u n i t . Moreover, t h i s research and development laid the technological foundation for the then u l t r a - h i g h - t e c h Mohole Project of the l a t e 1950s, the Deep Sea Drilling Project of the l a t e 1960s, and the construction of the Glomar Explorer in the 1970s. 158

the offshore revolution, the industry's confidence led it to believe that it could conquer the oceans. The oil industry soon learned what sailors, naval architects and marine engineers had always known.

The ocean

could not be defeated, but had to be accommodated.

It was a

difficult lesson, but the oil industry adapted by borrowing what it needed.

Gulf coast shipyards became important

advisory centers, and oil companies added marine engineers and naval architects to engineering staffs.

In addition,

U.S. Navy World War II veterans, along with military oceanographic and meteorological specialists gave the oil industry a needed marine familiarity.

What is more, war

surplus equipment gave the early offshore industry a source of ready-made marine technology.

Drilling crews used the

same equipment to find oil in the Gulf that sailors had used to wage war against fascism. The industry also formed cooperative groups and committees to ease the transition from land to marine operations.

In 1948 thirty-two oil companies formed the

Offshore Operating Committee (OOC) to assist with the systematic accumulation of data and the sharing of information.

Though the offshore industry was competitive,

it was clear that the complexity of marine operations required a cooperative effort.

The committee was charged

with the responsibility of finding

159

. . . . solutions to problems common to all continental shelf petroleum operators and arising in conjunction with the governmental agencies charged with administering certain regulations which had been formulated over a period of many years of general operations of ships in open waters.2 The OOC became an important clearinghouse for offshore news and development and served as an important industry link to federal agencies.

In addition, the committee

supported and

argued for oceanographic studies of the Gulf of Mexico.3 The industry turned to oceanography for answers that petroleum engineers were unable to address.

Platform

construction in an ocean environment was unfamiliar territory, especially in the open-water with harsher weather.

Companies were concerned about the type, strength

and frequency of waves, the variety of weather experienced, and the ability to predict meteorological events.

Though

oceanography and meteorology were still in formative stages of development. World War II had forced considerable advancement.

By the postwar period, scientists had

accumulated a substantial amount of data on waves and meteorological conditions, and had transformed weather

2"0ffshore Operators Groups Studies Gulf Drilling Problems," Tezas n-j ] Journal. 16, no. 2 (June, 1949), 23. 3Ibid. As Humble Oil and Refining pushed into the Gulf, it became increasingly concerned about weather conditions, especially as it affected foundations. Humble engineers asked Scripps to review the weather data and give them a reading as to what to expect from "subsurface washing or action of waves on the floor of the Gulf at the points indicated within thirty miles of shore." Letter, S. W. Oberg (Chief Engineer, Humble) to F. P. Shepard, August 9, 1946, Folder 47 (Humble Oil Company, 1946), Box 13, Shepard Papers, SIO.

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forecasting from its "hit-or-miss," Farmers' Almanac dependency to hard science. Only two oceanographic institutes of any note existed after World War II.

Scripps Institute of Oceanography in La

Jolla, California and Woods Hole in Massachusetts formed the core of America's oceanographic knowledge.

Scripps and

Woods Hole had undertaken important oceanographic work before World War II, and thus had become important wartime centers for research.

Such formative meteorological and

oceanographic research, helped the offshore oil industry in the postwar period. Scripps particularly became important to the oil industry because of its pioneering work in wave forces, submarine geology, and meteorology.

Scripps' stellar cast

of oceanographers included Harald Sverdrup, Walter H. Munk, Roger Revelle, Francis Shepard among others.

Sverdrup was

the acknowledged world leader in oceanographic work.

A

Norwegian, he spent World War II as an expatriate at Scripps.

Walter Munk received his Ph.D. in 1947 from the

University of California at Los Angeles and joined the faculty of Scripps as Professor of Geophysics.4

Both

Sverdrup and Munk were leading experts on wave forces and used the knowledge to predict surf conditions for allied

^Helen Raitt and Beatrice Moulton, Scripps Institution of nr*^stal Engineering. Proceedings of Second Conference, e d i t e d by J . WJohnson (Houston: Council on Wave Research/The Engineering Foundation, 1951), p . 164. In 1951, Texas A&M began a broad-based oceanographic study of t h e Gulf for Gulf Oil Corporation. This included a study of wave a c t i o n upon offshore s i t e s , offshore geology, and a hind c a s t of sea f l o o r e r o s i o n . See Texas A&M U n i v e r s i t y Department of Geography, [Development of Oceanographic Information for Offshore Operations on t h e (^n1f C o a s t i : Report on Organization and Progress, by Warren C Thompson (College S t a t i o n : Texas A&M U n i v e r s i t y . Department of Oceanography, 1952), p p . 6, 7, and 9.

167

strength steel piling, the offshore industry used the research to develop drilling platforms of unprecedented reliability.

With a more accurate understanding of the

marine environment, industry engineers replaced the creative stop-gap engineering of the early years with more dependable technology designed specifically for offshore drilling.18 As wave studies and improved metallurgy helped marine engineers solve its platform problems, submarine geology assisted the oil industry in finding oil.

By 1945 the

industry used both surface and subsurface geology in locating potential drill sites.

However, on the sea-floor,

no one had any idea where to drill, what signs to look for, or even how to gather that information.

Traditional geology

concentrated upon finding oil on dry land. underwater was something new.

Finding oil

The only source for

information came from the Scripps Institute of Oceanography that had performed some prewar sea-floor surveys offshore California under the guidance of oceanographers Roger Revelle and Francis Shepard.

Apart from Revelle and

Shepard, no one else had done much work in the field.

It

seemed that it would remain a obscure research area with only academic specialists taking any interest.

However,

that situation changed with the revived postwar demand for

^^Brine to Bonanza; The story of the American Oil Industry (Woodlands, TX: Pioneer Publications, Inc., 1981), pp. 417-419.

168

oil.

Unfortunately, with no scientific information on sea-

floor characteristics and sedimentary accretion, companies hesitated.

Not only was there little geological data, but

oceanography was a relatively modern academic discipline that had emerged only recently, largely due to its significant contributions to Allied success in World War II. The oil industry found itself stymied and unsure of the next step. As a result Shepard's book. Submarine Geology, published in 1948 generated considerable oil industry interest. Certainly, Shepard's work pioneered the study of sea-floor geological development, but the oil industry regarded the book as significant because it confirmed the long held belief that oil could be found in the Gulf.

Ever since the

Spindletop discovery, there had been tantalizing evidence that the coastal "oil play" extended into the Gulf, but it had not been confirmed.

With Shepard's book the industry

had a scientific publication that had evaluated Gulf geologic evidence and stated that it "adds immensely to the possibility of finding oil."

Shepard's optimism about "oil

possibilities" and his belief that offshore seismic and photographic surveys would locate oil, recharged the industry's interest.19

^^Francis P. Shepard, Submarine Geology (New York: Brothers Publishers, 1948), pp. 327 and 328.

169

Harper &

Because of the book, Scripps and Shepard became the acknowledged authorities on submarine geology.

The industry

quickly adopted Shepards's volume as the touchstone for offshore geologic exploration and justified offshore operations to corporate stockholders.2 0 AS a result, anyone interested in finding submarine petroleum came to La Jolla, California.

Such broad interest transformed Scripps into

the industry training facility.

Oil company executives,

Latin American governmental leaders, and U.S. Navy personnel came to Scripps for classes, consultation, and contract studies.

In addition, the oil industry recruited and hired

Scripps' new Ph.D. graduates.21 In 1951 the oil industry followed Shepard's recommendation and launched one of the first major submarine geological surveys in the Gulf.

For years petroleum

geologists had argued for a formal survey because they could only guess as to i t s untapped petroleum potential. 2 0 s h e p a r d ' s book. Submarine Geology s t r u c k a responsive cord throughout t h e o i l i n d u s t r y . With a v a i l a b l e information l a c k i n g , t h e o i l companies scooped up t h e book and quickly used i t t o help o u t l i n e e x p l o r a t i o n programs. Shepard received l e t t e r s , telephone c a l l s asking for a d d i t i o n a l information. Because of t h e book Submarine Geology, Shepard was deluged with l e t t e r s about "backyard" o i l p o s s i b i l i t i e s . The S t a t e of Georgia even sent him l i t e r a t u r e about t h e p o s s i b i l i t i e s of f i n d i n g o i l w i t h i n t h e s t a t e . The s t a t e l e t t e r h e a d had a t t h e bottom "Georgia i s Offering $100,000 Award for t h e F i r s t Commercial Oil Well." See Folder 48, Box 3, Shepard Papers, SIO; In 1957 Zapata Offshore Company h i r e d i t s own g e o l o g i s t "in order t o b e t t e r e v a l u a t e and s e l e c t d r i l l i n g v e n t u r e s worthy of p a r t i c i p a t i o n . . . " Zapata Off-Shore Annual Report. 1957, p . 4 . 2 l L e t t e r , Doug Inman t o F. P. Shepard, February 12, 1951. Folder 51 (Correspondence 1951). L e t t e r , John Ludwick t o F. P. Shepard, October 9. 1950, Folder 31 (1950 correspondence). Box 3 , Shepard Papers, SIO.

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T a r g e t i n g the Texas-Louisiana Gulf Coast, the American Petroleum I n s t i t u t e (API) launched Project 51, otherwise known as "Study of Near-Shore Recent Sediments and Their Environments in the Northern Gulf of Mexico."

Under the

guidance of t h e Fundamental Research on Occurrence and Recovery of Petroleum Committee, the study r e p r e s e n t e d a major push by t h e i n d u s t r y t o explore the Gulf and understand i t s environmental mechanics. 22 From 1951 t o 1955, Project 51 unveiled the sedimentary c h a r a c t e r of t h e Texas and Louisiana Gulf Coast.

Through a

c o n c e r t e d program of core d r i l l i n g , a e r i a l mapping, and s e i s m i c s u r v e y s , using a v a r i e t y of oceanographic s p e c i a l i s t s from Scripps and Texas A&M U n i v e r s i t y d e l i n e a t e d t h e boundary between a n c i e n t and more contemporary sediments.

Such p r o j e c t s gave petroleum g e o l o g i s t s a

t a n t a l i z i n g h i n t as t o the l o c a t i o n of productive o i l reservoirs.

23

^ ^ L e t t e r , M. G. Cheney ( P r e s i d e n t , AAPG and w i t h t h e Anzac O i l c o r p o r a t i o n of Coleman, Texas) t o Dr. P a r k e r D. T r a s k (Dept of Geology U n i v e r s i t y of W i s c o n s i n ) , November 27, 1945, F o l d e r 7 : (Correspondence 1 9 4 5 ) , Box 2, Roger R e v e l l e P a p e r s , SIO. ^•^F. P. Shepard, C u r r e n t and Wave A c t i o n on Shallow Sea F l o o r West of M i s s i s s i p p i D e l t a [ r e p o r t f o r Humble O i l and R e f i n i n g Company], August 2 1 , 1946 , p . 2 - 3 . F o l d e r : 47 (Humble O i l Company, 1 9 4 6 ) , Box 1 3 , S h e p a r d P a p e r s , SIO. API, Report of P r o g r e s s - - Fundamental R e s e a r c h on Q r r u r r e n c e and Recovery of P e t r o l e u m . 1950-1951 ( B a l t i m o r e : The Lord B a l t i m o r e P r e s s , 1 9 5 1 ) , p p . 4 and 256. See a l s o American P e t r o l e u m I n s t i t u t e P r o j e c t f o r I n v e s t i g a t i o n of Recent Marine S e d i m e n t s . F . P. S h e p a r d and F . B. P h l e g e r , F o l d e r 48 (Correspondence 1 9 5 1 ) , Box 3 , S h e p a r d P a p e r s , SIO. Buchanan, "The F o u n d a t i o n Problems on t h e Gulf C o a s t , " [158-165] i n C o a s t a l E n g i n e e r i n g . P r o c e e d i n g s of Second i^ffpference. e d i t e d by J . W. Johnson (Houston: C o u n c i l on Wave R e s e a r c h / T h e E n g i n e e r i n g F o u n d a t i o n , 1951), p . 164.

171

As for sea-floor evaluation. Project 51 sparked the development of more reliable standards for the lateral and vertical stability of platform-support piles.

The

Oceanography Department of Texas A&M University launched a similar study.24 initiative.

However, private industry seized the

From 1947 to 1978, McClelland Engineers of

Houston performed the bulk of the industry's foundation studies and virtually placed the offshore industry on solid footing.

Previously, Bramlette McClelland had worked as a

land-based soils engineer. dam near Houston.

His largest job had been on a

When offshore oil companies deluged him

with requests to core the soft mud in the Gulf, McClelland took on such new projects without hesitation.

Drilling from

a floating barge with a small core drilling unit,25 he and his staff gave an important service to his clients and began compiling what would become one of the largest soils databases of the Gulf.26 2^In 1951, Texas A&M began a broad-based oceanographic study of t h e Gulf for Gulf Oil Corporation. This included a study of wave a c t i o n upon o f f s h o r e s i t e s , offshore geology, and a hind c a s t of sea f l o o r e r o s i o n . See TAMU Department of Geography, fDevelopment of Oceanographic Information for Offshore Operations on t h e Gulf C o a s t i : Report on Organization and Progress, p p . 6, 7, and 9. 25 I r o n i c a l l y , McClelland's f i r s t core d r i l l i n g v e n t u r e from a f l o a t i n g barge e a s i l y makes him one of t h e e a r l i e s t a n t e c e d e n t s t o what would become d r i l l s h i p s and semisubmersibles. 26ln 1978, i t published t h e f i r s t comprehensive compilation of g e o t e c h n i c a l information p e r t a i n i n g t o a l a r g e offshore zone. See McClelland Engineers, Strength C h a r a c t e r i s t i c s of Near Seafloor f n n t i n e n t a l Shelf Deposits of North C e n t r a l Gulf of Mexico (Report 0178043, 1978), p . i . Fugro-McClelland p r o p r i e t a r y p u b l i c a t i o n . FugroMcClelland Corporate L i b r a r y . Bramlette McClelland [founder and P r e s i d e n t , r e t i r e d , of Fugro-McClelland], i n t e r v i e w by a u t h o r . Tape r e c o r d i n g , Houston, Texas, May 8, 1991. In August 2 1 , 1947 Greer-

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Scripps and Woods Hole answered crucial questions for the Gulf coast oil companies and helped to lay the ground work for offshore success.

However, both institutions, so

far removed geographically, had logistical difficulty in dealing with the Gulf Coast.

Moreover, both had pressing

regional demands. Such factors compelled oil companies to find research services within the region.

The Southwest

Research Institute of San Antonio, founded in 1947, responded to such early demand.

The institute, created by

Tom Slick, J r . , became an important research and development center for industry research.

Originally, formed to carry

out agricultural and petroleum research "for companies, individuals, and government agencies at cost," the institute soon became an important partner in offshore investigations.27 As one of many companies preparing for the offshore. Humble Oil and Refining Company contacted the institute.

In

McClelland Engineers signed a contract with California Company t o examine two offshore s i t e s . Engineering Report No. 4731, Vol. 3, FugroMcClelland Corporate Library, Houston, Texas. 27The Southwest Research I n s t i t u t e , a brain-child of Tom Slick, J r . , became an important commercial research and development center for the industry. Tom Slick, J r . , son of Thomas Baker Slick, Sr. who wildcatted the prodigious Gushing o i l field in the Tulsa area, e s t a b l i s h e d the Foundation of Applied Research. In 1946, Slick b u i l t a s c i e n t i f i c research i n s t i t u t i o n t o further the technology and efficiency of t h e a g r i c u l t u r e and industry. He funded the i n s t i t u t e with o i l leases in the Tinsley f i e l d and founded the Essar Ranch that would conduct c a t t l e breeding experiments. In addition he founded the I n s t i t u t e of Inventive Research which focuses upon social and economic i n v e n t i o n s . Tom Slick chartered a l l of these organization as "nonp r o f i t , c h a r i t a b l e " e n t i t i e s which would become self-supporting a f t e r a few y e a r s . "Tom Slick Elected to Board of Director of Dresser I n d u s t r i e s . " Texas Oil Journal 18. no. 10 (February, 1952), 23. 173

1946 Mercer Parks, Rumble's offshore director, had arranged for one of the earliest meteorological surveys o^ the Gulf. Also, Humble had been one of the earliest in contacting Scripps for marine data.

