OKLAHOMA: Where Energy Reigns

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OKLAHOMA Where Energy Reigns OKLAHOMA: Where Energy Reigns

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Oklahoma Where Energy Reigns

The Oklahoma Energy Resources Board (OERB) is proud to add this book to the lexicon of our state’s Centennial Celebration. The OERB is a true Oklahoma organization, born of necessity by bold and caring individuals willing to dare things differently. The OERB was conceived by committed individuals from the ranks of Oklahoma’s premier business and industry organization, the Oklahoma Independent Petroleum Association. The OERB exists to educate Oklahomans about the importance of the state’s crude oil and natural gas exploration and production industry, including our state’s rich and colorful history, which is completely intertwined with the birth and development of its cornerstone industry. In 2007, as our tribute to the oil and natural gas industry is published, Oklahoma is undergoing a renaissance. And, as it has been for more than 100 years, the driving forces for economic, social and cultural change are the visionary Oklahomans in the oil and natural gas industry. The OERB is pleased to share some of their stories, past and present, in Oklahoma: Where Energy Reigns. 05545 001-039_Sec.1:Layout 1 9/21/07 7:36 PM Page 2

OKLAHOMA Where Energy Reigns Contents OKLAHOMA ENERGY RESOURCES BOARD Chairman Steve Agee From Office Governor ...... 4 Public Education Chairman the of the Dewey F. Bartlett Jr. Executive Director From the Oklahoma Energy Mindy Stitt Resources Board ...... 6 Communications Director Mary Ann Osko Environmental Director Steve Sowers Education Director Landi Thompson OERB Centennial Project Director Mickey Thompson OERB Centennial Project Coordinator Ellis Stromberg

ENERGY RESOURCES FOUNDATION OF OKLAHOMA / OKLAHOMA INDEPENDENT PETROLEUM ASSOCIATION President Mike Terry

OIL AND GAS INVESTOR, HART ENERGY PUBLISHING www.hartenergy.com Publisher Shelley Lamb Editor-in-Chief Section 1 — History 1859-2007 Leslie Haines The Legacy of Oil and Gas in Oklahoma ...... 10 Senior Exploration Editor Peggy Williams Senior Financial Editor Section 2 — Boom and Bust Brian A. Toal An Incredible Ride ...... 42 Financial Editor Jeannie Stell Contributing Editors Gary Clouser Kelly Gilleland W.H. “Bill” Leach Jr. Taryn Maxwell Director, Custom Publishing Monique A. Hitchings Photo Editor Lowell Georgia Production Director Jo Pool Art Director Alexa Sanders Senior Graphic Designer Melissa Ritchie Section 3 — Drilling Activity Robert McGarr Oil, Gas and The 21st Century ...... 49 Regional Sales Manager Oklahoma Oilpatch Going Strong ...... 53 President and Chief Executive Officer Richard A. Eichler Woodford Shale Heats Up ...... 58

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Section 4 — Oklahomans Independent Development ...... 64 Partners in Oil and Gas Production ...... 76

Section 5 — Drilling and Services Oklahomans Serve Up Technology ...... 81

Section 6 — Monetary Impact Oil and Gas Drive Oklahoma’s Economy ...... 89

Section 7 — Pipelines and Refineries Midstream and Downstream Sectors ...... 93 Deep Oklahoma Roots ...... 100 Cushing: Pipeline Crossroads of the World ...... 101

Section 8 — Hall of Fame Key Players in Oklahoma Oil and Natural Gas History ...... 104

Section 9 — The OERB OERB, Oklahoma Oil and Gas Industry is Family Affair ...... 124 Oklahoma Oilmen—and Women—Proactive in Telling their Industry’s Story ...... 127

Section 10 — Oklahoma’s Oil and Gas, The Future Oklahoma’s Driving Force ...... 140

Glossary of Terms ...... 148

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From the Office of the Governor

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Oklahoma Governor Brad Henry

Fellow Oklahomans and Members of the Energy Industry: The discovery of crude oil and natural gas under the famous red dirt of Oklahoma was a defining event in our state’s history and economic growth, one that propelled us to center stage in the U.S. energy industry.

For more than 100 years, the unique individuals and dynamic companies who comprise Oklahoma’s energy sector have been more than leaders in business and industry. They have helped build and sustain our communities, our government and our educational, social, cultural and philanthropic successes.

So I am excited to introduce this publication to you as part of the many wonderful projects and events surrounding the Centennial Celebration of our great state. This publication highlights our colorful past and emphasizes the opportunities in our future.

The efforts of the Oklahoma Energy Resources Board in compiling this publication to commemorate the rich history of Oklahoma’s oil and gas industry are a welcome addition to the Oklahoma Centennial. I hope this edition will be prominently displayed in homes, offices, libraries and classrooms throughout our state and our nation for years to come.

This publication is special in two ways: the work of historians Dr. Bob Blackburn and Dr. Paul Lambert illuminates our past; while a treatment of contemporary Oklahoma oil and natural gas topics is provided by some of the nation’s best energy writers.

To a great extent, both in 1907 and in 2007, Oklahoma is defined by oil and gas. My hope is that the “can do” spirit of the Oklahoma oilmen—and women—will keep us at the leading edge of energy exploration and production for another 100 years.

Sincerely,

Brad Henry Governor

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From the Oklahoma Energy Resources Board

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OERB Board Chairman OERB Executive Director Steve Agee Mindy Stitt

Fellow Oklahomans and Energy Industry Professionals: The 20th Century saw not only the birth of our state, but also a rapid evolution of communities, an economy and a culture powered by access to abundant energy resources.

Still today, Oklahomans are blessed to be standing on top of some of the nation’s most prolific sources of energy. Ten percent of America’s proved natural gas reserves are right here in Oklahoma. Our state ranks second in production of natural gas, the cleanest form of abundant energy. And we pump out 61 million barrels of oil each year that the United States would otherwise have to import.

Oklahoma: Where Energy Reigns is a centennial tribute to these resources, not only the natural resources, but also the human resources that have shaped our state. Through our first century, oil and natural gas brought many distinctions to the Sooner State — consider that during the prolific discoveries of the 1920s, Tulsa became the “Oil Capital of the World” almost overnight; the University of Oklahoma created the world’s first school of petroleum geology; and 20 of the world’s Top 100 Most Influential People of the Petroleum Century hailed from Oklahoma.

One hundred years after statehood, the resources flowing under our feet are still having a tremendous impact on Oklahoma. One out of every seven jobs in our state is directly or indi- rectly supported by the oil and natural gas industry. And this past year, the oil and natural gas industry provided $1 out of every $6 the state spent on education, teacher retirement, roads, bridges, wildlife conservation and all other state programs and services.

The future of energy exploration and production in Oklahoma is bright. With advancements in technology, we are unlocking unconventional resources, such as shale rock and coalbed formations. Finding new resources means new jobs, and Oklahoma’s oil and natural gas industry is making sure young Oklahomans can take advantage of these opportunities by generously funding scholarships, university donations and Career Tech educational programs.

The Oklahoma Energy Resources Board is pleased to present this book in partnership with Hart Energy Publishing and Oklahoma historians Dr. Bob Blackburn and Dr. Paul Lambert. This book illustrates how Oklahoma’s role in bringing oil and natural gas to the American people has always been and will continue to be significant. It is an account of the proud history and great prosperity these resources have given our state and the promise of a bright future driven by the oil and natural gas industry. It is a timely reminder we flourish in Oklahoma — where energy reigns.

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History 1859-2007

Oklahoma Black Gold celebrates the 100th anniversary of the oil and natural gas industry in Oklahoma. The wooden structure on the left of the mural represents Oklahoma’s first attempts at drilling. The modern drilling rig and equipment on the right represent the present and future influence of the energy industry on the state. The three roughnecks in the middle of the epic piece display the physical strength and stamina necessary to work in the oil patch as the Oklahoma state flag blankets the state through “booms” and “busts.”

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Section 1

Photo by Lowell Georgia

Oklahoma artist Jeff Dodd painted the fan-shaped mural, 22 feet at its base, to depict how oil and natural gas exploration and production have shaped the history of the state. Funded by private donors organized by the Oklahoma Independent Petroleum Association, the commission was managed by the Oklahoma Arts Council. Dedicated in 1996, Oklahoma Black Gold hangs above the Oklahoma State Senate Chamber entrance on the fourth floor of the state Capitol.

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1859 1859 1866 Drake’s Oil Well Completed. Colonel Oklahoma’s First Oil Well Drilled. Reconstruction Treaties Signed. Following Edwin Drake drilled his discovery Lewis Ross, brother of Cherokee the Civil War, the Five Civilized Tribes were punished well at Titusville, Pennsylvania, inau- Chief John Ross, struck oil while for joining the Confederacy through a series of gurating the “Age of Petroleum.” drilling for salt water near present- treaties that took the western part of the territory Salina on the Grand River. for other tribes, granted the right-of-way for the first railroads and started the state-making process. 10 Oklahoma: Where Energy Reigns 05545 001-039_Sec.1:Layout 1 9/19/07 1:12 AM Page 11

The Legacy of Oil and Gas in Oklahoma

By Dr. Bob L. Blackburn and Dr. Paul F. Lambert

When historians of the future look back on Oklahoma’s first century as a state, they will search for the events, people and themes that make our experience unique.

istorians will find a state built quality of life enjoyed by all, thanks in large part on the foundations of the old to the philanthropy of families whose fortunes Indian Territory, where the un- are grounded in the oil and gas fields of the foldingH drama of tribal removal, conflict, emerging state. To fully understand that impact, to appre- self-government and individual expression set ciate the men and women who wrote that the stage for all that would follow. They will hear story, we must go back in time to the eve of the the echoes of the land runs, which fostered a Civil War. belief that the good times will never end and that the next boom is just around the corner. Most Indian Territory importantly, they will see an economic and social The presence of oil and gas in the future state of transformation that turned a rural, agricultural Oklahoma was common knowledge to early frontier into an urban, business-driven state explorers and travelers. When the first of the Five with some of the nation’s fastest growing cities. Civilized Tribes arrived in the Indian Territory in When they look for the fuel that fired the the 1820s and 1830s, oil working its way to the engines of that revolution, they will find the surface through seeps was used to treat cuts on legacy of the oil and gas industry. people and horses, lessen the pain of rheumatism The search for and production of oil and gas and treat chronic diseases. The first oil well, has affected almost every chapter of Oklahoma however, did not pierce the surface of the history for the past 100 years. It is evident in the territory until 1859, the same year Colonel Edwin skylines of Oklahoma City and Tulsa, along the W. Drake launched the “Age of Petroleum” by main streets of towns from Enid and Chickasha completing his famous oil well at Titusville, to Ardmore and Bartlesville, and even in the Pennsylvania. 1871 1882 McAlester’s Coal Mine Activated. The first coal mine Standard Oil Trust Created. in Oklahoma is started by Confederate veteran and John D. Rockefeller (pictured left) formed country trader J.J. McAlester, who married a Chickasaw the Standard Oil Trust, which controlled woman and gained the mineral rights to a 4-foot vein 30 separate business units. of bituminous coal near the tracks of the Katy Railroad.

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Photo courtesy of Chesapeake Energy Co.

Oil and gas explo- That first Oklahoma well was sunk by Lewis before the constant march of change. First came ration has been part Ross, brother of Cherokee Chief John Ross, who the emergence of local markets with the arrival of of the Oklahoma operated a salt works on the Grand River near the railroads after 1871 and the growth of towns such landscape since 1898. present community of Salina. Looking for a as Vinita, Wagoner, Muskogee, McAlester, Eufaula Here, Chesapeake stronger flow of salt water that he could reduce to and Durant. Then came the steady assault on tribal Energy Co. drills a salt in boiling kettles, he dug a well to 700 feet. To sovereignty with the General Allotment Act of well in Pittsburg his disgust, instead of salt water, he hit oil. The 1887, the land run of 1889 and the Curtis Act of County. well produced about 10 barrels of crude a day 1898, which abolished tribal courts and set a date for about a year. for the destruction of the Indian Nations. With a Ross cursed his bad luck for a good reason— growing network of railroad lines to distant mar- there was no market for crude oil. In distant kets and individual ownership of mineral rights markets, where city folks burned lamps, the through allotment of tribal lands, the search for common fuel in 1859 was whale oil. Locally, oil and gas gained new life. the thick goop would not burn, and the means In 1897, before the walls of tribal sovereignty for breaking it down into useable components were toppled, Michael Cudahy of Omaha, such as kerosene were as yet beyond the Nebraska, negotiated a deal with the Cherokee reach of the western frontier. Even if there Nation and drilled a well along the banks of the had been a local market for oil, the tribe as a Caney River in present-day Washington County. whole owned all surface and mineral resources, Among the Cherokee tribal leaders who invested which limited personal investment and excluded in the venture was William Johnstone, and the outside investors. well, named for his daughter, became known as After the Civil War, the obstacles to further the Nellie Johnstone No. 1. When completed, it development of oil and gas resources gradually fell produced 50 barrels per day, but was capped in

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Underground Reservation anticipation of a railroad being built to the The ability to purchase mineral rights in the community. Two years later, the railroad arrived, Indian Territory before 1898 was a challenge. providing transportation to a refinery in Instead of dealing with individuals, negotiations Neodesha, Kansas. The Nellie Johnstone No. 1, were conducted with tribal governments. uncapped to become the territory’s first commer- One wildcatter, Henry Foster, thought he hit cially successful oil well, produced more than the big time March 16, 1896, when he concluded 100,000 barrels of crude during the next 50 years. a deal with Chief James Bigheart and the Osage Council to purchase a “blanket lease” on 1.5 Dawn of the Petroleum Century million acres of tribal land. Just as the doors to exploration and production Foster’s brother, Edwin, drilled one well with in the Indian Nations opened, demand for oil no show, then another, again without finding oil and natural gas was gaining momentum. Railroad or gas. The third well produced a trickle of oil in companies, with steam engines that could be fired what would later be called the Bartlesville Sand, by oil, pushed their steel rails into every corner of but it was not enough to justify the expenses of the Twin Territories, creating a demand for oil and transporting drilling equipment and supplies over at the same time offering an efficient outlet to the rutted trails of the reservation. refineries in surrounding states. The real rise in Despite the disappointment, the Osages saw demand, however, came from a surprising new the potential value of their mineral rights by the industry that was just emerging on the world hori- time they were forced to allot land to individual zon. It was the dawn of the “Automobile Age.” tribal members. As a result, they retained those The first practical application of an internal mineral rights for the entire tribe, creating what combustion engine on an untracked carriage was some have called an “underground reservation.” demonstrated in 1896. Within four years, there

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Photo courtesy of the Oklahoma Historical Society were 4,000 “horseless carriages” in the U.S. The to satisfy that demand. Rising prices, however, growing market attracted investors such as John were only one reason for the resulting boom. D. Rockefeller, who cornered the transport and Compared with latter-day rotary rigs costing mil- refining of gasoline, and innovators such as lions of dollars, oilfield technology at the turn of Henry Ford, a Michigan farm boy whose first the century was sufficiently cheap to encourage two companies failed before he introduced the start-up companies and independent operators to Model A in 1904. Competing against 178 car try their luck in the oil patch. The workhorse was companies in the country, Ford sold 658 cars at a the cable-tool rig, with a derrick made of wood, a sticker price of $750 in one year. By 1909, when few metal parts that could be fabricated and he introduced his first Model T, there were more repaired on the spot, and a steam engine for than 200,000 automobiles on American roads. power. On such rigs, a skilled driller could raise By 1929, the American automobile industry and drop a massive drillbit, suspended on the end would be turning out more than 4.5 million cars of a heavy cable, into the ground, literally pound- and trucks each year. An industry was born, and ing its way through the earth. it depended on a growing supply of gasoline. Another reason for the coming explosion of oil For the first three decades of the 20th century, discoveries was a steady source of oilfield veterans oilmen spread out across Oklahoma and the rest from the “Old Oil Region” of Pennsylvania, West of the country searching for the next oil bonanza Virginia, New York and Illinois, which had been a 1885 1893 Bunsen Burner Invented. German Robert Bunsen invented Oklahoma Historical Society Created. Only four short years after what is now known as the Bunsen burner. The Bunsen burner the land run of 1889, members of the Oklahoma Territory Press produced a flame that could be safely used for cooking and Association organized the Oklahoma Historical Society to collect the heating by mixing the proper proportion of natural gas and air. “first draft of history,” their newspapers. In 1895, the organization became a territorial agency, followed by designation as a state agency in 1907. 14 Oklahoma: Where Energy Reigns 05545 001-039_Sec.1:Layout 1 9/19/07 1:12 AM Page 15

working classroom for men who understood leases, discovered, the field quickly depleted, leaving the With no conservation drilling, production and refining. Just as impor- late-arriving oilmen to look around the region for laws or limits on tant as their skills were their collective aptitudes other gushers. They quickly spread through the old spacing before the for taking risks, a characteristic best personified by Indian Territory where oil had already been found. 1930s, well owners rugged individualists known as wildcatters who One wildcatter bought a lease near Red Fork, four raced their neighbors were always looking for the next big strike, hungry miles southwest of the sleepy Creek Indian village to recover oil beneath for the thrill of discovery and willing to gamble of Tulsa, and started punching hole for the Sue A. the surface by drilling everything to have one more chance for the Bland No. 1. At 534 feet, when the driller struck oil as many wells as find of a lifetime. That attitude, coupled with and gas, he telegraphed his boss, “Send packer, oil possible. The result was affordable technology and a rising demand for is spouting over the derrick.” Telegraph operators a forest of derricks. oil, would make the first 30 years of the 20th quickly spread the news and the rush was on. century a remarkable succession of one oil boom Wildcatters combed the hills of the Creek and after another. Cherokee nations. In 1904, they discovered the Cherokee Shallow Sand District, which eventually A New Oil Frontier included most of Nowata County and part of This new era of the oil frontier began in 1901 with Rogers County. It featured productive wells as shal- the discovery of the legendary Spindletop Field low as 75 feet with a few going as deep as 750 feet. in Texas. Although a prolific producer when first By 1906, about 1,490 wells had been drilled in the 1897 1889-1901 Oklahoma’s First Commercial Oil Well. The Land Openings. Thousands of families trace their roots The first commercial well in Oklahoma Territory, the in Oklahoma to the land runs and lottery that served as Nellie Johnstone No. 1, is completed at Bartlesville. unique and historic processes to instantly convert public land to farms and cities.

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field. These wells were inexpensive to drill, causing Territory indicated one would be found. That was the district to be known as a “poor man’s field.” about to change. Significant production also was found near Muskogee in 1904. Oil Capital of the World To the south, in the Creek Nation near the In 1905, among the frontier adventurers attracted present-day town of Cleveland, W. J. Fellows and by the strike at Red Fork were Robert “Bob” John Schell of the Minnetonka Oil and Gas Co. Galbreath and Frank Chesley. With financial drilled a 1,600-foot discovery well, which initially backing from their real estate partners in produced 200 barrels a day, on the “Uncle Bill” Oklahoma City and Tulsa, the wildcatters secured Lowry farm. Within a year, there were more than a lease on the allotment of Ida Glenn, a young 220 producing wells in the small field. The town Creek woman who lived about 12 miles southwest of Cleveland quickly grew from fewer than 1,000 of Tulsa. After raising sufficient money to hire a residents to more than 7,000, and the find contract driller, they punched hole until they encouraged additional exploration in the area. reached 1,400 feet without any show. At first, they In 1902, Edwin B. Foster, a native of Rhode decided to abandon the hole, but changed their Island who moved to the little town of Bartlesville, mind and set a goal of reaching 1,500 feet. If they transferred his mineral rights in the Osage Nation did not find oil or gas by then, they would walk to the Indian Territory Illuminating Oil Co., bet- away. The next day, just 20 feet deeper, a mixture ter known as the ITIO. Although they found no of crude oil and natural gas gushed over the top of giant field or prolific producers, the company the derrick. drilled a number of small, successful wells. In Galbreath and Chesley quickly secured addi- 1905, the future Osage County produced 1.8 mil- tional financing from partners Charles Colcord lion barrels of oil, most coming from wells along of Oklahoma City and J. O. Mitchell of Tulsa so the eastern fringe of the reservation near the they could purchase leases and drill more wells. emerging boomtown of Bartlesville. As word of the strike spread, the price of leases This steady string of modest discoveries may soared from as cheap as $2 per acre to thousands have been important to mineral owners and a few of dollars plus royalty payments on production. wildcatters, but they were not especially notewor- The field expanded so dramatically that in 1908 thy to the rest of the world anticipating another 20.5 million barrels of crude were produced giant field like Spindletop. At the time, a field was from 80,000 acres. considered a giant if it produced more than 100 Glenn Pool made national headlines as the million barrels. Thus far, nothing in the Indian newest Spindletop. Drilling proceeded at a frenzied

Nellie Johnstone Burns Her Oil Well

Oklahoma’s first commercial oil well, the Nellie Johnstone No. 1, was completed in Bartlesville in 1897. Drilled in expectation that the community soon would be served by a railroad that would link the area to a refinery in Neodesha, Kansas, the well was capped to await the arrival of the railroad. The well was not sealed properly, however, and in time, a steady trickle of crude ran from the well downhill to the Caney River. Local residents used the crude as a lubricant for medicinal purposes, but that changed one winter evening. The river had frozen sufficiently to allow local teenagers to ice skate. The youngsters decided to build a fire for warmth. Suddenly, the fire ignited the rivulet of crude and flames raced to the rig, which burned to the ground. The panicked teens fled, and years later, Nellie Johnstone, for whom the well was named, admitted she was among the group of teens who accidentally burned the well. The damage was repaired, and when the railroad arrived in 1899, the well was opened, and Bartlesville was on its way to becoming an oil boomtown.

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Glenn Pool, southwest of Tulsa, was Oklahoma’s first “giant” oil field. It was discovered in 1905.

Photo courtesy of the Oklahoma Historical Society pace because of the “law of capture,” meaning Tribal members of the Lochapoka Band of the any oil and gas brought to the surface belonged Creek Nation had founded Tulsi-town in 1836 on to the owner of that well, regardless of the loca- the bank of the Arkansas River. By 1890, as a stop tion of the subsurface formations. Faced with the on the western extension of the St. Louis and San reality of losing their oil to the well on an adjoining lease, producers and royalty owners scram- bled to drill wells as quickly as possible. “Line fights” were common, with one producer drilling wells along the edge of his lease and a competitor drilling offset wells only a few feet away. The flush production of Glenn Pool overtaxed the existing transportation facilities of the region. When oilmen could not build storage tanks fast enough to keep up with production, ravines were dammed and storage pits dug to Voices of Doom create massive lakes of crude oil. The flush production depressed the price of oil in the market At the dawn of the 20th century, many people to an average of 30 cents per barrel. Oilmen thought the oil and gas industry would die unsuccessfully attempted to control production, side-by-side with whaling. The suspected culprit but new gushers were discovered daily. The was electricity. opening of the nearby Okmulgee oil field in 1906 With cheap electric service, they assured added to the glut. the public, consumers would quickly replace In the long run, the strike at Glenn Pool kerosene, whale oil and natural gas lamps with opened a new chapter in the history of oil and wires and light bulbs. The only remaining use gas exploration and production in Oklahoma. In for oil would be lubricants. addition to the creation of jobs, the stream of The voices of doom were proven wrong. royalties to land owners, and the impact on In 1906, the founders of Oklahoma Gas and banking and retail, the play attracted to Electric Co. needed a cheap and reliable source Oklahoma big national companies with deep of fuel to fire the generators of their company pockets for long-term investment. The Texas Co. in Oklahoma City. They wanted natural gas. and Standard Oil of New Jersey drilled wells at To get the gas from fields in northeastern Glenn Pool and remained major players in subse- Oklahoma to their hometown, they organized quent fields. The Prairie Oil and Gas Co. and a company and started laying pipeline. One Gulf Oil Co. built pipelines that connected the hundred years later, that company would still state to world markets. Perhaps most significantly, be delivering natural gas to most of Oklahoma. Glenn Pool was the catalyst that made Tulsa the That company was Oklahoma Natural Gas. “Oil Capital of the World.”

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Francisco Railroad, Tulsa had a population of The hotel lobbies became meeting places where about 1,400. The drilling at Red Fork and subse- oilmen swapped information and bought, sold quent finds in the area stimulated some growth and traded leases. in the community, but it was Glenn Pool that Tulsa became the headquarters for oilmen such caused Tulsa to boom. Community leaders in as Henry F. Sinclair, who organized the Exchange Tulsa recognized the potential of the oil industry National Bank to cater to the oil industry. Other and took a variety of steps to attract oilmen and industry giants attracted to the oil capital of the their companies to their city. Through a private world included William G. Skelly, James A. subscription, they constructed a bridge over the Chapman, Robert M. McFarlin, Waite Phillips, Arkansas River to link the city with Glenn Pool. and David R. and S. Miller Williams. One of their Investors established banks catering to the oil fellow immigrants was Patrick C. Doyle, who industry, while other businessmen built fine established the Petroleum Publishing Co. and hotels such as the Robinson, the Hotel Tulsa and published the leading industry newspaper, Oil and the Mayo. Gas Journal. Tulsa’s international prominence in the energy industry was affirmed by the creation of the International Petroleum Exposition and Con- gress in 1923. Worldwide industry leaders and visitors descended upon Tulsa for the event. Exhibits of oil field equipment and new technologies were featured as well as a general assembly of oilmen and business leaders. The weeklong trade show was a success and grew each year until the Great Depression and World War II caused the event to be held on an irregular basis. Tulsa’s role as the oil capital of the world also was The Blue Flame reflected in the refinery complex that developed on the west side of the Arkansas River.Among the early Since statehood in 1907, natural gas has been refining pioneers in Oklahoma was Josh Cosden,the a steady source of energy in towns and cities. “Prince of Petroleum” who constructed a refinery At first, with limited demand and shallow gas that eventually covered one square mile. By 1916, it formations close to markets, natural pressure was the largest independent refinery in the world. coming from the wellhead was enough to get gas Cosden made and lost two fortunes during his to homes and businesses. That quickly changed. career, dying broke on a train in 1940 at the age As demand increased and the extensive of 59. pipeline system expanded to gather and deliver gas, the natural pressures became inadequate, Wildcatters especially on peak-load days in the wintertime. The lure of Glenn Pool and the growth of Tulsa In 1910, to increase pressure in their pipelines, attracted to Oklahoma an entire generation of Oklahoma Natural built the first compressor wildcatters who drilled for oil and gas in areas station in the southwest. It was in Kellyville. that did not have proven oil and gas reserves. As the network expanded to connect new oil Some of them became wealthy, but many more and gas fields to growing cities and towns, of them never struck it rich. Despite the risks, additional compressor stations were built. they were willing to gamble everything on the turn of a drillbit. Typical of the thousands of 1898 1898 The Golden Age of Farming. From 1898 Curtis Act. This federal legislation abolished tribal courts to 1918, a combination of land openings, throughout Indian Territory and set the date to complete railroad construction, plentiful rainfall and allotment of tribal lands. good prices generated bumper crops and a building boom in towns from Boise City and Miami to Idabel and Frederick.

