by The Big Rich: The Rise;Fall of the Greatest Texas Oil Fortunes
The foundation of Hunt’s little empire, however, remained far from secure. The problem was legal title to the Joiner leases. The old wildcatter had sold and resold shares of his mineral rights so many times that, as Hunt’s attorneys analyzed the situation, he actually held unobstructed titles to barely two of the four thousand acres he sold Hunt. One by one Joiner’s investors sued, until by mid-1932 Hunt found himself facing some three hundred separate legal challenges. Rather than fight each one in court, Hunt told his lawyers to offer the plaintiffs cash settlements. It worked. Dozens of the plaintiffs, mostly poor farmers, took the $250 or so Hunt offered and withdrew their suits. The whole mess would still take nearly a decade to clean up, but Hunt’s strategy saved him a fortune in legal fees and potential judgments.
The real danger, however, was Joiner himself. The trouble began in the autumn of 1932. On a rainy night outside Tyler, Hunt and his brother Sherman came upon an overturned car. The driver was trapped inside. Hunt joined a crowd of people trying to push the car into an upright position, but in the process he badly wrenched his back. The pain was so bad, he could barely move. A doctor gave him a steel back brace and ordered him to remain in bed for the next six months. It was just days later, on the night of November 19, while lying in the brace in Tyler, that ominous rumblings reached Hunt’s beside: Dad Joiner was unhappy.
Hunt cursed. He had done everything in his power to placate the old man. Every month he made sure Joiner received his scheduled oil payments, usually between thirty thousand and fifty thousand dollars. But Joiner was now living high, squiring a new girlfriend around Dallas, and pouring much of his earnings into questionable new ventures. Every month, it seemed, he would track down Hunt and ask for an advance or a loan. Hunt gave it to him, usually with a little lecture on the importance of saving, but even though Joiner continued testifying on Hunt’s behalf in the lease-challenge lawsuits, it was clear Joiner resented it. He had discovered East Texas, not Hunt, yet he was the one obliged to beg for money.
A lawsuit’s statute of limitations, November 26, the two-year anniversary of Hunt’s historic deal, loomed just a week away. Hunt dragged himself from bed and drove to Dallas, where he summoned Joiner to his suite at the Baker Hotel. There remained genuine affection between the two men. They had so much in common—their love for oil, the years in obscurity, the sudden riches—and they passed several long days at the Baker reminiscing, Hunt lying in bed in his brace, Joiner on the opposite bed, smiling and bringing him food.
At nightfall on November 25, with the statute of limitations scheduled to expire the next day, Joiner rose to leave. Hunt rolled out of bed and limped to the door. For the first time he addressed the gorilla in the room. “Mr. Joiner,” he said, “I think efforts are being made to get you to sue me. I hope you don’t fall for that.”
Joiner looked at Hunt for a long second. Tears appeared in his eyes. “My boy,” he said, throwing an arm over Hunt’s shoulder, “I would never do a thing like that. I love you too much.”
When Joiner left, Hunt crawled back into bed to think. Tears. He kept thinking about the old man’s tears. There was real sentiment there. But the more Hunt thought, the more he became certain what Dad Joiner’s tears actually meant. They were tears of sadness.
He was going to sue.
And—far worse—Hunt was defenseless. It was the leases. His banker, Nathan Adams, had been so confident of the East Texas field’s potential, he had never demanded the Joiner leases as collateral. No one had. If Joiner sued, his attorney could place a lien on everything. From his bed Hunt reached for the phone, called his attorney, J. B. McEntire, and told him to bring every stenographer he could find to Dallas that night. Next he telephoned his principal trade creditor, Continental Supply Company, and told them to send down a credit executive. Everyone reached the Baker by midnight. Under Hunt’s supervision, they began writing out dozens of mortgages, giving Continental and Hunt’s banks first liens on every acre of his land. By dawn they were almost finished. When the final papers were signed, Hunt had them messengered to Henderson with orders to file them at the courthouse the moment it opened. Everything went off without a hitch—and not a moment too soon. An hour later Joiner’s attorney filed suit.