Humble continued to collect

information and decided to launch a broad oceanographic study of the Gulf.

In 1949 Humble contracted the Southwest

Research Institute for the study.28 In response, the institute formed a Houston office and created oceanography and petroleum technology divisions.

In

addition, directors of the research institute converted a privately owned forty-six foot powered schooner, the Harpoon, for oceanographic research.29

Technicians

outfitted i t with a recorder fathometer, a Walker ship's log, and navigation instruments, thus making i t one of the first oceanographic vessels to explore the Gulf in the postwar period.3 0 The Institute proved i t s value.

The Houston office

published an important three-volume comprehensive report that evaluated offshore drilling methods.

Besides compiling

oceanographic data, the report included an impressive 2oA. H. Glenn [meteorologist and owner/operator of A. H. Glenn and A s s o c i a t e s ] , i n t e r v i e w by author [ t e l e p h o n e ] . Tape r e c o r d i n g . New O r l e a n s . Louisiana, March 26, 1992. Parks was a member of t h e o i l i n d u s t r y ' s oceanography committee. 2^Tom S l i c k and some of h i s business a s s o c i a t e s made t h i s available to the institute. ^^Vagtborg, The Story of Southwest Research Center, p . 126. Southwest Research I n s t i t u t e Trustee Newsletter, February 28. 1991, f a c s i m i l e i n V a g t b o r g ' s . The Story of Southwest Research Center, p . 144.

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b i b l i o g r a p h y on offshore technology and o p e r a t i o n s .

It

served as an s i g n i f i c a n t offshore r e f e r e n c e t o o l . 3 1 However, such e f f o r t s ,

though important, again confirmed

t h a t t h e r e had been "an almost complete lack of information on t h e Gulf of Mexico."32 As o f f s h o r e o i l i n t e r e s t continued to grow, an i n c r e a s e d dependency upon academic i n s t i t u t i o n s for r e s e a r c h and e x p e r t i s e emerged.

While the Southwest Research I n s t i t u t e

gave important r e s e a r c h s e r v i c e s , t h e r e was a l s o a push for an academic r e s e a r c h focus and resources t h a t only a major u n i v e r s i t y or c o l l e g e could g i v e . were too far away.

Scripps and Woods Hole

Therefore, i t became apparent t h a t the

Gulf c o a s t needed i t s own oceanographic school.

In 1949

Claude ZoBell, a Scripps Marine Microbiologist working in t h e Gulf, recommended t h a t Texas A&M c r e a t e an oceanography department.33

^^Emory N. Kemler and Edward W. Rosencrants, Offshore Summary (Spring Park, Minn.: Summary Reports, 1954). Kemler headed t h e SWRI Houston o f f i c e , o f f s h o r e d i v i s i o n . ^^southwest Research I n s t i t u t e Trustee Newsletter, February 28, 1991, f a c s i m i l e in Vagtborg, The Story of Southwest Research Center, pp. 149-150. Vagtborg, "Southwest Research I n s t i t u t e Reports P r o g r e s s , " Chemical and Engineering News 28, no. 46 (November 13. 1950). Reprinted i n Vagtborg, The s t o r y of Southwest Research Center, p . 155-157. ^^ZoBell f e l t t h a t i t was important t o c r e a t e a department with e x p e r t s t r a i n e d in Physical Oceanography, Chemical Oceanography, Marine Meteorology, Submarine Geology, and Marine Biology. As a u n i v e r s i t y , Texas A&M could provide academic support s e r v i c e s v i a t h e departments of E n g i n e e r i n g , Chemistry, Biology, and Geology. In a d d i t i o n , t h e department should maintain a l a b o r a t o r y adjacent t o t h e c o a s t . Claude E. ZoBell, "Some Comments on Applied Oceanographic Research in t h e Gulf of Mexico." May 23. 1949, Folder 12-31, Sewell H. Hopkins C o l l e c t i o n , Oyster M o r t a l i t y Reports, U n i v e r s i t y Archives, Texas A&M U n i v e r s i t y . H e r e i n a f t e r c i t e d as TA&M. ZoBell in 1949 was Professor of Marine

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Texas A&M performed some e a r l y r e s e a r c h for the o i l industry.

I t s departments of biology, engineering, and

o t h e r s had performed important work.

But, i t lacked a f u l l -

fledged oceanography department t h a t might address the s p e c i f i c needs of t h e offshore i n d u s t r y .

In 1949 the

u n i v e r s i t y f i l l e d the vacuum by e s t a b l i s h i n g a Department of Oceanography. 34

By 1951, A&M had begun a major

oceanographic study of the Gulf of Mexico.35

in keeping

with Z o B e l l ' s recommendations, the study examined a l l

facets

of t h e G u l f ' s oceanographic c h a r a c t e r - - t h e b i o l o g i c a l , chemical, g e o l o g i c a l , and meteorological.36

By 1954, A&M's

Oceanography Department emerged as the l a r g e s t in the South, and one of t h e l a r g e s t in the country.

With f o r t y - f o u r

s c i e n t i f i c s t a f f members, and twenty-one a s s i s t a n t s , s c i e n t i f i c a i d e s and fellows, Texas A&M had i n s t a l l e d a dynamic academic program, p l u s , i t had c r e a t e d a r e s e a r c h

Microbiology a t S c r i p p s . He received h i s Ph. D. in 1935. R a i t t and Moulton, Scripps I n s t i t u t i o n of Oceanography, pp. 185-186 •^^One of i t s founders. Dale F. Liepper had been in t h e f i r s t m i l i t a r y wave f o r e c a s t c l a s s a t Scripps in 1943. Charles C Bates and John F. F u l l e r , America's Weather Warriors. 1814-1985 (College S t a t i o n : Texas A&M U n i v e r s i t y P r e s s , 1986), fn 20, p . 277. -^^The Department e n t e r e d i n t o t h e p r o j e c t with p a r t i a l sponsorship from t h e Office of Naval Research and Bureau of Ships, and with t h e f u l l backing of t h e A&M Research Foundation in cooperation with t h e F i s h e r i e s Biology D i v i s i o n of t h e U.S. Fish and W i l d l i f e S e r v i c e . 3^Oceanography Department Research Reports, 1950-1979 (MSS in Texas A&M U n i v e r s i t y Archives, College S t a t i o n , Texas), Dale F. Leipper, • P h y s i c a l Oceanography of t h e Gulf of Mexico, A Brief Review," P r o j e c t 24, Texas A&M Research Foundation and t h e Department of Oceanography, w i t h t h e F i s h e r i e s Biology Division of the U.S. Fish and W i l d l i f e S e r v i c e , February 14, 1952, Folder 1-23.

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operation of extraordinary dimensions.

With oil companies

clamoring for Gulf environmental data, the department found itself

involved in twenty-five separate research projects.

Such studies included marine pipeline problems, beach erosion, wave forces on pilings, design of offshore structures, wave energy loss, offshore bottom conditions, structural design of portable drilling rigs, and meteorology.

Though some projects had a purely academic

origin, the majority stemmed directly from commercial inquiry.37 The project that did the most to bring the A&M Oceanography Department into prominence was the oyster mortality studies.

After World War II charges that oil

industry pollution destroyed the Gulf coast fishing industry resurfaced.

Such allegations had been common since the turn

of the century.

However, after the war, fishing losses in

some areas soared.

Oysters were particularly hard-hit with

mortality rates as high as 100%. The oyster industry in 1947 filed a series of 64 suits, placing the blame squarely on the oil companies.38

3'^Nelson Marshall, editor. Marine Sciences Programs In the South: Preliminary Report (Atlanta: Southern Regional Education Board, 1954), pp. 14-17. ^^"Extracts from Biennial Reports of Louisiana Department of Conservation," (Selected by S. H. Hopkins), Folder 3-18, Hopkins Collection, Oyster Mortality Reports, TA&M.

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In response, the oil industry, with the Texas Company taking the lead, contracted with Texas A&M for . . . .a long-term, impartial scientific investigation of the extent and causes of alleged abnormal oyster mortality in Louisiana waters and of the possible effects of oil operations in Louisiana and Texas coastal areas on oysters and other marine organisms.39 Not surprisingly investigators soon discovered that oil pollution was common in the Gulf. 40

However, they did not

find any link between exposure and shellfish mortality.41 Rather, in 1949 the study found that a parasite-dermocystidium marinum--had infested oyster beds and was responsible for the high mortality rates.42 The study made a considerable impact.

Aside from being

the first scientific study evaluating oil pollution's effect -^^Letter, S. H. Hopkins t o Thurlow C Nelson, March 7, 1947, Folder 3 - 1 , Hopkins C o l l e c t i o n , Oyster M o r t a l i t y Reports, TA&M. 40ciaude ZoBell i n h i s r e s e a r c h observed t h a t t h e o i l i n d u s t r y was r e s p o n s i b l e f o r t h e "death of tens of thousands of b i r d s each y e a r , t h e d e s t r u c t i o n of e x t e n s i v e a r e a s of Zostera and other marine v e g e t a t i o n , complaints from people i n t e r e s t e d i n beaches from one end of t h e i s l a n d t o t h e o t h e r , and law s u i t s from yacht owners whose boat bottoms have been smeared with o i l and t a r . " L e t t e r , Claude ZoBell t o Dr. C C Doak, November 12, 1947, Folder 12-21, Hopkins C o l l e c t i o n , Oyster M o r t a l i t y R e p o r t s , TA&M. Apparently, r e g i o n a l s c i e n t i s t s who were f a m i l i a r with o y s t e r s and o i l p o l l u t i o n were bored by t h e d i s c u s s i o n of o i l and b l e e d w a t e r , because they had seen so many o y s t e r s f l o u r i s h i n g i n ^ p o l l u t e d ' w a t e r s . See l e t t e r , Sewell Hopkins t o William Loose, Chief Counsel f o r Texas Company, January 26, 1948, Folder 3-19, Hopkins C o l l e c t i o n , Oyster M o r t a l i t y Reports, TA&M. ^ ^ L e t t e r , William Loose, Chief Counsel for Texas Company, t o Dr. Claude E. ZoBell, October 15, 1947, Folder 12-21, Hopkins C o l l e c t i o n , Oyster M o r t a l i t y Reports, TA&M. ^^The f i n a l r e p o r t was published i n 1958, however, t h e discovery was made i n 1949. L e t t e r , J . G. Mackin t o Sewell Hopkins, March 7, 1958, Folder 9-35, Hopkins C o l l e c t i o n , Oyster M o r t a l i t y Reports, TA&M. Claude ZoBell, Report on Conferences and Observations a t Grand I s l e from October 27 t o 29, 1949, Folder 12-36, Hopkins C o l l e c t i o n , Oyster M o r t a l i t y Reports, TA&M.

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upon the environment,43 Texas A&M's success in ascertaining the cause of oyster mortality won i t oil industryfriendship, subsequent research contracts,44 ^nd ensured the growth of i t s fledgling oceanography program.45

Moreover,

such a major project accelerated A&M's evolution as a topt i e r marine research institute.

Administratively, the

project compelled Texas A&M to work closely with a wide range of other research institutes and experts.

These

included Woods Hole, Scripps, Rutgers University, and various American and European scientists.

^•^This was t h e f i r s t comprehensive impact of o i l on t h e environment. There s p i l l s along t h e Texas Gulf coast a t t h e Europe and Asia during World War I I , but s c i e n t i f i c a l l y evaluated.

As a result.

and exhaustive study on t h e had been previous major o i l t u r n of t h e century, and i n none of t h e s e had been

^^In subsequent y e a r s , t h e i n d u s t r y i n c r e a s i n g l y depended upon i t for a myriad of t e c h n i c a l e x p e r t i s e . In September, 1957, Texas A&M held p h y s i c a l oceanography and c o a s t a l engineering s h o r t courses a t t h e c o l l e g e . Most of t h o s e a t t e n d i n g were o i l i n d u s t r y employees r e p r e s e n t i n g Humble, Gulf, S h e l l , Standard, P h i l l i p s , Sun, Union O i l of Houston, Magnolia, and United Gas Corporation. Courses focused upon wave c h a r a c t e r i s t i c s , elementary oceanographic meteorology, h u r r i c a n e waves and storm t i d e s , coast e r o s i o n , near short c u r r e n t s and f e a t u r e s of s t r u c t u r a l design i n offshore e n g i n e e r i n g . "Texas A&M To Hold Course i n P h y s i c a l Oceanography," Offshore 7, no. 2 (October, 1957), 3 5 . In t h e p r o c e s s , Texas A&M developed a c l o s e working r e l a t i o n s h i p with t h e o i l i n d u s t r y . In platform p i l i n g t e s t s t h e department enjoyed t h e u s e of t h e Pure Oil and Magnolia Oil Company offshore platform 119-F l o c a t e d 35 m i l e s from Morgan C i t y , Louisiana. Also, i t had oceanographic and m e t e o r o l o g i c a l equipment setup on t h e Sun Oil Pier i n Caplen, Texas. And a s i t s r e p u t a t i o n grew, i t expanded i t s f a c i l i t i e s . In i t s work on o y s t e r m o r t a l i t y , i t e s t a b l i s h e d a s u b s t a n t i a l o n - s i t e marine l a b o r a t o r y i n Grand I s l e , Louisiana, and bought and o u t f i t t e d marine r e s e a r c h v e s s e l - t h e "A. A. J a k k u l a . " Marshall, e d i t o r . Marine Sciences programs In t h e South: Preliminary Report, p . 14. ^^Texas A&M became i n c r e a s i n g l y concerned t h a t o i l company p r e s s u r e s might compromise r e s e a r c h o b j e c t i v i t y and A&M's i n s t i t u t i o n a l independence. Apparently, t h e Texas Company placed g r e a t p r e s s u r e upon Texas A&M t o s o l v e t h e o y s t e r m o r t a l i t y mystery. A. A. Jakkula of Texas A&M a l l u d e d t o t h i s i n a l e t t e r w r i t t e n t o W. E. Loose, General Counsel for t h e Texas Company. L e t t e r from A. A. Jakkula t o W. E. Loose, June 1, 1947, Folder 5 - 1 , Hopkins C o l l e c t i o n , Oyster M o r t a l i t y Reports, TA&M.

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Texas A&M moved beyond i t s p r o v i n c i a l r e p u t a t i o n and emerged as "one of t h e leading marine r e s e a r c h l a b o r a t o r i e s of the world."46 As oceanography became an e s s e n t i a l component in o f f s h o r e development, so too did meteorology and storm forecasting.

Because of i t s r e l a t i v e l y shallow depths along

t h e c o a s t l i n e , and the p r o p e n s i t y for i n t e n s e thunderstorms during t h e summer and n o r t h e r s during the winter, the Gulf had marine c o n d i t i o n s t h a t were u n s t a b l e and subject t o r a p i d changes.