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Photo courtesy of the Oklahoma Historical Society

free-spending wildcatters who rolled the dice in Slick was another gambling wildcatter who This picture of oil Oklahoma were W. F.“Billy” Roeser and Thomas struck it rich. He managed to retain and build his derricks in the B. Slick. fortune but not without experiencing trying Cimarron River Rising from modest roots and a poor family, times. A native Pennsylvanian, Slick began when originally was a Roeser became a millionaire by age 30 through he was 16 working with his father in the oil fields. hand-tinted post- successful drilling and production in the Glenn Two years later, he purchased his first lease to card. In the race Pool. He purchased the “best” house in Tulsa drill a wildcat well in Illinois. By 1904, when he to find more oil, in 1907 and spared no expense in furnishing was 21 years old, Slick was in Indian Territory to drillers expanded it and landscaping the grounds. He staged an purchase leases for oilman Alexander Massey. the Cushing Field opulent house-warming party, purchased six Catching the fever, he drilled his first well near into the bed of the automobiles and proceeded to live in style. Tryon but abandoned it as a dry hole at a depth Cimarron River. Roeser also gave money to relatives and friends, of 2,800 feet. Later, crude was discovered at 4,000 and underwrote the explorations of numerous feet. This was the first of many dusters Slick wildcatters. drilled during the next eight years in conjunction Typical of the wildcatters, he could not resist with Massey and an investor in Chicago named the temptation to get back in the game. He drilled C. B. Shaffer. Unfortunately for him, he became a series of wildcat wells, developed 8,000 acres at widely known as “Dry Hole Slick” and “Mad Glenn Pool and leased 110,000 acres in Illinois. Tom Slick.” Despite spending millions this time, he drilled Not ready to abandon his dream, Slick con- nothing but “dusters” and went broke. Other vinced Shaffer to finance one more wildcat well oilmen remembered Roeser’s generosity, so they in exchange for an interest in some of his leases. came to his aid. Roeser regained some of his Slick began drilling on the farm of Frank fortune and achieved a series of moderate Wheeler, about 12 miles east of Cushing, where successes in drilling wildcat wells. With his he later claimed, “the smell of oil sands was per- confidence restored, he gambled everything once fume to his nostrils.” Slick’s last-ditch effort was more to finance the development of a 25,000- successful when the well blew in at 4 a.m. March acre lease near Merrimac, Oklahoma. Once again, 17, 1912. He later realized he had drilled the his luck deserted him. When he gave up, he had discovery well of the magnificent Cushing Field. gone through $50 million. Slick acted quickly to stop the flow of crude. 1899 1900 Railroad Arrives in Bartlesville. First School of Petroleum Geology. Charles The arrival of a railroad in Bartlesville Newton Gould (pictured left) established at the provided a means of shipping crude oil University of Oklahoma what is now the School of to a refinery in Neodesha, Kansas, and Geology and Geophysics. It became the first stimulated a drilling frenzy that caused school of petroleum geology in the world. Bartlesville to become a boomtown. Oklahoma: Where Energy Reigns 19 05545 001-039_Sec.1:Layout 1 9/19/07 1:14 AM Page 20

Some oilmen, like To keep his discovery a secret so he could lease as becoming one of the most significant pipeline L.E. and Frank much land in the area as possible before hubs in the U.S. As Oklahoma celebrated its cen- Phillips, expanded competitors arrived, he spread dirt on the oil that tennial of statehood in 2007, prices for light, from exploration covered the ground. Still, the news got out. sweet crude were still being set at Cushing. and production to One competing lease hound that arrived in Soon after Slick discovered the Cushing Field, refining and retail Cushing eager to get into the countryside to buy other wildcatters turned their attention south to sales. Here, a leases reported to his boss that he went to a livery the likely looking surface features of Carter and Phillips gas station stable and “damned if Slick hadn’t already been Stephens counties. In August of 1913, driller J. M. opens in Bartlesville. there and hired every rig.” He walked three miles Critchlow of Titusville, Pennsylvania, working in into the country to rent a farm wagon and horse, concert with Ardmore investors Roy M. Johnson, returned to Cushing to get a notary to go with him Edward Galt, Sam Apple and Wirt Franklin, to buy leases, and observed,“damned if Slick hadn’t drilled the first of two wells that ignited a rush to hired every notary in town, too.” the Healdton area. By August 1914, 242 wells Slick made millions from the Cushing Field, in the field were producing more than 58,000 known around the world for its highly produc- barrels a day. tive wells. The field spread in all directions The massive production led to significant from the original strike at Drumright, which amounts of crude being stored in tanks and in inspired the names for subsequent boomtowns open pits. On August 27, 1917, a strong electrical rising from the blackjack-covered hills: Drop- storm passed through and ignited several 55,000- right, Gasright, Alright, Downright, Justright and barrel storage tanks. The inferno spread to storage Damright. During World War I, the Greater lakes of crude and surrounding oil wells. By the Cushing-Drumright Field reached its peak of time the flames were extinguished, 400,000 bar- production and played a major role in fueling the rels of oil had been consumed. Soon, the field Allied war effort. returned to normal operations, and by January 1, By 1919, Cushing was producing 17% of all oil 1915, the field’s daily output was back to 90,000 marketed in Oklahoma and about 3% of the barrels per day. world’s production. The quality of Cushing’s As before, this kind of production attracted an crude was the highest that had been discovered army of lease hounds, drillers and investors who west of the Mississippi River, which convinced joined in the mad rush for the next big discovery. investors to build refineries and massive storage In 1919, they found it to the west near Hewitt in facilities in and near Cushing. This led to Cushing Carter County, the first of a series of oil and gas

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fields that eventually merged into one giant field tribal member got what was called a “head right,” called Sho-Vel-Tum. Covering significant portions which earned them a percentage of all revenues of Carter and Stephens counties, Sho-Vel-Tum flowing to the tribe from lease bonuses and proved to be an exceptionally long-lived field. royalties. Starting in 1916, Colonel E. W. Walters Almost 90 years later, it would be Oklahoma’s most of Skeedee auctioned leases to this “underground productive producer of crude oil. reservation” to the highest bidders under a While early attention was focused on Glenn large tree on the grounds of the Osage Council Pool, Cushing-Drumright and Healdton, oil House in Pawhuska. Auctions began at 1:30 p.m. and gas exploration moved back to center stage and continued until all leases were sold, some- in the old Osage Nation, which became Osage times as late as 9:45 p.m.On one June afternoon County after statehood. The Osages, in 1924,bidders paid a total of $10.8 who did not allot tribal lands to million for leases. Appropriately, the individuals until 1906, had retained tree became known as the Million mineral rights in common. Each Dollar Elm.

Pipeline Cats Pipelines were the veins and arteries of the oil fields, and before much of the work was mechanized, the job of laying pipelines was one of the most grueling in the oilpatch. Men had to clear the pipeline right of way, dig the ditch, wrap the pipe, screw lengths of pipe together and refill the ditch by hand. Often less educated than other oilfield workers, pipeline workers or “cats” rarely advanced above the position of foreman for a pipeline gang. Because anyone who possessed a strong back and a willingness to work could be a pipeline cat, their wages usually were lower than those who worked jobs that required more knowledge or skills. One pipeline cat recalled, “There’s a saying in the oil field that when a man can’t do nothing else, he goes to pipelining. . . . Pipelining ain’t no picnic. . . . The work will kill the average man, and lots of men have tried pipelining, but only for a spell. They can’t take it.”

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When the auctions first began, the highest bids were made for leases in the eastern part of the county where past production indicated there was a likely chance of finding more oil. For most veterans of the oil patch, this method of following “trends” was considered the most reliable, low-risk method of finding oil and gas. There was one oilman, however, a native of Pennsylvania, who was not joining in the bidding war. Patiently, he was waiting for the leases in the western part of the county where oil had never been found. Instead of relying on old discoveries or simple intuition, that innovator was armed with new data gathered by scientists who called their new profession petroleum geology.

Creekology to Geology When the first oilmen came to the Indian Territory, their search was anything but scientific. Many depended on divining rods, dreams, and “creekology,” while the more experienced relied on surface seeps and trends. Onto this stage of the oil and gas industry walked Charles Gould, a farm boy from Ohio who had moved to Kansas to teach school. In 1900, after he received his Masters degree in geology from the University of Kansas, he was recruited by the University of Oklahoma to create a new department of geology. The Glenn Pool strike in 1905 attracted Gould’s attention. He mapped the geology of the field and found a correlation between the producing wells and rock formations. The strike, he discovered, was sitting on top of an anticline, an underground mountain where the rock strata had been uplifted to form pockets that could trap the upward migration of oil and gas. The next year, when the Oklahoma Constitutional Convention was drawing up the structure for a new state government, Gould successfully convinced the delegates to include a State Geological Survey, in part to promote the search for oil and gas. As professor and director of the State Geo- Georgia logical Survey, Gould recruited promising young

Lowell students to help him map the underground by resources of the new state. When the Cushing

Photo Field drew the world’s attention, the scientist 1901 1901 1904 First Mass-Produced Automobile. Oil Discovered at Spindletop, Texas, and Red Fork, Indian The Cherokee Shallow Sand District Ransome Eli Olds designed the Territory. The Spindletop well near Beaumont, Texas, is the Discovered. Eventually covering parts of first mass-produced car with a world’s biggest gusher, producing between 750,000 and Nowata and Rogers counties, the region gasoline- powered engine. 100,000 barrels per day—50% as much crude as all other was known as a “poor man’s” field U.S. wells at the time. The discovery of oil at Red Fork, near because of its productive, shallow wells. Tulsa, stimulated additional exploration in that area. 22 Oklahoma: Where Energy Reigns 05545 001-039_Sec.1:Layout 1 9/19/07 1:16 AM Page 23

Photos courtesy of the Oklahoma Historical Society thousands of dollars. In May of 1920, that The Cushing Field, strategy paid off when Marland’s rigs struck a discovered in 1912, gusher near the little town of Burbank. Within a produced a large year, Burbank had yielded an astonishing 20.4 percentage of the oil million barrels of crude. Expanded to 32 square used by the Allies miles, the Burbank Field proved the usefulness of during World War I. petroleum geology. Soon, every major company had a staff of geologists. confirmed the producing wells followed an anti- Marland did not rest while other companies cline. In 1913, Gould shared his findings with the tried to catch up. His crews found another anti- International Geological Congress. The world cline near the town of Tonkawa, so they decided to noticed, especially a young, ambitious wildcatter drill 10 wells to test their findings. Although the from Pennsylvania waiting to bid on leases in first eight holes were dusters, the ninth hit pay dirt Osage County. His name was E.W. Marland. at 2,695 feet. The new field, at first called the Marland, with experience gained in the oil Tonkawa Field, covered only eight square miles, fields of Pennsylvania, West Virginia and Ohio, but it featured 14 distinct oil-bearing horizons, had arrived in Ponca City in 1908. Through an although most of the production came from three, acquaintance with the Miller Brothers of 101 hence the new name of Three Sands. It was a com- Ranch fame, he worked with the Ponca Indians mon sight in the field to see three derricks with to develop the Ponca City Field in 1911. He interlocking legs, each tapping one of the three then branched out to find several producing major sands at the same time. pools in the region, although nothing to draw The Three Sands Field, with its more complex the attention of the world. formations, convinced many oilmen to use a new Marland, unlike many of the oilpatch veterans, technology called rotary drilling. Rotary rigs used had a college education. When he read Gould’s steel derricks to support the additional weight that report, he quickly became a convert to petroleum resulted from the use of pipe to spin a drillbit. As geology. He hired young geologists to scour and the hole went deeper, additional joints of pipe were map undeveloped areas looking for anticlines. To screwed into the top of the pipe string. Rotary rigs the east, across the Arkansas River, they found a often used three or four steam boilers to twirl drill- major formation in the western reaches of Osage bits on the end of heavy pipe thousands of feet County. At an Osage auction in 1919, Marland below the surface and to pull the string frequently used this information to secure leases in the to change the drillbit. Water or a specially formu- unproved area at a cost of hundreds rather than lated drilling mud was forced down the center of 1905 1905 First Oil Refinery in Oklahoma. The Muskogee Oil Glenn Pool Oil Field Discovered Near Tulsa. Refining Co. built a “finishing plant” near Muskogee in Although neither the first nor the largest of the oil strikes, November 1905. It soon was producing lamp kerosene, Glenn Pool hit just as the first big Texas field was playing out. lubricating oil and industrial fuel—the beginning of oil Thousands of oilmen rushed to the territory and turned the refining in Oklahoma. sleepy village of Tulsa into the “Oil Capital of the World.”

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the pipe and out of the bit where it picked up blackjack thickets, most non-Indians thought the debris from the bottom of the hole and carried it land was worthless. Instead, it became the heart of around the pipe to the surface. This helped seal the Greater Seminole Field that quickly was proven the hole from the surrounding formations oilmen to consist of 39 separate oil pools that spilled into might want to produce later. While cable-tool rigs neighboring Okfuskee, Pottawatomie, Hughes and continued to be used for a few more years to Pontotoc counties. drill shallow wells, rotary rigs quickly became The Greater Seminole Field developed rapidly dominant in Oklahoma during the 1920s. and attracted independent oilmen and large oil Marland became a legendary figure in the oil companies, including the Shell Oil Co. headquar- industry, making and losing several fortunes. tered in The Hague, Netherlands. Unfamiliar with He always did things first class, equipping his the amount of territory their oil scouts were oil scouts and other field men with big shiny required to cover, company officials shipped a large Buicks. He built two mansions in Ponca City and number of bicycles for their geologists and other became one of the most generous philanthropists employees to use to save money. in state history. Because of overexpansion and By 1929, the Greater Seminole Field was the the effects of the Great Depression, Marland’s oil nation’s premier producer of high gravity oil. interests eventually were absorbed into the Between July 16, 1926, and September 1, 1929, Continental Oil Co.—Conoco—which continued about 250 million barrels were produced in the to operate a large refinery and research complex in Greater Seminole. Ponca City. The Greater Seminole also was noted for mud. Heavy oilfield equipment broke down the mostly The Greater Seminole Field unpaved rural roads and city streets, and the As Three Sands and Burbank yielded their black region was unusually wet during the field’s devel- bounty, oilmen wondered where and when the next opment. Teams of mules and oxen were frequently big play in Oklahoma would occur. The answer employed to haul steam boilers and other items came March 23, 1923, when wildcatter R. H. Smith’s to drilling sites. Even Seminole’s Main Street fre- Betsy Foster No. 1 blew in as a 2,800 barrel-per-day quently was a mud bog that greatly hampered the gusher about two miles southeast of Wewoka in flow of traffic. Cars and trucks often sunk to their Seminole County. Soon the rush was on to the for- fenders in the marsh, and enterprising individuals mer Indian reservation, and the area proved to be sold the unfortunate drivers and passengers food prolific. Ironically,the county had been forced upon and drink. Even prostitutes offered their wares the Seminole Indians as punishment for to the stranded motorists. When the their resistance to removal to Indian roads did dry out, passing vehicles Territory. Covered with scrub oak and generated incredible clouds of dust.

Shamrock Oklahoma’s oil booms created numerous oil boomtowns. Among the more unique of these communities were Whizbang in Osage County, Ragtown in Carter County and Shamrock in Creek County. Shamrock was a small farming community with less than 100 people when the Greater Cushing- Drumright Field boomed in 1915 and the town site shifted to the southern edge of the field, causing the town to boom. At its zenith, it was estimated to have a population of 10,000. Because of its name, the community took on an Irish character, with streets named Cork, Dublin, Ireland, St. Patrick and Killarney. Virtually every building in town was painted green, and a blarney stone was imported from Ireland. The community’s first newspaper was the Shamrock Brogue. Typical of oil boomtowns, the town featured gambling halls, pool halls, brothels and tough individuals. As production in the area declined in the 1920s, the town was abandoned by most of its residents as they moved to the next boom. Shamrock, however, had earned a permanent place in the lore of the Oklahoma petroleum industry.

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Photo courtesy of the Oklahoma Historical Society 05545 001-039_Sec.1:Layout 1 9/19/07 1:16 AM Page 26 Georgia Lowell by Photo

1905 1906 1907 State of Sequoyah. In an attempt to avoid single statehood Oklahoma Natural Gas Co. Indian Territory and Oklahoma Territory United merging Oklahoma and Indian territories, 182 delegates from Formed. Dennis T. Flynn, C. B. in Statehood. The new state, Oklahoma, entered the Five Civilized Tribes met in Muskogee to draft a constitution Ames, T. N. Barnsdall and Glenn the union as the biggest oil-producing state at that would create the State of Sequoyah. Although approved T. Braden created ONG to build and operate a the time. Gulf and Texaco built rival pipelines by voters of the Indian nations, Congress ignored the effort. pipeline to bring natural gas from northeastern from Tulsa to Gulf Coast refineries. Oklahoma Oklahoma to Oklahoma City. established a Corporation Commission to regulate oil production to prevent waste. 26 Oklahoma: Where Energy Reigns 05545 001-039_Sec.1:Layout 1 9/19/07 1:17 AM Page 27

The great oil fields discovered during block long in front of every restaurant all day . . ..” Oklahoma’s first three decades as a state spurred Many of the eating establishments operated around the development of wide-open boomtowns. the clock with little time to clean off the floors mud Most of the workers who followed the oil booms patrons carried into the eateries on their shoes. were single or married men who left their fami- Often the waiters and cooks were not paradigms of lies behind in more stable environments. The cleanliness. One worker recalled observing a cus- industry was labor intensive and with the law of tomer at a cafe in the town of Three Sands ordering capture driving oilmen to drill as rapidly as pos- a bottled coke and a hard-boiled egg. When the sible, oilfield operations were conducted around waitress asked, “What kind of a meal is that,” the the clock. As money flowed patron replied,“it is a meal that freely, bands of gamblers, does not allow you to get your prostitutes and grafters filthy hands on any part of it!” flocked to the oil booms to Sleeping accommodations get as much of the workers’ always were in short supply, so money as possible. many buildings served a dual purpose. During the height of Boomtowns the Cushing boom, pool halls The oil boomtowns of Okla- were converted into hotels after homa were similar to the midnight so workers might mining boomtowns of the old sleep on or under pool tables, West. Some of them had been in chairs or anywhere else

sleepy rural hamlets prior to Society space could be found for 50 the boom, while others owed cents to $1 a night. In some their very existence to the pool halls, men slept under the Historical petroleum bonanza. Most of tables while others played pool them retreated into obscurity a few feet above their heads.

when the flush production Oklahoma Cots were rented in so-called

declined, but in a few in- the hotels usually in eight-hour stances, production persisted of shifts, with three different sufficiently for more perma- workers occupying the cot each nent installations, such as courtesy day. Men even rented rooftops

refineries, tank farms, supply Photo where they pitched tents or houses and oil well service The lifeblood of the oil patch was money, rolled up in a blanket. When all companies to perpetuate pros- and it was raised from friends, family and else failed, some slept on the perity in communities such as investors. The Eureka Oil and Gas Co., open ground. Cushing and Seminole. formed by Muskogee businessmen, raised Local law enforcement es- Workers arriving in a new their capital investment by selling stock. tablishments and personnel boomtown faced numerous were overwhelmed in most hardships. Flimsy buildings had been hastily thrown boomtowns. Brothels, dance halls, gambling together and others were under construction. dens, saloons, pool halls and businesses that Securing shelter and food were immediate difficul- featured various combinations of such establish- ties. In boomtowns, most of the men ate at “greasy ments flourished. Prostitutes usually plied their spoon” cafés where high-priced food of dubious trade with impunity. In some communities, if quality was served, often in unappetizing sur- fined by a justice of the peace, prostitutes were roundings. A supply house salesman arrived in put back on the streets to earn the money to pay Cushing in 1912 to discover that “there was a line a their fines. 1909 1910 First Gas Processing Plant. Gas processing to make State Capital Moved to Oklahoma City. When U.S. Congress gasoline and other products was begun in Oklahoma by authorized the state-making process in 1906, it stipulated that the D. W. Franchot Co, which operated the state’s first Guthrie would be the first state capital. By 1910, Oklahoma City successful gas processing plant at Kiefer, using gas had grown by 600%, while Guthrie remained the same size as it produced in the surrounding Glenn Pool Field. had been in 1900. The citizens of the state voted to move the capital to the larger city.

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Frank Phillips, on With the vice came violence. Vicious fights were One veteran of the oil booms recalled that in the far right, hosted common on the main streets of these communities. Kiefer there were“fights and killings every day. You a group at his ranch On Tiger Creek Avenue in the town of Drumright, got used to seeing them, and if a couple of fellows west of Bartlesville. one witness declared that by merely turning one’s started fighting on the sidewalk, you just [went Among his guests head,“it was an easy matter to see a dozen fights in around] them, not paying any attention unless it were brothers L.E. full blast at the same moment.”Armed robbery was was extra good.” When the 55,000-barrel oil stor- (second from right) a common occurrence, and killings were all too fre- age tanks in Kiefer were drained for cleaning a few and Waite (center). quent in places such as “The Bowery,” a row of years after the boom, a number of skeletons were saloons, brothels and gambling establishments in found. During the transition from Indian Territory Kiefer, or “Bishops Alley,” a vice district encom- to statehood in 1907, Kiefer had three days in passing four square blocks in Seminole. which there was no law enforcement in place, and

Erle P. Halliburton

A native of Tennessee, Erle P. Halliburton took a job in 1918 with the Perkins Oil Well Cementing Co. in California. Fascinated by the cementing process, Halliburton made so many suggestions for improvements, he was viewed as a nuisance and was fired.

Halliburton Halliburton and his wife, Vida, moved to Burkburnett, Texas, where he started of his own company, the New Method Oil Well Cementing Co., working out of his garage with two employees, Erle and Vida. He soon moved his operations to be courtesy near the prolific Healdton Oil Field and found success. By 1921, he had reor-

Photo ganized as Halliburton Oil Well Cementing Co., headquartered in Duncan, and continued to develop innovative equipment and methods of cementing oil wells. Halliburton went public with his company in 1924, established operations in Canada in 1926 and began operating in South America in 1940. By the time of his death in 1957, the company had 201 offices in 22 states and 20 foreign countries. The company was poised, through acquisitions and aggressive growth, to become one of the world's largest suppliers of the complicated technology and services needed to produce oil and gas.