Hunt’s all-nighter prevented Joiner from seizing or freezing his wells, but the lawsuit still threatened everything. Joiner claimed fraud. He charged that Hunt had lied to him about the Deep Rock well and had bribed Deep Rock’s superintendent; the former was probably true, and the latter certainly was. Valuing the leases at fifteen million dollars, Joiner argued that he should have gotten three to five times what he had received; if a judge agreed, Hunt was staring at three million to five million dollars in damages. While Joiner put his best face forward for the press—“I have nothing against Mr. Hunt personally,” he told reporters—the legal maneuverings quickly grew heated.
Hunt was in a dangerous position. Joiner was still a folk hero to many in East Texas, and the Deep Rock “bribe” would look very bad to a local jury. As the January 1933 trial date approached—lawsuits moved quickly in those days—rumors swirled fast and furious, that Hunt was promising Joiner big money to settle, that he had unearthed dirt from his past, that threatening phone calls and letters had been sent to various Hunt men involved in the original deal. What happened next has never been explained. On January 16, 1933, just as a crowd of reporters and oil scouts took their seats in a Henderson courtroom to watch opening arguments, Dad Joiner stood and began to read a statement. After a “thorough investigation” of the case, Joiner announced, he had “determined to my satisfaction that the allegations of fraud in my petition are not true.” He was dropping the lawsuit.
Around the courtroom, jaws dropped in disbelief. What had just happened? No one knew. Joiner hustled out and brushed away all questions, as he would for years afterward. Somehow, just about everyone in East Texas agreed, Hunt had gotten to Joiner. What he did, or what he promised, remains a mystery to this day. In the months to come, the two men silently returned to their old routines, Joiner accepting his monthly payments, then pestering Hunt for an advance. They remained that way for the next fourteen years, until, in 1947, Joiner, after years of fruitless drilling ventures throughout Texas, finally died, virtually penniless, at the age of eighty-seven.
“Much has been written about the Joiner deal,” Hunt wrote years later, “and some with overly active imaginations have implied machinations all the way around, but the fact is it was a sound deal for both Joiner and me, and Joiner received through the cash, notes and production payments more funds than he would have received by trying to operate the properties in the face of his legal difficulties.”1
More than two long years after his arrival that fateful day at the Daisy Bradford No. 3, Hunt was finally secure. Life, in fact, was just about perfect. Joiner’s challenges were over. He had nearly two hundred wells pumping oil in East Texas now, with more on the way. His two families remained cared for, content and, most important, oblivious of each other. When he found time, Hunt swung by the house on Versailles Avenue in Dallas to visit Frania and their three young children. His “first” family, meanwhile, was putting down roots in Tyler. Chafing at life in a cramped rental house, Lyda had wasted little time selecting a permanent home, a two-story, white-columned Greek revival mansion known as the Mayfield Estate. She spent a year remodeling before finally moving into the house in October 1932. The Hunts were now, officially, Texans. And though no one realized it at the time, Hunt himself was fast on his way to becoming not only the wealthiest Texan of all, but the richest man in the world.
FIVE
The Worst of Times, the Best of Times
I.
East Texas made fortunes for scores of Texas oilmen, many of whom were from or later settled in Dallas. Few plunged into the backwoods chaos with the fervor of thirty-five-year-old Clint Murchison who, having grown up in East Texas, knew the piney woods well. Unfortunately, like Hunt and so many of his peers, Murchison had no free cash to invest; every
last cent was going to Southern Union’s banks and his main creditor, Oilfield Supply. Lack of funds, however, never stopped Murchison. All that oil needed pipelines to reach market and, just as he had in West Texas, he burned to build one. A single meeting with Oilfield Supply executives persuaded them he was right, and they put up the money, which in three short months Murchison used to build an eight-inch pipeline from the field’s southern edge thirty miles to Tyler. By the summer of 1931 it was complete. Murchison even prevailed upon a partner to erect a refinery there as well, and entered the gasoline business.