As a r e s u l t , weather f o r e c a s t i n g became

important t o t h e s u r v i v a l of offshore

operations.47

Thunderstorms possessing i n t e n s e l i g h t n i n g , winds more than 40 k n o t s , and waves from s i x to eight feet high were dangerous t o offshore crews, s e r v i c e c r a f t , and p l a t f o r m s . Storms often develop quickly and s u r p r i s e unwitting crews. Mid-summer and f a l l had the most favorable c o n d i t i o n s for thunderstorm development, when the moisture laden s o u t h e a s t e r l i e s combined with the a f t e r n o o n ' s h e a t i n g . O c c a s i o n a l l y , thunderstorm s q u a l l l i n e s appeared in

^^Thurlow Nelson, n a t i o n a l l y recognized o y s t e r s p e c i a l i s t and P r o f e s s o r of Zoology a t Rutgers U n i v e r s i t y , had commented p r o p h e t i c a l l y t o Sewell Hopkins of Texas A&M t h a t "With t h e funds of t h e Texas Company behind you t h e r e i s no reason why you cannot develop one of t h e leading marine r e s e a r c h l a b o r a t o r i e s of t h e world." L e t t e r , Thurlow Nelson t o Sewell H. Hopkins, March 13, 1947, Folder 11-9, Hopkins C o l l e c t i o n , Oyster M o r t a l i t y Reports, TA&M. ^"^Texas A&M U n i v e r s i t y Department of Geography, Problems Of Oceanographic Engineering in the Gulf of Mexico. Volume 1, by Warren C Thompson (College S t a t i o n : Texas A&M U n i v e r s i t y . Department of Oceanography, 1952), p . 1-15.

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conjunction with the passage of a cold front.

In contrast

to the isolated nature of an individual thunderstorm, a squall represented a line of thunderstorms sometimes over a hundred miles long.48 In winter, polar air masses (northers) descend upon the Gulf coast thirty to forty times.

Of that number, fifteen

or twenty generate strong winds that exceed 2 0 knots, and one to six generate winds more than 60 knots.

The most

severe storms occur in late December, January, and February.49 Texas A&M's Meteorological Department became an important center for research that revealed regional weather characteristics.

Certainly local oil companies and

personnel understood the weather trends, but such information was unknown to companies entering the region from outside.

Also, minimal work had been done that

formally outlined meteorological patterns, so even Gulf coast companies were surprised by weather events.

As with

oceanography A&M took the lead in collecting data as it related to long-term meteorological trends, and evaluated the circumstances that produced specific weather events.

48 Ibid., p. 1-17, 18 49ibid., p. 1-15

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One of A&M's e a r l y r e s e a r c h c o n t r a c t s involved a longterm wave study of t h e Gulf.50

in 1953 A&M published t h e

r e p o r t Marine Meteorology of the Gulf of Mexico. A Brief Review.51

Drawing from World War I I r e s e a r c h t o o l s the

p r o j e c t used h i n d c a s t techniques thereby allowing for f o r e c a s t s of wave h e i g h t , l e n g t h , and speed.

As a

consequence, o i l companies could expect to have a s e t number of o p e r a t i o n a l days per month, thus p r o j e c t i n g c o s t s a c c u r a t e l y , and p r e p a r i n g them for strong storms.52 Humble had been one of the e a r l i e s t to explore the p o s s i b i l i t y of o b t a i n i n g weather information.

In 1946

Humble had c o n t a c t e d Scripps and had obtained some data t h a t included rudimentary information on hurricane c o n d i t i o n s and frequency.

However, Humble needed more concrete data t o

50.phg Texas A&M Research Foundation i n i t i a t e d Research p r o j e c t 37 a t t h e b e h e s t of Gulf Oil Corporation which had been c o n s i d e r i n g o f f s h o r e e x p l o r a t i o n and p r o d u c t i o n . The Research Foundation channeled t h e study through t h e Texas A&M U n i v e r s i t y Oceanography Department which began work on September 15, 1951 with option for renewal t h e next y e a r . S p e c i f i c a l l y , Gulf Oil wanted a thorough preliminary examination of t h e o f f s h o r e environment before v e n t u r i n g t h e r e . Texas A&M commented t h a t " . . . Gulf has shown an unusual f o r e s i g h t in i n d u s t r y by attempting t o u n d e r s t a n d and r e s o l v e t h e problems t h a t w i l l be met in v e n t u r i n g i n t o t h i s r e l a t i v e l y unknown environment." TAMU Department of Geography, [Development of Oceanographic Information for Offshore Operations on t h e (^^pf Coasti : Report on Organization and Progress, p . 2, 5, 6, 10. 51oceanography Department Research Reports, 1950-1979 (MSS in Texas A&M U n i v e r s i t y Archives, College S t a t i o n , Texas), Dale F. Leipper, ]^^ri"^ Meteorology of t h e Gulf of Mexico. A Brief Review. Texas A&M Oceanography Department, February, 1953. Performed for t h e Texas A&M Research Foundation. Sponsored by t h e Office of Naval Research Contract N7 onr-487 T.0.2 and t h e Bureau of Ships (NE 120219-5), Folder 1-58. 52TAMU Department of Geography, rDevelopment of Oceanographic Informat ion for Offshore Operations on t h e Gulf C o a s t i : Repprt on Qy-ganization and Progress, p . 6 and 7. TAMU Department of Geography, Problems Of Oceanographic Engineering in the Gulf of Mexico, p . 1-4.

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protect daily operations against catastrophe.

Eventually,

Humble signed two meteorologists, A. H. Glenn and Charles C Bates of the National Weather Service, to one of the earliest weather forecast contracts.

During the war they

had participated in the military's wave forecasting project Afterwards, both joined the Weather Service.

Glenn and

Bates proved their worth by compiling a successful weather/wave forecasting manual for Rumble's first Gulf location.

As a result, Humble hoped to sign the team for

additional projects.

However, Bates did not want to leave

government service and remained in Washington.

Meanwhile,

in 1947, Glenn, sensing commercial opportunity for his fledgling craft, set up a weather forecast business in New Orleans.53 In spite of Rumble's early interest, the oil industry was generally suspicious of scientists, and therefore, not fully convinced that weather forecasting was necessary. ^^In t h e Summer of 1946, S. W. Oberg, Humble's Chief Engineer, and Mercer Parks t r a v e l e d t o La J o l l a and v i s i t e d with Walter Munk and F r a n c i s Shepard. Oberg sent U.S. Coast and Geodetic Survey Sheets 116 and 117 and a p i l o t a g e c h a r t of C e n t r a l American waters for t h e months of J u l y and August. They o u t l i n e d t h e worst h u r r i c a n e s i n t h e s e months. The c h a r t a l s o showed wind v e l o c i t i e s . They wanted Scripps t o review t h i s d a t a and give them a reading as t o what t o expect from "subsurface washing or a c t i o n of waves on t h e floor of t h e Gulf a t t h e p o i n t s i n d i c a t e d w i t h i n t h i r t y miles of s h o r e . " Shepard d i s p a t c h e d a r e p o r t t h a t he compiled from previous work he had done i n t h e a r e a and from World War I I submarine defense d a t a . L e t t e r s , S. W. Oberg (Chief Engineer, Humble) t o F. P. Shepard, August 9, 1946, and F . P. Shepard t o S. W. Oberg (Chief Engineer, Humble), August 2 1 , 1946. Folder 47 (Humble Oil Company, 1946), Box 13, Shepard Papers, SIO. A. H. Glenn [ m e t e o r o l o g i s t and owner/operator of A. H. Glenn and A s s o c i a t e s ] , i n t e r v i e w by a u t h o r [ t e l e p h o n e ] , Tape r e c o r d i n g , New Orleans, Louisiana, March 26, 1992.

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Just as traditionalists had a problem in adapting to marine operations, so too did employees and executives have reservations about meteorologists dictating the tempo of operations.

For many, weather forecasting came from the

Farmer's Almanac, or was the topic of endless conversation and not taken seriously. Ironically, the "can-do" oil field spirit that found practical offshore solutions created a deep-seated industry "machismo" lambasting weather forecasting as unnecessary. The offshore industry had emerged from the shore-based oil field tradition that resisted change.

With no experience in

marine operations, early day roughnecks on platforms scurried around in cowboy boots on oil-coated decking, and protested shutting down operations for "small" problems like bad weather. In t h e o i l i n d u s t r y you always keep going - - forget t h e w e a t h e r . You d o n ' t ever shut down because of weather.54 Many vowed never t o use such a s e r v i c e , nor would they allow i t in the industry.55

^^Glenn remembered one p a r t i c u l a r l y o b s t i n a t e Superior Oil Company s u p e r i n t e n d e n t in L a f a y e t t e , Louisiana named "Slim Long." Glenn p a r a p h r a s e d Long's r e f u s a l . A. H. Glenn [meteorologist and o w n e r / o p e r a t o r of A. H. Glenn and A s s o c i a t e s ] , interview by a u t h o r [ t e l e p h o n e ] , Tape r e c o r d i n g . New Orleans. Louisiana, March 26, 1992. ^ ^ I b i d . Marvin Jones [petroleum e n g i n e e r ] , interview by a u t h o r . Tape r e c o r d i n g , Houston, Texas. April 29, 1993. Jones noted t h a t o i l i n d u s t r y e n g i n e e r i n g had a p r o p e n s i t y of blocking innovation and ingenuity.

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Acceptance was slow, but by the early 1960s prudent companies used weather forecasting.

The industry converted

when oil companies not using the service suffered damage, lost drilling time, and other costly charges, while those with reliable forecasts emerged relatively unscathed.

The

offshore industry came to depend upon regular and accurate reports for i t s day-to-day operation.

Routine forecasts

more than severe storm warnings proved the worth of the service.56 Particularly compelling was the pressure that insurance companies brought to bear.

Underwriters noticed that fewer

accidents occurred to those companies who used such a forecast service.

By the 1960s insurance companies raised

rates on those oil companies s t i l l refusing to use them.

By

the 1970s, using a weather service became a required part of offshore operations.

That meant before undertaking any

operation companies had too have a certified report from A. H. Glenn.54

56in comparison t o t h e g e n e r a l type of f o r e c a s t issued by t h e N a t i o n a l Weather S e r v i c e , o i l i n d u s t r y f o r e c a s t s were l o c a t i o n and t a s k s p e c i f i c , and much more a c c u r a t e . Glenn commented t h a t i f you were not a c c u r a t e , you could s t a r v e . A. H. Glenn [meteorologist and o w n e r / o p e r a t o r of A. H. Glenn and A s s o c i a t e s ] , i n t e r v i e w by a u t h o r [ t e l e p h o n e ] , Tape r e c o r d i n g . New Orleans. Louisiana, March 26, 1992. 5'^Curtis Crooke [Global Marine Chief Engineer, r e t i r e d ] , i n t e r v i e w by a u t h o r [ t e l e p h o n e ] . Tape r e c o r d i n g , Templeton, C a l i f o r n i a , November 9, 1992.

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From an engineering perspective, meteorological forecasts designated mobile platforms either for removal or evacuation of personnel. operations.

It improved the safety of offshore

In addition, meteorologists used hindcasts of

previous storms and weather conditions to help the industry design drilling platforms.

Gulf hurricanes caused the

industry special problems.

Feeding off the warm water of

the Gulf, hurricanes generated tremendous wave strength and size.

Offshore economic planning depended upon the accurate

forecast of potentially destructive storms.58 In the postwar period, oceanographers and meteorologists only had a rudimentary knowledge of hurricane dynamics. Aside from revealing historic hurricane paths, and understanding its convectional nature, many scientists admitted that the "exact nature or meteorological conditions necessary for the generation of tropical cyclones is a matter of some conjecture."59

Understandably oil companies

felt exposed to such storms and scrambled for any available information.

The Offshore Operators Committee pushed for

hurricane studies, and expressed concern about offshore

^^TAMU Department of Geography, fDevelopment of Oceanographic Tpformation for Offshore Operations on the Gulf Coasti: Report on Organization and Progress, p. 3. 5 9 T A M U Department of Geography, Problems Of Oceanographic flpgineering in the Gulf of Mexico, volume 1, p. 17. One storm pounded offshore rigs with 35 foot waves driven by 65 MPH winds

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o p e r a t i o n s , e s p e c i a l l y a f t e r the 1950 h u r r i c a n e season wreaked havoc upon offshore r i g s . Oceanographers soon r e a l i z e d t h a t such storms generated two wave t y p e s .

Hurricanes produced wind driven waves t h a t

could reach 100 feet in h e i g h t .

In the Gulf, such waves

were r a r e because of the shallow-water.

However, when they

d i d occur such waves caused c o n s i d e r a b l e damage.

The

shallow-water c o n d i t i o n s allowed the winds to whip the Gulf i n t o a much more f r a n t i c s e a - s t a t e than otherwise would have been p o s s i b l e .

The waves accompanying storm t i d e s were more

frequent and were r e s p o n s i b l e for the majority of h u r r i c a n e damage.

By i n c r e a s i n g the normal water depth as much as 14

f e e t , h u r r i c a n e s generated even l a r g e r waves.60

Scientists

t h e o r i z e d t h a t the low barometric p r e s s u r e in the "eye" caused t h e s e a - l e v e l t o r i s e .

As a r e s u l t , both the storm

t i d e and the storm wave gave h u r r i c a n e s the power to cause heavy damage to offshore equipment, and t o impede e x p l o r a t i o n and p r o d u c t i o n . 6 1 In 1949 the i n d u s t r y had a preview of the damage a h u r r i c a n e could cause in the Gulf c o a s t .

A minor storm,

n e a r l y a t h u r r i c a n e - s t r e n g t h , moved through the Gulf waters ^^A Texas A&M o c e a n o g r a p h i c r e p o r t mentioned t h a t even t h e U . S . Weather B u r e a u ' s Monthly Weather Review f a i l e d t o mention t h e "storm wave" i n any of t h e h u r r i c a n e d e s c r i p t i o n s . TAMU Department of Geography, Problems Of O c e a n o g r a p h i c E n g i n e e r i n g i n t h e Gulf of Mexico, volume 1, p . 1-8. ^^TAMU Department of Geography, Problems Of O c e a n o g r a p h i c T^pgineering i n t h e Gulf of Mexico, volume 1, p p . 1-7 and 1-8.

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and traveled northward through Grand Isle, Louisiana.

It

caused widespread damage and interrupted operations. Surprised that such a storm could create such havoc, the industry improved platform design and supported the collection of additional weather and oceanic data so that i t would be better prepared.62 However, predicting storm strength and frequency was unreliable, if not impossible.

Meteorologists and

oceanographers could only suggest what might be the "probable maximum hurricane."

Further confusing matters,

the various scientists and research groups had devised varying methods of assessing storm strength.

They used

different mathematical formula and hindcast data pools. Therefore, one standard of storm strength could not be compared with the next.

The solution came in 1950 when

A. H. Glenn correlated a storm's intensity to i t s recurrence interval. ^^National Petroleum Council Committee on Effects of New Technology on t h e Petroleum I n d u s t r y . Impact of New Technology on t h e y..q. Petroleum I n d u s t r y . 1946-1965 (Washington, D . C : National Petroleum Council, 1967), p p . 205 and 206. Many of t h e o i l companies met June 16, 1949 i n Houston a t a meeting of t h e Offshore O p e r a t o r s ' Committee. The twelve o i l companies r e p r e s e n t e d discussed t h e e f f e c t s of wave a c t i o n , and f e l t t h a t an e x t e n s i v e study by a " q u a l i f i e d r e s e a r c h o r g a n i z a t i o n " should be i n i t i a t e d . E i t h e r through a c t u a l o f f s h o r e s t u d i e s or through t h e use of models, t h e d e l e g a t e s f e l t s u r e t h a t a more economical and safe s t r u c t u r e could be b u i l t . The meeting suggested t h e u s e of automatic data c o l l e c t i o n on r i g s exposed t o storm e f f e c t s . R. C Farley and J . S. Leonard, "Hurricane Damage To D r i l l i n g P l a t f o r m , " World Oil 130. no. 4 (March, 1950), 90. One of t h e consequences of h u r r i c a n e concern was t h e development of t h e mobile o f f s h o r e d r i l l i n g p l a t f o r m . Ralph Scales [Chief Engineer ( r e t i r e d ) of Bethlehem S h i p y a r d ] , i n t e r v i e w by a u t h o r . Tape r e c o r d i n g , Beaumont, Texas, June 15, 1992.

