Business & Finance: Boiling Oil

Last week for the first time in the dark & stormy history of East Texas oil fields a State body, controlling production, and a Federal body controlling interstate shipments, sat down in a joint effort to stop the flagrant traffic in illegal oil. It took a raging gasoline price war to bring this logical event about (TIME, Oct. 29).

In a one-story building in Kilgore in the heart of the East Texas Field, where hot oil is now flowing at the rate of at least 100,000 bbl. per day, seven men hunched around a long council table—three members of the new Federal Tenders Board, three members of the State Tenders Board and Col. Ernest O. Thompson, dominant member of the Texas Railroad Commission which is supposed to regulate the oil business of Texas. By order of Oil Administrator Ickes not a drop of oil could be accepted for interstate shipment without a tender certifying its legality.

To the excited leaseholders, landowners, operators, pipeliners, refiners and their swarming lawyers the Federal chairman explained: “The State will determine what is legal oil. We are going to keep all illegal oil out of interstate commerce by stopping it at the State line.”

For once it looked as if the Administration meant business. President Roosevelt, pelted with demands for action, declared that adequate enforcement of the Oil Code was necessary to prevent surpluses accumulating. Having received his orders from Attorney General Cummings. L. R. Martineau Jr., the new special oil prosecutor, darted by plane to the East Texas Field to lead a platoon of Federal agents into the murky forest of 10,000 derricks.

To New Jersey where the gasoline war burned hottest Administrator Ickes dispatched a lieutenant to investigate and intervene. By last week joyous Jersey motorists were filling their tanks for less than 10¢ per gal., tax included. New areas were affected, and in Philadelphia the battle spread to fuel oil, which dropped 1½¢ per gal. to 5½¢. But in East Texas the Federal pressure brought quick results. This week some 50 East Texas refiners agreed to up wholesale gasoline to 11¢ per gal., 6¢ above last week’s war price.

Meantime the industry tossed in secret strife over the price of crude oil which has been $1 per bbl. for a year. After a few small buyers boldly chopped the posted price to 60¢, Col. Thompson swore that the Texas Railroad Commission would shut down every well in the State if the major companies followed suit.

From the moment the Federal Tenders Board went to work in Kilgore, it was apparent that the wily hot-oil runners were in for real trouble. The Federal Board took its cues from the State but the final decision on the status of any lot of oil actually rested on a bulldogged, stone-steady gentleman named Captain E. N. Stanley. He was the Railroad Commission’s chief enforcement officer. After an application was read, the Board would turn for advice to Captain Stanley, who passed about one in seven. Notorious hot-oil runners—and he knew them all—he cheerfully referred to as ”regular customers.”

Typical of slick East Texas tactics was the case of a big “regular customer” who was represented by a lawyer named Neil Powers. Until a month ago Lawyer Powers was an assistant to Attorney General James Allred, who becomes Texas’ next Democratic governor with this week’s perfunctory election. Lawyer Powers’ client had paid a fine (7½¢ per bbl.) on tens of thousands of oil illegally produced. Thereupon the hot-oiler obtained from a State court an order commanding that the necessary tender be granted. Captain Stanley tossed the court order aside. “I recommend you gentlemen refuse the tender,” he boomed.

“Refusal will be in contempt of court,” warned Lawyer Powers. The crowd of oil men, who regard oil regulations much as they do Prohibition, roared with laughter.

Powers: It’s no laughing matter.

Stanley: No, indeed. Nobody knows better than I how serious it is. I’ve paid one $25 fine for fighting this thing with my fists.