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Photos courtesy of the Oklahoma Historical Society

the place reportedly went “hog wild.” pushed relentlessly during their work shifts or An oil field worker All of the major oil fields during this period “tours.” Among the most strenuous jobs was that (above) stands on a had significant boomtowns. In addition to Kiefer of rig builder, who originally constructed wooden calf wheel, part of and Seminole, among the most notorious were derricks and then assembled steel derricks in the the drive mechanism Whizbang in Osage County, Shamrock in Creek 1920s. One rig builder recalled he and his com- used to power cable County, Rag Town in Carter County, Three Sands rades “had to hit a hard lick every time we raised tool rigs. on the boundary of Kay and Noble counties, and our hands and keep it up all day long. I’ve seen rig Bowlegs and Cromwell in Seminole County. At its builders [urinate] while they was working; they By the 1920s, height, Cromwell was dubbed “The Wickedest City didn’t have time to take out to the brush, and they Oklahoma highways in the World.” It was there that legendary lawman was so damned tired they couldn’t control them- were dotted with Bill Tilghman, who had been called out of retire- selves anyway.” Rig builders “dug the cellars, dug small “filling” ment to bring some semblance of order to the the footing, sawed out the lumber for the rig, and stations, including community, was gunned down in 1924 by Wiley then built it.”And they constructed the rigs as rap- this one operated Linn, a corrupt federal liquor agent. idly as possible. by the Marland The“wild and woolly”days of most boomtowns Other laborers, such as drillers, roughnecks, Refining Co. were fairly short lived. If a town’s prosperity per- tank builders, pipeline “cats,” machinists and (center). sisted for long, civilizing agents such as wives and “shooters,” worked hard with frequent overtime. mothers, ministers and churches, and crusading One roughneck recalled one of the hardest jobs on newspapermen began to demand crackdowns on a rotary rig was pulling pipe to change drillbits. vice and violence. Gradually,the more vile elements This had to be done usually every other hour. moved on to new, more wide-open boomtowns. When pulling pipe, roughnecks would work two Bishop’s Alley in Seminole, for example, lasted hours at a frenetic pace, during which they would only about three years, after which a park and “yank up three joints at a time, unscrew it, rack it playground occupied the site. up in the derrick . . . until we’ve got the bit out on the derrick floor.” On a 5,000-foot hole, that was The Work “plenty of work . . ..”And it was dirty work. When In addition to enduring the hardships and frustra- the pipes were unscrewed, drilling mud “spouts all tions of boomtown life, oilfield workers faced over us.” exceptionally demanding conditions on the job. One machinist recalled working for $1.25 an The law of capture caused oilmen to drill their hour at Earlsboro in 1927 with time and a half leases as rapidly as possible, so work crews were for overtime and “all the overtime a man could

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stand up to.”He averaged $125 a week working as long as he could keep his eyes open. After working a 20-hour stretch, he would have to haul drinking water from a well miles away from his home and often would shop for groceries to keep his wife off the streets of the boomtown. When allowed, he would lie in bed “like a chunk of steel” as long as he could. Often only an hour or two would pass before a driller would wake him with an urgent request for him to turn out a pipe joint. Perhaps the most dangerous job during the early oil fields in Oklahoma belonged to the shooters because they handled nitroglycerin, a volatile, powerful explosive. Shooters prepared “torpedoes” loaded with explosives and lowered them into the well hole to the oil-producing strata. There, it exploded and fractured the formation to enhance the flow of crude to the wellhead. Accidents involving nitroglycerin were fairly commonplace. As for a test well. On December 4, 1928, working on a “Shorty” Moses, a shooter for the Acme Torpedo deep-drilling rotary rig placed near present-day S.E. Co. at Seminole, indicated, “shooters don’t make 59th and Bryant, the crew brought in the Oklahoma but one mistake.” City No. 1, which blew in as a gusher. A new boom was on. By 1932, there were more Conservation and Innovation than 300 wells producing massive amounts of crude Petroleum geologists with the Indian Territory from the Wilcox Sand. One well, Phillips Petroleum Illuminating Oil Co. made no mistake in 1928 Co.’sMcBeth No.1,produced 9,469barrelsintwoand when they reported they found a promising anti- half hours, a daily rate of 101,002 barrels. cline a few miles south of Oklahoma City. The lease The unusually high gas pressure led to numer- hounds descended on the area to create a protected ous gushers and blowouts with wells spewing block of mineral rights and sent the drilling crews in significant amounts of oil and gas over the tops

Pioneer Settler, Banker and Oilman

Herbert Hiram Champlin realized the American dream and played a major role in the development of Oklahoma and the petroleum industry. At age 31, Champlin made the land run into the Cherokee Outlet in northwest Oklahoma in 1893. He purchased some real estate in the heart of the new community of Enid and eventually became well established as a banker. He served as a member of the Oklahoma Constitutional Convention in 1906. In 1916, when the Garber Field was discovered to the east of Enid, he entered the oil business, encouraged to do so by his wife, Ary. He was immediately successful in producing oil and soon acquired a fledgling refinery in Enid. In 1920, through an acquisition, Champlin became a gasoline retailer. By 1939, when he constructed a Tudor Revival-style mansion in Enid that remains a community landmark to the present, his company was vertically integrated. By the time of his death, the Champlin Petroleum Co. was said to be the “world’s largest family-owned company engaged in every phase” of the oil business. 1911 1912 1912 U.S. Navy Abandons Coal. President Greater Cushing-Drumright Field. Discovered in March 1912 The ocean liner Titanic struck an William Howard Taft instructed the by Tom Slick and C. B. Shaffer, the Cushing-Drumright Field iceberg in the North Atlantic while U.S. Naval fleet to switch from coal became one of the greatest oil discoveries of the early on its maiden voyage from England to oil as the fuel source. 1900s, ranking as the nation’s largest oil province for the to the United States. More than next eight years. Production in the Cushing Field peaked at 1,500 people died. 300,000 barrels daily.

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Santa Fe tracks. When city officials denied the state approval to drill on the grounds of the state Capitol, Marland, now governor, called out the National Guard. He declared an emergency and protected the drilling crews from city police as the rigs moved up the median on Lincoln Boulevard and ringed the Capitol building. The Oklahoma City Field, although the most productive giant field discovered in the state, marked a turning point in the history of oil and gas exploration. Gone were the days of the wild boomtowns, in part the result of Oklahoma City’s size, but more significant was the realiza- tion by the oil companies that they had to regulate and control living conditions to protect their investments in machines and labor. Starting with the Seminole strike, companies established Photo courtesy of the Oklahoma Historical Society work camps with housing, medical care and of derricks for hours and even days before they even schools for workers’ children. By the time could be brought under control. One such well, the Oklahoma City blew in, camps were planned as ITIO’s Wild Mary Sudek, captured national atten- carefully as drilling programs. tion. The crew had failed to“mud the hole”and the Adding to this sense of order was a growing well blew in March 26,1930.Soon,20,000 barrels of demand for conservation in the oil and gas indus- crude oil and 200 million cubic feet of gas per day try. The turning point came with the Great were being projected into the atmosphere. Oil was Depression, which dramatically reduced demand thrown into the air so high that wind carried a film for oil and gas, and the glut of crude oil flowing of it as far south as Norman—an 11-mile dis- from Oklahoma City, the Greater Seminole and the tance—and to Nicoma Park, some 10 to 12 miles to new East Texas Field discovered in 1930. At one the northeast.Workers in slickers and steel helmets, point, the price of oil dropped to 10 cents a barrel, wearing goggles with cotton stuffed in their ears to convincing Oklahoma’s governor, William “Alfalfa keep out the deafening roar, worked to connect the Bill” Murray, to call out the National Guard to shut master gate to the top of the casing pipe and bring down production until the price rose to a dollar a the well under control. After five days of intense barrel. Elected officials and businessmen realized effort, the master gate was placed on the well, but they had to do something to save the industry. The the cutting action of sand being forced through the results included ending the law of capture, rig spac- well by the extreme gas pressure caused the pipefit- ing and creating the Interstate Oil Compact tings to give way. Commission, a cooperative effort of several states The struggle to contain the well continued, to regulate exploration and control production. with a national audience receiving live radio Oklahomans took the lead on each battlefield. reports from ABC correspondent Floyd Gibbons. A man with roots deep in the Oklahoma oil- Finally, April 4, a special “bonnet” weighing about patch triggered in the 1930s another oil and gas 3,000 pounds was stabbed over the top of the cas- industry turning point. Everette Lee DeGolyer ing and anchored into place. The battle was over. came to Oklahoma in 1906 to study at the Despite such setbacks, the Oklahoma City Field University of Oklahoma School of Petroleum expanded north, went over the North Canadian Geology. With his scientific approach to the busi- River and moved into neighborhoods east of the ness, he learned a German team had developed a 1912 1913 Jim Thorpe Wins Olympic Gold Healdton Oil Field Discovered. J. M. Critchlow of Titusville, Medals. A Sac and Fox-Pottawatomie Pennsylvania, working in concert with Ardmore oilmen Roy Indian named “Bright Path” was born between two worlds. After M. Johnson, Edward Galt, Sam Apple and Wirt Franklin, discovering his athletic skills at an Indian school, he won the drilled the first of two wells that would ignite a rush to the pentathlon and decathlon at the 1912 Olympics. That Indian, Healdton area. Jim Thorpe, was later recognized as the “Greatest Athlete of the 20th Century.” Oklahoma: Where Energy Reigns 31 05545 001-039_Sec.1:Layout 1 9/19/07 1:18 AM Page 32

new device, known as a seismograph, for testing y et i underground geological formations. It worked by c So

creating a small blast on the surface and recording al c i r o

the echoes from underground at distant points. t s i H

Because sound travels at different speeds through a m

different rock formations, the underground geol- o ah

ogy revealed its secrets, including anticlines, sands, kl O e h

and domes that could trap oil and gas. t f DeGolyer sent his seismic crews into the o y es t

Greater Seminole Field to see if he could find r u o underground reservoirs of oil and gas that might c o t have been missed. They came back with surprising o news. In the middle of the field, they found a Ph depression that looked like an old lakebed. Based on traditional methods of reading surface geology, it was the opposite of where they should find oil. The seismic crews, however, found signs that the underground formations might hold oil and gas, so they drilled. On February 6, 1930, the hole pieced a zone at 4,214 feet that produced 8,000 barrels a day. This little girl appears to have been dressed in her “Sunday best” Half of the oil and gas discoveries since that time to have her photo taken in front of a cable-tool drilling rig. would not have been made without the subsurface mapping of seismic geology. was producing 26.5 million barrels annually. Just as the means for finding and producing oil With peace came increased demand for oil and and gas increased, the price of petroleum products gas across the country. Industry, which had been plummeted. First came the effects of the Great revived by wartime production, expanded even Depression, with the price of a barrel of oil hover- more as veterans re-entered the work force and ing near 75 cents to a dollar, followed by World War the middle class swelled with families that wanted II and the necessity of direct government control new homes, new cars and all the conveniences of and gas rationing.Still,the search for new sources of modern life. By the end of 1948, the price of a oil and gas continued. Two of the more interesting barrel of oil was up to $2.59, enough to spur finds were the Fitts Field in Pontotoc County, which another flurry of activity in the oil patch. Moti- produced nearly 31 million barrels of crude in 1937, vated by the higher prices and armed with new and the West Edmond Field, a giant field discovered methods of discovery, more wells were drilled in in 1943. By the end of World War II, West Edmond Oklahoma in 1949 than in any previous year.

One of the most dangerous jobs in the oil patch was performed by “shooters,” the men who lowered nitroglycerine down the well hole to “crack” the formation.

Photo courtesy of the Oklahoma Historical Society

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A New Era Despite the return of drilling activity, the oil and gas industry was heading into an era of change. First was the shift of discoveries from giant fields to smaller fields. Never again would the state see the flow from fields like Cushing and Seminole. Production would come from new, more limited strikes in places like Kingfisher, Blaine and Garvin counties, or from older, proven fields where technologies such as water, gas and steam injection recovered oil that had been left behind the first time around. At the same time, production was shifting to overseas areas such as the Persian Gulf, Mexico and South America. Oklahoma oilmen followed the play, often striking it rich but occasionally suffering from new realities such as revolutions and nationalization of producing wells. One company that found a profitable niche in the shifting sands of this new age was Kerr-McGee, led by the optimistic and well connected Robert S. Kerr and managed by the cautious, technically innovative hand of Dean McGee. While most major companies and drilling contractors viewed overseas business as their future by the 1940s and 1950s, Kerr-McGee saw new horizons closer to home. McGee, like most oilmen of his generation, knew about the prolific production from salt domes along the Louisiana coastline. Why, he reasoned, would these oil-bearing formations abruptly end at water’s edge? He ordered his seismic crews to action, found promising results and drilled a well 12 miles off the coast out of sight of land in 20 feet of water. On December 13, 1947, the rig hit a flow of 922 barrels a day at 1,732 feet. The race for offshore oil and gas was on. Kerr-McGee, like Phillips Petroleum, Conoco and other state-based companies, also turned to diversification and vertical integration as tools to stay competitive. By the 1970s, Kerr-McGee operated eight major companies, ranging from borax and coal mining to the processing of uranium and pigments for the production of paint. With the acquisition of Deep Rock, a company with roots in the Cushing Field, they aggressive-

ly entered the retail sales of gasoline through a Photo courtesy of the Oklahoma Historical Society chain of filling stations. K.S. “Boots” Adams, who began his career as a By World War I, most oil companies employed petroleum engineers, who warehouse clerk, was another innovator who rec- used geology and scientific analysis to predict where oil might be found. ognized the end of the giant oil strikes did not This notebook illustrates one calculation. mean an end to opportunity. In 1945, when he became chief operating officer of Phillips Petroleum, he convinced Frank and L.E. Phillips 05545 001-039_Sec.1:Layout 1 9/22/07 7:36 PM Page 34 Society Historical Oklahoma the of courtesy Photo 1913 1914 New Method of Oil Refining. Standard Oil engineers patented the thermal Oklahoma’s First Regulated Oil Field. Production from the newly cracking process, which significantly increased gasoline yields in the refining discovered Healdton Field flooded the market. In response, the process. They found heavier petroleum molecules could be “cracked” into Oklahoma Corporation Commission ordered a local pipeline carrier gasoline’s lighter molecules under heat and pressure. This played a major role in to purchase oil ratably and equitably from Healdton producers. the expansion of the automobile industry, whose preferred fuel was gasoline. This order resulted in proration of oil purchasing and made Healdton the first field in the state to be regulated by a state commission.

34 Oklahoma: Where Energy Reigns 05545 001-039_Sec.1:Layout 1 9/19/07 1:18 AM Page 35 y et i c So al c i r o t s i H a m o ah kl O e h t f o y es t r Towns, such as Seminole, that owed their very existence to the u o c search for and production of oil and gas, embraced their unique o t o heritage with anniversaries to mark important discovery dates. Ph

they had to diversify. They boosted their research appropriate places on area roads to warn motorists capabilities, especially in the development of plas- about the possibility of a gas pocket just ahead. tics from petroleum products, and turned their Oklahoma’s first significant “dry” gas field (gas sights to purchasing rights to natural gas, which not produced in association with crude oil) was had traditionally been a disposable by-product of the Hogshooter Pool in southeastern Washington oil production. Within 10 years, by diversifying and County, which was discovered in 1907. By 1910, turning to natural gas, Adams tripled the assets of pipelines had been extended into the area and the Phillips Petroleum. gas was being shipped to Bartlesville, Dewey and Miami for use in smelters and to communities in Natural Gas Kansas and Missouri for industrial and residential As Adams recognized, natural gas was the new use. A pipeline was extended south from the field frontier in Oklahoma. Natural gas had been found to Muskogee, serving various communities along in abundance during the first four decades of the the route. 20th century, but a relatively small amount of it Converting natural gas to gasoline and other was captured. Many early-day oilmen viewed nat- products began in 1909 when the D. W. Franchot ural gas as a nuisance, and most believed oil could Co. built the state’s first successful gas processing be produced more efficiently if the gas found in plant at Kiefer. Soon it was producing 24 barrels of early fields such as Glenn Pool and Cushing were gasoline per day. By 1911, eight such plants were flared or vented into the atmosphere. They wanted operational statewide. With the discovery of to reduce the pressure and put their wells on Cushing and Healdton, combined with the in- the pump. creased demand of WorldWar I and the explosion in The practice of venting natural gas had some- the use of automobiles and trucks, gas-processing times produced calamitous results in the Cushing plants proliferated. By 1920, 314 such plants in the Field. Gas would settle in areas of low elevation, state were producing almost half of the “natural especially on damp, cloudy days. gasoline” in the U.S. The 1920s and 1930s also saw On one such day, four individuals were touring the rise of the petrochemical industry in Oklahoma, the field in an automobile when a powerful explo- with Cities Services’ pioneering plant at Tallant in sion shattered the vehicle, killing two of its occu- Osage County earning the title “Patriarch of the pants. The other two were severely burned by the Petrochemical Industry” in the production of fireball that accompanied the blast. Local inhabi- butane, propane and other gases. tants at first were puzzled by the incident, but soon Scientists employed by Cities Service proved thereafter two drilling contractors were killed in a in the 1920s that natural gas plays an important similar explosion near Drumright. The cause role in forcing crude oil to the surface. Cities quickly became obvious, and signs were posted in Service, Phillips Petroleum, Oklahoma Natural 1914-1918 1915 World War I. World War I was fought primarily in Europe Cosden Refinery. After the discovery of the Cushing Oil and stimulated increased demand for petroleum products. Field, Josh Cosden, the “Prince of Petroleum,” built his first The United States entered the war in 1917. refinery in Tulsa. Within a decade, it covered a full square mile of industrial might.

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A growing network of pipelines connected oil and gas fields in Oklahoma with refineries and consumers throughout the 20th century. a i g r eo G l el w o L y b o t o Ph

Gas (ONG) and other companies and individuals As in the case of crude oil, prices for natural gas began promoting the conservation of natural gas were controlled during World War II. Controls and touting its value for industrial purposes as remained in place following the war to combat well as for heating homes, heating water and inflation and were retained during the Korean cooking food. They began building gathering Conflict for reasons of national security. In 1954, lines and long distance transmission lines for with the war concluded, the U.S. Supreme Court getting natural gas to consumers. ONG’s pio- ruled that natural gas sold over state lines was sub- neering development of underground natural ject to the regulation of the Federal Power gas storage facilities in the 1940s also played an Commission. Price controls, demanded by a pub- important role in the emergence of natural gas as lic that wanted cheap fuel, were kept in place. a prized commodity. This enabled ONG and other companies to purchase and store gas in the Boom, Bust and Beyond summer when demand was low and have an The pace of exploration,production and delivery of ample supply in winter when demand was high. natural gas to the public for the next 25 years By 1929, pipelines capable of transporting natu- was affected by price controls. In effect, regulation ral gas long distances had become technologically created a two-tier system. Inside the boundaries feasible, and some 3,300 miles of such lines were of the state, the price of natural gas reflected what laid nationally in that year. This technology made the market would support. By the 1970s, gas in possible the development of the massive Hugoton Oklahoma sold for about $1.25 per thousand cubic Gas Field, which had been discovered in 1918. The feet, while on the interstate market, regulators kept field eventually proved to underlay parts of the the price capped at 50 cents per thousand cubic Texas and Oklahoma panhandles as well as south- feet. Price controls, coupled with the import of west Kansas. In 1931, a long-distance gas transmis- cheap foreign oil, caused a drop in domestic sion line was completed to the area, allowing drilling, seasonal shortages and a public hooked on Hugoton gas to be sold as far away as Chicago. The cheap fuel. Misinterpreting the results, one Federal Great Depression slowed the construction of new Power Commission study predicted the end of pipelines and World War II created shortages of natural gas supplies by 1985. pipe, but the technology was in place for a dramatic However, people in the oil and gas industry expansion of the natural gas infrastructure in the regularly ignored such warnings in their quest economic boom years following the war. for the next big discovery. A good example of this

36 Oklahoma: Where Energy Reigns 05545 001-039_Sec.1:Layout 1 9/19/07 1:19 AM Page 37

high-stakes gambling attitude was found in Robert A. Hefner, III, a young petroleum geologist who turned his sights on the Deep Anadarko Basin in the far western part of the state. Since 1918, oilmen had known there was gas in the region based on the anticline geology, and many good wells had been drilled in the shallow fringes of the field. Why, Hefner asked, would there not be gas at lower depths? Most geologists believed sands bearing gas below 15,000 feet would be The Greatest Oil Show crushed by the overlay, and even if there were gas on Earth at that depth, the drilling technology was not capable of going that deep. Hefner, like others In 1923 a band of business leaders in Tulsa before him, baulked at the conventional belief pledged their support for the first International and decided to test the deep formations. Petroleum Exposition (IPE) and Congress, in effect By 1967, armed with widespread recognition a world’s fair for all aspects of the oil and gas that demand for gas was rising, Hefner had raised industry. sufficient capital to drill the No. 1 Green. For two Within 30 years, the IPE was the greatest oil years, they drilled before discovering a huge gas show on earth. In 1953, under the deft leader- reservoir at a depth of 24,454 feet—the second ship of William G. Skelly, the 10-day exposition deepest well drilled in the U.S. It had the highest gas covered more than 15 acres of land with more pressure of any well drilled and required the largest than 2,000 exhibitors. Among the 369,835 visitors wellhead ever designed. Then the well blew up and were drillers, producers, equipment manufac- production dropped. Even so, the well produced tures and government officials from around the almost 11 billion cubic feet of gas during the next world. It was part carnival, part trade show and 12 years, but Hefner barely recovered one-fourth of part reunion. his initial investment of $6.5 million because of a For many members of the oil and gas fraternity, regulated price for gas that started at 22 cents per the IPE was the crown jewel when Tulsa was the thousand cubic feet and declined in real terms oil capital of the world. during the ensuing years.

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Although an economic failure, Hefner’s discovery recovered. Too much gas, combined with a well attracted the world’s attention. shrinking market, rocked the deep gas industry. Exploration in the Anadarko Basin continued Those who borrowed at high interest rates could throughout the 1970s as companies anticipated not make payments, which rippled through the producing for the more profitable intrastate market local economy. By 1982, Penn Square Bank, an and at least partial decontrol of natural gas prices. aggressive newcomer to oil and gas lending, By 1976,there were 22“superwells”in the Anadarko failed. Three years later, First National Bank of Basin, each producing at least 6 billion cubic feet of Oklahoma City, one of the biggest and most gas a year. respected banks in the country, declared bank- Despite this record production, most of the gas ruptcy. The boom was over. stayed in Oklahoma, where the price was not regu- Although it would take almost a decade for the lated and was free to match demand. The rest of the state’s economy to recover fully, oil and gas pro- country, which had grown addicted to cheap natu- duction remained strong during the 1980s. With ral gas under price controls, was shivering as sup- new companies entering the business, such as plies dwindled. In 1978, seeking to correct this per- Chesapeake, Devon and Continental Resources, ceived gas shortage, Congress passed the Natural and established companies such as Phillips, Gas Policy Act, which immediately decontrolled the Conoco and Kerr-McGee seeking opportunities price of natural gas produced below 15,000 feet. at home and abroad, new fields were found and The boom was on. older regions of the oil and gas patch were tapped As prices for deep gas skyrocketed to as high as again. Some of the major discoveries included $9 or $10 per thousand cubic feet, producers the Arkoma Basin in southeastern Oklahoma, borrowed money at high interest rates to drill Ames Hole near Hennessey and the Potato Hills Georgia expensive deep wells in western Oklahoma. One Field discovered in 1997. Oklahoma’s potential

oilman said the only way not to make money in for long-term, high-volume production of natu- Lowell the oil and gas business was to not be in it. ral gas seems strong, according to the Oklahoma by

Communities such as Sayre, Elk City and Geological Survey. Photo Woodward boomed. New companies were created and new rigs were built as fast as welders could turn them out working 24 hours a day. For people living in Oklahoma City and Tulsa, it seemed like Cushing and Seminole all over again, just bigger and better. It was too good to be true. First came a drop in national demand as the impact of higher prices reached consumers. Then came deregulation of all natural gas, regardless of the depth found and

1915 1917 1917 Oklahoma City Ford Plant. Henry Mid-Continent Oil and Gas Association. A Phillips Petroleum Co. Frank and L. E. Phillips Ford constructed a Model-T assembly group of oilmen gathered at the Hotel Tulsa to formed the Phillips Petroleum Co., head- plant on West Main Street in organize and make sure petroleum products quartered at Bartlesville, after having been Oklahoma City. are available to U.S. armed forces and allies. active in the oil business for 12 years. They formed the Mid-Continent Oil & Gas Association. 38 Oklahoma: Where Energy Reigns 05545 001-039_Sec.1:Layout 1 9/19/07 1:19 AM Page 39

Photo by Arthur Shoemaker

resources, lays the direct impact of oilmen When E. W. and women on our communities. Out of Marland lost 1,200 non-profit foundations in the state, control of his oil more than 1,000 can be traced back to the company, his oil patch. The generosity of oilfield pio- filling stations neers such as Lloyd Noble, William K. got a new name, Warren, Thomas Gilcrease and John Continental Oil, Kirkpatrick can be seen in hospitals, food better known banks, universities and museums. The as Conoco. next chapter is being written by their successors such as Aubrey McClendon, Larry Nichols and Lew Ward. Through their success, the state moves forward. Through their industry, the state prospers. I

The Legacy Paul F. Lambert was born in Tulsa and raised in So what will the historians of the future say Tishomingo. He holds a Ph.D. from Oklahoma about the oil and gas industry in Oklahoma? State University and has authored or co-authored They will undoubtedly conclude that Oklahoma 12 books relating to the history of Oklahoma and has always been one of the top two or three oil the petroleum industry. He was employed by the and gas producing states in the Union. They will Oklahoma Heritage Association for 32 years in recognize the technical and financial innova- various capacities, including executive director, tions that have come from the state in the search and is membership campaign coordinator for the for oil and gas. And they will calculate the eco- Oklahoma Historical Society. nomic impact of capital accumulated, jobs created, Bob L. Blackburn was born in Oklahoma City royalties paid and tax revenue generated. and earned a Ph.D. from Oklahoma State Most of all, the historians of the future will University. He is the author of 16 books on a range see the impact of the oil and gas industry on the of topics dealing with Oklahoma history. He quality of life all Oklahomans enjoy. Beyond the joined the Oklahoma Historical Society as editor low tax base made possible by gross production of the Chronicles of Oklahoma in 1979, became revenues, beyond the sense of economic oppor- deputy director in 1989 and executive director tunity created by the free flow of capital in 1999. 1918 1919 Bartlesville Energy Technology Center. Bartlesville was designated by the U.S. Highway Construction. The U.S. government as the site for what is now the Bartlesville Energy Technology Center. Congress passed the Federal Highway Known first as the Petroleum Experiment Station, the center provided pioneering Act, providing federal matching funds scientific and engineering research to industry. With research targeted to oil and for highway construction. gas field problems, the center developed specialists in petroleum engineering and technology, thereby indicating the need for these specialists within oil companies. Oklahoma: Where Energy Reigns 39 05545 040-048_Sec.2.qxd:Layout 1 9/19/07 1:33 AM Page 40 Boom

Photo by Lowell Georgia

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Section 2

and Bust

Oklahoma: Where Energy Reigns 41 05545 040-048_Sec.2.qxd:Layout 1 9/19/07 1:33 AM Page 42

Photo by Lowell Georgia 1919 1920s 1920 National and Regional Petroleum Organizations Pipeline Expansion. During the 1920s, driven Burbank Field Discovered. E. W. Marland Created. The American Petroleum Institute, head- by the growth of the automobile industry, discovered the prolific Burbank Field in quartered in New York City, was founded, and the total U.S. pipeline mileage tripled to more western Osage County. Mid-Continent Oil & Gas Association established its than 115,000 miles. Kansas-Oklahoma Division, headquartered in Tulsa.