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In the late 1940s meteorologists applied what they termed "extreme value analysis" to historic weather data. Drawing from historical meteorological data, for a five or ten year span, scientists mathematically extrapolated the possible storms for either a 25-, 50- or 100-year interval. Using the method, Glenn was able to give the oil industry i t s first look at what i t might expect in the Gulf.63 Through the years the offshore industry has tracked and evaluated hurricanes.

Such studies gave important insight

into the storms and prompted the alteration of design requirements for both static and mobile platforms.

However,

two powerful hurricanes in the mid-1960s that devastated the Gulf coast and caused considerable industry damage compelled the industry to reevaluate design, and raise construction standards.

In 1964 Hurricane Hilda bewildered the industry

when i t capsized "Bluewater I" built for deep-water and hurricane conditions.64

in 1965 Hurricane Betsy created

^-^A. H. Glenn [meteorologist and owner/operator of A. H. Glenn and A s s o c i a t e s ] , i n t e r v i e w by a u t h o r [ t e l e p h o n e ] , Tape r e c o r d i n g . New O r l e a n s , Louisiana, March 26, 1992. Though t h e term i s used with g r e a t frequency amongst t h e general p u b l i c t o d e s c r i b e wave c o n d i t i o n s t h a t occur every 100 y e a r s , i n f a c t , having a number of storms, e i t h e r matching o r exceeding t h e 100-year r a t i n g was p o s s i b l e . This r a t i n g i s simply a b a s e - l i n e e s t a b l i s h e d by mathematical evidence. The offshore i n d u s t r y acknowledges Glenn as t h e developer of t h e storm and wave rating scale. ^^Quoted i n "This i s What Hilda Did," Offshore 1 1 , n o . 4 (November, 1964), 20. "The offshore i n d u s t r y has been d e a l t a s l e d g e hammer blow." The impact of t h e storm s u r p r i s e d t h e i n d u s t r y t h a t had become accustomed t o s u r v i v i n g h u r r i c a n e s without major i n c i d e n t . In t h e p a s t , mobile d r i l l i n g u n i t s had experienced minimal damage, and o p e r a t o r s had considered permanent platforms as v i r t u a l l y immune. Hilda had t h e impact of d i s p e l l i n g t h e notion t h a t a l l h u r r i c a n e s were h a r m l e s s , and forced t h e i n d u s t r y t o r e e v a l u a t e i t s e n g i n e e r i n g .

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widespread damage and toppled the heavy-weather mobile p l a t f o r m "Maverick." most dramatic impact.

But, Hurricane Camille in 1969 had the Producing waves more than 7 0 feet

h i g h , i t slammed i n t o the Gulf c o a s t .

The t h r e e storms, one

a f t e r t h e o t h e r , prompted the complete r e - e v a l u a t i o n of o f f s h o r e design c r i t e r i a .

The o i l i n d u s t r y had been

f o r t u n a t e s i n c e during the e a r l y y e a r s from 1945 t o 1957 i t had enjoyed a p e r i o d of h u r r i c a n e - f r e e weather.

Hurricane

Audrey in 1957 served as b r i e f "wake up c a l l " to the i n d u s t r y t h a t had l u l l e d i t s e l f i n t o complacency and had b u i l t equipment t h a t accommodated much milder weather.65 But, the severe storms of the mid-1960s j o l t e d the i n d u s t r y i n t o r e a l i t y and forced i t to r e a l i z e t h a t severe storms occurred much more frequently than p r e v i o u s l y thought.66 The use of s c i e n c e and technology was c r u c i a l to the development of offshore o p e r a t i o n s .

Coming immediately

•Missing Rigs Give F i r s t Hint of Hilda' Lethal Fury," Offshore 11, no. 4 (November 1964). ^^The o i l producing a r e a s of the Gulf experienced only two f u l l fledged h u r r i c a n e s from 1945 t o 1965. The World Almanac. 1991 (New York: World Almanac, 1991), p . 541. As an economic d e c i s i o n , t h e i n d u s t r y b u i l t platforms r a t e d for only a 25 year storm r e c u r r e n c e . In t h e mid-1960s, storms t h a t exceeded the 25 year r a t i n g appeared causing widespread damage and a r e - e v a l u a t i o n of platform c o n s t r u c t i o n . Griff Lee, "Design and C o n s t r u c t i o n of Deep Water Jacket Platforms for Third I n t e r n a t i o n a l Congress on t h e Behavior of Offshore S t r u c t u r e s (BOSS) ' 8 2 , " p . 8. Massachusetts I n s t i t u t e of Technology, Cambridge, M a s s a c h u s e t t s . August 2 - - 5 , 1982. Courtesy Griff Lee. ^^From 1948 t o 1988, the i n d u s t r y had l o s t 40 platforms t o h u r r i c a n e s . Most of those came during Hurricanes Hilda and Betsy. G r i f f Lee, Fixed Offshore Platforms - Design and Construction c o n s i d e r a t i o n s : Lecture Notes for the U n i v e r s i t y of Texas Short Course. 1988. Courtesy Griff Lee.

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after the war, the industry took advantage of the wartime technology and expertise and applied the knowledge directly to the oil industry.

Tapping into the oceanographic

information of the leading academic institutions, the oil industry orchestrated the continued development of oceanographic research and pushed into realms never expected or planned for. The offshore industry did not invent the various research areas, but was the beneficiary of World War II development.

Oceanography, meteorology, wave study,

submarine geology, marine equipment, marine personnel, either naval or scientific went a long way to lower the technological threshold for offshore development and made it more economical to push into the Gulf and to survive there. Moreover, the oil industry created a fertile economic environment wherein such disciplines could grow and thrive. Undoubtedly, the offshore oil industry sparked the development of modern oceanography and meteorology.

Through

the sponsorship of oceanographic exploration, the creation and subsidization of oceanographic departments and institutes, the oil industry accentuated the growth of scientific inquiry.

In spite of an inherent conservatism

against technological innovation, the oil industry, driven by economic factors, sparked an interest in and development of fields that had for years lay just beyond the industry's

191

reach.

With the oil industry infusing interest in research,

it created a positive atmosphere where oil money synthesized scientific and engineering expertise, and helped to establish reasonable operational standards for a new and distinctive industry--the offshore oil industry.

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CHAPTER VI THE OFFSHORE BUSINESS--COMING OF AGE From 1953 to 1960, the modern offshore oil industry emerged.

With the lifting of the drilling ban on the

tidelands, and the sale of new leases to oil companies, the offshore industry enjoyed a rebirth of activity rivaling the post-World War II rush that had excited the industry from 1945 to 1948.

Larger oil companies, by aggressively

purchasing new leases, contracting for additional seismic surveys, and drilling new exploratory wells into even deeper water characterized the revived push into the Gulf.l

The

industry however suffered a severe economic collapse in the middle of the transition period.

The usual recessionary

characteristics of over-speculation, unsound business practices, and unsecured funding characterized much of it. In the business excitement that immediately followed the tidelands dispute, oil operators had made and lost vast fortunes.

Offshore lease prices had soared as investors and

speculators surged through the offshore.

Platform and

mobile barge construction had reached unprecedented levels. As demand had pushed oil prices higher, loan money had been

^Griff Lee, "Design and Construction of Deep Water Jacket Platforms for Third International Congress on the Behavior of Offshore Structures (BOSS) '82," p. 2, Massachusetts Institute of Technology, Cambridge, Massachusetts, August 2--5, 1982. Courtesy Griff Lee.

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plentiful and operators had taken advantage and, in some cases, had used no collateral.

Unfortunately the bottom

fell out in the late 1950s. As crude prices dipped, oil companies that had over-speculated in leases and platform construction disappeared, or, at least, retreated from the offshore.

The recession sobered the industry and clearly

showed how foreign oil dictated the fortunes of the offshore industry.

As a result, a new cadre of offshore operators

eclipsed those that had been important in the beginning. Meanwhile, larger oil companies that had been cautious, and had waited to see how political and economic events would play out, stepped forward and led the industry into a new age of development. The industry that emerged in 1962 was much different from that which had taken the first offshore steps. More conservative in both fiscal and operational matters, larger companies brought stability and forethought to offshore activity.

Prudently exploring new oil provinces and

assessing their long-term oil possibilities, taking an active part in the development of offshore technology that enhanced oil reservoir access, and establishing industry operational standards that saved money and ensured a safe work environment, such companies stood in stark contrast to the free-spirited organizations of the early years. Moreover, the increased rigors of making offshore profits

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forced an increased internationalization of the industry and a heightened division of offshore services.

Such conditions

set the stage for the worldwide development of offshore oil. In 1953, with the lifting of the drilling ban, oil companies vied for untapped oil reserves even further offshore.

With each technological advance, the offshore

frontier moved into even deeper waters, and potentially into new productive zones.

When Murphy Oil and John T. Hayward

achieved their greatest success with the first viable mobile drilling rig, Charles Murphy, the President of the Company, asked Hayward to consider moving into even deeper water. Murphy's deep-water query perplexed Hayward. Why on earth, with the present price of crude and the extremely expensive and clumsy methods of production, should anybody want to drill a well in a hundred feet of water? It appears to me that there are more profitable and easier accomplished lines of action to be undertaken first.2 Hayward favored a "go-slow" policy, and his hesitation stood in stark contrast to his daring efforts in the development of the Seadrill.

Hayward's caution about deep-water

operations hinged partly upon the difficulty in dealing with the Gulf's soft foundation problem and solving those and other questions.

Hayward, more than any other person, had

understood the extreme risk and expense of offshore

^Letter, John T. Hayward to Burch Williams (Murphy Oil) May 25, 1953, Folder: Murphy Corporation - Barge, Hayward Papers, Tulane University.

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operations.

Perhaps, Hayward doubted whether the industry-

would ever become profitable, given the huge initial investment. However, Murphy seemingly understood the ephemeral nature of offshore success.

Since the offshore industry was

still in its formative period of experimentation and was experiencing rapid change, he felt his lead was tenuous.3 As a businessman, he understood the competitive arena and knew if he did not continually improve his position, the competition would overtake him.

Rather than bask in the

after-glow of success, he fought to stay ahead of competition.

Remembering the intensely competitive West

Texas oil frontier, he expected operators to soon clog the continental shelf with activity.

He understood the oil

business and followed the unwritten rules of the offshore "game":

(1) get there first, and (2) apply as much cost-

effective technology as possible.

Though Hayward was the

creative and inventive force. Murphy grasped the business of finding, developing, and producing oil.

He understood that

competition in the search for productive fields at a reasonable price and the use of technology to unlock those fields shaped the offshore oil industry.

•^Dean McGee noted that the suspension of offshore activity during the tidelands crisis gave the companies that stayed out of the initial exploration time to catch up. Dean McGee, "Economics of Offshore Drilling in the Gulf of Mexico, p. 197. American Petroleum Institute: Prilling^ ^"d production Practice. 1954.

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In addition. Murphy fathomed the long-term financial character of offshore investment.

Because of the high price

of technology, lease bonuses, and operating costs, a handful of successful wells could not pay the bills.

Instead, oil

companies had to search for and develop complete reservoirs. Such large scale operations required an investment in excess of $20 million, sometimes extending over ten, twenty, thirty, or even forty years.4

Therefore, a cautious

industry spent considerable time exploring and evaluating leases.

Operating under tremendous pressure, companies had

to maximize yield from each dollar spent.

The burden of

performance tended to dampen wildcat activity, and made many operators cautious about expensive and unproductive experimentation.

Understandably, long-term goals and

strategies reined in a business that had been dominated by the wildcat spirit and short-term gain.5 The search to reduce the political and economic risks held the industry's attention.

In 1953, at least, the

^Ed McGhee, "Storm Warnings are coming down," Oil and Gas Journal 58. no. 23 (June 6, 1960), 100. ^These impressions of the oil industry emerge from the early years when free-flowing wells, and maximum production were the norm. In the post-World War II period, oil was in short supply and an increasing number of domestic wells required artificial lift methods to be produced. As a result, research and development of secondary lift technology received considerable attention. See George H. Fancher, The nil Resources of Texas: A Reconnaissance Survey of Primary and c^econdary Reserves of Oil (Austin: The Texas Petroleum Research Committee, 1954), pp. iii, and 1. It became a high priority for independent producers. See "Resolutions of IPAA Passed By Membership At 1952 Annual Meeting," IPAA Monthly 23, no. 7 (November 1952), 19-20, 4648.

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political problems had been solved, and ODECO's pioneering deep-water units, John Hayward and Mr. Charlie had not only reopened the Gulf, but pushed the offshore frontier past the 40 foot depth.

Eisenhower's pronouncement and the passage

of the Outercontinental Shelf Lands Act ended the tidelands dispute and lowered the political risks enough to revive offshore interest.

In the meantime. Murphy's successful

Seadrill design once again stimulated offshore interests by lowering the economic risks.6 As competition intensified, lease prices soared, such factors pushed some major oil companies abroad.

But the

offshore boom of the 1950s pulled them back to the Gulf and channeled resources into domestic deep-water research. Building upon the efforts of wildcatters, small independents, and drilling contractors that had pioneered the Gulf, the major companies increasingly seized the initiative and launched integrated offshore programs. 1954, the majors had committed themselves to the Gulf.

By Of

the nine largest leaseholders, three were major companies and one was a subsidiary.

Tapping into the expertise of

shipyards, drilling contractors and consulting engineers, the majors standardized offshore technology and operating

^Letter, Alden J. Laborde to Operating Committee (Special Report on New Barge Project), 11/16/53, ODECO #1 - Folder, Hayward Papers, Tulane University.

198

methods, and brought stability to an otherwise volatile industry.7 The reopening of the tidelands, prompted by the the passage of the OCS Lands Act that established Federal jurisdiction of a l l lands beyond State claim, sparked a surprising land rush.

Given the high cost of marine

operations, unknown environmental conditions, the difficulty in finding dependable platform technology, and the high risk associated with oil exploration anywhere, observers had predicted that oil companies and drilling contractors would stay rooted in West Texas and the mid-continent province. Instead, in 1954, oil companies submitted 326 bids for 97 oil and gas leases in the Louisiana offshore and that state collected $42,377,503 in revenue.8

Moroever, the first

federal OCS lease sale sold 95 tracts offshore Louisiana.9 Competitive bidding boosted lease prices to unprecedented heights.

The State of Texas received bonuses of $78 an acre

''Humble — 175.000 a c r e s , S t a n d a r d C a l i f - - 150,000 a c r e s . S h e l l - 120,000 a c r e s , Conoco - - 104,000 a c r e s . C i t i e s - - 101,000 a c r e s , Socony - - 100,000 a c r e s , P h i l l i p s - - 90.000 a c r e s , Kerr-McGee - - 75,000 a c r e s . P u r e - - 7 5 , 0 0 0 a c r e s . Walston, Hoffman and Goodwin R e s e a r c h Department B u l l e t i n , F o l d e r - T i d e l a n d s O i l Lobby # 2 , P e a r s o n P a p e r s , LBJ L i b r a r y . 8-The P e t r o l e u m I n d u s t r y i n L o u i s i a n a - Supplement Two, To The S p e c i a l R e p o r t on ( L o u i s i a n a S t a t e Department of Labor, D i v i s i o n of Employment S e c u r i t y , J a n u a r y , 1957), p . 2 , F o l d e r - P e t r o l e u m 1955-1957; 1 9 5 9 - 1 9 6 1 ; 1963-1965, New O r l e a n s Chamber of Commerce R e c o r d s , A r c h i v e s and M a n u s c r i p t s Department, E a r l K. Long L i b r a r y , U n i v e r s i t y of New Orleans. ^ U . S . Department of t h e I n t e r i o r , M i n e r a l s Management S e r v i c e , R e g i o n a l S t u d i e s P l a n F i s c a l Year 1986: E n v i r o n m e n t a l S t u d i e s Program f^r t h e Gulf of Mexico OCS Region ( M e t a i r i e , La, 1 9 8 5 ) , p . 4 8 .