That was just the start. To that point, while Murchison had drilled his own wells here and there, much of his money sprang from Southern Union and lease trading. But there was too much oil in East Texas not to grab some himself. Ernest Closuit and his brother Frank demurred; they had too many responsibilities already. So Murchison entered into a new partnership with an old Wichita Falls pal, Dudley Golding, who had a pair of rigs and money from his wife’s family. With new cash coming in from the pipeline, Murchison sent men to buy every lease they could find, paying as little as possible up front, then dispatched Golding and others to begin drilling. In the next three years they hit dozens of producers around Henderson and Kilgore.
The collapse in prices hit Murchison hard; his pipeline contracts obliged him to buy the oil delivered to Tyler at rates far higher than ten cents a barrel, which was all he could sell it for. The banks understood and allowed him to delay a payment or two; he managed to make payroll by coaxing cash advances out of the pipeline’s biggest buyer. But proration loomed as the real killer; the only way for Murchison to offset his mounting losses was to pump more oil, but the federal government was now saying that was against the law. Murchison was apoplectic. This was un-American, he told anyone who would listen. It was all a scheme devised by the majors to squeeze the independents out of East Texas. As one of his peers put it, “It’s my oil, and if I want to drink it, it’s none of your damned business.”
It was this line of thinking that led Murchison to become an outlaw, a defiant hot oiler. From 1932 until 1934, in fact, he may have been the biggest hot oiler in all of East Texas, and he didn’t especially care who knew. He even renamed his partnership with Dudley Golding American Liberty, because, he said, it represented freedom against regulatory tyranny; the new company would soon become Murchison’s largest. No stories of how Murchison managed the shady side of American Liberty’s business have survived, but running hot oil was a cat-and-mouse game. Federal inspectors, Railroad Commission agents, and Texas Rangers were everywhere; lookouts had to be posted. Most hot oil was pumped and refined late at night and loaded onto trucks that crept down the rutted dirt roads in caravans for Dallas or Shreveport; when federal agents were in the area, decoy caravans were sometimes used. In a pinch, many inspectors could be bought off with bribes.
This was a dicey game. Every night he ran hot oil Murchison risked court action or, worse, his own arrest. The Railroad Commission knew what was going on and repeatedly sent in raiding teams, which resulted in a string of state lawsuits against Murchison-owned companies. Murchison fought back with a maze of paperwork, repeatedly switching the ownership of questionable oil from one of his companies to another. By the time the Railroad Commission realized what had happened, it would take months to rebuild its case. When the commission did manage to haul him into court, Murchison sent in one of his boyhood pals, a canny lawyer named Toddie Lee Wynne, to fight on his behalf. Wynne succeeded in getting several irksome actions dismissed.
In the early 1930s, how you felt about Clint Murchison depended on how you felt about hot oil; to many wildcatters he was a hero, to others a selfish criminal. In time his notoriety grew to the point that, when East Texas oilmen gathered in Washington to meet with Harold Ickes, his peers turned Murchison away. “I didn’t [want to] have anything to do with Clint, because I knew damned well his hands weren’t clean,” the oilman J. R. Parten once recalled. “A fine person—I liked him very much—but Clint was a hot oiler in every respect. Clint didn’t want any rules. He had made a fortune by disobeying the rules. He showed up in Washington and asked what he could do to help us. [We] said, ‘The thing you could do most to help us is to get on that airplane and get out of town as quick as you can’. And he did.” Murchison resented it; he felt his efforts to fight proration should be applauded. “If I had been guilty of all the things they say I have done,” he once remarked, “I’d be under the jail, not in it.”
All through the hot oil wars Murchison’s mind thrummed with ideas for new pipelines and refineries and oil fields, all limited only by his chronic shortage of cash. His genius, though, was not so much finding oil as finding money. In 1933 he heard of a young loan officer at the Bank of Manhattan named Rushton Ardrey, a native Texan who had opened the bank’s first energy department. In those days the big New York banks steered clear of anything but the shortest-term loans to wildcatters, deeming them too risky. But Ardrey had made a five-year-loan to an Oklahoma independent, and when Murchison heard about it, he flew to New York. When Ardrey asked how much he wanted, Murchison replied, “All I can get.” He left with a one-million-dollar loan, the promise of more to come, and a crucial new ally; he called Ardrey “the Big A.” In time Murchison would introduce him to dozens of other oilmen, including Sid Richardson, and in 1937 Murchison would hire Ardrey to work for American Liberty, where he worked full-time raising money.