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An Incredible Ride

By Leslie Haines, Editor-in-Chief, Oil and Gas Investor

he triumphs and tragedies of Okla- find hydrocarbons and drill, complete and pro- homa’s storied boom-bust cycle, duce from wells is far and away more advanced from about 1974 to 1986, will never and precise. It is said the U.S. oil and gas industry Tbe forgotten by the Sooner State’s oil patch. uses more computing power today than any entity Indeed, lessons learned from that dramatic era except the federal government, the banking still apply today—coloring the decisions oil and industry on Wall Street and the movie industry. gas executives make 20 years later. Finally, today’s oil and gas producers have the Energy companies, real estate firms, banking ability to hedge commodity-price risk on the and even retail stores all felt the highs and lows New York Mercantile Exchange (Nymex), so they of that era. From Bartlesville executives and are better able to smooth out the highs and lows field hands based in McAlester to Oklahoma of their cash flow from production. City bankers, roustabouts in Enid and landmen in Ardmore, everyone was swept up in the Prelude to a Boom heady times, when the Oklahoma rig count Political events in the U.S. and around the world reached an astounding 882 rigs at its height in greatly affected Oklahoma’s oil patch and led to January 1982. higher commodity-prices, which fueled a drilling Whereas the oil patch has always been cyclical boom. The 1973 Arab oil embargo was a supply throughout its history, today, Oklahoma’s oil and shock heard around the world, hurting the U.S. gas industry is more prepared to weather any economy and affecting anyone who drove a car. storm. Managers and decision-makers are far As oil from the Middle East became (temporarily) more prudent and business-like. scarce and pricey, the cost of gasoline soared and The rough-and-tumble good ol’ boy image of long lines developed at service stations. These days gone by has been replaced by BlackBerry- factors fueled more drilling for oil in Oklahoma toting MBAs who focus on technical excellence and throughout the oil patch. and financial returns. They are financially By 1975, President Gerald Ford was calling for sophisticated and know how to spread risks a multibillion-dollar plan to build more nuclear more broadly, access capital from the least- plants and coal-fired power generation. Congress expensive sources and safely structure deals. mandated the first fuel efficiency (miles per gal- The technology they use day in and day out to lon) standards for cars. 1921 1921 Petroleum Funds State Government. Gross production tax Tulsa Race Riot. In one bloody night of violence, the entire receipts in Oklahoma equaled 71% of total state govern- segregated African-American community of Greenwood ment expenditures. was destroyed with a death toll estimated from 50 to 300. The racial violence was just one graphic outburst in a society that condoned segregation and tolerated lynching.

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In 1976, the CIA warned there could be future oil shortages. In April 1977, President Jimmy Carter declared his proposed energy program to make America energy-independent was“the moral equivalent of war.” External forces were playing with the fundamentals of natural gas. The price had been creeping up starting in 1974. Then in 1978, Congress deregulated the price pipelines could pay for natural gas and gas prices took off, jumping from 23 cents per thousand cubic feet as of 1974 to $1.49 by 1980. Certain regulations mandated different prices for so-called old gas, newly drilled gas and gas from very deep zones. In western Oklahoma’s deep-gas country (Roger Mills, Washita, Custer and Beckham counties), producers were able to command $8 or $9 per thousand cubic feet for their production, an unheard-of price for the time. Gas drilling in Oklahoma took off. “It was an artificial motivation to drill and when it was over, it was really over,” says Harold Hamm, chief executive officer of Continental Resources Inc. in Enid. A revolution in Iran in late 1978 led to that country stopping all oil exports. Non-OPEC oil production also fell, and by 1979, international companies were buying oil in a panic. The price of oil shot up to $34 a barrel from just $13 the prior year. In 1980 the Iran-Iraq War began, which further reduced oil exports. In 1981, incoming President Ronald Reagan decontrolled U.S. oil prices.

The Boom In the Sooner State, crude prices nearly doubled from $3.78 per barrel in 1973 to $7 the following year, says Dan Boyd of the Oklahoma Geological Survey. The boom began in earnest in 1978 and reached its zenith in December 1981 when more than 4,500 rigs were drilling in the U.S.—an all- time high that has yet to be repeated. Wall Street analysts, academics and oil executives worldwide thought oil was going to reach $100 a barrel. After all, its value increased when it became scarce. No wonder a drilling frenzy was under way. Technical advances or a new geological understanding did not cause the stir, but rather it was the pure economic force of much higher oil and gas prices making every drilling idea look feasible. People who knew next to nothing about the oil business flocked to Oklahoma City,Tulsa and other major oil cities such as Houston,Dallas and Denver to raise money from investors, buy leases, build a Photo by Lowell Georgia rig and drill a well. 05545 040-048_Sec.2.qxd:Layout 1 9/19/07 1:34 AM Page 45

In January 1982, Oklahoma’s rig count reached its all-time high of 882 and state revenues from oil and gas soared.

Photo by Lowell Georgia “When I graduated in 1975, more jobs were 1982. Nearly $1 billion was spent on new high- being offered in the oil patch. All the major ways, schools, higher teacher salaries and other companies were hiring,” recalls Mark Lester, benefits for Oklahomans. executive vice president of Chesapeake Energy Wages rose for geologists and petroleum engi- Corp. in Oklahoma City. “The enthusiasm and neers, toolpushers and rig hands, secretaries, the flow of money were just tremendous. Real accountants and everyone else in the oil and gas estate people were becoming landmen, and peo- business. Rig, royalty and lease costs soared also. ple were switching jobs from oil company to oil In January 1982, Oklahoma’s rig count reached company. You could finance just about anything its all-time high of 882. (Today in the current, at that time. I thought that was normal. In hind- more-measured boom, the count is about 188.) sight, it wasn’t.” Times were good. Newly wealthy oilmen Oklahoma’s part in the overall boom was bought corporate jets, flew to Las Vegas to cele- substantial. The state’s rig count rose to unprece- brate deal closings and bought second homes dented heights. By the end of 1981, at least 300 in Colorado or California. They also donated high-powered deep rigs were drilling for deeper gas millions to worthy charities, schools and political zones in western Oklahoma’s Anadarko Basin parties throughout Oklahoma. alone. Some of the most-expensive and riskiest “Many of the new entrants to the oil business wells were as much as 25,000 to 28,000 feet deep in were then living large. Some of the parties were Beckham and Washita counties. outlandish. It was as if Oklahoma had never been State revenues from oil and gas grew tenfold through a boom before, when it had, back in the from $72 million in 1972 to $745 million in 1920s and ’30s,” recalls David Bole, a Bartlesville native whose father worked for Cities Service. Bole worked his way through the University of The Failing Rig Oklahoma by roughnecking on rigs during summers, became a landman after graduating and, In 1929, it took a traditional steam-powered later, was an energy banker in New York City. In rotary rig about a week to set up and drill a 1981, at the height of the boom, he returned to 50-foot borehole. Once in place, rigs often Oklahoma City and was part of the founding were left in place for future workover service, group of Edwards & Leach Oil Co., which was later an expensive and wasteful practice that sold to publicly held Alexander Energy Co. Bole increased the cost of drilling. has worked in the state off and on but now resides George Failing, an oil-patch pioneer living in Houston as a managing director of private- in Enid, Oklahoma, had a better idea. equity firm Quantum Energy Partners. That year, he mated a small rotary drilling rig to a 1927 Ford farm truck to create a The Bust self-contained, portable drilling rig. With The good times were not to last,however,because of his patented rig, Failing could drill 10 50- influences external to Oklahoma, and to excesses foot boreholes in a single day. A new industry within the state itself. was born. Consumers backed off, spooked by soaring heating-oil and gasoline prices. In 1982 and 1983,

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In the mid-’80s, conservation caused U.S. oil demand to fall just On July 6, 1982, the U.S. Controller of the this sign captured as more oil was coming on the market. Amid Currency declared the bank insolvent. The Federal the prayer of many a worsening glut, the price of crude began Deposit Insurance Corp. (FDIC) took over.It found Oklahomans. to decline. that the bank, in its enthusiasm if not greed, had “It had been so hectic, but we got a sense it was made dozens of worthless oil and gas loans, many easing up in late 1981. People had prepaid us for with no collateral,which could never hope to be col- drilling-rig work, but there was no more sense of lected, even if oil and gas prices had not declined. urgency,”recalls Hamm.“By mid-1982, a whole lot “The Penn Square Bank did not vanish with- of things were going backward. People who had out a trace,” writes Singer. been paying their bills were no longer able to, and Indeed, because Penn Square could not handle investors went away. A lot of people cratered.” all those loans, it had sold or syndicated portions Many Oklahomans cite a central player in the of them to larger banks around the country. drama, Penn Square Bank, a small bank in Everyone was “buying in” to the notion the oil Oklahoma City’s Penn Square shopping center. and gas industry was a great business and oil was In fewer than three years it had amassed an going to $100 a barrel. astounding, and ultimately careless, portfolio of The largest bank in the U.S. northwest, almost $2.5 billion in oil and gas loans, more Seattle-First National Bank, then failed. It turned than many larger banks had achieved. out it held positions in some of those bad “There were three exhilarating years which oil loans. brought to Oklahoma more out-of-towners in One of the largest banks in the Midwest, quest of fun and profit than anything since the Continental Illinois National Bank & Trust Co. land rush of 1889,” according to the book Funny in Chicago, was so deeply in trouble from its own Money by Mark Singer. Penn Square oil-loan co-holdings that it would 1921 1921 1923 J. Clarence Karcher and some colleagues Radio. Rural isolation and International Petroleum Exposition. For more proved the utility of the reflection local cultural diversity than 50 years, this annual industrial fair in Tulsa seismograph by successfully detecting changed forever as radio served as a gathering place to distribute knowledge of the oil industry, provide a forum for new hard limestone strata underlying a farm brought the outside world into the living innovations and bring the international energy three miles north of Oklahoma City. rooms of most Oklahomans. community to the “Oil Capital of the World.”

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have failed, if not for a $5-billion rescue by the credit lines at Oklahoma banks. If they had FDIC in 1984. Some $845 million of problem incurred debt to make big acquisitions of pro- energy loans were later auctioned off. Scores of ducing properties or undrilled acreage, or geared banks throughout Oklahoma, Texas and other up to build new drilling rigs, they were stuck. oil-patch states also failed during this period, “The hot play in Oklahoma today is not a from 1982 to 1986. geologic trend…it is [good] management,” com- As the rig count began to fall in mid-1982, lay- mented the editors of Oil and Gas Investor offs ensued throughout the oil patch. Energy- magazine in the May 1986 issue. loan problems spread to real estate problems as By year-end 1986, producers were faced with new office buildings, apartment complexes and writing down the value of their proved oil and subdivisions financed during the boom, but fin- gas reserves, which on paper at least, devalued ished at the start of the bust, stood nearly vacant. the entire worth of their company and also The number of personal and corporate bank- caused commercial banks to restructure the ruptcies increased—and banks’ troubles only loans that had been made using those reserves multiplied. as collateral. In 1983, oil prices plummeted as OPEC flooded The term workout became commonplace, as the market with oil. Just as suddenly as the bankers and their clients struggled to contain the boom happened, the bubble burst. Between 1982 damage by extending loan maturities. and 1986, Oklahoma’s extraction-industry jobs “I’d run into people at the favorite bar we all dropped by half. went to and it was like a wake in there,” recalls In 1985, the industry began to hit bottom. The Dick Bogert, one of the survivors. He is president U.S. rig count plummeted from its all-time high of Oklahoma City’s Bogo Energy, but at the time of 4,500 in December 1981 to an average for the he helmed Bogert Oil and Gas, which went year of just 869 by 1989. In February 1986, public in late 1980 and kept 10 to 12 rigs running Oklahoma’s rig count fell to 189—the first time at the time. it had been below 200 rigs in 10 years. “Everybody was waiting for things to pick up. First-quarter 1986 sales of public drilling and There was a lot of gloom,” he says. income funds were down 70% from a year During this challenging time, oil and gas earlier. Energy companies were cutting their companies in a stronger financial position saw drilling budgets and laying off staff and many plenty of opportunity—they were able to pick were forced to merge. Public oil and gas firms up producing properties, rigs and other compa- suspended their common stock dividends. nies for pennies on the dollar. Dayrates for Spot oil prices fell to $10 a barrel and the cash drilling and the price of acreage acquisitions and flows of producers fell as well, threatening their oilfield services fell, helping some companies Order No. 4430 Beginning as early as 1913, the Oklahoma Corporation Commission began issuing various orders, attempting to foster conservation of the state’s oil and gas resources. The commission had little means of enforcing their edicts, but a foundation for eventual improvement in conservation was being laid. In 1928, the commission issued Order No. 4430, which set statewide production target limits of 275,000 barrels of oil per day for established fields and 475,000 barrels per day for “flush pools.” Again, with the law of capture still the norm, the limits were difficult if not impossible to enforce. But change was coming and Oklahoma was leading the way, as Order No. 4430 was the first statewide proration order issued in the U.S. 1923 1923 Highway Department. The Oklahoma Greater Seminole Field. Wildcatter R.H. Smith’s Betsy Foster Legislature passed legislation creating No. 1 blew in as a 2,800-barrel-per-day gusher about two the Oklahoma Highway Department miles southeast of Wewoka in Seminole County. This proved and established the state’s first gasoline to be the discovery well of the Greater Seminole Field. tax to fund road construction.

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maintain profit margins, albeit slim ones. ness strategies and survived. Today, they know they Some continued to have drilling success. could do it again and are passing that lesson on to Robin French, a third-generation oilman, had their successors in the industry. interests in 300 wells in Oklahoma at the time. If there is any caution in the oil patch today, it In 1986, he told Oil and Gas Investor, “This comes from that era of outsize challenges. realignment is the best thing that ever hap- “It’s easy to mark an era by those who gained pened to the oil business. It’s back to good old infamy, as opposed to the many who did it the old- hardcore business.” fashioned way, by honest, solid work,” says Bole. He said his company, French Petroleum Corp. “The leaders of the oil industry today are more based in Oklahoma City, was able to generate a sophisticated and responsible, having learned 25% return on its drilling program. many times over the lessons of the 1980s bust.” The rest of the decade was marked by no Another important lesson is that what goes growth or slow growth, refinancings and up must come down—and likely will event- bankruptcies, and consolidation. Many insolvent ually go back up. From the depths of 1986 when independents transferred their oil and gas assets oil prices hovered around $10 per barrel, prices to larger, stronger companies. Some of the climbed back to $19 by 1989. biggest mergers in the industry also occurred. Even during the lean years in the mid- and late In 1981, DuPont bought Con- 1980s, companies continued to oco, and Marathon was sold to Oklahoma Average Rig Count pursue their drilling ideas and U.S. Steel. Texaco bought Getty 1978 258 uncover riches beneath Okla- Oil, and in 1985, Chevron 1980 397 homa soil. In 1987, CNG bought Gulf Oil. 1982 622 Producing Co. started a signif- Squabbling between OPEC icant new oil play just west of and non-OPEC producers as 1984 342 Ardmore in the Arbuckle for- well as a continued slump in 1986 170 mation. Its first well flowed demand hit oil prices hard. By 1988 149 3,700 barrels per day to open 1986, oil on Nymex had tum- 1990 126 the Cottonwood Creek Field. bled to $10 a barrel from a high Two years later, it was still 1992 98 of $31 just six months earlier. drilling in the area, reporting a Source: Baker Hughes Inc., American Petroleum Institute In Oklahoma, there were well that flowed more than many twists and turns. At the The Oklahoma average annual rig count 1,300 barrels a day in Carter height of the boom, Hamm of closely tracks the rise and fall of crude oil County. Enid had 11 rigs drilling, but in and natural gas prices. After more than In Latimer County, Amoco 1982, thinking the market was doubling in the late 1970s and peaking Production Co. (now part of near the top, he sold Trend in 1982, the rig count plummeted BP) discovered gas in what Drilling Co. through the rest of the 1980s. came to be called the Zipperer “But the buyer didn’t make it Unit, making a huge gas well and later, the bank asked me if I’d buy it back, that flowed almost 49 million cubic feet per day. and so I did,” he said. “It’s different today,” says Bogert. “I don’t Hamm drilled his first well in 1971 in Alfalfa think there’s anything such as a boom-and-bust County and has grown his subsequent compa- now because it’s more steady. The new technolo- nies, including Continental Resources, since that gies make a difference, and with about 180 rigs time. With some 300 employees, the latter went working in Oklahoma now, as opposed to 800 public on the New York Stock Exchange in back then, it’s much more manageable.” May 2007 and now has a market value of almost Then too, Bogert points out, today there are $3 billion. far fewer fly-by-night deal promoters. All in all, the Oklahoma oil and gas industry Lessons learned is much different today, and more solid. The first lesson that came out of the dramatic “The industry is not in its twilight at all,” boom-bust cycle, and perhaps the most important says one observer, who thinks advanced technol- one, is that Oklahoma’s oilmen and women are ogy will continue to bring the cost of recovering tough and smart. Many who suffered setbacks dur- oil and gas down, and more reserves can be ing the bust hunkered down, rethought their busi- produced. I

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OKLAHOMA Where Energy Reigns

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Oil, Gas and The 21st Century

By Peggy Williams, Senior Exploration Editor, Oil and Gas Investor

When prospectors first started to drill for crude oil in Oklahoma, it was not yet a state and petroleum geology had not yet developed as a science.

andom wildcatting (mixed with a Hunt for Natural Gas fair amount of luck) yielded excel- Today’s explorers mainly look for natural gas lent discoveries in various parts in Oklahoma. The state’s oilfields are generally ofROklahoma, and people began to untangle shallow, and drillers have already poked and subsurface relationships. probed the well-known productive section with What soon became abundantly clear was the some 450,000 wells. Most oil accumulations of complexity of Oklahoma’s buried oil and gas size were discovered years ago. reservoirs. Drillers were puzzled by great thick- So, where’s an explorer with an eye on the nesses of steeply dipping beds beneath the state’s big prize to look? Natural gas reservoirs that diverse landscape. Prospectors were perplexed by are extremely deep or hidden in structurally the source of oil and its migration into disparate complicated areas are high on the list for reservoirs. Multiple unconformities in the geo- elephant hunters. Current deep exploratory logic section created unusual juxtapositions. activity focuses along the southern flank of Of course, Oklahoma’s complexity is one of the storied Anadarko Basin, one of Mother its strengths. Straightforward areas yield all their Nature’s great repositories of hydrocarbons. prizes quickly; it’s the more difficult ones that Here, where the Wichita Mountain Front runs continue to serve up discoveries for decades. through portions of Comanche, Caddo, Wash- And that’s what has been happening in Okla- ita, Kiowa and Beckham counties, companies homa, which remains a production powerhouse. drill 18,000-foot-plus tests for Pennsylvanian The state makes 1.6 trillion cubic feet of gas and Atoka, Morrow and Springer sands. Modern 60 million barrels of oil a year. It ranks second in wildcatters include Chesapeake Energy, Domin- the country for natural gas production and fifth ion E&P, St. Mary Land & Exploration and for crude oil. Marathon Oil. 1925 1926 Route 66. Second only to railroads, highways have Petrochemical Pioneer. The manufacture of chemicals from shaped the face of Oklahoma for the past century. petroleum had its beginning in the southwest at the Tallant gas The most famous band of concrete in the country processing plant in Osage County. Built in 1926 by a Cities Service is Route 66, the dream of Tulsan Cyrus Avery. Co. subsidiary, the plant process was the research answer to red rust produced in transmission to market of natural gas from the Burbank, Oklahoma, field.

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Companies drilling in Oklahoma rely on 3-D seismic techniques and advanced computer modeling to find oil and gas.

Infill drilling is also popular in the Anadarko’s A good chunk of natural gas activity also centers deep reservoirs. In Beckham County’s Mayfield on coalbed-methane (CBM) plays. At the beginning area, wells aim for Morrow and Springer reservoirs; of 2007, Oklahoma had 4,600 CBM wells. Statewide, in Caddo’s Verden Field, objectives are again Sprin- such wells produce about 200 million cubic feet of ger. Apache Corp. runs four rigs at Verden, which gas per day, some 5% of total gas production. Since was discovered in 1976. The company says reservoir development started, Oklahoma’s CBM wells have compartmentalization in the field has afforded it a produced a total of 360 billion cubic feet of gas. wealth of drilling opportunities. These days, drilling in Oklahoma’s two major Too, there’s a more bread-and-butter approach CBM plays concentrates in areas of already to natural gas drilling. Drilling for the commodity established production. In 2006, the state esti- is concentrated in the Anadarko Basin and Shelf mated that some 475 CBM wells were completed areas, in such reservoirs as the Chester, Morrow, in the Cherokee Basin in the Rowe, Mulky and Oswego, Atoka and Red Fork. Companies pick Riverton coals, and in the Arkoma Basin in the along the edges of existing accumulations and Hartshorne coals. wedge additional wells into developed fields. Exploitation and development activity abounds in Technology and Innovation such areas as the Strong City District, Mocane- Oklahoma has a secure place as an innovator and Laverne gas area and Watonga-Chickasha fields. early adopter of fresh technologies, and that’s

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demonstrated throughout its oil industry. Im- for instance, Chesapeake Energy has an on-going provements in horizontal drilling have created horizontal drilling program in the Cherokee. many opportunities, and Oklahoma has been On the eastern side of the Anadarko, horizontal reaping its share of rewards from this technology. Hunton and Cottage Grove wells have made Horizontal drilling works well in Oklahoma some excellent completions. because the state is stuffed with the types of Unconventional reservoirs such as shales rocks that offer prime targets. Reservoirs with and coals have also benefited greatly from low permeabilities and dual porosity systems horizontal drilling, particularly in the Arkoma can be economically produced with horizontal Basin in eastern Oklahoma. The Woodford wells, and operators are applying the tech- Shale play has lit up the industry with reports nology throughout the state’s petroliferous of solid wells in an area that trends from geologic section. western McIntosh through central Coal coun- Companies are able to tap bypassed or ties. In Pittsburg, Haskell and LeFlore counties, previously inaccessible reserves in old fields with horizontally drilled Hartshorne coal wells the horizontals. Cleveland sandstones have proved have been delivering excellent gas rates and to be amenable targets for horizontal drilling in reserves. Activity is high in such fields as the western Anadarko Basin, as have Cherokee Scipio Northwest, Canadian, Kinta, Poteau reservoirs. In Grimes Field in Roger Mills County, Southeast and Poteau-Gilmore.

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Oilfields Redux mapping and engineering studies to site wells Finally, Oklahoma is home to an abundance of in the mature waterfloods in the area, home mature oilfields, and these are drawing fresh to an amalgamation of fields discovered in attention and technologies. the 1910s and ’20s. Active in Oklahoma since New Dominion LLC of Tulsa is carrying out 1985, Citation today operates 4,300 wells in in Oklahoma one of the more interesting oilfield the state. rejuvenation techniques in the U.S. And, notwithstanding the tilt toward natural The company produces high volumes of water gas, oil exploration retains a small but relevant from fields thought to be depleted. The water place in Oklahoma activity. Chaparral Energy production reduces reservoir pressures, and the LLC is under way with an exploration program pressure drop causes natural gas associated with in Harmon County, in the northwestern Harde- still-trapped oil to expand. The expansion drives man Basin. It is drilling several 8,500-foot Arbuckle the oil toward the producing wells, where it can tests in the lightly explored area. be captured. Range Resources is also at work on a field reju- New Dominion has projects in Hunton and venation project at Tonkawa in Kay and Noble Arbuckle reservoirs. In Oklahoma City Field, the counties. Recently the company acquired 100% company has been drilling multilateral horizon- interest in the field and is in the midst of an active tal wells in the Arbuckle. drilling program. It has reported that it has some Other projects, such as enhanced oil recovery 400 shallow well locations in Tonkawa, which is one via carbon dioxide injection at Postle Field of Oklahoma’s original prolific fields and dates in Texas County, are also in progress. Whiting back to 1921. Petroleum is expanding the flood in that field. So, oil or gas, shallow or deep, straight or side- In southern Oklahoma’s Ardmore Basin, ways, there’s a lot of drilling and producing going Citation Oil & Gas has massive on in Oklahoma. Down the road, ongoing operations.The company the industry looks to remain a uses a variety of approaches, cornerstone of the state’s identity including 3-D seismic, detailed and of its economy. I

Castle on the Prairie Of all the grand homes built by oilmen in Oklahoma, none approaches the combination of size and ostentation of the castle on the prairie that E.W. Marland built. Even before building his castle, Marland had proven he was a man of unlimited appetite. He used his fortune to grace Ponca City with an 80-acre formal garden, a golf course and a polo field. The mansion built in 1928 topped everything. The Italian Renaissance home had 55 rooms, 15 bathrooms, three kitchens, two elevators, one hand-painted ceiling that cost $80,000, an indoor swimming pool, central heat and air conditioning and E.W. Marland several Waterford crystal chandeliers that cost $15,000 each. Outside were three lakes, another swimming pool, more polo fields, stables and a Japanese garden. By the time he was finished, the home cost $2.5 million—in 1928 dollars. Today, the Marland Mansion is an Oklahoma treasure, a monument built for a man of vision who recognized no limits. 1927 1927 1928 Oil Production Peaks. Oklahoma’s “Lucky Lindy.” Charles A. Lindbergh was Oklahoma City Oil Field. The Indian crude oil production peaked at the first person to fly alone nonstop Territory Illuminating Oil Co. and the about 770,000 barrels per day. across the Atlantic Ocean. Foster Petroleum Co. drilled the discovery well of the Oklahoma City Field, the Oklahoma City No. 1.