199

i n 1953, compared with $19 in 1947.

By 1954, the bonus paid

p e r a c r e had soared t o $350.10 The y e a r saw s e v e r a l f i r s t in the o f f - s h o r e o p e r a t i o n s , the f i r s t o f f - s h o r e l e a s i n g of f e d e r a l l y c o n t r o l l e d waters and the f i r s t f i e l d developed in t h e s e a r e a s ; t h e longest submarine pipe l i n e on r e c o r d ; and a twelve-inch l i n e extending f o r t y - e i g h t m i l e s i n t o the waters off the coast of S t . Mary Parish.11 The Gulf o f f s h o r e became the h o t t e s t development zone s i n c e t h e East Texas f i e l d in the 1930s,12 and as the Western h e m i s p h e r e ' s "most important undeveloped o i l and gas reserves."13 Humble was r e p r e s e n t a t i v e of the companies a c c e l e r a t i n g o f f s h o r e a c t i v i t i e s in 1954.

Humble announced a $14.5

m i l l i o n development program t h a t included four 14,000 foot Louisiana w i l d c a t s , two 12,000 foot South Texas w i l d c a t s , and 18 development w e l l s and 2 0 core t e s t s in southern Louisiana.14

in a d d i t i o n . Humble paced ODECO by s t a r t i n g

f i e l d t e s t s of i t s own mobile d r i l l i n g p l a t f o r m - - t h e

^^0. W. Noland and Roy M. Huffington, "Development and Outlook for t h e C o n t i n e n t a l Shelf of Texas and L o u i s i a n a , " Offshore Operations 1, no. 6, (February, 1955), 1011"The Petroleum I n d u s t r y in Louisiana - Supplement One, To The S p e c i a l Report on (Louisiana S t a t e Department of Labor, Division of Employment S e c u r i t y , June, 1955), pp. 2 - 3 , Folder - Petroleum 1955-1957; 1959-1961; 1963-1965, New Orleans Chamber of Commerce Records, Archives and Manuscripts Department, Earl K. Long Library, U n i v e r s i t y of New Orleans. l ^ E z e l l , Innovations in Energy, p . 152. l ^ c i t i e s S e r v i c e Company, 46th Annual Report. 1955. p . 10. Box 18, C i t i e s S e r v i c e Oil and Gas Corporation C o l l e c t i o n , Division of Manuscripts, Western History C o l l e c t i o n s , U n i v e r s i t y of Oklahoma. 14"Back To The Continental Shelf," The Humble Way 10. no. 2 (JulyAugust, 1954), 1. 200

DeLona-McDermott Drill Platform No. 1.15 to add 11 static offshore structures.

Also, it planned

Further augmenting

its offshore return. Humble had already begun construction of a seven-mile pipeline to gather production.

Previously,

operators collected and transported crude by barge. process had been time-consuming and costly.

Such a

With a

pipeline. Humble and other companies were no longer chained to slow-moving barges and ships.

Instead it could funnel

crude to refineries as quickly as it was produced.16 What had prompted the surge?

The suspension of offshore

activity during the tidelands crisis gave the companies that had stayed out of the first offshore push time to reconsider.

Also, as a result of the competitive search for

new oil provinces, operators had bought up most of the landbased properties.

What remained were less attractive leases

that had a lower percentage of oil possibilities, or would require costly secondary recovery methods.

In contrast, the

virtually untapped offshore zone promised as much oil as the coastal plain had produced in the preceding half century since Spindletop. 1'^

15"Back To The Continental Shelf," The Humble Way 10, no. 2 (JulyAugust, 1954), 1. l^"Back To The Continental Shelf," The Humble Way 10, no. 2 (JulyAugust, 1954), 1; Arthur S, Davenport, "Kerr-McGee's Venture in the Gulf," The Drilling Contractor 4 (April, 1948), 56. l^Dean McGee, "Economics of Offshore Drilling in the Gulf of Mexico, American Petroleum Institute: Drilling and Production Practice (1954), p. 197; "Back To The Continental Shelf," The Humble Way 20, no. 10 (July-August, 1954), 3.

201

Operators soon realized that offshore potential and reserves far surpassed onshore counterparts.

"Wildcat

success ratios were consistently higher than onshore."18 From 1945 to 1959 offshore success rates averaged 35%, while onshore averaged only 11%.19

Also, from 1938 to 1967 the

industry managed to d r i l l 9,460 wells with a 20% wildcat success r a t i o . In the offshore, the industry achieved a 73.7% success ratio. 20

some of the more fortunate

operators attained even higher rates--to 80%.21 with a growing postwar thirst for oil, companies moved quickly to take advantage of a favorable market.

The growing selection

of available platform technology gave oil companies the opportunity to offset rising offshore exploration and production costs.

Moreover, the new mobile platforms

offered entry into and maneuverability especially into the deep-water zones.

The construction of Mr. Gus for Glasscock

Drilling of Corpus Christi pushed mobile drilling into the

l®"Huge Spending Boom t o Reach New Highs," World Oil r e p r i n t e d i n Offshore Handbook (Houston: Gulf Publishing Company, 1969), p p . 19-20. See a l s o , J . E. Kastrop, "56 Years of Gulf Coast O i l , " World O i l . 130, no. 7 (June, 1950), 58-59. United S t a t e s S t e e l Corporation, Offshore D r i l l i n g i n t h e Gulf of Mexico: A Forecast of Future S t e e l Requirements ( P i t t s b u r g h : U.S. S t e e l , 1957), p . 5. l^"Offshore Payout S t i l l Years Away," Oil and Gas Journal 58 n o . 18, (May 2, 1960), 7 8 . Another source c i t e d offshore w i l d c a t t i n g a s 50 t o 70 p e r c e n t more successful than land-based o p e r a t i o n s . U. S. S t e e l C o r p o r a t i o n , Offshore D r i l l i n g in t h e Gulf of Mexico:, p . 5. 20"Huge Spending Boom t o Reach New Highs," World Oil r e p r i n t e d i n Qffshore Handbook (Houston: Gulf Publishing Company, 1969), p p . 19-20. 2lBarney McCasland [petroleum g e o l o g i s t and former Marine G e o l o g i s t for C i t i e s Services Company], i n t e r v i e w by a u t h o r , n o t e s , Lubbock, Texas, February 20. 1997. 202

record-breaking 100-foot depth zone.

Combining the

technology with risk-minimizing offshore partnerships, profitable Gulf operations became possible.22 The elimination of federal price controls also revived interest in the offshore.

From 1945 to 1947 and from 1948

to 1953 federal controls had kept the oil price down to approximately $1.80 a barrel.

Though i t cut inflation, a

low oil price barely allowed operators to cover expenses. The Cold War and Korean War further aggravated the situation by compelling operators to maximize production.

In essence,

operators depleted reserves and sold the oil below replacement cost.

The elimination of price controls in 1953

pushed oil prices upward to $3.11 a barrel. responded by moving into the Gulf.

Operators

However, observers said

the industry was like a bear out of hibernation--weak and yet unable to take advantage of opportunities.23 The willingness of drilling contractors to invest in new equipment contributed to the offshore rush.24 Such interest

22-Glasscock Commissions 'Mr. G u s , ' " Offshore Operations 1, n o . 4 (December, 1954), 1 5 . 23-why Oil P r i c e s Should R i s e , " Texas Oil J o u r n a l . 19, No. 10 (February, 1953), 6; T. S. Petersen, "New Horizons." Standard Oil of C a l i f . , 1954. p . 15. Folder - Text M a t e r i a l , Box 2 1 , C i t i e s Service Oil and Gas Corporation C o l l e c t i o n , Division of Manuscripts, Western History C o l l e c t i o n s , U n i v e r s i t y of Oklahoma. 24one of t h e problems offshore o p e r a t o r s had experienced was t h e p a u c i t y of offshore s e r v i c e s , such as cement and mud. This g r e a t l y l i m i t e d t h e o p e r a t i n g c a p a c i t y of t h e offshore r i g s . I t would not be u n t i l 1954 when bulk cement and mud s e r v i c e companies appeared. •6-well Derrick an Offshore H i g h l i g h t , " World Oil 138, no. 5 (April, 1954), 152. 203

was crucial since operators shied away from experimenting with technology and handling their own drilling operations. The majors had avoided capital investment in drilling equipment and personnel, both onshore and offshore. Corporate drilling departments had been notorious moneyp i t s , especially when equipment and personnel were idle.25 Also, in the 1940s and 1950s, the rise of labor unions had encouraged oil companies to rely upon service companies. Labor demands for pay raises, improved working conditions, hospitalization, and other issues convinced oil companies that drilling departments required an inordinate amount of administrative attention.

As a result, drilling contractors

became increasingly important in oil field operations.26 Contractors emerged as valuable resources of technical information.

Because they vended offshore drilling services

to the operators, contractors, as a consequence, became increasingly familiar with the available technology and developed considerable expertise in the evaluation and purchase of such equipment.

Though operating companies

continued to invest money in research and development.

^^Bruce C o l l i p p [Naval A r c h i t e c t formerly of Shell Oil Company and t h e acknowledged inventor of t h e semisubmersible], i n t e r v i e w by a u t h o r . Tape r e c o r d i n g , Houston, Texas. May 5, 1993. ^^Robert Bauer [founder and r e t i r e d CEO of Global Marine D r i l l i n g Company], i n t e r v i e w by a u t h o r , Tape r e c o r d i n g . Los Angeles. C a l i f o r n i a , March 1-3, 1993. Only a handful of companies maintained d r i l l i n g d e p a r t m e n t s . These included Kerr-McGee (Transworld) and Murphy Oil (ODECO). 204

contracting companies, operating within a highly competitive business environment, became more aggressive in seeking out and, in some cases, developing cutting-edge technology. Drilling contractors thus led the way for the rest of the industry into the Gulf.

Successful ones had sound

financial resources, often had previous land-based experience, and used simple and efficient offshore designs. To assess mobile platforms and other pertinent equipment, contractors linked themselves closely to shipyards, naval architects, marine engineers, oceanographers, meteorologists and other specialists.

Owing to the increasing complexity

of offshore operations, drilling contractors became data clearinghouses for various disciplines and fields of expertise, and took on a technological sophistication that often surpassed their land-based cousins.

From such

research and development emerged a myriad of new designs. They included Offshore Drilling and Exploration Company's (ODECO) reworking of the Hayward Seadrill. DeLong's floating dock concept, the LeTourneau jackup barge design, and Bethlehem Shipyard's mat-supported jackup barge.27 In addition to the contractors, independent operating companies, sporting a greater willingness to gamble, had refined offshore technology for the open waters of the Gulf.

^^Letter, C H. Murphy, Jr. to John T. Hayward May 28, 1953. Folder: Murphy Corporation - Barge, Hayward Papers, Tulane University

205

In the late 1940s, companies like Kerr-McGee and Humble Oil and Refining fostered the development of small platform and tender technology that made up 90% of the offshore business in the mid-1950s. Unfortunately, oil companies encountered difficult in designing the ideal platform.

No one knew with any degree

of certainty which design was best.

But, as operators and

contractors became increasingly interested in offshore operations, drilling activity accelerated.

As a result,

simply finding a platform manufacturer became as important as having a proven design.

Operators envied prudent

companies like ODECO that had well-timed its offshore entry. Alden Laborde's early and prescient commitment to the Hayward-design, his persistence in finding an underwriter and his contractual arrangement with a shipyard paid dividends.

Together ODECO and Avondale Shipyard28

maintained a strong and competitive offshore presence.29 ODECO's success revived offshore interest.

Contractors

swamped shipyards, elbowing each other for yard time and advice from naval architects and marine engineers.

What

emerged was a symbiotic relationship that served the interests of oil companies and marine fabricators.

Some of

^^Alexander Shipyard changed its name to Avondale. ^^Fares K. Hanna, "Off-Shore Trends," Drilling 16, no. 10 (August, 1955), 79.

206

t h e more well-known and successful r e l a t i o n s h i p s grew between Glasscock D r i l l i n g Company of Corpus C h r i s t i , Texas, and Bethlehem Shipyard in Beaumont, between Kerr-McGee I n d u s t r i e s of Oklahoma City and I n g a l l s Shipyard of Pascagoula, M i s s i s s i p p i , and Zapata Off-Shore of Houston, and R. G. LeTourneau, I n c . of Longview.

Such p a r t n e r s h i p s

formed t h e t e c h n i c a l base of Gulf development. Though i t gave e n t r e e to the offshore, technology was expensive.

Offshore operating companies expected to pay $20

m i l l i o n in developing an o i l f i e l d . 3 0

Successful

offshore

companies d i s t r i b u t e d the cost by forming corporate p a r t n e r s h i p s and using the l a t e s t technology.

Offshore

o p e r a t i o n s soon became r i f e with consortiums and p a r t n e r s h i p s t h a t d i s t r i b u t e d r i s k and kept investment sums low.

From 1954 to 1979 offshore p a r t n e r s h i p s increased and

formed 85% of a l l offshore b i d s . 3 1

From the beginning,

s h a r e d - r i s k shaped the o r g a n i z a t i o n a l c h a r a c t e r of operations.

offshore

The Kerr and P h i l l i p s Petroleum combine formed

in 1943 and financed the pioneering work of Kerr-McGee o f f s h o r e Louisiana.32

in 1946, C o n t i n e n t a l ,

Tidewater,

^^Ed McGhee, "Storm Warnings a r e coming down," O i l and Gas J o u r n a l 58, n o . 23 (June 6, 1 9 6 0 ) , 100. •^lAnne W o r c e s t e r Coleman, " O b s e r v a t i o n s About t h e L e a s i n g of t h e O u t e r C o n t i n e n t a l S h e l f f o r P e t r o l e u m E x p l o r a t i o n The Case of Texas" (MA T h e s i s , U n i v e r s i t y of T e x a s , May 1981), p . 144. ^ ^ v i d e o I n t e r v i e w , Dean McGee, S-113 P h i l l i p s H i s t o r i c a l P r o j e c t , J a n u a r y - March, 1979, Reel 2 (of 2 ) , C o r p o r a t e A r c h i v e s , P h i l l i p s P e t r o l e u m Company, B a r t l e s v i l l e , Oklahoma. 207

C i t i e s S e r v i c e Oil companies, and A t l a n t i c Refining Company (CATC) began a program of Gulf surveys and l e a s e purchases.33

i ^ a d d i t i o n . Magnolia, C o n t i n e n t a l , and

Newmont Oil companies (MCN) began bidding on offshore in 1946.34

leases

j n 1948, Barnsdall, Seaboard, and Gallery and

Hurt p a r t n e r e d for a s i x - w e l l d r i l l i n g program in Breton Sound, L o u i s i a n a .

By 1954, t h e number of combines and

p a r t n e r s h i p s continued t o f l o u r i s h .

