Graft And Corruption In The “Hot Oil Racket”

Taranaki Daily News, 23 March 1935, Page 16 (Supplement)

Graft And Corruption In The “Hot Oil Racket”

How Government Inspectors Are Tricked: Legislators At £lOO A Head

. 'THOUSANDS of flares by night, X rising at the ends of iron pipes 7 as high as a house and tipped with roaring flames as tall again, mark the centre of the “hot-oil” industry . ; in America. Hot oil is petroleum produced in ’< “ violation of State or Federal statutes ; i or regulations. Both the regulations and the economic drive behind them arose out of the fact that oil discoveries have run far ahead even of the r huge demand for gasoline and other products of petroleum. Half a de- ‘ cade ago it had already come to pass ■■■ that there were in existence so many wells, ready to produce, that if all-of them were unleashed 10 times as much oil would come to the surface as could be used. This obviously would have created chaos in the industry and wasted an essential 1 natural resource. Hence the drive, begun by Secretary Wilbur under the Hoover Administration to allocate production among the different fields, stabilise the industry and keep prices from falling disastrously. Hence, too, hot oil. For, whereas regulated oil sells at the reasonable price of $1 a barrel, yielding a gasoline that costs the consumer about 15 cents a gallon, hot oil, from freeflowing, unregulated wells, can be bootlegged profitably at 50 cents a barrel and turned into gasoline that can be sold at 10 cents a gallon. Until recently the East Texas field was one of America’s forgotten frontiers. Now all this is changed. One must go back to the great gold rushes and add a new element of , the surreptitious and the contraband to gain even a faint idea of what is happening. Beneath the East Texas field, it is estimated, is stored four billion dollars’ worth of oil, eager, under pressure of its accompanying gases, to burst into the light of day. Ethics and ideals of the public weal are lost under such pressure. Individualism turns rugged, reckless and ugly. There has never been anothei- racket like it. No efforts of the Texas Rangers, of an army of State and Federal enforcement officers and prowlers have been sufficient to stop it. Hof oil continues to flow. Take Kilgore, the oil metropolis. The other day it was a sleepy coun- •'' try village. Now it is a teeming, seething, roaring city, with a dash of Tombstone, of Silver City or Leadville and other famous mining camps of bygone years and an added aroma that is all its own. No mining town was ever slammed more quickly and crudely together —for ail is crude in more ways than one. None ever harboured a population that was tougher, grimier and greedier than that which came here, eager for the black, liquid gold. Colonial mansions of outskirt farmers suddenly grown rich beyond their most fantastic dreams sprout

not far from dirty shacks scattered every way ovei’ the plain. Every section in town has a well in it Every inhabitant hopes to get rich. It doesn’t matter what the town looks like, nor does it matter much what goes on. It is the oil that counts.

Across the fields from Kilgore is Gladewater—centre of the illegitimate refinery business and probably the vilest, most corrupt, ugliest town that the sun has ever shone upon. Gladewater, for all its pastoral name, is a lean-to, sheet-iron, tincan, shack to\yn, with all the vices and dreariness of the quick-built mining village, smeared and blackened over with the ugly but profitable slop of the oil wells. Romancers Of the future may endow it with a charm softened by the passing of

the years, but the present-day visitor, if he is not hypnotised by golden dreams, is likely to hold his nose.

How is the hot oil taken out? The first well one might see in Kilgore wouia give the answer. The owner spent $9OOO in drilling a- hole 3600 feet deep. He risked little, for he knew the pool was there. Beside the well is a tank into which he is legally entitled to draw 40 barrels a day, under inspection. At a dollar a barrel he has a legitimate income of $4O a day—not a bad return on his investment. But this well has a capacity of 15,000 barrels a day,

which would be worth $15,000. It is hardly human nature for the owner to be satisfied with a pittance when almost unlimited wealth is his for the taking.

What he has done is to tap his oil pipe eight or 10 feet down, leading a pipe away through a deep-buried trench. Through this pipe he may run 1000 barrels a day. He sells it at the bootleg price of 50 cents a barrel, but even this brings him in $5OO a day—not so good as $15,000, but a lot better than $4O.

His neighbour works it a little differently. When he put in his tank he looked to the future. He arranged an outlet in the bottom of it. From this he draws out his hot oil; and theoretically no one is the wiser. Another man • did a smart thing, though he got only small profit out of it, after all. He had one good well on his lot. From it he ran underground pipes and established what seemed to be three other wells. Sluggish streams meander through the countryside, accumulating an ever-increasing scum from the incidental waste of many wells, Someone once thought of damming one of these streams and skimming off the

oil— a perfectly legitimate business. Then came the idea of diverting an illegal flow into the stream. Certain acids made to drip .on an exposed pipe surface would eat holes in it and the black gold would gush forth, to float downstream and be recovered.

Why have not Government agents stopped the outlaw traffic? They have tried. They run the permissible oil, turn the valves and lock them. Each well, supposedly, is under lock and key. But greed, like love, laughs at locksmiths. Locks are picked, valves tampered with. A device known as a “left-handed

valve” may be installed, which actually turns on the oil when revolved in the direction indicated as “off.” The oil may be “by-passed” around the valve. Innumerable schemes are developed for getting the oil past the lock that is supposed to hold it in.

There are hot-oil princes in Eastern Texas who openly fly their flags, proclaim tlie flow of illicit oil through their pipes and challenge the authorities to stop them. One such group owns a score of wells, net works of pipes, storage tanks by the dozen, and the biggest and best refinery thereabouts. “Certainly we run hot oil,” one membei' of this group said, .standing on the steps of the Capitol at Austin. “That is our business. And it is a good business. We have made millions at it. We find that legislators can be bought on the hoof at about $5OO a head. Stop us if you can.” Arrangements for refining and shipping hot oil are as perfect as those for producing it. The illegitimate gathering system may tie into a self-styled “refinery,” which rarely amounts to more than what is known as a “skimming plant.” Some of these “refineries” merely run the oil into their plants and run it out again, to be shipped as “refined.” They find ways, by bribery and otherwise, to get carloads and even trainloads of illegitimately produced oil out of the field.

A good deal of hot oil is taken out in tank trucks. Thus a certain lan-tern-jawed native, with a Government lock on his well, was taught the secret of the “by-pass.” Soon a joint of modest pipe was sticking its nose out of the side of a hill at a screened and handy place just off the main road. A truck, passing by night, could stop here and suck up LOO barrels in a jiffy. Half-a-dozen trucks might drop by between dusk and dawn. Then they would roll away over the Sabine and into Louisiana, their drivers probably “sugaring” a palm or two as they went. Modest fellows these, in the game only in a small way. But enough of them may work havoc with the oil industry, penalising the honest producers, who not only miss the immediate profit from large sales, but also, because petroleum is a fluid often found in continuous pools underlying wide areas, may have to sit ouiet while oil is being sucked out from underneath their holdings through adjoining wells illicitly operated.