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Oklahoma Oilpatch Going Strong

By W.H. (Bill) Leach Jr., Contributing Editor, Oil and Gas Investor

Companies from Oklahoma and elsewhere are pursuing a number of oil and gas plays throughout the state.

klahoma, “where the wind comes Cimarex Energy Co. sweepin’ down the plain.” Home of Although based in Denver, this company traces its Will Rogers and Gene Autry, Reba roots back to Oklahoma. It was formed as a suc- McIntyreO and Garth Brooks, Mickey Mantle cessor to Key Production Co., which was a spin-off and Steve Largent, not to mention Curley from Apache Corp. Apache got its start in the and Ado Annie (according to Rodgers and Mid-continent area, drilling wells in western Hammerstein). Oklahoma in the 1970s. And, home to some of the world’s most pro- In 2002, Key purchased the exploration and lific oil and natural gas activity for more than production assets of Helmerich & Payne Inc. of 100 years. Tulsa and became Cimarex Energy Co. In 2005, Like most of the states in the U.S. that have the resultant company doubled again when it oil and gas production, the Sooner State is expe- purchased the assets of Magnum Hunter Energy riencing a resurgence of its energy industry, Co., which had Oklahoma production. born of high oil and gas prices and perhaps There are currently 310 employees in the Tulsa more important, astounding new drilling and Cimarex office. completion technologies that make the state’s From these purchases came not only a much subsurface reservoirs more open to economic larger company with a strong production base, production. but also valuable Oklahoma exploration acreage, Oil and Gas Investor talked to several key players thereby greatly enhancing the company’s position. who see Oklahoma as a central focus of their busi- Cimarex expects to drill 70 to 90 wells in ness strategy, to find out what they are doing and Oklahoma in 2007. While active partnerships are why they still believe in Oklahoma’s potential for oil not sought, some are mandated for development and gas production. of certain drilling blocks. The company is actively 1929 1929 1929 IPAA Organized. Wirt Franklin, an independent Tom Slick Cashes Out. Considered to be Oklahoma City Field Shut Down. Oklahoma oil producer from Ardmore, Oklahoma, led the largest independent oil producer in Corporation Commission ordered 30-day the formation of the Independent Petroleum the nation at the time, Tom Slick sold his shutdown of Oklahoma City field because of Association of America and served as the extensive holdings in Oklahoma and Texas wasteful over-production. organization’s first president. to Prairie Oil and Gas Co. for $35 million. This was the largest transfer to date by an individual of oil properties. Oklahoma: Where Energy Reigns 53 05545 049-063_Sec.3:Layout 1 9/19/07 1:43 AM Page 54

The operator of drilling in southern Oklahoma and along the and the rate of return, after all costs, averages this Helmerich southern flanks of the Anadarko Basin, specifically 15% to 25%. & Payne “flex rig” in Custer, Roger Mills, Washita, Canadian, Garvin “This figure alone makes us like Oklahoma,” is surrounded by and Greer counties. he says. “But there are other reasons, such as that technology. Compu- At the end of the first quarter of 2007, 41% of it has long-life reserves, low-risk, dependable terization is making the company’s production was in the Mid-conti- production and a comfortable working environ- dramatic changes to nent area, as were 41% of its proved reserves of ment. We’re here to stay.” many drilling floor 1.4 trillion cubic feet equivalent. functions previously Cimarex targets traditional Oklahoma forma- Chaparral Energy LLC handled by rig hands. tions such as the Springer, Atoka, Red Fork, Syca- Also in the Anadarko Basin, specifically in Harmon more and Bromide, at about 11,000 to 16,000 County,Chaparral Energy LLC of Oklahoma City is feet. According to G. Mark Burford, director of an active driller. The company leased 27,900 acres capital markets, drilling costs for each well are in and shot 3-D seismic over 16,000 acres,says Mark A. the $2- to $4-million range, with reserve expec- Fisher, president and chief executive officer. tations 1- to 3 billion cubic feet range per well. Todate, four wells have been drilled to define the All wells to date have been vertically drilled, but area’s potential. Three of those initially tested at rates Burford says the company is looking into future between 40 and 80 barrels of oil per day from a horizontal drilling activity. Mississippian reef found at 7,000 to 7,500 feet. The Burford says initial potentials of 1- to 3 million fourth well was drilled off the reef for delineation. cubic feet of gas per day are generally realized, The wells cost $1- to $1.2 million each, and all

Top 5 Oklahoma counties for Top 5 Oklahoma counties for crude oil production natural gas production

Carter Roger Mills Stephens Latimer Osage Beckham Grady Caddo Garvin Pittsburg Source: IHS Inc. Source: IHS Inc.

Oil production is found in 68 counties and natural gas production in 69 counties in Oklahoma. Carter and Stephens counties in southcentral Oklahoma produce the most oil. Roger Mills and Latimer counties are the highest gas-producing counties. From 1995 to 2005, gas production rose in 30 of the counties and fell in 39 others. The importance of oil and gas production by county shifts as different areas play out and others gain new drilling. In Beckham County alone, gas output rose 98% in the 10-year period from 1995 to 2005, according to the Oklahoma Corporation Commission.

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Whiting Petroleum Corp. recently expanded this gas plant in Texas County near Guymon to process 130 million cubic feet per day.

Photo courtesy Whiting Petroleum 05545 049-063_Sec.3:Layout 1 9/19/07 1:43 AM Page 56

were drilled vertically with no special Top 10 operators 2005-2006 problems. The company owns essentially 100% of the play. It is considered too early for reserve projections, but based on good Operator Wells Spud in 2005 performance, three or four more wells are planned for 2007. Chesapeake Operating Inc. 436 Chaparral claims to be the third-largest producer of oil in the state. Most of that Newfield Exploration production comes from its enhanced recov- Mid-continent Inc. 183 ery projects. In the Panhandle, the company operates the Camrick Unit, a carbon dioxide EOG Resources Inc. 76 (CO2) injection project, which injects 16 Apache Corp. 66 million cubic feet of CO2 per day, up from 7 million at project start. This increase has Dominion Oklahoma Texas caused a production increase from 100 to Exploration & Production Inc. 60 1,150 barrels of oil per day. Also, in Osage County, the company New Dominion LLC 59 operates the Burbank Unit, an older field with a recovery to date of 315 million bar- Questar Exploration & rels of oil. This field is undergoing an Production Co. 58 enhanced oil-recovery polymer flood, to PetroQuest be followed by CO2 injection. Energy LLC 52 St. Mary Land & Exploration Co. Another firm with a strong Anadarko Cimarex Energy Co. 48 Basin commitment is St. Mary Land & Vectra CBM LLC 46 Exploration Co. The Denver company, with 50 employees in the Tulsa office, has been active in Oklahoma since the mid- 1970s and has production across the state. Currently it is pursuing a drilling program Operator Wells Spud in 2006 in the Northeast Mayfield Field area, principally in Beckham County, where deep gas Chesapeake Operating Inc. 508 wells are typical. These wells are drilled to about 16,500 feet to target the Atoka and Newfield Exploration Granite Wash formations. The company has Mid-continent Inc. 226 plans for roughly 30 wells this year,says Brent A. Collins, director of investor relations. New Dominion LLC 95 Costs for these Atoka wells average $4- to Apache Corp. 76 $4.9 million each. All of the wells are vertically drilled, with no particular drilling Range Production Co. 61 challenges encountered. Well potentials average 4 million cubic feet of gas per day, Noble Energy Production Inc. 60 and anticipated reserves are in the 1.4- to Panther Energy Co. 60 1.5-billion cubic feet equivalent (Bcfe) range per well. BP America Production Co. 56 A second frontier of Oklahoma activity for St. Mary is in the rapidly growing Woodford Dominion Oklahoma Texas shale play, in Coal County in the Arkoma Exploration & Production Inc. 54 Basin. Here, nine wells have been completed, Special Energy Corp. 53 and about 15 additional are planned this year. The exploited shale formation is found at 8,500 feet, vertical depth. All wells are

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drilled horizontally, and initial potentials average acres. At present, the company is expanding CO2 2.5- to 3 million cubic feet per day. Well costs are injection to the other two field units. Two in the $4.3-million range. Anticipated reserves drilling rigs and six workover rigs are working Coalbed Methane are in the 2- to 2.5 Bcfe range per well. full time. The field produces 5,500 barrels of oil equivalent to Whiting’s interest, says James J. By Leslie Haines, Editor-in-Chief, Oil and Gas Investor Whiting Petroleum Corp. Volker, president. A “new” player in Oklahoma is Whiting Petroleum Whiting also owns the Dry Trail gas plant, Gas production from coalbed-methane wells drilled in coal seams plays an important Corp. of Denver. Although the company has been which produces 60 million cubic feet of CO2 in the state since 1983, its presence came into per day. Production is being stepped up to 130 role in Oklahoma’s overall energy mix. prominence with the acquisition of Postle Field, in million cubic feet per day by year-end. It also Texas County, from ExxonMobil in 2005. owns 60% of the 120-mile TransPetco pipeline ne of the beauties of Oklahoma’s oil tions data. Reports to the state tend to lag actual The field shows the potential that remains with a 10-year purchase agreement to furnish and natural gas resource heritage is activity, so there will likely be more reports from untapped in Oklahoma when new technologies CO2. Current daily CO2 injection requires 60 the variety of areas and geologic plays 2006 to come,” says Brian Cardott of the OGS. are applied. Postle Field was drilled in the early million cubic feet per day from recycled gas, Oa company can drill in the state. The fact that Today, a lot of the CBM drilling that occurs 1960s, and water injection operations were initi- and 70 million purchased. these producing basins are spread across so many is infill drilling, mostly of vertical wells on 80- ated in 1967. Three of the field’s five units are The company will invest $303 million in the counties, from east to west and north to south, is acre spacing. under enhanced oil recovery operation using field until 2010. Of this total, $154 million will be a big plus. Advanced horizontal drilling techniques have injected CO2. spent on plant renovation and field develop- Drilling for coalbed methane (CBM) in old meant a lot to the successful development of the The field contains 127 producing wells and ment, and $149 million for CO2. The field is coal seams makes up a growing state’s coalbed methane poten- 107 injection wells. Whiting controls 26,000 gross designated as a water-alternating-gas flood. I portion of the state’s gas activ- tial, Cardott says. By 2005, ity. There are more wells com- some 96% of the wells drilled pleted annually in these shallow were horizontals, most to the Current gas pro- Total Crude Oil Produced in Oklahoma Total Gas Produced coal seams than there are in the Hartshorne coals. duction comes from Woodford Shale play in eastern Because CBM wells tend to Year Barrels* Year Thousand Cubic Feet about 31,000 gas Oklahoma. produce less gas per day than 2005 60,939,369 2005 1,605,654,476 wells in some 1,400 Cumulative CBM production other types of gas wells, pro- 2004 63,816,895 2004 1,646,956,321 fields, according to is about 360 billion cubic feet of ducers have to drill more of 2003 64,676,767 2003 1,566,663,548 the Oklahoma gas and daily output is about 200 them to make a play economic. Geological Survey. 2002 66,030,455 2002 1,559,705,213 million cubic feet of gas. Another challenge is when a The state makes 2001 68,725,026 2001 1,603,732,986 “CBMisnowabout6%of CBM well is drilled, it first about 60 million 2000 71,256,935 2000 1,660,456,198 total state gas production—it’s produces water, and it may barrels of oil and 1999 71,047,405 1999 1,579,425,500 been shooting up pretty fast,” take months or even years 1.6 trillion cubic 1998 77,796,579 1998 1,649,110,067 says Dan Boyd, a petroleum before the well dewaters and feet of gas per year. 1997 83,124,976 1997 1,691,034,594 geologist with the Oklahoma the natural gas production 1996 85,623,876 1996 1,737,459,733 Geological Survey. begins. Once it does, though, 1995 87,656,947 1995 1,775,429,065 “Thousands and thousands the gas may flow for decades. 1994 90,998,504 1994 1,889,516,609 of low-rate, shallow gas wells are Companies are careful to safely sustaining this state,”he says.“In handle the produced water. 1993 96,819,613 1993 2,016,922,956 terms of annual activity, 500 to In 2006, the most active 1992 101,833,596 1992 1,962,533,314 600 of those completions are CBM driller was Newfield Ex- Source: Oklahoma Corporation Commission, Oil and Gas Conservation Source: the Shale Shaker, Geological Society Oklahoma City Division Statistical Department Source: Oklahoma Corporation Commission, Oil and Gas Conservation CBM wells—that’s a big chunk ploration Mid-continent Inc., *Barrels include crude oil production and liquids-condensate production. Division Statistical Department of it.” Coalbed methane production occurs in operating out of Tulsa and As of January 2007, there Northeast and Southeast Oklahoma. McAlester. It drilled 78 CBM were some 3,341 active CBM wells in the state. wells. Amvest Osage drilled 42. Devon Energy of Oklahoma Oil and Gas Employment In 2004, about 578 CBM wells were drilled in Oklahoma City also drills many CBM wells. 1993 1995 2000 2005 several counties on the Cherokee Platform in Houston-based Constellation Energy Group northeastern Oklahoma and in the Arkoma Basin has announced it will acquire certain Newfield Oil and Gas Extraction 33,500 30,400 27,400 33,907 along the state’s southeastern border, where com- Exploration Co.’s CBM assets in the Cherokee Oilfield Machinery 6,700 5,400 4,900 5,653 mercial and non-commercial coal mines dot the Basin of Northeastern Oklahoma for $128 Petroleum and Coal Products 5,500 5,100 4,000 1,610 landscape. In 2005, another 637 wells were million. Constellation recently acquired Amvest drilled. Preliminary data for 2006 shows some Osage Inc., a subsidiary of Amvest Corp., Total 45,700 40,900 36,300 41,170 534 such wells were drilled. for an agreement purchase price of about Source: Oklahoma Employment Security Commission “Every Friday I update the coalbed comple- $240 million. I 05545 MapInsert:Layout 1 9/21/07 8:47 PM Page 1

drilled horizontally, and initial potentials average acres. At present, the company is expanding CO2 2.5- to 3 million cubic feet per day. Well costs are injection to the other two field units. Two in the $4.3-million range. Anticipated reserves drilling rigs and six workover rigs are working Coalbed Methane are in the 2- to 2.5 Bcfe range per well. full time. The field produces 5,500 barrels of oil equivalent to Whiting’s interest, says James J. By Leslie Haines, Editor-in-Chief, Oil and Gas Investor Whiting Petroleum Corp. Volker, president. A “new” player in Oklahoma is Whiting Petroleum Whiting also owns the Dry Trail gas plant, Gas production from coalbed-methane wells drilled in coal seams plays an important Corp. of Denver. Although the company has been which produces 60 million cubic feet of CO2 in the state since 1983, its presence came into per day. Production is being stepped up to 130 role in Oklahoma’s overall energy mix. prominence with the acquisition of Postle Field, in million cubic feet per day by year-end. It also Texas County, from ExxonMobil in 2005. owns 60% of the 120-mile TransPetco pipeline ne of the beauties of Oklahoma’s oil tions data. Reports to the state tend to lag actual The field shows the potential that remains with a 10-year purchase agreement to furnish and natural gas resource heritage is activity, so there will likely be more reports from untapped in Oklahoma when new technologies CO2. Current daily CO2 injection requires 60 the variety of areas and geologic plays 2006 to come,” says Brian Cardott of the OGS. are applied. Postle Field was drilled in the early million cubic feet per day from recycled gas, aOcompany can drill in the state. The fact that Today, a lot of the CBM drilling that occurs 1960s, and water injection operations were initi- and 70 million purchased. these producing basins are spread across so many is infill drilling, mostly of vertical wells on 80- ated in 1967. Three of the field’s five units are The company will invest $303 million in the counties, from east to west and north to south, is acre spacing. under enhanced oil recovery operation using field until 2010. Of this total, $154 million will be a big plus. Advanced horizontal drilling techniques have injected CO2. spent on plant renovation and field develop- Drilling for coalbed methane (CBM) in old meant a lot to the successful development of the The field contains 127 producing wells and ment, and $149 million for CO2. The field is coal seams makes up a growing state’s coalbed methane poten- 107 injection wells. Whiting controls 26,000 gross designated as a water-alternating-gas flood. I portion of the state’s gas activ- tial, Cardott says. By 2005, ity. There are more wells com- some 96% of the wells drilled pleted annually in these shallow were horizontals, most to the Current gas pro- Total Crude Oil Produced in Oklahoma Total Gas Produced coal seams than there are in the Hartshorne coals. duction comes from Woodford Shale play in eastern Because CBM wells tend to Year Barrels* Year Thousand Cubic Feet about 31,000 gas Oklahoma. produce less gas per day than 2005 60,939,369 2005 1,605,654,476 wells in some 1,400 Cumulative CBM production other types of gas wells, pro- 2004 63,816,895 2004 1,646,956,321 fields, according to is about 360 billion cubic feet of ducers have to drill more of 2003 64,676,767 2003 1,566,663,548 the Oklahoma gas and daily output is about 200 them to make a play economic. Geological Survey. 2002 66,030,455 2002 1,559,705,213 million cubic feet of gas. Another challenge is when a The state makes 2001 68,725,026 2001 1,603,732,986 “CBMisnowabout6%of CBM well is drilled, it first about 60 million 2000 71,256,935 2000 1,660,456,198 total state gas production—it’s produces water, and it may barrels of oil and 1999 71,047,405 1999 1,579,425,500 been shooting up pretty fast,” take months or even years 1.6 trillion cubic 1998 77,796,579 1998 1,649,110,067 says Dan Boyd, a petroleum before the well dewaters and feet of gas per year. 1997 83,124,976 1997 1,691,034,594 geologist with the Oklahoma the natural gas production 1996 85,623,876 1996 1,737,459,733 Geological Survey. begins. Once it does, though, 1995 87,656,947 1995 1,775,429,065 “Thousands and thousands the gas may flow for decades. 1994 90,998,504 1994 1,889,516,609 of low-rate, shallow gas wells are Companies are careful to safely sustaining this state,”he says.“In handle the produced water. 1993 96,819,613 1993 2,016,922,956 terms of annual activity, 500 to In 2006, the most active 1992 101,833,596 1992 1,962,533,314 600 of those completions are CBM driller was Newfield Ex- Source: Oklahoma Corporation Commission, Oil and Gas Conservation Source: the Shale Shaker, Geological Society Oklahoma City Division Statistical Department Source: Oklahoma Corporation Commission, Oil and Gas Conservation CBM wells—that’s a big chunk ploration Mid-continent Inc., *Barrels include crude oil production and liquids-condensate production. Division Statistical Department of it.” Coalbed methane production occurs in operating out of Tulsa and As of January 2007, there Northeast and Southeast Oklahoma. McAlester. It drilled 78 CBM were some 3,341 active CBM wells in the state. wells. Amvest Osage drilled 42. Devon Energy of Oklahoma Oil and Gas Employment In 2004, about 578 CBM wells were drilled in Oklahoma City also drills many CBM wells. 1993 1995 2000 2005 several counties on the Cherokee Platform in Houston-based Constellation Energy Group northeastern Oklahoma and in the Arkoma Basin has announced it will acquire certain Newfield Oil and Gas Extraction 33,500 30,400 27,400 33,907 along the state’s southeastern border, where com- Exploration Co.’s CBM assets in the Cherokee Oilfield Machinery 6,700 5,400 4,900 5,653 mercial and non-commercial coal mines dot the Basin of Northeastern Oklahoma for $128 Petroleum and Coal Products 5,500 5,100 4,000 1,610 landscape. In 2005, another 637 wells were million. Constellation recently acquired Amvest drilled. Preliminary data for 2006 shows some Osage Inc., a subsidiary of Amvest Corp., Total 45,700 40,900 36,300 41,170 534 such wells were drilled. for an agreement purchase price of about Source: Oklahoma Employment Security Commission “Every Friday I update the coalbed comple- $240 million. I 05545 MapInsert:Layout 1 9/21/07 8:47 PM Page 2

Oil & Gas Facts Around the Sooner State

WASHINGTON N O O T 17 9 W T A A 3 T W A A CIMARRON LFA KAY CRAIG A HARPER GRANT 11 2 TEXAS BEAVER WOODS LF A OSAGE D EL R A O W PA G ARE WN E WOODWARD 24 NOBLE EE R This map highlights key discoveries and facts about Oklahoma’s GARFIELD 4 S MAYES ELLIS MAJOR 7 5/6 oil and gas industry through the years. TU LS W PAYNE A AGO C H A this coming from Glenn Pool. In the summer of N E D 1 As early as 1846, “oil springs” in the Choctaw DEWEY ER RO A 1907, the pool had 516 wells that produced KINGFISHER CREEK K IR country were reported to be valued for their me- BLAINE LOGAN E 18 E dicinal properties. (Debo, 1949) 117,440 barrels of oil a day. (Debo, 1949) ROGER O LINCOLN OKMULGEE MUSKOGEE MILLS K 7 The Cushing Pool in the hills of the Creek country CUSTER CANADIAN LA 2 During the 1880s, promoters entered the Indian 13 H O was opened in 1912. A year later came Healdton 12 O KF SEQUOYAH Territory and helped tribal leaders organize com- M 15 U A S Field, which made Ardmore an oil city. In 1920, K panies and obtain drilling franchises from their Oklahoma City S E Burbank Pool was discovered in Osage country PO E E McINTOSH governments. Drilling began when the Cherokee 19 M CL 14 W TT I HASKELL east of Ponca City; and the next year a field was 25 EVEL A N Nation leased land to Nathan Byrd in 1886. In BECKHAM WASHITA T A O 1 opened near Tonkawa. (Debo, 1949) CADDO O - LE 1889, the first shallow well, 36 feet deep, was MIE 22 Mc AND brought in near Chelsea. Within two years, 11 23 16 CL HUGHES wells in this area were producing, and 30 barrels 8 Oil was discovered at Hewitt, near Healdton in A IN 20 western Carter County, heralding 80 years of dis- GREER KIOWA GRADY PITTSBURG of crude oil were marketed in 1891. (Dale, 1948) H 21 LATIMER covery in Sho-Vel-Tum Field, still Oklahoma’s most A LE FLORE RM Oklahoma’s first commercial oil well was the Nel- prolific oil-producing region. (OERB) PONTOTOC 3 ON 10 GARVIN lie Johnstone No. 1, drilled in Indian Territory on COMANCHE JACKSON the south bank of the Caney River. It was com- 9 E.W. Marland, who would establish Continental COAL Oil Co. (later Conoco) and would become gover- STEPHENS pleted in 1897 by Cudahy Oil Co. (Okla. Corp. Com- MURRAY nor of Oklahoma, discovered Burbank and Three 8 PUSHMATAHA mission, 2005) TILLMAN Sands fields. (OERB) ATOKA COTTON JOHNSTON 4 On June 25, 1901, a little gas-driven oil sprayed JEFF CARTER 10 Earle P. Halliburton established his oil-well ce- ER McCURTAIN from a hole at Red Fork across the Arkansas River. SO menting company in Duncan in 1921. (OERB) N MARSHALL CHOCTAW Tulsa boosters built a bridge to the discovery, and BRYAN planted headlines did the rest. Telegrams poured in LOVE from Kansas and Pennsylvania; promoters flocked 11 In 1924, the Osage Tribe offered leases for oil to the location; and the first oil boom—a phenom- drilling on their vast reservation. The auction, held enon to be repeated many times in Oklahoma’s his- outdoors adjacent to the Osage Council House in tory—was in full swing. (Debo, 1949) Pawhuska, brought more than $10 million in lease fees. The tree next to the Council House became 13 The “Wild Mary Sudik" gusher at Oklahoma City 14 Dean A. McGee and Robert S. Kerr founded Kerr-McGee achieved international notoriety. Beginning on March Corp. in Oklahoma City in 1937. Ten years later, Kerr- Oklahoma’s first spectacular production came known as the Million Dollar Elm. (OERB) 5 25, 1930, the Sudik No. 1 produced, according to one McGee would make history by completing the world’s from Glenn Pool, south of Tulsa. Two wildcatting estimate, more than 2,000 barrels of oil and 10 million first offshore well. (OERB) partners discovered this famous field in 1905. The 12 Oklahoma City Field was discovered December 4, cubic feet of gas an hour during 11 days. Although Wild discovery well, drilled on the Ida Glenn farm, 1928, by the Indian Territory Illuminating Oil Co. Mary was some distance out in the country, there were 15 The Seminole Uplift, which is home to Seminole, Earls- made 75 barrels of oil per day from the Pennsyl- and Foster Petroleum Corp. The discovery well was large areas within the city where people were forbid- boro, Bowlegs, Little River and other oil fields, is a pro- vanian Bartlesville sand. Glenn Pool soon became the Oklahoma City No. 1, drilled to a total depth of den to strike a match or even cook their meals. In resi- nounced structural feature north of the Arbuckle the most sensational small field in the world. 6,402 feet. The tools blew out of the hole at that dential sections more than 10 miles away, droplets of oil Mountains. Enormous quantities of oil were contained (Debo, 1949; Wilson, 1927) depth, and the well was flowing 215 barrels of oil per hour. One field well, the Thomas-Fuzzell No. 1, fell thick on houses and parked cars. It took six months in Ordovician Simpson sands that ranged from 20 to 80 to tame Mary to a quiet production of 1,000 barrels of feet thick. The largest individual wells were at Earlsboro When Oklahoma was admitted to statehood in produced 43,000 barrels of oil per day from the Ar- 6 oil an hour. (Debo, 1949) and Little River, and each could make more than 13,000 1907, it had production of 43.5 million barrels of buckle. (Charles, 1930) barrels per day. (Powers, 1927) oil, 26.2% of the nation’s output, almost half of 05545 049-063_Sec.3:Layout 1 9/21/07 8:44 PM Page 57