Pure, Sun, Seaboard,

and Ohio Oil companies joined t o g e t h e r . Melben Oil companies formed another.35

Pure O i l , and in a d d i t i o n ,

natural

gas companies, i n c r e a s i n g l y aware of the vast gas p o t e n t i a l of t h e Gulf, formed t h e i r own combines.3 6

The t r e n d

continued through t h e 1960s and 1970s where consortiums d i f f u s e d t h e c o s t l y North Sea geophysical surveys and d r i l l i n g , 3 7 ^nd t h e Gulf o p e r a t i o n a l expansion.38

^^"Tenth Anniversary," Offshore 4, no. 6 (August, 1956), 67-68. -^^Eugene H. H a r r i s , South Pelto Block 20, in Lafayette Geological S o c i e t y , Offshore Louisiana Oil and Gas F i e l d s , p . 8 1 . •^^"Four Majors Form New Combines in Search for Offshore O i l , " Offshore Operations 1, no. 3 (November, 1954), 25. •^^"Nine Companies Band In Two Offshore Combines," Offshore Operations 1, no 2 (October, 1954), 22. ^"^Video I n t e r v i e w with John Houchin, S-113 P h i l l i p s H i s t o r i c a l P r o j e c t , January 9, 1980, Reel 5 (of 6 ) . Corporate Archives, P h i l l i p s Petroleum Company, B a r t l e s v i l l e , Oklahoma. "Europe's North Sea F r o n t i e r , " Offshore 2 1 , no. 5 (June 22. 1964), 47. •^^Pennzoil Offshore Gas Operators was formed in February, 1970 t o d e l v e i n t o o i l and gas e x p l o r a t i o n in t h e Gulf. They s u c c e s s f u l l y b i d on land s e t up for bid by t h e I n t e r i o r Department off of t h e Western Louisiana c o a s t . The b i d s accepted by t h e f e d e r a l government on December 16, 1970 involved land t h a t had been fought over by t h e s t a t e of Louisiana and t h e f e d e r a l government. Of t h e f o r t y - f i v e on which POGO bid t h e f e d e r a l government accepted n i n e , c o s t i n g $113 m i l l i o n . This s a l e r e p r e s e n t e d t h e f i r s t by t h e Department of t h e I n t e r i o r s i n c e 208

Often, partnerships were complementary with each company bringing specific strengths.

Usually land-rich operating

companies sought out drilling contractors, and vice versa. Phillips Petroleum entered into a series of successful partnerships with marine drilling firms.

In such

arrangements, drilling companies performed the actual well spudding at a specified capital outlay.39

in return, the

non-working partner underwrote the project.40 Shell Oil Company's and Southeastern Drilling Company's (SEDCO) partnership was one of the more well-known and successful.

Headquartered in Dallas, William P. Clements'

drilling company developed a reputation for reliable, highquality work.

As a result, Shell signed SEDCO drilling

units to a series of "firm, noncancelable" contracts in the 1960s and 1970s.

Shell received superior, dependable

service at a price i t could afford.

By "farming out," Shell

cut i t s equipment and personnel investment.

In return,

SEDCO, with contracts in-hand, built drilling platforms with

t h e p o l l u t i o n controversy which s t a l l e d federal offshore l e a s e s a l e s i n 1968. Tulsa Daily World. December 18. 1970^^Spudding means t o d r i l l a w e l l . ^^In t h e Kerr-McGee/Phillips p a r t n e r s h i p P h i l l i p s assumed t h r e e f o u r t h s of t h e o p e r a t i n g expenses in r e t u r n for 50 percent of t h e p r o f i t s from any o p e r a t i o n s anywhere i n t h e U . S . . Video Interview, Dean McGee, S-113 P h i l l i p s H i s t o r i c a l P r o j e c t , January - March, 1979, Reel 2 (of 2 ) , Corporate Archives, P h i l l i p s Petroleum Company, B a r t l e s v i l l e , Oklahoma. " P h i l l i p s I s Sharing Offshore C o s t s , " o i l and Gas J o u r n a l (February 29, 1960), 4 1 .

209

". . . .no capital, at all," and had guaranteed work.41 Such a relationship and many others like it, showed how drilling companies, with excellent reputations and advanceddesign equipment, stayed in business.

Moreover, it clearly

showed how contractors with proven performance records became virtual subsidiaries, if not partners, of the major companies.

Though the majors had long ago drifted away from

directly subsidizing their own service departments, corporate leadership showered highly profitable contracts upon favored companies.

In turn, such mutually beneficial

arrangements encouraged the growth of the service sector, particularly those companies that shared a similar corporate work ethic and work quality. However, even successful offshore operations had difficulty adjusting to the long-term recouping of investments.

No company expected to see any profit for at

least four years. 42

Even combines such as CATC with solid

financial backing took a long time to recover investments. From 1946 to 1959, CATC spent $284,785,00 to make $67,492,000.

The trend continued through the 1960s with

profits of only $1.5 million for $44 million invested.43 ^Iwilliam P. Clements [Retired President/CEO of SEDCO and former Texas Governor], interview by author. Tape recording, Dallas, Texas, June 20, 1991. ^^Ed McGhee, "Storm Warnings are coming down," oil and Gas Journal 58, no. 23 (June 6, 1960), 100. ^3"Offshore Oil: A Losing Proposition?" oi1 and Gas Journal 61, no. 13 (April 1, 1963), 78-79.

210

Though the cash-flow problems had improved by the late 1960s, the industry s t i l l languished $1.9 billion in the red.44 Offshore operations depended upon a combination of market and regulatory forces.

Such influences included

crude oil prices, the 27.5% oil depletion tax deduction, and oil well production allowables.45

of the three, declining

domestic production allowables effectively throttled offshore development.

The industry, in cooperation with

state and federal agencies, implemented production quotas as a prewar conservation measure to prevent oil reservoir destruction.46

After World War II, the push to restrict

domestic production increasingly stemmed from the push to import foreign crude, and the fear of a postwar oil glut. While offshore wells needed high allowables to offset costs, in 1949, rates dropped by 90%.47

offshore wells in 100 feet

^^Some investments, made as e a r l y as 1944, had no hope of r e t u r n u n t i l t h e y e a r 2000. "North America Offshore," World Oil r e p r i n t e d i n Offshore Handbook (Houston: Gulf Publishing Company, 1969), 10-14. ^^T. S. P e t e r s e n , "New Horizons." Standard Oil of C a l i f . , 1954, p. 15. Folder - Text M a t e r i a l , Box 2 1 , C i t i e s Service Oil and Gas C o r p o r a t i o n C o l l e c t i o n , Division of Manuscripts, Western History C o l l e c t i o n s , U n i v e r s i t y of Oklahoma, Norman, Oklahoma. 46ln 1933, t h e f e d e r a l government e s t a b l i s h e d c o n t r o l over o i l p r o d u c t i o n , t r a n s p o r t and importation v i a t h e National I n d u s t r i a l Recovery Act (NIRA) and t h e National Recovery Act. The U.S. Supreme Court d e c l a r e d t h e o i l r e g u l a t i o n p o r t i o n of t h e l e g i s l a t i o n u n c o n s t i t u t i o n a l i n 1935. But, in t h a t same year t h e Connally "Hot O i l ' Act was passed t h a t " p r o h i b i t s t h e movement in i n t e r s t a t e and foreign commerce of o i l produced or withdrawn from s t o r a g e i n v i o l a t i o n of a s t a t e s t a t u t e or r e g u l a t i o n . " Clark, The Chronological History of t h e petroleum and Natural Gas I n d u s t r i e s , p . 185. ^ ^ L e t t e r , C H. C Anderson ( o i l p r o p e r t i e s ) t o Lyndon Baines Johnson, J u l y 28. 1954, Folder - "Natural Resources - O i l , " Box 252,

211

of water usually needed 2.9 times the onshore allowable and wells in 250 feet of water required 4.2 times.

But, in

practice, marine wells received only 1.5 times the onshore rate.48

in contrast, the State of Texas had no preferential

allowable for offshore production.49

Marine operators felt

offshore production limits were never high enough, and argued that imports prevented the Gulf from becoming a domestic oil bonanza.50 As production allowables declined, operators relied increasingly upon the oil depletion tax allowance to lessen the impact of high-cost offshore operations.

Originally,

the tax deduction, implemented in 1913, allowed producers to write off up to 5% of yearly production until the recovery of the i n i t i a l investment.51

As oil companies pumped a

reservoir, i t lowered the value of the property.

The

federal government encouraged continued production by giving producers a tax break based upon the rate of depletion. L e g i s l a t i v e F i l e s , 1953-1954, United S t a t e s Senate, 19.49-1961, LBJ Papers, LBJ L i b r a r y . See a l s o Texas L e g i s l a t i v e Council, The Texas Petroleum I n d u s t r y and S t a t e Finances (Austin: S t a t e of Texas, 1950), p . 56. ^^"Offshore O i l : A Losing Proposition?" Oil And Gas Journal 6 1 , no. 13. (April 1, 1963), 78-79. ^^James A. Clark, "The Blue Chip Sea," American Petroleum I n s t i t u t e O u a r t e r l y . Centennial Issue (1959), [34-36], p . 35, Box 29, Folder - O i l F u e l : S t o r i e s About t h e Oil F i e l d s and Gas Corporation, C i t i e s S e r v i c e Oil and Gas Corporation C o l l e c t i o n , Division of Manuscripts, Western History C o l l e c t i o n s , U n i v e r s i t y of Oklahoma. ^ ^ L e t t e r , James A. Madden t o George H. Mahon, J u l y 18. 1947, Tidelands Folder, George H. Mahon Papers. SWCTTU. ^ I c i a r k , The Chronological History of t h e Petroleum and Natural Has I n d u s t r i e s , p . 103.

212

Congress increased the rate to 27.5% in 1926.52

The highly

favorable tax deduction stimulated offshore production, in spite of high offshore costs.

Though both large and small

companies benefited, independent operators with a much smaller profit margin depended upon it for survival.53 In the meantime, larger companies thrived.

Though

experts recommended operators handle offshore properties as "very, very long-term investments,"54 the major companies with much larger and more diversified financial resources could more easily support a non-paying project for ten, fifteen, or even twenty years.55

using exploration and

drilling technology, financial resources, favorable tax laws, and the high rate of offshore discovery, the larger companies actually took less risk than popularly perceived.5 6

52ibid., p. 148. ^•^The 27.5% depletion allowance was pivotal in bringing Humble back to the Gulf. See "Back To The Continental Shelf," The Humble Way 10. no. 2 (July-August, 1954), 3. The Independent Petroleum Association of America deemed its possible elimination as the most pressing issue in 1950. See "Our Major Problems As Viewed by Oil Industry Leaders," 1 P M Monthly 20 no. 10. (February, 1950), 22-25, and 49. ^^Statement by E. B. Miller of Tidewater Oil Company. Quoted in "Offshore Oil: A Losing Proposition?" Oil and Gas Journal 61, no. 13, (April 1, 1963), 78-79. ^^It was expected that the successful companies would or could expect pay-out in ten years, the others could expect it in 20 years. "North America Offshore," World Oil reprinted in Offshore Handbook (Houston: Gulf Publishing Company, 1969), 12. ^^David Robnett Fitch, "Economic Aspects of the Gulf Coast Offshore Oil Controversy," (Ph.D. Dissertation, University of Oklahoma, 1956), p. 165. Fitch's work is a pioneering examination of the offshore oil industry. Many of his observations and conclusions have been verified in this study. See also Testimony of Everette L. DeGolyer. U.S. Congress, House, Committee on Armed Services, Special Subcommittee

213

"Large companies do not stake their fortunes on the outcome of one well, but rely on the probability of obtaining a reasonable ratio of success in many scattered wells."57 The trend toward larger lease size also benefited companies with greater financial resources.

The State of Texas set

lease size at 640 acres, but, the State of Louisiana that had been much more productive set its acreage at 5,000.

In

1953, Outer-continental Shelf legislation set federal lease size at 5760 acres.

The larger tracts ensured efficient

offshore development, avoiding the atomization of oil field prevalent in the years before conservation measures.

By

producing a field as a unit with fewer operators, field development could be paced and field longevity ensured.

The

increased lease size, with no limit as to the number, almost guaranteed the offshore province as the exclusive domain of operators that could "put up a multi-million dollar ante before the cards are dealt."58 In contrast, the smaller companies continued to search for and drill new reservoirs.

Independent companies had

drilled the majority of exploratory wells, and, in the

on Petroleum, Petroleum for National Defense. Hearing, 80th Congress, 2nd Session, February 6, 1948 (Washington, D.C; Government Print Office, 1948), p. 370. ^^Fitch, "Economic Aspects of the Gulf Coast Offshore Oil Controversy," p. 165. ^^Fitch, "Economic Aspects of the Gulf Coast Offshore Oil Controversy, pp. 130. 216-220; T. S. Petersen, President of Standard Oil Company of California, quoted in "Majors Speed Offshore Efforts " World Oil 138, no. 7 (June, 1954), 95.

214

offshore frontier, they had spearheaded drilling activity.59 However, larger and fiscally more conservative companies eventually took over industry leadership. Technology remained the crucial instrument through which the oil industry achieved offshore success.

Smaller

companies, forced into high-risk wildcatting, gambled everything, and effectively used technology to cut costs and improve their chances for success.60

in 1953, a survey

discovered that technical advice enhanced offshore drilling success 2.5 times over onshore well.

It also showed that

11.9 percent of those wells that were discovered via technology were eventually successful, compared to 4.7 percent for those located without.61

The rest of the

industry followed and subsidized the development of and incorporated the most cost-efficient drilling equipment and

^^Public Lands Committee, Interstate Oil Compact Commission Monthly Bulletin 5 (December 1946), 87. ^^In a survey of the wells drilled in 1953 it was discovered that wells drilled with the benefit of technical advice were 2.5 times more successful than those drilled without. Moreover, since 1945 to 1953 the success rate has increased to 3.8 times. It was revealed that 11.9 percent of those wells that were discovered via technology were eventually successful, compared to 4.7 percent for those located without. Fitch, "Economic Aspects of the Gulf Coast Offshore Oil Controversy, p. 167. According to Wallace F. Lovejoy, a former SMU economist, the use of technological development in offshore drilling and production has been probably the "single greatest 'innovation' in the industry to maintain its reserves and capacity position. Wallace F. Lovejoy, "Oil Conservation, Producing Capacity, and National Security," in National Petroleum Policy: A Critical Review, edited by Albert E.' Utton, p. 74. ^iFrederick H. Lahee, "Exploratory Drilling in 1953," Bulletin of the American Association of Petroleum Geologists 35 (June, 1956), 1231.

215

techniques.62

AS a r e s u l t , d r i l l i n g c o s t s dropped from 1953

t o 1965,63 and E v e r e t t e L. DeGolyer, noted petroleum g e o l o g i s t and economic a n a l y s t , noted t h a t crews could perform o f f s h o r e o p e r a t i o n s more cheaply than on land. . . . . a t f i r s t i t was more expensive because they were t r y i n g t o proceed on e x a c t l y the same b a s i s on which they operated on land. When they found t h a t . s p e c i a l equipment could be used - - d r i l l i n g barges - they can now operate in t h a t type of water more cheaply than you can operate on land. The only requirement for lower cost i s t h a t the o p e r a t i o n has t o be on a s c a l e g r e a t enough to j u s t i f y the very g r e a t c a p i t a l expenditure for t h i s s p e c i a l equipment.64

^jl

^^Ed McGhee, "Gulf Shows How t o D r i l l a Mile a Day Over W a t e r , " and Gas J o u r n a l 58, n o . 29, ( J u l y 18, 1960), 6 6 - 6 7 .

^^Coleman, " O b s e r v a t i o n s About t h e L e a s i n g of t h e Outer C o n t i n e n t a l S h e l f , " p . 169. ^^Testimony of E v e r e t t e L. DeGolyer. U . S . C o n g r e s s , House, Committee on Armed S e r v i c e s , S p e c i a l Subcommittee on P e t r o l e u m , p^^rroleum f o r N a t i o n a l Defense. H e a r i n g , 8 0 t h C o n g r e s s , 2nd S e s s i o n , F e b r u a r y 6, 1948 (Washington, D. C : Government P r i n t O f f i c e , 1 9 4 8 ) , 370.