Rushton Ardrey’s loans enabled Murchison to plunge back into East Texas at a fever pitch, drilling dozens of wells, throwing up small refineries, building an asphalt plant when low-quality crude was found, even buying up giant storage tanks for surplus oil outside New Orleans. His most ambitious project was a pipeline built from East Texas all the way to the town of Conroe, north of Houston, which allowed independents to move oil directly to the tankers in Houston’s ship channel. By the time the hot oil controversy finally died down in 1936, Murchison had at least tripled his fortune, more than two million dollars alone coming from the sale of 125 wells. He finally stopped carping about proration, claiming he saw the wisdom in preserving Texas oil fields, and most oilmen assumed his days as a hot oiler were over.
In late 1936 came news they weren’t. Federal prosecutors in Houston indicted his Conroe pipeline subsidiary for exceeding legal limits on transport of oil. It was a serious situation, with rumors that Murchison himself might be indicted, and dealing with it would take the young Texan all the way to the White House.
II.
The day Dad Joiner discovered the East Texas field, there were wealthy oilmen in the state, but there were no true oil fortunes. The only Texan who could be said to control an oil fortune—actually an oil-service fortune—was Howard Hughes, but Hughes had long since left for Hollywood. It was East Texas and other fields discovered during a single five-year window—1930 to 1935—that created the state’s great family fortunes. The magnitude of wealth initiated in those sixty months would not become apparent for years and remains underappreciated today. In fact, the spigot of cash Texas Oil opened in the early 1930s ranks among the greatest periods of wealth generation in American history, in size perhaps the largest creation of individual wealth between the Gilded Age and the Internet boom of the 1990s.
The irony was that it happened during the worst economic depression in American history. But the explosion of Texas oil wealth didn’t happen despite the Depression. It happened because of the Depression. There is a notion in Texas, repeated in several oil-industry histories, that wildcatters grabbed the lion’s share of the East Texas field because the majors ignored its potential and, once it was found, pooh-poohed its size. In fact, the majors had a good sense of what Joiner had found. The problem wasn’t lack of vision. It was lack of money. The Depression hit oil companies hard, and it was their wholesale retreat from exploration that allowed men like Hunt to amass fantastic oil reserves. More than any other single factor, it was the majors’ retreat that created the fortunes that came to define Texas.
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bsp; The day East Texas oil first spewed into the skies, all the major oil companies were in the process of drastically scaling back their exploration budgets. Shell, saddled with heavy debt after a late-1920s expansion, had all but stopped acquiring Texas leases and rarely drilled the ones it had; in 1931 alone, it let lapse leases for which it had paid eight million dollars. Gulf was in even worse shape. Beset with financial losses, unable to secure bank loans, it simply lacked the money to buy new acreage. Many of Gulf’s leases lapsed as well. The Texas Company, meanwhile, had refocused its operations, deemphasizing exploration in favor of refining and marketing. Only the sharp executives at Houston-based Humble, while slashing their exploration budget, remained actively in the market for new reserves. Its men, led by the geologist Wallace Pratt, instituted a new policy that emphasized the acquisition of proven oil fields, that is, fields found by others.
It was Humble’s new policy, in turn, that laid the foundations of the three greatest oil fortunes in Houston. The first recipients of Humble’s largesse were Roy Cullen and his obstreperous partner, Big Jim West. By 1931 West had been pestering Cullen to sell their newfound properties for almost two years. At least sell one field, he pleaded—Rabbs Ridge in Fort Bend County. To West, it was “just another field.” Cullen wouldn’t hear of selling. Without telling Cullen, West sounded out Gulf Oil’s Pittsburgh headquarters, but found no interest. In March 1932 he telephoned Wallace Pratt at Humble in Houston, who had been following their progess. The previous November one of Pratt’s geologists, estimating that the field might contain 127 million barrels, had recommended buying it “on anything like reasonable terms.” Pratt proposed a deal in which Cullen and West would receive $3 million in cash and an additional $17 million to be paid from future production; in today’s dollars, the offer was roughly $250 million.