16 The Golden Trend of south-central Oklahoma, mainly in 21 Exploratory activities reached an unprecedented level in western McClain and Garvin counties, produces from 1981 and far exceeded the previous peak reached in the structural Ordovician and stratigraphic Pennsylvanian mid-1950s. Drilling for deep Springer and Goddard sand traps. The first Golden Trend well was completed in objectives was in frenzy in the Fletcher area in the south- 1944, but the well that caught everyone’s attention was eastern Anadarko Basin. In 1981, Oklahoma produced the Lawson No. 1. It was drilled in 1945 by Cities Service 154 million barrels of oil and 2 trillion cubic feet of gas. and made 852 barrels in eight hours. Brokers and pro- (Northcutt, 1982) moters soon swarmed the area, despite the high cost of leases, and deep and expensive drilling, Eastern capital 22 At the end of 1981, 962 rigs were reported active in and tax money poured into the play. (Swesnick, 1950) Oklahoma and the Panhandle of Texas; by the end of 1982, that had dropped to 400. Deep exploration was 17 Natural gas fields have been found throughout the concentrated in Custer, Washita and Caddo counties, Oklahoma Panhandle. Pennsylvanian Morrow sandstones Oklahoma, where 62 wells were drilled below 15,000 account for the majority of the gas, but numerous zones feet and 16 below 20,000 feet. However, the high produce from depths between 2,600 and 13,600 feet. numbers of completions were mainly carry-over activity This is part of Hugoton Field, which spans an area from from 1981 rather than drilling begun in 1982. southwestern Kansas though the Oklahoma and Texas (Northcutt, 1983) panhandles. (Totten, 1961; OERB) 23 The deeper-pool Arbuckle discovery at Wilburton Field 18 Most of Oklahoma’s deep production (below 18,000 in late 1987 set off a drilling boom in the Arkoma Basin feet) comes from the Anadarko Basin. An average centered in Pittsburg and Latimer counties. Arco’s 20,000-foot Anadarko Basin well costs $1.65 million in Yourman No. 2 was capable of producing 73 million 1970 and $2.45 million in 1975. Today, such wells cost cubic feet of gas per day. (Fryklund, 1989) between $8- and $12 million. (Steinmetz, 1977) 24 All but six of Oklahoma’s 77 counties have oil and gas 19 In 1974, the Bertha Rogers No. 1 reached a depth of production. More than 425,000 wells have been drilled in 31,343 feet in Washita County and became the world’s the Sooner State, and 72% of those produced oil or gas. deepest well until 1979. Operator Lone Star Producing The state has more than 115,000 producing wells, and Co. discovered what appeared to be a pool of liquid sul- made 60 million barrels of oil and 1.6 trillion cubic feet of fur under high pressure in the Arbuckle Group. Samples gas in 2005. (IPAA, 2005; Oklahoma Corp. Comm., 2005) that reached the surface were covered with bright yel- low sulfur crystals. (Wroblewski, 1975) 25 Fueled by surging oil and natural gas prices beginning in 2004, large publicly traded independent oil and gas com- 20 The National Association of Royalty Owners (NARO) was panies, including Oklahoma City-based Devon Energy founded by Ada oilman/rancher/publicist Jim Stafford. and Chesapeake Energy, drive an industry expansion and NARO was created to represent oil and gas royalty own- consolidation effort. (OERB) ers in the legislative battle over the Windfall Profits Tax in 1980. (OERB)

Map References Northcutt, R. A. Oil and Gas Developments in Oklahoma and the Panhandle of Texas in 1982. AAPG Bulletin, 67(10), 1629-1633. 1983. Bartram, J. G., & Roark, L. The Healdton Field, Oklahoma. AAPG Bulletin, 5(4), Powers, S. The Seminole Uplift, Oklahoma. AAPG Bulletin, 11(10), 1097-1108. 1927. 469-474. 1921. Shannon, C. W., & Rockwell, F. G. New Oil and Gas Development in Oklahoma. Charles, H. H. Oklahoma City Oil Field, Oklahoma. AAPG Bulletin, 14(12), 1515- AAPG Bulletin, 4(3), 277-281. 1920. 1533. 1930. Steinmetz, R. Statistical Summary of Wells Drilled Below 18,000 ft in West Texas Dale, E. E. History of Oklahoma. New York: Prentice-Hall Inc. 1948. and Anadarko Basin. AAPG Bulletin, 61(2), 297. 1977. Debo, A. Oklahoma: Foot-Loose and Fancy Free. Norman, Oklahoma: Norman Swesnik, R. M. Golden Trend of South-Central Oklahoma. AAPG Bulletin, 34(3), University of Oklahoma Press. 1949. 386-422. 1950. Fryklund, R. E. Oil and Gas Developments in Oklahoma and Panhandle of Texas Totten, R. B., & Horn, P. H. Geology of Gas Fields of Western Anadarko Basin, in 1988. AAPG Bulletin, 73(10), 130-135. 1989. Texas and Oklahoma Panhandles. AAPG Bulletin, 45(1), 124-125. 1961. Lawrence, F. J. Oklahoma. 2005-2005 IPAA Oil & Gas Producing Industry in Your 2005 Report on Crude Oil and Natural Gas Activity within the State of Oklahoma. State, 74(16), 64-65. 2005. Technical Services Department, Oklahoma Corporation Commission. 2006. Moore, R. C. The Relation of Mountain Folding to the Oil and Gas Fields of Wilson, W. B. Geology of Glenn Pool of Oklahoma. AAPG Bulletin, 11(10), Southern Oklahoma. AAPG Bulletin, 5(1), 32-48. 1921. 1055-1065. 1927. Northcutt, R. A. Oil and Gas Developments in Oklahoma and Panhandle of Texas Wroblewski, E. F. Developments in Oklahoma and Panhandle of Texas in 1974. in 1981. AAPG Bulletin, 66(11), 1879-1886. 1982. AAPG Bulletin, 59(8), 1401-1403. 1975. 05545 049-063_Sec.3:Layout19/19/071:44AMPage58

Photo courtesy of Devon Energy Corp. 05545 049-063_Sec.3:Layout 1 9/19/07 1:44 AM Page 59

Woodford Shale Heats Up

By Brian A. Toal, Senior Financial Editor, Oil and Gas Investor

This booming gas play in southeastern Oklahoma is not only drawing producers to the region, but also renewed interest in the state’s hydrocarbon harvest.

hen Oklahoma became a state region, the rig count is rising as is the number of in 1907, it was the biggest oil- producing gas wells. producing state in the U.S., Tulsa Last year at this time, there were perhaps five boastedW the title of Oil Capital of the World, and rigs drilling in the Woodford play. This year, in Gulf Oil and Texaco were busy building rival early June, there were 41—a testament to the pipelines from Tulsa to Gulf Coast refineries. importance of this play. Now, 100 years later, Oklahoma remains one One of the bigger operators here is Oklahoma of the nation’s top-handful of oil and gas pro- City’s Chesapeake Energy Corp. It estimates that ducers. According to the Oklahoma Corporation the rich 200- to 300-foot-thick shale sections Commission, the state’s annual oil-liquids out- under its holdings in the Woodford Shale may put in 2005 was nearly 61 million barrels. Its nat- yield ultimate recoverable gas reserves of 1 Tcf. ural gas production was more than 1.6 trillion Houston’s Newfield Exploration Co. is even cubic feet (Tcf). Meanwhile, oil and gas-related more bullish about the potential of the employment in Oklahoma that same year was Woodford. It entered Oklahoma through several 41,170, up from 40,900 a decade earlier. large acquisitions of successful Oklahoma inde- The energy industry’s dominant role in the pendent producers such as Latigo Petroleum in state’s economy is likely to continue for many Tulsa. It wants Oklahoma oil and gas production years to come. In addition to ongoing explo- to balance it activities in other states and in the ration and production in numerous well-estab- Gulf of Mexico. lished fields, Oklahoma is now home to a “hot By this company’s calculations, its acreage in the spot” for leasing, drilling and new production. southeastern Oklahoma shale play could hold a The recent unconventional gas-resource drilling treasure trove of 3- to 6 Tcf of recoverable gas, successes found in the Woodford Shale play depending on whether its Woodford position is has industry experts making the inevitable com- developed on 80- or 40-acre spacing. parison between this southeastern Oklahoma “When you consider that we are today a 2.3-Tcf find and the prolific Barnett Shale 150 miles company, in terms of overall proved reserves, this to the south. Drilling activity is centered on means that the Woodford play has the potential to Coal, Hughes and Pittsburg counties near more than double our size,” says Lee K. Boothby, McAlester. who served as president of Newfield Exploration’s An increasing number of producers from Mid-continent business unit in Tulsa until transfer- Oklahoma and other states is flocking to the ring to Houston in September 2007.

Oklahoma: Where Energy Reigns 59 05545 049-063_Sec.3:Layout 1 9/19/07 1:44 AM Page 60

Whatever the recoverable reserves may be for to north of 100 million cubic feet—more than 15% the highly fractured Woodford Shale, the opera- of its companywide gas output. tors in this promising play agree on one thing: “While we originally believed the play could offer advances in horizontal-drilling and completion up hundreds of Bcf [billion cubic feet] of gas technologies are keys to lowering costs and mak- reserves—and indeed our booked gas reserves in the ing the economics of this play highly attractive. Woodford currently stand at about 250 Bcf—we’re now estimating its ultimate recoverable gas-reserve Woodford Giant potential to be 3- to 6 Tcf, depending on whether Simply put, the Woodford Shale play is for many our lease position is developed on 80- or 40-acre companies a bright spot in U.S. drilling activity. spacing,”says Boothby. In late 2002, Newfield, for example, redefined The operator’s acreage position in the play runs its business strategy in the Mid-continent region, 50 to 60 miles north-south and 15 to 20 miles east- deciding to focus on natural gas-resource opportu- west with the Woodford occurring at depths of nities in the western Arkoma Basin—specifically the 6,000 to 7,000 feet at the north end of the compa- Woodford Shale play in Pittsburg,Hughes,Coal and ny’s holdings and at 11,000 to 12,000 feet at the Atoka counties in southeastern Oklahoma—and in southern end, explains Sam Langford, Newfield’s the Anadarko Basin where it’s pursuing a similar manager of commercial development for the Mid- strategy in the Mountain Front Wash play. continent region. By spring 2003, with less than 10,000 Woodford Long term, the company believes the average Shale acres under lease, it spud in Pittsburg County ultimate recoveries per Woodford well completion its first vertical shale well, a 7,900-foot test, which will be in the range 3- to 3.4 Bcf. the following month flowed at an initial rate of “One of the key aspects of this play with about 2 million cubic feet per day of gas. respect to its productiveness is the fracturing Today, after drilling more than 100 vertical wells network that occurs throughout our acreage and 80-plus horizontal wells in the play across what block,”says Boothby.“When we drilled the initial is now a dominant 137,000 net-acre horizontal test in the Woodford in position, Newfield’s Woodford daily late 2004, we utilized a three-stage gross gas production has mushroomed frac design. But starting late last year,

The Other Brother

One of the most recognizable names in Oklahoma’s oil heritage is Phillips Petroleum Co., which was founded by banker brothers Frank and L.E. Phillips. Less well known is the legacy of their younger brother, Waite. Waite followed his older brothers from Iowa to Oklahoma in 1906, but instead of joining the family bank, he went out on his own with headquarters in Tulsa. He made a fortune in the Cushing Field, then sold his company for millions. He started a new company and again sold for millions. With his oil fortune, he built a grand mansion in Tulsa, commissioned an Art Deco skyscraper downtown, and purchased a third-of-a-million-acre ranch in New Mexico. In the 1930s, before moving to California where he would make another fortune in real estate, Waite donated his home and art collection to the people of Tulsa. Today, it is known as Philbrook Museum of Art. He gave the ranch to the Boy Scouts, with the gift of the Philtower Building to generate a stream of revenue to maintain it. Known today as the Philmont Scout Ranch, this landmark is the legacy of the other brother. 1929 1930 1930 The Greater Seminole Field was the The Great Depression. A stock market crash in 1929 The “Wild Mary Sudek.” The Sudek No. 1 in Oklahoma nation’s premier producer of high marked the beginning of the Great Depression of the City field blew out March 24 because of an error on the gravity oil. Between July 16, 1926, 1930s. After 30 years of relative prosperity, the people part of the drilling crew as well as exceptionally high gas and September 1, 1929, about 250 of Oklahoma suffered an extended period of drought, pressure in the field. Crude oil was thrown so high into million barrels were produced in unemployment and dislocation that changed an entire the air that winds carried a film of oil as far south as the Greater Seminole. generation and altered the self-image of the state. Norman, 11 miles away. Heroic efforts were required to “tame” the well, which finally was accomplished April 4. 60 Oklahoma: Where Energy Reigns 05545 049-063_Sec.3:Layout 1 9/19/07 1:44 AM Page 61

we went to horizontals with five-stage Equipment used by fracs because increased frac density has Devon Energy in seismic- translated into higher initial production imaging activities in levels and expected reserve recoveries.” Oklahoma’s Woodford While such wells today cost Newfield Shale play is loaded $5.5- to $6 million to drill and complete onto a truck. versus earlier verticals that ran anywhere from $1.5- to $1.75 million, the increased cost is more than offset by the greater pro-

ductive value per well that’s being achieved . p r

in the play. o C y

The company says it’s confident drilling g er

costs in theWoodford will trend lower as the En n play ultimately enters the development o ev D

phase. To date, Newfield has drilled only 3% f o y

of the wells it expects to drill for full field es t r u

development. o c o Also expected to help the company’s t o

economics in the Woodford is its applica- Ph tion of new drilling and completion technolo- Fracing the Woodford gies—from the use of polycrystalline diamond For Oklahoma City-based Devon Energy Corp., its compact bits that increase downhole penetration entry into the Woodford Shale in southeastern rates and reduce the number of days it takes to drill Oklahoma in early 2003 was a natural extension of a well, to the use of slick-water fracs in its well its earlier success in the Barnett Shale in the Fort completions. Worth Basin in Texas. “Compared to polymer gels, slick-water fracs “When we bought Mitchell Energy & Develop- allow an operator to impart greater hydraulic ment in 2002, we saw that the technology to get energy into the formation’s fracture network, natural gas out of dense shale bodies as the Barnett breaking it into additional fractured pieces such was really opening up,” says J. Larry Nichols, that more gas can flow out of the fractures and Devon’s chairman and chief executive officer. into the wellbore,” explains Boothby. “And as we developed our knowledge and With a 2007 capex budget of $500 million allo- expertise in the Barnett, where we now produce on cated to the play and an aggregate $700 million a gross basis about 850 million cubic feet of gas per earmarked for the entire Mid-continent—close to day—almost half the current gas output from that 40% of Newfield’s overall 2007 capital spending— play—we started looking around the country for the company this year plans to drill about 150 hor- other places that would be prospective for shale gas.” izontal wells in the Woodford. Comparatively, it The Woodford Shale, particularly in Coal and spent just a couple hundred million dollars in 2006 Hughes counties, looked very attractive, in terms of to drill 47 gross wells in the play. having the requisite thickness and geologic charac- Langford notes there’s little problem getting the teristics to apply the knowledge the operator had play’s gas production to market. gained in the Barnett, notes Nichols. “We sell into the CenterPoint, Enogex and “Currently, we’re producing on a gross basis Ozark pipelines and realize about 85% of what- about 32 million cubic feet of gas per day in the ever the prevailing Henry Hub gas price is— Woodford but expect a 2007 exit rate there of 70 so we don’t take any big hit on natural gas-price million cubic feet per day and ultimately, about 200 differentials.” million cubic feet of daily gross output.” 1931 1931 1931 Governor Murray Acts. Governor "Alfalfa Wiley Post Circumnavigates the Globe. Pioneer Water Flood Project. Injection of water Bill" Murray shuts down Oklahoma City Wiley Post, the son of Oklahoma sharecroppers, into an oil reservoir to increase recovery was first field. Oklahoma enacts comprehensive teamed with co-pilot Harold Gatty to become the attempted in Oklahoma on an oil lease in conservation law. first men to fly an airplane around the world. Rogers County by Bert Collins on a Carter Oil Their ticker-tape parade in New York City was Co. lease. The test was encouraging and the bigger than that given to Charles Lindberg. method was applied to other oil reservoirs.

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To put this potential contribution in some per- reservoir. In short, it provides a good picture of how spective, Devon in 2006 produced worldwide 214 effectively we’re completing a well,” he says. million barrels of oil equivalent, which included 815 To handle the increasing amount of production Bcf of gas.Annualized,the company’s Woodford gas that will result from Devon’s stepped-up horizontal output could reach nearly 73 Bcf. drilling in theWoodford,the company is continuing With about 70,000 net acres under lease in the to expand its gas-gathering system in the region and play,Devon is targeting Mississippian-age shale rock is constructing a gas-processing plant with the at depths ranging from 6,000 to 10,000 feet. capacity to handle 200 million cubic feet per day. “It’s a pretty rich black shale, the thickness of Additionally, it has made a volume commitment which ranges from about 140 to 175 feet,” says to the Boardwalk Gulf Processing Pipeline Project in Stephen J. Hadden, Devon’s senior vice president southeastern Oklahoma that will give the producer of exploration and production. “Potentially, the about 1.6 Bcf per day of takeaway capacity, to trans- gas reserves under our acreage could be as much port its gas from the Woodford Shale to markets in as 1 Tcf.” the northeast and southeast U.S. Since 2004, the producer has drilled 35 horizontal wells in the play, each costing around $4 million Big Shale Focus to drill and complete. Last year, with a capex budget Active in virtually every onshore U.S. natural gas of $80 million for the Woodford, it drilled 21 of basin east of the Rockies, Oklahoma City’s those wells. Comparatively, the company this year Chesapeake Energy Corp. in 2006 grew estimated plans to spend about $140 million to drill and com- proved proves by 19%, to a record 9 Tcf equivalent plete upward of 50 more horizontals. The average while increasing year-over-year daily production initial production from each well drilled is about from 1.4- to 1.7 billion cubic feet equivalent. What’s 3 million cubic feet and Devon is estimating ulti- particularly notable about this operator is that half mate recoverable reserves of about 2.5 Bcf per well. its domestic drilling is focused on shales. “As we learned with the Barnett, matching the It’s not surprising, therefore, that in 2006, the right frac technology with a particular reservoir is company began moving aggressively into the always important when it comes to unlocking the Woodford Shale play in southeastern Oklahoma, optimum value in shale plays,”notes Hadden.“Early where the producer now has about 100,000 et acres. in the Woodford play, we tried some gel fracs, but “If all that acreage were productive, and assum- later moved to slick-water fracs. We found them ing 160-acre spacing, we could drill about 800 wells cheaper and more efficient, in terms of getting bet- that might yield ultimate recoverable reserves of ter production performance.” about 2 Bcf per well,” says Aubrey K. McClendon, Slick-water fracs, he points out, allow for higher Chesapeake’s chairman and chief executive officer. pump rates and higher volumes of water and sand “That would translate into roughly a Tcf of reserves to penetrate a targeted formation such that an oper- net to us.” ator can optimally extend the fracture system and This is why last year Chesapeake put its toe into get more of the formation’s gas flowing into the the 5,000- to 10,000-foot, Mississippian-age, wellbore. Put another way, the water pressure of the Woodford Shale by drilling one vertical and one frac shatters the rock in the formation, creating mil- horizontal well—both commercially successful—at lions of avenues for gas to escape from the rock into a cost of $6 million. It also participated in another the wellbore. 73 Woodford wells at a cost of $35 million. Another value-added technology Devon is “The latter effort was important because it bringing to bear in the Woodford is 3-D seismic. allowed us to save some learning-curve dollars,” “Being able to image a reservoir in great detail says Steve Dixon, Chesapeake’s executive vice before we drill helps us avoid geological hazards that president and chief operating officer. might be present in a shale formation and deter- The company’s 2007 capex for the play is a far mine the optimal locations to position our horizon- more aggressive $60 million, which will allow it tal wells,” explains Hadden. to drill between 17 and 20 horizontals in Coal, In the completion phase, the operator is also Hughes and Pittsburg counties—areas it consid- employing micro-seismic technology. ers the Woodford’s sweet spot. Also, it plans to “It’s a tool that allows us track and map the path spend an additional $35 million to participate in a frac job may take in a wellbore—such that we can some 70 wells in the play plus shoot more 3-D actually see how the frac is being distributed in a seismic to better understand the Woodford. I

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Going Deep

By Leslie Haines, Editor-in-Chief, Oil and Gas Investor

Ultra-deep natural gas wells in western Oklahoma have made headlines.

klahoma is assured its place in energy ducing at least 6 billion cubic feet of gas per year—an history as the state where some of the astounding rate rarely seen onshore today. deepest onshore gas wells in the world In January 1981, the No. 1 Tomcat in Caddo haveO been drilled. Many hardy operators continue to County, operated by Ports of Call Oil Co. of search for that kind of deep, high-temperature, high- Oklahoma City, made the front page of The Wall pressure gas to this day. Wells can be as much as Street Journal,as one of the deepest and highest-flow- 15,000 to 30,000 feet deep. ing gas wells in the U.S. It flowed an astounding 110 However, because these high-risk wells cost many million cubic feet per day from about 15,335 feet millions of dollars, the decision to drill depends on until the casing collapsed. Its enormous gas flare natural gas prices. Currently, companies will drill could be seen for miles. only if prices rise above $6 per In 2003, GHK began a multi- thousand cubic feet of gas. well program in western Okla- Estimates of the deep-gas po- homa that led to its discovery of tential in the Anadarko Basin of the Indian Field, where significant western Oklahoma range from Hunton and Morrow production 60- to 300 trillion cubic feet, says has been established. Dr. Charles Mankin, head of the Oklahoma City’s Chesapeake Oklahoma Geological Survey. Energy Co. is one of the most The drilling action occurs in aggressive drillers in the state, and Grady, Caddo, Beckham, Washita, indeed, in the U.S.At press time, it Custer, Roger Mills and other west- had about 40 rigs running in ern counties. Geological targets Oklahoma and was a partner in include the Atoka, Morrow, Sprin- another 100 wells. It has drilled ger and deeper Hunton zones. more gas wells below 15,000 feet A longtime champion of this than anyone in Oklahoma. expensive, high-stakes drilling is Chesapeake’s Buffalo Creek Robert A.Hefner III,chief executive 1-17 in Beckham County,near the officer of the GHK Co. This Okla- Texas border, is one of the best homa City geologist was one of the wells drilled in the state. First pro- Photo courtesy of St. Mary Land & Exploration Co. first people convinced deeper gas in duced in 2002, its output held at the Anadarko Basin could be successfully drilled— 40 million cubic feet per day for two years from and safely produced. the Springer formation at about 19,600 feet, says In 1967,he tested his first deep well,finding a huge Mark Lester, executive vice president of explo- gas deposit at 24,454 feet—at the time, the deepest ration. He estimates it will ultimately recover gas well produced in the U.S. It eventually blew out, 59- to 60 billion cubic feet of gas—that’s more however, although it attracted much industry atten- from one well than some companies recover from tion. Along with rising natural gas prices, it kick- dozens of wells. started a mini-boom of deep drilling that lasted The Mayfield and Northeast Mayfield area, through the 1970s. Since then, GHK has set many producing from Springer and Morrow, will see six deep-well technological firsts. gas wells drilled in 2007 by Chesapeake. These wells In 1971, the Bertha Rogers No. 1 in Washita can take six months to drill and complete at depths County was drilled even deeper, to 31,441 feet—the of 18,000 feet. But the rewards can be huge. deepest well at the time. By 1976, some 22 so-called No wonder drillbits continue to make their mark superwells had been drilled in Oklahoma, each pro- in western Oklahoma. I

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OKLAHOMA Where Energy Reigns

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Independent Development

By Taryn Maxwell, Contributing Editor, Oil and Gas Investor

The oil and gas industry in Oklahoma was founded by independents, developed by independents, and now that many of the fields have grown too mature for some of the interests of the majors, it is being maintained by the independents.