216

At t h e same time, companies such as Glasscock D r i l l i n g Company, Zapata Offshore, ODECO were r e p r e s e n t a t i v e of d r i l l i n g c o n t r a c t o r / o p e r a t o r hybrids t h a t w i l d c a t t e d the Gulf.

Such companies understood t h a t technology gave them a

c o m p e t i t i v e edge, if they picked the c o r r e c t equipment, i n v e s t e d p r u d e n t l y in offshore l e a s e s , and r e t a i n e d the w i l d c a t t e r ' s w i l l i n g n e s s to gamble.

Such motivations had

been c r u c i a l t o o i l i n d u s t r y success, and they remained important through the p e r i o d .

But, with heightened offshore

r i s k s , e s p e c i a l l y in water 100- and even 200-feet deep, the i n d u s t r y depended upon technology to balance the increased costs.65

Companies l i k e Zapata, Glasscock, and ODECO became

adept in e i t h e r developing or i n c o r p o r a t i n g

offshore

technology t o t h e i r d r i l l i n g programs. The emphasis on technology revealed a much broader industry-wide trend.

In the post-World War e r a ,

the

i n d u s t r y as a whole discovered t h a t domestic production had ebbed and t h e o i l discovery r a t e had slowed.

To maintain

p r o d u c t i o n , o i l companies and engineers devised v a r i o u s means of pumping the o i l out of the ground.

As a

^^A summary of t h e N a t i o n a l P e t r o l e u m C o u n c i l ' s recommendation of what s h o u l d be c o n t a i n e d w i t h i n a n a t i o n a l o i l p o l i c y . "NPC O u t l i n e s N a t i o n a l O i l P o l i c y , " World Petroleum 20 ( F e b r u a r y , 1 9 4 9 ) , p . 3 9 . Quoted from N a t i o n a l P e t r o l e u m C o u n c i l . A N a t i o n a l Oil P o l i c y For The TTnited S t a t e s : A Report of t h e N a t i o n a l P e t r o l e u m C o u n c i l . 1949 (Washington, D . C : N a t i o n a l P e t r o l e u m C o u n c i l , 1952), p . 9. O. WNoland and Roy M. H u f f i n g t o n , "Development and Outlook f o r t h e C o n t i n e n t a l S h e l f of Texas and L o u i s i a n a , " O f f s h o r e Operation.s l , n o . 6 ( F e b r u a r y , 1 9 5 5 ) , 10.

217

consequence, the study and e v a l u a t i o n of

artificial-lift

technology became an important focus of c o r p o r a t e and university research.66

Moreover, i t spawned the "high-tech"

equipment t h a t o p e r a t o r s used to d r i l l beyond 20,000 feet t o t h e next o i l f r o n t i e r . 6 7

Technology had become so

i m p o r t a n t , t h e National Petroleum Council, the i n d u s t r y a d v i s o r y group t o the federal government, s t a t e d t h a t , "Technology i s a c r e a t i v e force of major importance in expanding our petroleum resources and in providing adequate s u p p l i e s of o i l a t reasonable p r i c e s . " 6 8

Companies t h a t

understood t e c h n o l o g y ' s future r o l e became i n d u s t r y l e a d e r s . Offshore a c t i v i t y peaked with the Suez C r i s i s in 1956 and 1957.

In 1956 Egypt had seized the Suez Canal, ending

° ° I n 1947, while making a speech d e d i c a t i n g Shell Oil Company's E x p l o r a t i o n and Research Lab in Houston, the Chairman of the Texas R a i l r o a d Commission Ernest Thompson announced t h e importance of r e s e a r c h t o enhance petroleum p r o d u c t i o n . The commission encouraged t h e i n d u s t r y t o appeal t o t h e Texas l e g i s l a t u r e for funding t o sponsor a u n i v e r s i t y r e s e a r c h program. "Importance of Research t o Oil Business and Nation S t r e s s e d by Ernest Thompson," Texas Oil Journal 14, no. 8 (December, 1947), 17. In t h e mid-1950s Texas Technological College sponsored t h e a r t i f i c i a l l i f t short course. ^^A f o r t y member c o r p o r a t e combine s t a r t e d D r i l l i n g Research, I n c . i n 1949 for a t h r e e - y e a r study of a l t e r n a t i v e methods for d e e p - d r i l l i n g . D r i l l i n g Research. I n c . Collected Reports. 1951, f r o n t i s p i e c e and cover l e t t e r s . These r e p o r t s were published from 1949 t o a t l e a s t 1954. See a l s o Robert L. H a z l e t t , Deep Rotary D r i l l i n g (Findlay. Ohio: The Ohio Oil Company, 1956; r e p r i n t e d from 1950), p . i i i . Also, in 1954 t h e Ohio Oil company d r i l l e d t h e f i r s t well beyond four miles t o a depth of 21,482 f e e t in Paloma, C a l i f o r n i a . In October 1958, P h i l l i p s d r i l l e d a 25,340 foot well in Pecos County, Texas. Clark, The Chronological H i s t o r y of t h e Petroleum and Natural Gas I n d u s t r i e s , pp. 245 & 258. ^®A summary of t h e National Petroleum C o u n c i l ' s recommendation of what should be contained w i t h i n a n a t i o n a l o i l p o l i c y . "NPC O u t l i n e s N a t i o n a l Oil P o l i c y , " World Petroleum 20 (February, 1949), 39. Quoted from National Petroleum Council. A National Oil Policy For The United . q t a t e s : A Report of t h e National Petroleum Council. 1949 (Washington, D . C : National Petroleum Council, 1952), p . 9.

218

an on-going ownership dispute between i t and Britain and France.

Eventually, compromise, mediated by the United

States, settled the disagreement, but an oil shortage and market anxiety drove the price upward to $3.09 per barrel. Unprecedented offshore profits aroused the entire industry to fever pitch with the drilling of 14,707 exploratory wells and annual production in the Gulf reaching 16 million barrels.

Operators paid top-dollar for marginal offshore

properties.

In a short time, everyone had apparently become

an offshore contractor.

Many had no workable platform,

while others built drilling units without any guarantee of a drilling job.

However, with opportunity beckoning, a myriad

of investors, companies, and untried platform prototypes appeared in the offshore business.69 With the reopening of the Suez Canal, crude oil prices returned to normal, driving the industry into a severe recession.

High levels of surplus crude, and low production

allowables forced the majors to curtail exploration and production.

As a result, drilling contractors felt the

pinch immediately.

Some went out of business, while others

^^Ezell, Innovation in Energy, p . 244. Responsible Drilling c o n t r a c t o r s in the 1950s did not order offshore exploratory r i g s unless they had a contract in hand with a major o i l company. Kerr-McGee's unit #54 was the f i r s t major offshore r i g b u i l t without a contract. Oil and n^g Journal 59, no. 25 (June 19, 1961), 78; Zapata Off-shore c a p i t a l i z e d on t h e mid-1950s Gulf d r i l l i n g boom. In 1956. i t reported equipment shortages that would give an enterprising company "an advantageous p o s i t i o n not only t o secure additional contrct d r i l l i n g work, but also to enable i t t o p a r t i c i p a t e in i n t e r e s t deals, or farmouts." Zapata Off-shore Annual Reports. 1956. p . 5. 219

were absorbed."70

Two-thirds of the r i g s were i d l e . ' ^ l

Louisiana was h i t h a r d e s t with offshore r i g counts dropping from 115 t o 30."72

The r e c e s s i o n and a 1957 p r o d u c t i o n - c u t

v i r t u a l l y evaporated i t s offshore activity."73 The r i g o r s of r e c e s s i o n forced companies t o adopt new s t r a t e g i e s and changed the complexion of the i n d u s t r y . Prudent companies such as Zapata Off-Shore Company, Reading and Bates, Loffland Brothers, Dixielynn and o t h e r s survived t h e c r i s i s by adopting various s t r a t e g i e s .

First,

they

r e f r a i n e d from b u i l d i n g any platform without c o n t r a c t in hand.

Too many had been b u i l t based upon s p e c u l a t i o n .

Second, they scrambled for any work they could find, even if t h e remuneration was below s c a l e .

B e t t e r to s t a y a c t i v e ,

r a t h e r than t o l e t crews and equipment atrophy.

Idle

c o n t r a c t o r s l o s t $1,500 to $2,000 a day, while a t work they

"^"^Merger of Marine D r i l l i n g i n t o American Tidelands 8/2/1957, • L e t t e r from Lloyd M. Bentsen, J r . t o Stockholders of Marine D r i l l i n g , Co. August 2, 1957," Folder: Marine D r i l l i n g , I n c . (Formerly American T i d e l a n d s , I n c . ) , Hayward Papers, Tulane U n i v e r s i t y . "^Izapata Offshore of Houston r e p o r t e d t h a t in s p r i n g of 1957 100% of t h e i n d u s t r y r i g s were d r i l l i n g , whereas, in January 1958 only 36.5% were working. Zapata Off-Shore Annual Report. 1958, p . 3 . Ed McGhee, •Storm Warnings a r e coming down," Oil and Gas Journal 58, no 23 (June 6. 1960), 100. "^^speech, Alden J . t o S t . Louis S e c u r i t y Analysts Meeting, 6 / 1 4 / 6 1 , p . 5-6, Laborde F i l e - Folder, Hayward Papers, Tulane University. '^^"Marine Rig round-Up" Offshore 9. no. 1 (August, 1958), 19; James A. Clark, "The Blue Chip Sea," American Petroleum I n s t i t u t e Q u a r t e r l y . Centennial I s s u e (1959), 36. Box 29, Folder - Oil F u e l : S t o r i e s About t h e Oil F i e l d s and Gas Corporation, C i t i e s S e r v i c e Oil and Gas Corporation C o l l e c t i o n , Division of Manuscripts, Western History C o l l e c t i o n s . U n i v e r s i t y of Oklahoma. 220

lost only $1,000.74

staying busy included taking on

•farmouts" from operators unable to develop leases.'^5 Third, contractors used technology to increase efficiency. Companies added new drilling equipment and techniques to reduce drilling time and reduce cost.

Companies increased

dramatically the number of multiple-completions per platform.

Using directional drilling methods perfected on

the California coast, operators could tap into a number of production zones from one platform.

Drilling crews had used

triple-well completions during World War II when resources were scarce.

The offshore drillers quickly pioneered

quadruple and quintuple completions. "^6

Moreover, operators

received a full-well-production allowable with each completion, thus further distributing platform and production costs. "^"^ Contractors adapted to the economic crisis in other ways.

They shifted their focus from domestic to foreign

operations.

Foreign drilling arrangements became

increasingly attractive.

"The costs are very comparable.

"^^Ed McGhee, "Storm Warnings a r e coming down," O i l and Gas J o u r n a l 5 8 . no 23 (June 6, 1 9 6 0 ) , 1 0 0 . "^^Zapata O f f - S h o r e Annual R e p o r t . 1957, p . 5 . "^^"Offshore Quadruple C o m p l e t i o n , " O f f s h o r e 8, n o . 6 (August, 1 9 5 8 ) , 1 9 , 2 1 ; Ed McGhee, "Storm Warnings a r e coming down," O i l and Gas J o u r n a l 5 8 , n o . 23 (June 6, 1960), 100; C l a r k , The C h r o n o l o g i c a l H i s t o r y ^f t h e P e t r o l e u m and n a t u r a l Gas I n d u s t r i e s , p p . 2 1 1 , 257 and 2 6 4 . ^^By t h e l a t e 1950s, 75% of a l l o f f s h o r e w e l l s were d i r e c t i o n a l l y drilled. I n A p r i l , 1960, S i n c l a i r O i l and Gas f i n i s h e d t h e f i r s t quintuple completion. Ed McGhee, "Storm Warnings a r e coming down," O i l and Gas J o u r n a l 5 8 , n o . 23 (June 6. 1960), 100.

221

and they practically give you the concessions."^8

Lucrative

contracts, often without production limits, ushered in an internationalization of the offshore industry.'^9

oil

companies moved to Columbia, Guatemala, Costa Rica, Peru and to the Middle East.

In addition, contractors became

offshore lease operators.

The meager, though steady, income

from offshore production maintained equity levels. Also, companies found they could deduct exploration costs on their income taxes, thus lessening the ever-increasing cost of doing business offshore.80

Finally, businesses diversified,

distributing their investments both onshore and offshore.81 By the late 1950s, such practices characterized the successful offshore companies. The recession also transformed the industry by ending the predominance of the small platform-tender system prevalent in offshore operations.

Though drilling barges

and other mobile drilling platforms had proven themselves, the small platform-tenders had remained the most pervasive means of drilling during the 1950s.

The popularity of

"^^Statement by officials from the Offshore Company. "Going Abroad? Try an Offshore Site!," oil and Gas Journal 57, no. 26 (June 22, 1959), 67. "^^Zapata Off-Shore Annual Report. 1957, pp. 3 and 5; Ed McGhee, "Storm Warnings are coming down," oi1 and Gas Journal 58, no. 23 (June 6, 1960), 100. ^•^Reading and Bates Offshore Drilling Company, Annual Report. 1957, p. 4. Courtesy Reading and Bates. Houston, Texas. ^Izapata Off-Shore Annual Report. 1962, pp. 8.

222

p l a t f o r m - t e n d e r s stemmed, in p a r t , from i t s e a r l y success barkening back t o Kerr-McGee's f i r s t well in 1947.

The

system had remained popular s i n c e companies could move the small j a c k e t e d platform inexpensively and e a s i l y .

As a

r e s u l t , t h e i n d u s t r y had invested h e a v i l y in such u n i t s . But, t h e r e c e s s i o n forced o p e r a t o r s - p r o d u c e r s t o permanently dry-dock 75% of the LST-type tender r i g s .

Later, when

b u s i n e s s revived, o p e r a t o r s scrapped and replaced them with l e s s expensive production platforms and mobile u n i t s . 8 2

in

one i n s t a n c e , Zapata Off-Shore converted one of i t s unused p l a t f o r m - t e n d e r s i n t o a f l o a t i n g d r i l l i n g barge.83 Though i t survived the r e c e s s i o n , the i n d u s t r y c u r t a i l e d i t s t e c h n o l o g i c a l experimentation.

The g r e a t flowering of

p l a t f o r m types and completion methods slowed as an i n d u s t r y grew c a u t i o u s .

In a d d i t i o n , a s e r i e s of a c c i d e n t s occurred

i n v o l v i n g capsized p l a t f o r m s .

In 1956, the C a l i f o r n i a

Company's S-55 turned-over in the shipyard.84

in 1957, both

Deepwater Exploration Company's Deepwater No.2 and Golden Meadow Well Service Company's Mister K up-ended in southern

^^Ed McGhee, "Storm Warnings a r e coming down," Oil and Gas Journal 58, no. 23 (June 6. 1960), 100. ^ ^ " I d l e Tender t o Become F l o a t i n g Barge," Oil and Gas Journal 57, no. 1 (January 5, 1959), 69. S^Bruce C o l l i p p , "Invention Part I I I , 1950-1965," p . 4. P r e l i m i n a r y t y p e s c r i p t d r a f t which forms p a r t of t h e Offshore I n d u s t r y c h a p t e r t o Society of Naval A r c h i t e c t s and Marine Engineers 2nd 50 Year H i s t o r y s l a t e d for p u b l i c a t i o n in 1993. Courtesy of Alan McClure. H e r e i n a f t e r c i t e d as SNAME H i s t o r y . 223

Louisiana. 85

Glasscock Drilling's $3 million super-rig MlL.

QMS. fell over while making location offshore Texas.86

The

submersible barges continued to display a marked instability while making location.87

John Hayward had voiced such

concerns, though he attributed the problem more to personnel than to equipment.88

Nevertheless, the sobering events

forced the industry to admit that Obviously, many of the existing platforms and barges were unstable and dangerous to operate under some conditions; they needed expensive modification.89 The pell-mell race into the Gulf had encouraged companies to cast aside caution, and occasionally overlooked, glaring design flaws.

