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Texas | Columns | "Hindsights"

Looking back at
Spindletop:
Selling Wind and Hot Air

by Michael Barr
Michael Barr
Legendary Texas swindlers, like Billie Sol Estes and Frank Sharp, knew well that the human mind, when seduced by the possibility of making fabulous sums of money in a short time, has an amazing ability to ignore good judgement and common sense. For evidence look no further than Beaumont, Texas in early days of the twentieth century.

When the Spindletop oil field near Beaumont came in on January 10, 1901, businessmen, investors, speculators, charlatans, hustlers, and crooks from all over the world hurried to Jefferson County; each man convinced that destiny had selected him for riches. “There is a wild excitement throughout Southeast Texas,” declared the New York Times. The mad rush of humanity to a single place had not been seen in such numbers since the discovery of gold in California in 1849. The population of Beaumont tripled in a few weeks. “Sidewalks weren’t wide enough to accommodate the crowds which congest them day and night,” a reporter wrote. “So great was the multitude that flocked to Beaumont that it could not be housed or fed.” Everything was in short supply, from whiskey to a few private moments in the toilet. Two days after the field came in there was not a drop of liquor in Beaumont. All 25 saloons had sold out. Boys made money by waiting in the long lines at public outhouses, then selling their places to the highest bidder as they got near the front.

Hundreds of potential buyers offered big money for a small amount of real estate, sending land prices near Spindletop into the stratosphere. One piece of property, originally purchased for less than $150, sold for $20,000, then resold for $50,000, and resold again for $100,000. J. N. Page of Georgetown owned 15 acres four miles south of Beaumont. He bought the land for $200. After the oil boom began he sold one acre for $65,000 and the remaining 14 acres for $600,000 cash. The purchaser was a syndicate that included ex-governor Jim Hogg. James T. White owned 125,000 acres of land between Beaumont and the Gulf of Mexico. He bought the land for a dollar an acre. After the boom, Standard Oil offered him $2 million for the whole parcel, but he held out for $3 million. After a few weeks of negotiations, White sold 62,000 acres to Standard Oil for $1.25 million.

In crowded saloons and hotel lobbies, pieces of paper alleged to be land titles changed hands with blinding speed; often backed only by the seller’s word that the title was good. Lawyers worked day and night handling legal challenges to land titles, many of which were so faulty they would not hold up in court. The amount of land in Jefferson County whose titles were in question was estimated to be as high as 50 percent. Former landowners who once signed away their titles and mineral rights for a few dollars an acre hired attorneys who miraculously discovered flaws in the original documents. Heirs, some of whom had never heard of Beaumont and couldn’t find Texas on a map, came out of woodwork. The litigious nature of the oil business began at Spindletop.
Lucas Gusher, Beaumont TX
Lucas Gusher gushing 170 feet
Postcard courtesy rootsweb.com/ %7Etxpstcrd/
At first the massive amounts of oil that came out of the ground made inflated land prices look like a steal. The Lucas Gusher at Spindletop blew 70,000 barrels of oil a day into the air. At that pace, provided it could be capped and provided oil prices held steady at forty cents a barrel, that one well stood to make its owners $28,000 a day. Revenue for a year would be over $10 million. And other gushers produced similar results. The Palestine-Beaumont Well blew a stream of petroleum so powerful that three men drowned in oil trying to cap it. Some oil field workers used diving suits when working close to spewing wells. Oil came out of the ground so fast and in such volume there was no place to put it. Drillers damned up ravines to catch runaway petroleum, creating lakes of oil that covered 50 to 75 acres and were 10 to 20 feet deep.
Spindle Top Oil Field, Beaumont, Texas
Spindle Top Oil Field, Beaumont, Texas
Postcard courtesy rootsweb.com/%7Etxpstcrd/
0ver 200 oil companies were formed in the first 90 days after Spindletop. On April 10 alone, 15 new oil companies filed charters with the secretary of state in Austin. But even the handful of companies that struck oil discovered that getting petroleum to the surface was the easy part. After that it had to be stored, transported, refined, marketed, and sold. Small companies did not have the capacity for such things. Only when the big companies, like Standard Oil, Gulf, and The Texas Company (later Texaco) took over did the business gain stability.

Unfortunately for investors, few of the oil companies formed after Spindletop survived for long. In the wild and unregulated atmosphere in Beaumont, anyone with panache and a fast mouth could pass for an oil man. And many of them had no intention of drilling for oil. Their only mission was to sell fraudulent land titles and “watered” oil company stock to unsuspecting investors who got caught up in the drama and excitement of Spindletop and traded their life savings for “wind and hot air.” Then the so-called oil men, their mission accomplished, vanished with the cash like a puff of smoke on a windy day.

The New York Times estimated that $75 million in oil stocks were sold in the first 90 days after Spindletop came in. Much of it proved to be worthless. Most small investors never stood a chance.


© Michael Barr
"Hindsights"
August 19 , 2015 Column

Sources:
Judith Walker Linsley, Ellen Walker Rienstra, and Jo Ann Stiles, Giant Under the Hill: A History of the Spindletop Oil Discovery (Austin: Texas State Historical Association, 2002)
New York Times, January 13, 1901, March 26, 1901, May 8, 1901, August 29, 1901

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