il and gas fortunes have been made, lost Gulf of Mexico, Canada and overseas, while and made again in Oklahoma, and still maintaining their presence in Oklahoma. through it all, it is the independents Whether producing 25 barrels of oil per day or thatO have stuck it out, operating in shops set up by 25,000, each company has a tremendous amount their fathers and grandfathers who were the origi- of pride in calling Oklahoma home. nal developers of the state’s oil and gas industry. As the hub of the nation’s industry has moved south to Ward Petroleum Corp. Houston, large and small independents have main- In 1963, Lew Ward, founder of Enid-based Ward tained their presence in Oklahoma, developing new Petroleum Corp., drilled his first well in the technologies and acting as mainstays in a state that Sooner Trend near Enid. Since then, Ward in its 100-year history has attracted companies and Petroleum has drilled or participated in more professionals from far and wide, all trying to get a than 1,000 wells, never straying from Oklahoma’s barrel or two of its bubbling crude. Anadarko and Arkoma basins. While many of the basins in Oklahoma are Ward, who was born and raised in Oklahoma, characterized as mature by industry standards, watched his father start out as a roughneck and a the independents that call Oklahoma home are driller in 1935, and work his way up to drilling fiercely loyal to the state and continue to pull superintendent.So,when it was time for Ward to go large amounts of oil and gas from its red off to the University of Oklahoma, he decided to earth. Some are small shops with a few employees study petroleum engineering. Upon graduating content to continue exploration and develop- from OU and working as a petroleum engineer for ment in Oklahoma alone; some have grown to Delhi Oil Corp. in Casper, Wyoming, Ward was become national and international companies, called to serve in the Korean War. He returned to producing huge amounts of oil and gas from the Oklahoma to marry his sweetheart, Myra Gungoll, 1934 1935 Interstate Oil Compact Commission. Oklahoma Governor- Rogers and Post Killed. Two of Oklahoma’s elect E. W. Marland called a conference of oil-state favorite sons, Will Rogers and Wiley Post, governors to draft a new version of a voluntary interstate were killed when Post’s plane crashed near oil conservation compact without enforcement powers. Point Barrow, Alaska, killing both men. Plans for creating an Interstate Compact to Conserve Oil and Gas were developed at Marland’s Ponca City home in December. Oklahoma: Where Energy Reigns 65 05545 064-080_Sec.4:Layout 1 9/19/07 2:01 AM Page 66

least the next generation. The company has yet to dabble in anything unconventional. Its current efforts lie mainly in exploration and creating value through the drillbit. Since drilling his first well, Ward says he has experienced several milestones, but one of the biggest boosts for him was a discovery in Major County. “It was a large Hunton discovery that had enough reserves to cause a pipeline company to lay a line all the way from Miami, Oklahoma, to just south of Ames, which was more than 200 miles,”he says. “They felt like the risk in laying that pipeline for one well was justified because they thought there would be many other wells discovered in the area. They were right.” Ward says the independents have always been the pioneers of oil and gas exploration in Oklahoma. “Since the time we started being very active, Photo courtesy of Ward Petroleum which was in the late 1950s, very few wells have Lew Ward, founder and subsequently became a partner with her father been drilled by major companies,”Ward says.“Most of Ward Petroleum in Enid-based Ward & Gungoll Oil & Gas of the wells throughout the years have been drilled Corp., and his wife Investments. by the independent producers. The independents Myra in front of a Ward gained experience about lease-brokerage have been the pioneers in driving down the cost of rig drilling on a and did consulting work as a petroleum engineer in exploration and driving up the success. We were Ward Petroleum Enid. He soon acquired some acreage in Garfield always more dedicated and spent more time on the lease in Oklahoma. County, drilled his first well, and formed Ward job. A lot of the time when folks were out playing Petroleum Corp. golf or going to football games, you would find the Lew’s son, Bill, joined Ward Petroleum in 1984 independent producer out there putting deals after obtaining a degree in petroleum engineering together and drilling wells.” from Colorado School of Mines and an MBA Even in the older areas of Oklahoma, Ward says from Southern Methodist University. He became there is a bright future for independents working in president and chief executive in 1997. Under his the state. leadership, the company’s assets, revenues and “With 3-D seismic technology and directional reserves have had a four-fold increase with a and horizontal drilling, there are enough exciting significant number of exploratory prospects for prospects in Oklahoma to keep us busy for the development in the next few years. next decade,” he says. More than 1,000 wells later, Ward Petroleum is As demand for people working for the inde- one of the largest privately owned gas producers in pendents becomes almost as great as the demand the state. for oil and gas, Ward believes the opportunities The strength of Ward Petroleum is in its focus available in the industry will naturally draw people. and its particular type of exploratory efforts, For its part, Ward Petroleum is always looking for Ward says. interns who want to learn about the industry and “We want to be able to look at an area that is the “entrepreneurial attitude” toward exploration geologically complex with multiple potential pay Ward says it takes to be a successful independent zones that can be subjected to newer exploration in Oklahoma. techniques, and we want to be able to acquire a In his years of operating, Ward says the most substantial acreage position in those areas,” he says. important thing he has learned is about the “We focus on areas that have that potential.” chain of development; from acquiring the lease The company has no operations outside of you want, to acquiring and interpreting the Oklahoma, because Ward says there is enough for geological information on that lease, to having the independent producer to do in Oklahoma for at the mechanical ability to drill and successfully

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complete the well. All of the steps are important. buy the properties by offering to operate them and Though Ward was born and raised in letting Cimarron buy in for half at cost. The deal Oklahoma, it’s not just roots that are keeping his worked out nicely, and Brown & Borelli began company in the state. It’s serendipity, he says. working more with Cimarron. “Oklahoma has multiple producing zones, and When the price of oil went down again, Brown’s any time you go out to drill a well, you may find a partner in Brown & Borelli didn’t want to explore producing zone and you may not, but on the way outside low-risk prospects. down, serendipity will always play a role,” he says. “The problem with low-risk prospects at that “In most cases, you’ll find additional zones that are point in time was they became unprofitable and productive that you weren’t expecting. I think you couldn’t drill for them,” Brown says. “I was serendipity in Oklahoma is probably the greatest wanting to go out with a little higher risk ventures attraction that I can think of.” and Joe Warren also had the same idea, so I decided to sell my interest in Brown & Borelli to my Cimarron Production Co. Inc. brother-in-law and use that capital to finance Pete Brown, co-founder of Oklahoma City-based moving forward in that direction.” Cimarron Production Co. Inc., has come full- Cimarron came across a coalbed-methane play circle as an independent. In 1972, Brown formed in Oklahoma in which it bought a large position Kingfisher-based Brown & Borelli Inc. with his and decided to operate. It was then that Price brother-in-law. The company focused on drilling suggested he would move his assets out of low-risk, moderate return and moderate-to-low Cimarron, they could split the stock three ways and return wells in northwest Oklahoma. The company Brown and Warren could move forward with continued to drill wells and grew rapidly as a result. Cimarron as the entity to drill the coalbed-methane Then, in 1981, oil went bust. wells. “It didn’t really hurt us too bad because being Three years ago, the circle was complete when up in Kingfisher, we weren’t exposed to all the Cimarron bought back Brown & Borelli, making it banks that were loaning money freely, so we the operator of all of the leases and prospects weren’t highly leveraged,” Brown says. “We came Cimarron generates. The company operates almost across a fairly good-sized bankruptcy we wanted, solely in Oklahoma, in unconventional shale plays but needed some help buying, and that’s how we and conventional deep Arbuckle plays. They also got in with Cimarron.” have a substantial stake in horizontal drilling in At the time, Brown’s current partners, Joe Ellis County. Warren and Michael Price owned Cimarron. Major oil companies tend to lose interest in Brown & Borelli struck a deal with Cimarron to maturing regions such as Oklahoma, Brown says. Cimarron Production Company owners Joe Warren (left) and Pete Brown.

Photo courtesy of the Oklahoma Energy Resources Board

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“There are some really great people in our industry, and I’ve enjoyed doing business with them, even though many of us are competitors. I still enjoy the friendliness of our competition and our willingness to share ideas and concepts.” —Pete Brown, Co-founder of Oklahoma City-based Cimarron Production Co. Inc.

That’s where the independent comes in. reasoning, eventually something is going to “The independent’s role is to go out and explore work for you. Sometimes you can get pretty for oil and gas and that is where their profit center disillusioned, though.” is,”he says.“As the area gets older,the risk of drilling Brown believes Oklahoma has one of the gets higher. Majors are not willing to take the risks best environments for operating in oil and gas, associated with finding smaller amounts of oil and and the biggest challenge for independents gas. Independents step in and assume that role.” operating in Oklahoma is getting the oil out Brown says Cimarron’s greatest strength is in of the ground. He says the best moments of his taking chances. career have been when he was president of “We’re not timid and we’re not deterred when the Oklahoma Independent Petroleum Asso- we fail,”he says.“We’ve probably had more failures ciation and chairman of the Oklahoma Energy than successes, but the successes by far have Resources Board. paid for all the failures. So if you persevere and “I think serving in those roles put me in touch you’re using sound technology and sound with more independents than I ever would

Martial Law in the Oklahoma City Field

Oklahoma Governor William H. “Alfalfa Bill” “Generalissimo Cicero,” the guardsmen attempted Murray assumed office January 12, 1931. to shut down the wells. Many of them were The depressed state of oil and natural gas prices, fooled, however, when producers reversed valves caused by overproduction and reduced demand so they seemed to be closed when, in fact, they as a result of the Great Depression, quickly were running wide open, feeding “hot oil” to became a concern for the governor. Several hidden pipelines. Murray turned a deaf ear to voluntary efforts to limit production in Oklahoma the pleas of oilmen to re-open the field until the met with failure. state legislature enacted a new, comprehensive On March 4, 1931, Murray ordered the code designed to control over-production. Oklahoma National Guard to halt oil production Murray ordered the National Guard back in the state in conjunction with a similar action by into the Oklahoma City Field in May 1932 to the governor of Texas. Hoping to raise the price enforce the City of Oklahoma City’s zoning of crude to $1 per barrel, Murray finally allowed regulations controlling where wells could be oilmen to resume production when the price drilled in the city. reached 75 cents per barrel. Texas production Murray’s actions foreshadowed the end of also resumed. unfettered production of oil and gas in the state A year later, Murray ordered the troops into as oilmen soon realized conservation and rational the Oklahoma City Field in an effort to enforce production quotas would serve the best interest production limits. Commanded by Cicero Murray, of the people of Oklahoma and the petroleum the governor’s cousin often referred to as industry. 1935 1937 1939 The Grapes of Wrath. Oklahoma Highway Patrol. The OHP was First Digital Computer. John Atanasoff and Clifford Berry of Novelist John Steinbeck established in response to the increasing Iowa State College completed the prototype of the first digital depicted the plight numbers of high-speed automobiles and computer. It could store data and perform addition and of Dust Bowl migrants. resulting carnage on the state highways. subtraction using binary code. The next generation of the machine was abandoned before it was completed because of the onset of World War II. 68 Oklahoma: Where Energy Reigns 05545 064-080_Sec.4:Layout 1 9/19/07 2:02 AM Page 69

Keener Oil & Gas Co. employees (left to right) Victor Sidbala, David Bartlett, Bob Burke, John Laury and Dewey Bartlett. Photo courtesy of Keener Oil & Gas Co. 1939-1945 1940 World War II. Germany invades Poland, beginning This Land is Your Land. Woody Guthrie, a native World War II. The U.S. entered the war when of Okemah, wrote this mixture of folk tune, the Empire of Japan attacked U.S. military protest song and ode of optimism while hitchhiking installations at Pearl Harbor, Hawaii, on across the country just as the Great Depression December 7, 1941. was giving way to wartime production.

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Photo courtesy of Keener Oil & Gas Co.

In the 1950s the U.S. have been,” he says. “There are some really great Throughout the years, Hamm and his team Department of Mines people in our industry, and I’ve enjoyed doing followed oil and gas through Montana, Wyoming, (predecessor to the business with them, even though many of us are North Dakota, South Dakota, Illinois, Texas and U.S. DOE) conducted competitors. I still enjoy the friendliness of our Louisiana. Today, the company operates primarily “field camps” for oil competition and our willingness to share ideas in the Rockies, Mid-continent and Gulf Coast producers. Here, a and concepts.” regions, and had some 118.3 million barrels of oil large crowd has gath- Brown says the future for Oklahoma is strong equivalent in proved reserves as of year-end 2006. ered at a production because of all the unconventional plays that have Hamm says the company’s oil reserves are its site on the Weber been discovered in the state. strength right now. lease, operated by “When I first decided to go into this business, “Continental has a lot of crude oil reserves and Keener Oil, in people told me I was crazy because we were going it’s very strong in its own right as an exploration Washington County, to run out of oil in 20 years, and that was in the company,”he says.“Historically, we’ve been able to east of Dewey. 1970s,” he says. “There are always the naysayers find oil and gas reserves year after year and I think who say we’re going to run out of oil. Eventually, going forward we’ll be able to continue doing that. we will, but not in my lifetime, and not in my Those are strengths. The production we have is children’s lifetime. It is getting harder and harder primarily oil and the prices for that commodity to find oil reserves in Oklahoma. I believe natural look good.” gas is the future of Oklahoma.” Though Hamm’s company has taken him throughout the U.S., he still believes Oklahoma has Continental Resources Inc. one of the best operating environments because of It has been quite a year for Enid-based Con- its good people, its good oil and gas infrastructure, tinental Resources Inc. On May 14, 2007, the and its network of service companies. company announced its initial public offering “I’m glad to be an Oklahoman,” he says. “I’m so on the New York Stock Exchange as CLR. The thrilled Oklahoma has done as well as it has in its company, which is celebrating its 40th anniversary first 100 years as a state. I think we should all be this year, originally started in November 1967 as proud of our state and of its rich culture and Shelly Dean Oil Co. history, and I certainly am. I’m proud of the role “We named it after our oldest two kids, which oil and gas has played in its development.” were the only two kids we had at the time,” says Hamm says that in the 40 years his company has Harold Hamm, chairman and chief executive. been operating in Oklahoma, the independent’s Hamm says he didn’t necessarily decide to focus role in the state’s oil and gas industry has changed. on Oklahoma, it just happened to be where he was, “The majors kind of ran the state back when so Oklahoma is where he built his company. I first got into the business, but now there

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are hardly any major oil companies left in Harold Hamm, Oklahoma,” Hamm says. “Nearly all the work is chairman and done by independents. It’s definitely changed all chief executive of across the nation. Most of the oil and gas is found Continental by the independents and most of the production is Resources Inc. produced by them.” in Enid. Hamm says the most challenging part of being an independent is relying solely on the success of the company’s oil and gas operations to keep the company afloat. “You don’t have the other integrated parts to keep your company moving along,” he says. “If you’re a major oil company and you have a bad string of luck and are not successful finding new reserves of oil and gas, your refining or pipeline segments can keep you going. As an independent, you don’t have those. You either find oil and gas or Photo courtesy of Continental Resources Inc. you’re gone.” Just like every other independent, Hamm is bet- Tulsa-based Keener Oil & Gas Co. began in the ting on good commodity prices for his newly pub- industry’s real birthplace: Titusville, Pennsy- lic company. lvania, where the first well in the U.S. was brought “It all depends upon our commodity prices and in through drilling. upon those hopefully holding up,” he says. “We’re Dewey Bartlett Jr., president of Keener, is the price-takers, so we totally live on what we get for third generation in his family to be involved with commodities. And if that goes way down, we’re the company, which started with his grandfather, hurt. I like the prospects of good commodity prices D.A. Bartlett, who owned a general store in in the future; they look good. We’re in very close Titusville. His grandfather was always more than proximity of supply and demand today. There’s not happy to advance the oilmen of Titusville supplies a whole lot of excess capacity available. I think that from his store, but he made them use their leases bodes well for good commodity prices.” for collateral. When one person didn’t pay his debt, the elder Bartlett took over the lease, and Keener Keener Oil & Gas Co. Oil & Gas, named after the producing sand in that Though most people think of the oil and gas part of Pennsylvania, was born. industry as originating in Oklahoma or Texas, Bartlett’s grandfather followed the oil boom all

The team at Contin- ental Resources reviews seismic data. . c n I es c r u o es R al t en n i t n Co f o y es t r u o c o t o Ph 05545 064-080_Sec.4:Layout 1 9/19/07 2:02 AM Page 72

the way to Tulsa, where he arrived pete with people in order to make just in time for Cushing Field to a deal come together.” be discovered. He credits the independents Keener made its name early with with having the vision and drive to waterflooding, with which the com- take risks to make the oil and gas pany began experimenting in the industry what it is in Oklahoma. late 1940s. The company became “The independents in Okla- very successful using its waterflood homa are the ones that spend the technique, though its methods were most money, and have the capabil- controversial among the oil and gas ity and seem to have the most community, which thought the vision and the most risk-taking technique would destroy the well. desire to look for new sources of In the mid-1960s, Keener turned oil and gas,” he says. “The inde- its focus to Seminole County, an pendents seem to have more toler- old oil area that produced from Dewey Bartlett Jr., President ance for risk, and they are usually the first Wilcox sand. It was there of Keener Oil & Gas much more hands-on in a situa- that Keener discovered the second Photo courtesy of Keener Oil & Gas Co. tion than the large major compa- Wilcox formation with the Lena Jones No. 1 well, nies. The large major companies are basically which is still producing. gone from the domestic onshore of the U.S.” Dewey Bartlett became CEO in 1987. He con- Like every company in the industry, one of tinues to focus in Seminole County, as well as in Keener’s biggest challenges is to keep qualified Noble and Cimarron counties. The company people on staff. focuses on drilling for oil because he says most of “Competition is fierce,” Bartlett says. “The the companies in Oklahoma are focusing on gas. industry has gone through two serious recessions “There’s not much competition for oil deals,” in the past three decades that really devastated Bartlett says. “If we have an idea we want to pur- the real muscle and fiber of the industry. As a sue, we like to get all of it and not have to com- consequence, we lost at least a full generation of

Russian Electric Dynamo of Arutunoff A young Russian engineer named Armais Arutunoff developed an innovative, submersible electric motor and pump that held great promise for use in the petroleum industry. The budding entrepreneur formed the Russian Electric Dynamo of Arutunoff company, and later shortened the name to REDA. When the Communist revolution took place in Russia in 1917, he fled his homeland to seek opportunity in the U.S., convinced the technology was viable. Frank Phillips became interested and convinced Arutunoff to relocate to Bartlesville, where he formed the Bart Manufacturing Co. in 1923. His electric submersible pumping units soon found great success in the El Dorado, Kansas, oil field where highly corrosive water was produced along with oil that damaged tubes and pumps. Arutunoff’s equipment overcame both problems. The company was renamed the REDA Pump Co. in 1930, and Arutunoff remained in charge of the firm until 1969 when he sold it to TRW Inc. The company continued to thrive, manufacturing submersible pumps for the petroleum industry and a range of pumps for a variety of other applications. For decades, Aruntnoff was a popular figure in the Bartlesville community where he was known for his business acumen and his love of the U.S. as a land of opportunity. 1940 1943 1943 Grand River Dam Authority. The Pensacola West Edmond Field. The Giant West Underground Natural Gas Dam on the Grand River in northeastern Edmond Field was discovered thanks Storage. Oklahoma Natural Gas Oklahoma was completed in March. The to the persistence of Ace Gutowsky. Co. pioneered the storage of dam provided for electrical generation to be It was the first major stratigraphic natural gas underground and administered by the Grand River Dam Authority and created the find in Oklahoma. began operating the state’s first Grand Lake O’ the Cherokees. In later years GRDA would pur- underground natural gas storage chase natural gas to increase its electrical-generation capacity. facility at Depew.

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“We wanted it to be headquartered in Oklahoma and be a meaningful producer of both oil and gas in North America.” —Larry Nichols, Devon Chairman and Chief Executive Officer

people who had been in the business that left, stand that once the holes in the ground are never to come back. So we’re now seeing a 10- to plugged and abandoned, they’re gone forever. 15-year age deficit between experienced person- They can’t be re-opened. It is very smart for nel and people that are just now coming into the our country to do everything we can to keep industry. We’ve lost two of our very key people in those holes open and useable in an environmen- the last couple of years because of that. They tally positive way. Keeping those holes open were headhunted.” ensures that as new technologies become more Though attracting and keeping talented affordable and are created, those wellbores can employees is an issue in Oklahoma, Bartlett be used to produce and find new sources of oil believes the Oklahoma Energy Resources Board and gas.” (OERB), of which he was a founding member, is one of the best things about being Devon Energy Corp. an independent in Oklahoma. Oklahoma City-based Devon En- “We really made a sea change with ergy Corp. has far surpassed the the public with their understanding label “independent” in the tradi- of our industry,”he says.“They really tional sense. The company, formed understand the significance, and they in 1971 by current chairman and accept the oil and gas industry in chief executive Larry Nichols and Oklahoma. That’s a huge plus, where his father, has grown to become one we don’t have to worry about getting of the world’s leading independent hit in the nose all the time because oil and gas producers, with opera- we’re accepted.” tions spanning the globe. Though Despite the general notion that 88% of the company’s production Oklahoma’s basins are primarily ma- still comes from North America, the ture, he says new technology mixed company also has international with information that is developed Larry Nichols, Devon Chairman positions in Canada, Brazil, China every time a new well is drilled will and Chief Executive Officer and Azerbaijan. result in a bright future for the inde- Photo courtesy of Devon Energy Corp. Devon’s core areas in North pendent looking for oil and gas in America are the Barnett Shale in Oklahoma, despite some saying the state looks like North Texas, gas plays in East Texas, the Permian “Swiss cheese, with holes everywhere,”he says. Basin of West Texas, Wyoming, Montana, the Gulf The other aspect of the independents’ future of Mexico and Alberta. depends on Washington’s understanding of Nichols, who earned a geology degree from the independent and its role in the nation’s Princeton University and a law degree from the energy supply. University of Michigan, learned the business “It is so important for the policymakers in from his father John Nichols, who registered the Washington to understand there is a huge differ- first public drilling fund with the Securities ence between the independent oil and gas com- and Exchange Commission in 1950. From his panies and the majors,” he says. “We should not hometown of Oklahoma City, John had already be treated as Exxon. They also need to under- accomplished much as an independent in the oil 1947 1947 1948 Woodward Tornado. Offshore Drilling. A new realm of From Slavery to Freedom. Rentiesville The deadliest tornado in petroleum exploration was inau- and Tulsa native John Hope Franklin Oklahoma history, an F5 gurated by Kerr-McGee Corp., an published the first edition of his history killer, changed many lives Oklahoma City-based firm, when of the African-American experience in in an instant and proved the need for a the company completed the first America. The book became the stan- scientific system of early detection and oil and gas well drilled beyond the sight dard history of the subject and to date warning. Today, Oklahoma is the center of land. has sold more than six million copies. for severe storm research. Oklahoma: Where Energy Reigns 73 05545 064-080_Sec.4:Layout 1 9/19/07 2:02 AM Page 74

National Stripper Well Association

Oklahoma oilmen have been in the forefront in founding numerous organizations important to all phases of the petroleum industry. One such organization is the National Stripper Well Association, organized in 1934 during a meeting of interested parties in Tulsa. The group’s purpose was to serve as an advocate with state and federal officials on behalf of owners of marginally producing wells and the related royalty owners. The organization has served an ever-larger clientele as the oil producing regions of the U.S. have matured. By 2007, about 80% of all domestic wells in the U.S. were classified as strippers, and they provided about 20% of domestic production of oil and gas. Oklahoma oilmen have been active in the leadership of this organization throughout the years. Oklahoman Dewey F. Bartlett Jr. of Tulsa was serving as its president in 2007, the state’s centennial year.

fields of Oklahoma, Texas and New Mexico, so it of multibillion-dollar deals that began with the was a natural decision for the father and son to $2.6 billion-PennzEnergy deal in 1999 and remain in Oklahoma City to establish Devon. ended with the $5.3-billion Ocean Energy Nichols says Devon came through the bust of the merger in 2003. The Ocean deal established 1980s without having to lay off a single employee. Devon as the largest U.S.-based independent. The reason was a timely asset sale that allowed “We wanted it to be headquartered in Okla- the company to pay off all of its debt just before homa and be a meaningful producer of both oil the massive downturn battered the industry. and gas in North America,”Nichols says.“We tried “We had observed a lot of the euphoria and the through acquisitions to build an asset base backed excesses of the 1980s and really got the sense that up by the expertise of qualified people that would everything was getting much too exaggerated,” give us the opportunity to grow entirely with the he says. “We bought some properties in western drillbit once the acquisition game became fairly Oklahoma in the Deep Anadarko Basin for about mature, as we believe it is now.” $180 per acre, and we ended up selling all of it Since going public, the company has estab- for well over $2,000 per acre, plus a 50% back-in lished industry-leading positions in the deepwa- after pay-out on each well. We used all those ter Gulf of Mexico, the Barnett Shale and proceeds to pay off our debt, so when the bust Alberta. came, we were in great financial condition In the deepwater Gulf, Devon holds the sec- because we had zero debt.” ond-largest number of acreage blocks in the Devon’s decision to sell out of the Deep Lower Tertiary trend. Devon and its partners Anadarko Basin just happened to coincide with have drilled to total depths of more than six an article in Forbes projecting that major compa- miles and have made four discoveries in the nies were being made in that very basin. Nichols Lower Tertiary, which is estimated could contain says his proposal to sell the asset was not popular as much as 15 billion barrels of oil equivalent, at the time. making it the largest North American discovery “It was really the only somewhat difficult board since Prudhoe Bay. meeting we had, because there were several of our The company established its leading position directors who had flown down from New York and in the Barnett Shale in early 2002 through the the first thing on the agenda was selling everything purchase of Mitchell Energy & Development we had in the basin,”he says. “They eventually got Co., a company that had finally cracked the code the wisdom of the plan; we sold the properties, paid to the Barnett Shale, an emerging play that had off the debt and lived happily ever after.” drawn skepticism from many in the industry. As Devon went public in 1988 and made its goal it turned out, the Mitchell acquisition was a to build up a significant company through game-changing decision that made Devon the acquisitions. It has since merged with or ac- leader in what would become the hottest play in quired 27 energy companies, including a series North America.