Offshore operations proved to be an uncertain

field during the early years. been common.

As a result, accidents had

With the recession, accidents increased in

frequency with much of them attributable to budgetary cutbacks that frequently sacrificed safety for financial expedience.^^ ^ ^ " D r i l l Barge T o p p l e s i n G u l f , " O f f s h o r e 7 , n o . 1 (September, 1 9 5 7 ) , 2 8 ; " S a l v a g e of ' M i s t e r K' Underway by D i v e r s , " O f f s h o r e 7 , n o . 1 (September, 1 9 5 7 ) , 3 1 . ^^•Mr. Gus D r i l l s A g a i n , " O f f s h o r e ( 9 , No. 2 (September, 1 9 5 8 ) , 56. ®'^Sixty p e r c e n t of t h e a c c i d e n t s i n v o l v e d p l a t f o r m s making location. R i c h a r d J . Howe, "Major Rig M i s h a p s , " Q f f s h o r e 2 5 , n o . 3 (March 1 9 6 6 ) , 9 1 - 9 2 . ® ^ I n t e r - o f f i c e C o r r e s p o n d e n c e , John T. Hayward t o D. R. Snow September 3 0 , 1949, F o l d e r : D r i l l i n g Barge - C o r r e s p o n d e n c e , Hayward Papers, Tulane U n i v e r s i t y . ^^Ed McGhee, "Storm Warnings a r e coming down," O i l and Gas J o u r n a l 5 8 , n o . 23 (June 6, 1 9 6 0 ) , 1 0 0 . ^Ojudy S a t t e r f i e l d , " U . S . I n s u r e r s Seek O f f s h o r e P l a y , " O f f s h o r e 28, n o . 2 (February 1968), 26.

224

As a r e s u l t , the u n d e r w r i t e r s , often l o c a l and r e g i o n a l companies, backed away from marine o p e r a t i o n s .

The

i n s u r a n c e market c o n t r a c t e d and premiums soared.

Though

L l o y d ' s of London, and o t h e r l a r g e insurance consortiums, f i l l e d t h e vacuum by providing "replacement and a d d i t i o n a l c a p a c i t y * in r i s k management funding, marine o p e r a t i o n s were i n danger of becoming too expensive.

Insurance groups,

working with o i l companies, pressured the i n d u s t r y for improvement in both equipment design and performance, and, t h e r e b y , helped t o r e k i n d l e i n t e r e s t in offshore r e s e a r c h and development programs.

In 1958, the Offshore Operators

Committee and the American Association of D r i l l i n g C o n t r a c t o r s formed a j o i n t subcommittee to i n v e s t i g a t e . 9 1 I t p u b l i s h e d a guide t o platform o p e r a t i o n s e n t i t l e d Manual of Safe Operating P r a c t i c e s on Raising. Lowering and Moving Offshore Mobile D r i l l i n g Platforms.92 succeeded.

Their

efforts

For t h e next eight y e a r s , u n t i l 1966, no major

submersible a c c i d e n t s occurred.93

^^The C a l i f o r n i a Company, Magnolia Petroleum, Gulf Oil C o r p o r a t i o n , J . Ray McDermott, Humble Oil and Refining, Freeport Sulphur Company, Conoco, and S h e l l r e p r e s e n t e d t h e o p e r a t o r s . Norton D r i l l i n g , Loffland B r o t h e r s , Zapata Off-shore, Delta D r i l l i n g r e p r e s e n t e d t h e c o n t r a c t o r s . "Offshore Safety Manual A v a i l a b l e , " D r i l l i n g Contractor 15, n o . 1 (December-January, 1958-1959), 42. ^^Norman Tuck, "One U n d e r w r i t e r ' s View on Safety Offshore," Safety Qf T.ife Offshore (Proceedings from the Symposium, 1983), pp. 78-79, lADC L i b r a r y , Houston, Texas; Ralph Storm, i n t e r v i e w by author [Telephone], Tape r e c o r d i n g , Corpus C h r i s t i , Texas, December 5, 1992. ^-^Richard J . Howe, "Major Rig Mishaps," Offshore 25, no. 3 (March 1966), 91-92. In 1968, t h e i n d u s t r y put i n t o p l a c e a d d i t i o n a l g u i d e l i n e s with t h e p u b l i c a t i o n of "Rules for b u i l d i n g and Classing Offshore Mobile D r i l l i n g U n i t s . S t e e l e , "Mobile Offshore D r i l l i n g 225

Recognizing the need for safe platform designs, hoping t o improve s a f e t y s t a n d a r d s , pushing for new and improved deep-water p l a t f o r m s , and s t i l l convinced of the G u l f ' s p o t e n t i a l for p r o f i t ,

the major o i l companies revived t h e i r

own i n t e r n a l r e s e a r c h and development programs.

Shell Oil

Company led t h e way with the c r e a t i o n of i t s Technical S e r v i c e s Division in 1954.

The department evaluated

o f f s h o r e technology and formulated p r a c t i c a l designs.

offshore

However, i t s chief r e s p o n s i b i l i t y was to transcend

t h e c u r r e n t 200-foot depth b a r r i e r and allow Shell access to o i l l e a s e s in water 200 t o 300 feet deep.

Mobile u n i t

technology had j u s t broken the 150-foot b a r r i e r , 9 4 while s t a t i c u n i t s had only r e c e n t l y gone beyond the 200-foot limit.95

None could guarantee S h e l l ' s deep-water

future.

Taking t o h e a r t the admonition t h a t the best technology would give t h e b e s t p r o f i t s , 9 6 in 1961, Shell introduced the

U n i t s ; Notes on Design and Operation," p . 85, [Draft chapter for SNAME h i s t o r y ] , 1991, Alan McClure Papers, Alan C McClure and A s s o c i a t e s , Hous t o n , Texas. ^^As of 1949 t h e o i l industry did not d r i l l beyond the 120 foot d e p t h . The i n d u s t r y understood t h a t beyond t h a t depth cost would o u t s t r i p any p r o d u c t i o n p r o f i t . See Fort Worth Star-Telegram. March 20, 1949. Not u n t i l t h e launch of Penrod u n i t s in the mid-1950s did t h e i n d u s t r y p o s s e s s t h e technology to go beyond t h a t l i m i t . With t h e launch of Mr. Gus I I in 1957, the i n d u s t r y broke t h e 150-foot depth barrier. ^^"Gulf Platform in 200 ft Water," o i l and Gas Journal 57, no. 21 (May 18. 1959), 174. ^^In t h e i r a r t i c l e on the future of t h e offshore i n d u s t r y 0. W. Noland and Roy Huffington, Gulf coast o i l men, expected technology t o s o l v e t h e c u r r e n t problems which prevented deep water e x p l o r a t i o n and d r i l l i n g . They argued t h a t t h e l a r g e s t p r o f i t s would go t o t h e company t h a t g e n e r a t e d t h e b e s t s o l u t i o n s . 0. W. Noland and Roy M. Huffington, "Development and Outlook for the Continental Shelf of Texas and 226

"semisubmersible" platform capable of drilling in water from 200 to 600-feet deep.

Together with the necessary

completion equipment and techniques. Shell formulated a successful deep-water drilling program.

In the 1962

offshore lease sale in the Gulf, Shell led the way in new purchases.

Shell secured options to seven 5,000 acre tracts

in water deeper than 200 feet.97 Shell's achievements helped to revive the industry in a number of ways.

Shell's secret development of deep-water

technology, and i t s preparation to bid in the 1962 Federal Lease sale stirred the industry to action.

Oil companies

bought 402 tracts offshore Louisiana and 10 tracts offshore Texas--29 were located in waters 240 ft or deeper.

The

industry leased 411 tracts in 1.9 million acres which set an all-time record.

In addition, the industry bid the largest

total bonus money ever, $445.8 million, in a lease sale that showed a major shift of drilling capital from onshore zones.98

i t represented 12% of the total sum the oil

L o u i s i a n a , " Offshore Operations. V. 1, No. 6, February, 1955 [9-10], p . 10. ^^Zapata Off-Shore Company Annual Report. 1962, p . 6. John Lohrenz and H i l l a r y A Oden, "Bidding an Production R e l a t i o n s h i p s for F e d e r a l OCS Leases: S t a t i s t i c a l Studies of Wildcat Leases, Gulf of Mexico, 1962, and P r i o r S a l e s , " Society of Petroleum Engineers Paper 4498, 1973, p . 1. "What t h e Biggest Offshore Sales Means," Oil and Gas J o u r n a l 60. n o . 13 (March 26, 1962), 82. "Big Lease Guarantees More Deepwater D r i l l i n g , " o i l and Gas Journal 60, no. 12 (March 19, 1962), 88. Brine t o Bonanza: The Story of t h e American Oil Industry (Woodlands. TX: Pioneer P u b l i c a t i o n s , I n c . , 1981), p p . 288-291. ^^Zapata Off-Shore Company Annual Report, 1962, p . 6. John Lohrenz and H i l l a r y A Oden, "Bidding an Production R e l a t i o n s h i p s for Federal OCS Leases: S t a t i s t i c a l Studies of Wildcat Leases. Gulf of 227

companies had allocated for all drilling and production in 1962.99 Shell's development of a workable and dependable means of offshore operation worked to inspire confidence that had held many companies back.

Simply the realization a

practical solution was possible galvanized others to action. Shell's announcement that it planned to share its offshore knowledge by licensing its technology industry-wide reenergized operators.

As a result of its research and

development work in the 1950s, Shell held 160 affiliated patents on equipment that included marine conductors, subsea wellheads, remote controlled underwater vehicles, dynamic positioning equipment and semisubmersibles.

Beginning in

1962, Shell held classes outlining its offshore vision. Culminating with a seventeen-day course in January, 1963, the industry learned how to replicate Shell's success.100 The high-priced, $100,000 per person school captured the attention of the industry, and it clearly detailed Shell's expertise, signaling to industry observers that Shell had

Mexico, 1962, and Prior Sales," Society of Petroleum Engineers Paper 4498, 1973, p. 1; "What the Biggest Offshore Sales Means," Oil and Gas Journal 60, no. 13 (March 26, 1962), 82; "Big Lease Guarantees More Deepwater Drilling," oil and Gas Journal 60. no. 12 (March 19, 1962), 88; Brine to Bonanza: The Story of the American Oil Industry (Woodlands, TX: Pioneer Publications. Inc., 1981), pp. 288-291. ^^"What the Biggest Offshore Sales Means," Oil and Gas Journal 60, no. 13 (March 26. 1962), 80. lO^Floating Drilling and Underwater Well Completions: A Course for Industry, Preview November 9, 1962 (Houston: Shell Oil, 1962), p. 1. Courtesy Bruce G. Collipp.

228

established a new operational benchmark for offshore development.101 In addition to devising new equipment. Shell conceived of a new reservoir development strategy that costeffectively delineated oil field boundaries.

Using the

mobility and speed of the semisubmersible. Shell quickly drilled "expendable" or exploratory wells. After collecting the information. Shell capped the core holes and abandoned the site.

If the potential reservoir exceeded 100 million

barrels. Shell might produce the wells, but only after organizing an effective, long-term reservoir program.102 The expendable-well approach saved Shell the expense of unnecessary drilling.

Moreover, it represented a marked

departure from the immediate gratification of the wildcatting tradition that had epitomized the oil industry. Instead of drilling for immediate profit, Shell had ushered in an era where companies could drill for the future. 1^-^ However, such achievements failed to win over many of the small independent operators and contractors.

The

recession had so weakened the smaller companies some had not

lOlFloating Drilling and Underwater Well Completions: A Course for Industry, (Houston: Shell Oil, 1962), pp. 12 and 13. Courtesy Bruce G. Collipp. 102p_E s _ A Primer of Offshore Operations, p. 1. lO^Statement, Bruce G. Collipp [Naval Architect formerly of Shell Oil Company and the acknowledged inventor of the semisubmersible], interview by author. Tape recording, Houston, Texas, August 1. 1991.

229

fully recovered, even by 1960.

To them, the oil prices and

production allowables were still too low.

Angry

independents lashed out openly against the offshore expansion. This looks bad, and it is bad. Fourteen years of effort and out-of-pocket expense and still that far behind the eight ball. Each and everyone of those 14 years we have spent more than we have received.1^4 They perceived it as an another large-company conspiracy to destroy them.

Many argued that the majors had parlayed

foreign production into easy profits that subsidized domestic speculation, especially offshore.

By manipulating

federal import quotas, the majors were guaranteed a U.S. market, and domestic allowables were pushed even lower. In contrast, with the industry moving into deep-water, smaller companies had to decide quickly whether to ante-up once more, or terminate their offshore programs.

The majors

seemed ready to take over the industry and their success in the Federal Lease Sale of 1962 confirmed that.

The renewed

offshore interest also drove up lease prices making it even more difficult for the independent companies to stay in the game.

Frankly t h i s continued high bidding i s puzzling . . . We have examined t h i s aspect e x h a u s t i v e l y from every

l ^ ^ Q u o t e , I r a H. Cram [ S e n i o r Vice P r e s i d e n t of C o n t i n e n t a l O i l Company and an e a r l y o f f s h o r e p i o n e e r ] i n "Offshore Payout S t i l l Years Away," O i l and Gas J o u r n a l 58. n o . 18 (May 2, 1960), 7 8 . 230

angle and can find no way to justify these inordinately high lease-bonus costs.1^5 With the industry moving into the expensive deep-water arena beyond the 200 foot depth, and with crude oil prices not yet recovered from the recession, many independents considered i t part of the continuing saga of the " l i t t l e guy" squeeze brought on by the "majors." The independents had fumed for years over the supposed rough treatment doled out by the majors.

Charges of

transportation monopolization, unavailable refining capacity, and occasional accusations of price-fixing, had formed the core of the independents' antipathy to the majors.

An industry observer had stated the bulk of the

nation's oil business had been dominated by the large, integrated companies that had forced smaller independents to "operate under very serious difficulties."106

Large, fully-

integrated companies and the smaller, independents had drifted apart.

The rift had widened enough compelling

smaller companies to found the Independent Petroleum Association of America (IPAA) in the 1930s.

lQ5"0ffshore O i l : A Losing P r o p o s i t i o n ? " o i l and Gas J o u r n a l 6 1 , no. 13 (April 1, 1963), 78-79. 1*^^Statement, Dr. J . B. I s e (University of Kansas Economist and a u t h o r ) before t h e TNEC Hearings (1939), v . 6 , p . 3 . quoted i n U . S . Congress, House, Committee on I n t e r s t a t e and Foreign Commerce, S p e c i a l Subcommittee on Petroleum, Petroleum I n v e s t i g a t i o n . The Proposed •Petroleum Conservation Act of 1939. Hearing. 76th Congress, Third S e s s i o n , (Washington, D. C : Government P r i n t Office, 1940), p . 2148.

231

In the 1950s, independents watched with alarm as oil imports threatened domestic production.

The Texas Railroad

Commission lowered state production allowables to accommodate foreign oil.

The Interstate Oil Compact

Commission and respective state regulatory agencies had limited and monitored oil flow from the wellhead since the 1930s.

Though described as conservation measures, such laws

had prevented glutted markets and stabilized crude oil prices.

However, in 1949, the replenished oil and gasoline

stocks, the general decline in domestic consumption and the increasing amount of imported crude, forced a 90% cut in U.S. production.107

By 1953, the Railroad Commission had

curtailed Texas allowables by 200,000 barrels per day,1^8 and had shut-in Texas fields 33% of the time.109 Independents believed a rising river of foreign oil and the major oil corporations were destroying the domestic industry.

In response, independent operators, formed the

Texas Independent Producers and Royalty Owners Association

10'^Texas Legislative Council, The Texas Petroleum Industry and