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“We saw how Mitchell Energy was experi- Devon, an Oklahoma-based menting around with technology that allowed company, is active in offshore them to begin completing wells at economic drilling, often with partners such rates out of this very dark shale,” Nichols says. as ConocoPhillips. “We speculated that we could improve upon that technology and most importantly combine it with horizontal drilling and take it out of the relatively small area that Mitchell had begun exploring in, and expand that into a much larger area, which in fact, we’ve done. We’re now producing more than 700 million cubic feet of gas per day in the Barnett and think we’ll be producing about one billion cubic feet of gas per day by the end of 2009.” Devon is also the only U.S. independent with active operations in the Canadian oil- sands, a position it holds because of its acquisition of Calgary’s Anderson Exploration. That purchase helped Devon strengthen its position in Alberta and helped it eventually become the largest U.S. independent in Canada. Devon’s strength is in its entrepreneurial nature, which has allowed it to build the company into one with enough size and scope to have exposure to the plays with the highest potential for undeveloped reserves in North America. Being an independent has helped Devon become a leader in those areas, Nichols says. “As the majors have concentrated higher and higher percentages of their assets internationally, that continues to open up the door for independents of all sizes to move into areas and use new and evolving technology in old areas to create oil and gas reserves for our country,” he says. Though Devon’s production is global today, its roots remain in Oklahoma, and Nichols believes Oklahoma City is an exciting place. “The development of the downtown area and Bricktown over the last decade has really been wonderful for this city and this state. It has allowed us to attract quality employees,” he says. Because the country will continue to demand oil and gas, meeting that need will mean a busy and vibrant future for the Oklahoma independ- . p r

ent, Nichols says. o C y g

“The outlook is incredibly robust because r e n of the country’s need for oil and gas,” he says. E n o v

“Our industry has a tremendous amount of e D f work to do to deliver those sources of energy, o y s e t and it’s going to take a lot of people to do that. r u o c

It is both a challenge and an opportunity for o t o h

the young people working with Devon.” I P 05545 064-080_Sec.4:Layout19/19/072:03AMPage76

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Partners in Oil and Gas Production

By Gary Clouser, Contributing Editor, Oil and Gas Investor

By owning royalty interests in thousands of producing wells, many Oklahomans benefit directly from the state’s largest industry.

ore Oklahomans benefit from the The average price for gas was $6.09 per thousand energy industry than you might cubic feet, meaning the value of gas produced think. About one of every 10 was about $9.7 billion. Oil production totaled adultsMin the Sooner State receives royalty checks about 62 million barrels at an average price of from oil or natural gas production, according to $62.99, or a total value of about $3.9 billion. the Oklahoma Independent Petroleum Asso- Together that’s about $13.6 billion. Figuring ciation. Although no exact statistic is kept on the royalty owners receive about 18.75% of that number of royalty owners in the state and the total value, an estimate of royalty payments for the amount paid in royalties, year totaled $2.55 billion. there are educated estimates. Royalty Defined If you consider the state Royalty recipients in Ok- of Oklahoma is itself a roy- lahoma receive an average of The term “royalty” refers to the ownership alty owner, whose interests 3/16ths, or 18.75%, of the rights of a mineral property, such as a are managed by the Okla- value of production, says producing oil or natural gas lease. The homa Land Commision, Jerry Simmons, executive owner is entitled to a share of the money then, in fact, every resident director of the Tulsa-based made from oil or gas production from the of Oklahoma is a royalty National Association of Roy- property, which has been leased to an oil owner, says David Smith, a alty Owners (NARO), which and gas company to drill. The royalty former Oklahoma state describes itself as “the only amount is usually expressed as a fraction representative and NARO national organization rep- of the total amount of hydrocarbons board member. As the U.S. resenting, solely and with- produced from the leased premises. That government is a minerals out compromise, oil and gas percentage is negotiable, but generally it is owner and receives royalty royalty owners’ interests.” at least 1/8 interest, or 12.5% of the well’s payments, in reality, every The Oklahoma chapter production proceeds. single citizen of this coun- alone has more than 1,000 try is a royalty owner, he members representing thou- adds. Based in Tulsa, Smith sands of families, institutions, trusts and royalty also is the vice president of gas management companies, he says. for Farmers National Co., the nation’s largest The Oklahoma Tax Commission says that in independent oil and gas management, farm and 2006, natural gas production in the state totaled ranch management, real estate and agricultural 1.62 billion Mcf (or thousands of cubic feet). services company.

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“We work with oil and gas companies, but realize the interest of royalty owners will from time to time not be the same as the operating companies or pipelines.” — Jerry Simmons, executive director, National Association of Royalty Owners

NARO’s Start Power in Numbers Royalty advocates have been fighting The premise of NARO is simple: for the common good of royalty power in numbers. An individual owners since NARO was founded in landowner often lacks the political 1980, when angry royalty owners clout, legal acumen and resources to from across the country gathered ensure fairness, but collectively the in Oklahoma City to fight the oner- legions of landowners with royalty ous federal windfall profits tax on claims possess enormous political oil producers. influence and resources to work for “NARO was the first and is still their shared concerns and interests, the only national association solely Smith says. representing the interests of the Julie Kruger, a third-generation nation’s mineral and royalty own- Jerry Simmons, Executive Director, royalty owner, is another long-time ers. What began as a ‘voice in the National Association of Oklahoma-based advocate of royalty wilderness’ for a largely ignored Royalty Owners interests. She praises NARO as being segment of the domestic oil and Photo courtesy of NARO “without question the strongest and gas industry, became the ‘voice that counts’ as most effective advocate for royalty owners at both the mineral owners are the landlords of the the national and state levels.” industry,” Smith says. She leads a delegation of royalty owners to

Interstate Oil and Gas Compact Commission

Although E. W. Marland had lost his oil company at the onset of the Great Depression, he was not ready to quit serving his state and the petroleum industry. After serving a term as a member of the U.S. House of Representatives, Marland successfully ran for election as governor of Oklahoma. Marland knew conditions in the petroleum industry were chaotic. While legislation and Corporation Commission orders had been promulgated in various oil-producing states, serious steps needed to be taken to foster conservation of oil and gas and stabilize prices. With these goals in mind, Governor-elect Marland held a conference in his home December 3, 1934, to draft plans to create the Interstate Oil Compact Commission. Representatives from 12 states took part in the conference. February 16, 1935, the agreement creating the commission was approved and ratified in the same year by the legislatures of Oklahoma, Texas, New Mexico, Colorado, Illinois and Kansas. Headquartered in Oklahoma City, the organization’s mission through the decades has been to “promote the conservation and efficient recovery of domestic oil and natural gas resources, while protecting health, safety and the environment.” By 2007, membership had grown to include 38 states, seven Associate State members and seven International Affiliates. 1949 1950-1953 Television. The first regularly scheduled television broadcasts U.S. armed forces enter the Korean Conflict on in Oklahoma started at WKY-TV, providing a new technology behalf of the United Nations to counter Communist that would revolutionize entertainment, advertising, news state North Korea’s invasion of South Korea. The and weather reporting, and a sense of community. war ended in a negotiated truce with a demilitarized zone established along the original border between the two countries.

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Washington, D.C., about once a year to visit with legislators. A member of NARO since the late 1980s, Kruger serves on its board of directors and was the Oklahoma NARO president from 2004-2005. She is the chair of the National Legislative Council of NARO, representing royalty owners’ interests in Washington, D.C. She also serves on the Oklahoma Energy Resources Board (OERB) and is its royalty owner representative. Kruger manages oil and gas properties for National Production Corp., JMW LLC and the Trust of Raleigh W. Shade in Tulsa. “Royalty owners live in all 50 states and as such could, and should, have the greatest influence of any segment of the oil and gas business. Think of the effect a bunch of mom-and-pop interest owners could have on Congress as opposed to the Big Oil, fat-cat image that is currently portrayed in Washington,” Kruger says. Having worked for oil and gas companies for a number of years, as well as being in the mineral and royalty business, she can see the producer side of the business and the royalty/ mineral owner side. “The mineral owner owns the rights for the producer to come in and drill. We are lucky to live in a country where property rights are owned by individuals, and this extends to mineral ownership,” she says. “Because of this relationship, producers and royalty owners have to work together. It is a symbiotic relationship…it can and should be a mutually beneficial relationship for both.” Royalty owners take great pride in the Oklahoma landscape and enjoy being good stewards. “Being able to help landowners restore their land shows a great effort to work in partnership with surface owners to treat the land with respect,” she says. “Education is also a worthy initiative, and teaching children as well as adults and legislators Georgia about the oil and gas business is a welcome and

necessary opportunity. Many of us on OERB Lowell dream of the day when there is a nationwide by

program like OERB,” Kruger says. Photo 1950 1950 1953 First Public Drilling Fund. John W. Nichols Desegregation of Higher Education. Following The Golden Driller. of Oklahoma City with three partners four years of legal attempts to enroll African- A 76-foot statue called The formed Blackwood and Nichols, which put American students Ada Lois Sipuel and George Golden Driller was erected for together the first public oil and gas-drilling W. McLaurin in the University of Oklahoma, the International Petroleum fund to be registered with the Securities the U.S. Supreme Court ruled segregation at Exposition in Tulsa. and Exchange Commission. he graduate level in higher education was unconstitutional. Oklahoma: Where Energy Reigns 79 05545 064-080_Sec.4:Layout 1 9/19/07 2:03 AM Page 80

“It has been my pleasure to know thousands of royalty owners and hundreds of producers. I have witnessed the ever-changing landscape as young men and women bring their ambition to the oil patch and learn to respect the important natural resources they supply to our state and to our country.” —Rick Chapman, President of the American Royalty Council

When the OERB was founded in 1993, 2005, and as NARO national chairman from NARO’s founder, Jim Stafford, wanted royalty 1994-1996. Additionally, he was the executive owners to be involved because he wanted to be director for the Oklahoma Commission on part of a program that was going to do signifi- Marginally Producing Oil and Gas Wells from cant things for the state. Stafford fought for roy- 1996-2000. alty owners to have the same stature and clout as “It has been my pleasure to know thousands of the producers. royalty owners and hundreds of producers. I have “The royalty owner is the first witnessed the ever-changing land- to make a deal and the last to scape as young men and women bring receive a check,” says Rick Chap- their ambition to the oil patch and man, president of the American learn to respect the important natural Royalty Council (ARC), a Norman, resources they supply to our state and Oklahoma-based organization. to our country,” Chapman says. Chapman describes ARC, which “Royalty owners have been around was founded in March 2005, as the from the beginning and will be there 21st century voice of royalty own- until domestic production ends in ers. ARC differs from NARO in Oklahoma.” that it represents royalty owners Oklahoma’s royalty owners have and energy professionals, and been partners to thousands of wells. hopes to create best business Chapman says maximization of practices through dialogue and Jim Stafford, NARO’s Founder Oklahoma’s great legacy of oil and education. Photo courtesy of Sandra Stafford gas takes outspoken support of the “ARC sustains the efforts of many partnership that exists between county, state and regional royalty owners groups royalty owner and producer. that met for education and support as the petrole- “Many famous Oklahoma oil and gas compa- um industry grew in the state,”he says. nies got their start buying leases and staking Chapman served as NARO CEO from 2000- their claims to history,” he says. I

Fast Facts

I National Association of Royalty Owners (NARO), based in Tulsa, was founded in 1980.

I Royalty owners in Oklahoma receive an average 18.75% of the value of oil and natural gas produced.

I One in about 10 Oklahoma adults receives a royalty payment.

I Oklahoma royalty owners in 2006 received almost $2 billion.

Visit www.naro-us.org for more information about NARO, and www.americanroyaltycouncil.com for more information about the American Royalty Council.

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OKLAHOMA Where Energy Reigns

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Oklahomans Serve Up Technology

By Gary Clouser, Contributing Editor, Oil and Gas Investor

Oklahoma’s oilfield service companies and drilling contractors contribute much to the energy industry’s technical achievements.

klahoma-based oilfield service com- Helmerich & Payne’s panies and drillers have advanced FlexRigs Propel Growth the technology of the oil and gas Helmerich & Payne Inc. is the successor to a industryO through the years, as well as enhancing business organized in 1920. Today, contract the economy and culture of the state for nearly drilling accounts for almost all its operating a century. revenues, making it one of the major land and The stories of four companies—Helmerich & offshore platform-drilling contractors in the Payne Inc., Halliburton Co., Unit Corp. and Genie world. Its market capitalization is more than Well Service—illustrate their technical prowess $3.3 billion. The company owns more than and help tell the industry’s colorful history. 140 U.S. land rigs, nine platform rigs in the Tulsa’s Helmerich & Payne, which celebrated Gulf of Mexico and 27 international rigs, and is its 85th anniversary in 2005, is believed to be the building more. oldest contract drilling company in the U.S. An Walter Hugo Helmerich, a World War I pilot, internationally-known service giant, Houston- and William Thomas Payne, a microbiologist, based Halliburton has its roots in Duncan founded H&P. Helmerich became involved in and retains a strong presence in the state. Unit, the oil business after his marriage to Cadijah Col- based in Tulsa, is one of the state’s fastest-grow- cord, daughter of Charles Colcord, an Oklahoma ing companies, with major divisions in contract oil pioneer. Helmerich quickly became fascinated drilling as well as exploration and production. by the excitement of wildcat drilling. Genie Well Service is an independently owned, The company has about 6,000 employees, private company in Tulsa that has thrived despite of which about 10% work in Oklahoma. The the ups and downs of the industry during its size of its Oklahoma payroll is about $50 more than 26-year history. million annually. 1953 1954 Turner Turnpike. After World War II, business leaders Natural Gas Regulation. U.S. Supreme envisioned a network of high-speed, limited access highways Court rules Federal Power Commission connecting the industrial and trade centers of the country. must fix wellhead price of natural gas The state of Oklahoma, unwilling to wait for federal funding, sold in interstate commerce. passed a bond issue to build a ribbon of concrete from Tulsa to Oklahoma City. The bonds were to be paid through tolls.

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The early 1980s saw a drilling boom focused In 2005, soon after completion of the company’s in large part on Oklahoma’s deep Anadarko 50th FlexRig, Alan Orr, H&P’s executive vice Basin. Red Holley, retired drilling superintendent president for engineering and development, with more than 40 years at the company, recalls received the International Association of Drilling when H&P had about 30 rigs, or close to 70% of Contractors’ Contractor of the Year award. its U.S. land fleet, focused on deep drilling in Walter H. Helmerich III, son of the co- Oklahoma, with many wells targeting depths of founder, remains chairman of the company. He nearly four miles. joined the company in 1950 and became presi- The company is best known for its rigorous rig dent in 1960. He is also the sole trustee of the construction campaign, spending in the past 10 The Helmerich Foundation, created in 1965, years more than $2 billion. Helmerich & Payne which contributes annually to numerous civic, has embarked on the most interesting develop- cultural, health and education organizations in ment in land drilling technology since the 1980s, the Tulsa area. The Foundation has also made which was its design and construction of a new significant gifts to OU and OSU. generation of land rigs known as FlexRigs. Walter’s son, Hans, joined the company in 1981 “FlexRigs are efficient, state- and is president and CEO. of-the-art land rigs which allow “Although my granddad, Walt an exploration and production Helmerich, drilled the company’s company (H&P’s customer) to first well in Texas in 1920, he was complete a drilling program in a determined early on to establish shorter period of time. Since cus- Helmerich & Payne’s headquarters tomers pay for drilling rigs and in Oklahoma and to call Tulsa his other related services on a daily home. For over eight decades, the basis, spending fewer days on a company and its people have been well can deliver significant total closely involved with the Tulsan well cost savings, even while pay- and Oklahoman communities. ing a high daily premium for a “During the early years Tulsa FlexRig,” says Hans Helmerich, came to be known as ‘The Oil company president, CEO and a Capital of the World,’ but most grandson of the founder. companies in the industry that had “In addition…FlexRigs have Hans Helmerich, President and established headquarters or signif- contributed to the industry in CEO of Helmerich & Payne Inc. icant presence here eventually fled other ways. They provide a much- Photo by Lowell Georgia to other states. Helmerich & Payne enhanced and safer workplace for drilling crews, and its people are glad to continue to be part of minimize impact to the environment in a variety this community and we look forward to further of ways and allow greater access to underground contributing to our city and our state.” reservoirs through extended-reach capabilities,” he said. Halliburton’s Oklahoma Heritage Increasing demand for FlexRigs has allowed the Halliburton, the world’s second-largest oilfield company’s fleet to rapidly expand and its market service company with 2006 revenues of $13 value to more than double in the past three years.Six billion and more than 11,000 patents to its name, FlexRigs were built by 1998,another 12 by 2001,and spent its formative years in Oklahoma. a third-generation of 32 were built by 2004. Although it is based in Houston with new plans In 2006 and 2007, the company’s capital for a “dual headquarters” in Dubai, it retains a spending will total close to $1.3 billion, mostly strong presence in the Sooner State, employing attributable to building 75 additional FlexRigs, all more than 2,800 people in nine different of which are sponsored by customers that have Oklahoma cities. Its global workforce is 45,000. already signed long-term operating commitments. In 2006, gross wages paid by Halliburton in the “In the cyclical land rig market, H&P’s state totaled $181.9 million. FlexRigs have always been in high demand and Halliburton’s 2006 annual stockholders’ meet- have earned a premium of 25% or more relative ing was held in Duncan, where the company to conventional rigs,” says Geoff Jones of Baron was founded. This remains home to one of Capital, a large H&P shareholder. Halliburton’s manufacturing centers as well as

82 Oklahoma: Where Energy Reigns 05545 081-088_Sec.5:Layout 1 9/21/07 9:16 PM Page 83 a a field camp, technology center, energy institute i g r o and the company’s employee transaction center. e In 2006 and 2007, G l l Employee loyalty says a lot about a company. e Tulsa’s Helmerich w o L

Halliburton employs about 2,600 in Duncan. y & Payne will build b o t 75 new FlexRigs, a

Of that total, 690 have more than 25 years of o h service with the company, and 21 have more P new generation of than 40 years. Two employees have more than land drilling rigs. 50 years of Duncan-based service. The company traces its roots to 1919 when Erle P. Halliburton created a business named New Method Oil Well Cementing Co. in Wichita Falls, Texas. Later that year, he and his wife, Vida, moved to Wilson, Oklahoma, where a new crop of wells was springing up. Two years later, they moved their family and business—a fleet of six well cementing units—to Duncan. Also in 1921, the company received a patent for its method of excluding water from oil wells. That same year, Halliburton invented the revolutionary cement jet mix that eliminated hand mixing of cement, and the measuring line, a tool used to guarantee cementing accuracy. On July 1, 1924, the company incorporated as the Halliburton Oil Well Cementing Co. Its first office was a one-room, single-story wooden “Halliburton has had a mutually beneficial building across from Erle Halliburton’s home. relationship with city and state government, In 1949, in Velma, Halliburton performed its educational institutions and the general public in first hydraulic fracturing job, using gasoline, Oklahoma for 86 years,” says Joe Sandy, vice napalm, crude oil, a breaking agent and 150 president of technology. pounds of sand. In 1968, it reached the milestone Based in Duncan, he has spent about 20 of his of performing its 500,000th frac job. Today, frac- 26 years with the company based in that city. He turing is one the main technologies that has began his career as a chemist in 1981 and has enabled operators to successfully complete thou- served several roles. sands of gas wells across the U.S. “As the outlook for hydrocarbon production remains positive for Oklahoma, Halliburton will remain active in servicing the needs of oil and gas customers working throughout the state,” Sandy says. “Oklahomans are known for showing their philanthropic spirit and desire to help others, and we, at Halliburton, also believe it is important to give back the communities where our employees live and work. Nowhere is this better demonstrated than in Duncan through the many community outreach projects,” he says. “We look forward to our continued rela- Photo courtesy of Halliburton tionship with the University of Halliburton was founded in Duncan and maintains manufacturing and technology Oklahoma, Oklahoma State Uni- facilities there. versity, the University of Tulsa and

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All Oklahoma companies employ state-of-the-art technology to find and produce oil and gas.

Cameron University, to name just a few. In order through its subsidiaries in contract drilling of to meet the increasing demand for personnel re- onshore oil and gas wells, exploration of oil and gas, sources around the world, Halliburton is focused and gathering and processing of gas. Its operations on leveraging its highly skilled, global workforce are principally located in the Mid-continent region, through proactive recruiting and accelerating including the Anadarko, Arkoma, Permian, Rocky employee development. These universities are Mountain and Gulf Coast basins. It has regional critical to our future success in attracting and offices in Woodward and Oklahoma City, as well as retaining graduates with technical competencies.” in Texas, Colorado and Wyoming. A recent donation of more than $100,000 from King Kirchner and Don Bodard founded the the Halliburton Foundation made Cameron company in 1963. They started with three drilling University-Duncan a wireless campus with multi- rigs, two office employees and 13 rig hands. media access in every classroom. In 1979, Unit added exploration and production In 2006, Halliburton donated about $350,000 to to operations and had its initial public offering. In various charitable and civic organizations in 1996, it entered the midstream sector by forming Oklahoma, including the Boy Scouts of America, Superior Pipeline Co., initially owning 40% of that United Way and the Duncan Future Farmers of business and purchasing the remainder in 2004. America. In addition, through its Giving Choices The company began trading on the New York program for 2007, Halliburton employees have Stock Exchange in 1986 under the ticker symbol pledged more than $225,000 to area charities. UNT. In the past 10 years, Unit’s stock price has increased about 480%. Total company revenues Unit Corp. for 2006 were $1.16 billion. One of Oklahoma’s fastest-growing companies is Unit’s success has been nationally recognized. Tulsa-based Unit Corp., a diversified firm engaged In 2006, Fortune magazine listed it as the 37th 1954 1955 Brown v. Topeka Board of Education. OIPA Founded. The Oklahoma Independent In ruling on this case, The U.S. Supreme Petroleum Association was established and it now Court made racial segregation in public is the “state’s largest oil and gas advocacy group, schools illegal. representing more than 1,600 member companies in the crude oil and natural gas exploration/ production industry or affiliated businesses.”

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fastest-growing company in the payroll for the first quarter of U.S., and Business Week ranked it 2007 was about $28 million, or 43rd in its 100 Companies To an annualized rate of more than Watch List. Co-founder Kirchner $100 million. was inducted into the University “I chose my home state of of Tulsa’s College of Business Ad- Oklahoma because I knew that ministration Hall of Fame in it would be much easier to start 2006. He was also inducted into a company and make it grow the Oklahoma Heritage Associa- in this state over any other,” tion’s Oklahoma Hall of Fame. Kirchner says. “Oklahoma’s oil Unit Drilling Co., now 44 and gas customers, the Corpor- years old, is the oldest division ation Commission, the state of the company. It has grown to and local governments and the include 119 rigs, 70 of which are banks are all approachable, in Oklahoma. inviting and in favor of getting The E&P segment, Unit Petro- King Kirchner, co-founder wells drilled here. Unit has leum Corp, has grown from of Unit Corp. branched out into other states, about 3 billion cubic feet equiv- Photo courtesy of Unit Corp. but Oklahoma is still our core alent of gas reserves in 1979 to area of operations.” 476 Bcfe of proved reserves at year-end 2006. Kirchner retired as CEO in June 2001 and as About 70% of its reserves are in Oklahoma. board chairman in 2003 but remains on the In all, the company employs 2,806 people, board. The current board chairman, John Nikkel, of which 1,334 are in Oklahoma. Its Oklahoma retired as CEO in April 2005. Larry Pinkston is 1956 1958 1958 Interstate Highway System. President The Postle Field Discovered in Texas County Urban Renewal. After an unprecedented building Dwight Eisenhower signed the Federal- in Oklahoma’s Panhandle. As of early 2007, boom from 1898 to 1930, Oklahoma City and Aid Highway Act into law. The nation- the field had produced 120 million barrels of Tulsa experienced 30 years of inner city decay wide highway system was originally oil. Its production has increased during the prompted by depression, war and suburban flight. built to ensure troop mobility in response past 10 years because of an extensive secondary The new federal program called Urban Renewal to the Cold War, but it also contributed to recovery effort involving injection of carbon was brought to the state to “prime the pump” of America’s emerging “highway culture.” dioxide into producing formations. redevelopment in both cities’ downtown areas. Oklahoma: Where Energy Reigns 85 05545 081-088_Sec.5:Layout 1 9/19/07 2:08 AM Page 86

“I chose my home state of Oklahoma because I knew it would be much easier to start a company and make it grow in this state over any other.” — King Kirchner, co-founder, retired CEO and board member, Unit Corp.

the current CEO and company president. Bodard, Beyond that, however, Stovall is well known who co-founded the company with King, died in for serving his industry. He is chairman of the September 1997. Oklahoma Independent Petroleum Association’s safety committee and serves on the association’s Genie Well Service board of directors and legislative committee. Genie Well Service is a land-based service com- He is the immediate past president of the pany that provides mobile rigs and personnel Association of Energy Services Cos. and was to perform repairs and other services, including chairman of the Oklahoma chapter from 1987 well plugging. to 1992. It was founded in early 1981 by Kenneth Genie Well Service won AESC’s first place Valliquette, Corbett Stovall and his son, Michael gold safety award for mid-sized companies Stovall, as a one-rig well servicing contractor in 2004. with a yard in Crescent, Oklahoma. Today, the Oil service companies are playing an increas- independently owned company ingly important role as more has between 50 and 60 employ- exploration and production ees and an annual payroll of companies are outsourcing, or about $2 million. contracting, their drilling and Michael Stovall is president and related technical activities, CEO, and through his leadership instead of having such skilled role in various trade associations, personnel on their staffs, Stovall is a spokesman and advocate for says. the industry. Another major change during The company focused its early the past three decades is the efforts on providing services to reduction in dry holes, or wells smaller independent producers. that were drilled but never pro- Today, it has grown to have eight duced marketable volumes of oil rigs, with a number of ancillary or natural gas. services provided, such as oilfield “The exploration side of the cementing, roustabouting and Michael Stovall, President and business has become much more trucking. Genie serves the com- CEO of Genie Well Service efficient,” Stovall says. pletion, workover, well servicing Photo courtesy of Genie Well Service “It used to be a rule of thumb and plugging needs of a variety of that about one of three drilled customers ranging from major oil companies to wells produced. Now the success rate is above mom-and-pop producers. 60% and on the rise because of huge leaps in Genie survived the bust of the mid-1980s seismic and computer mapping,” he says. by taking lemons and making lemonade. In the “Service companies have much better methods mid-1980s, it determined many of its customers of drilling and efficient ways to complete and needed to begin plugging and abandoning some stimulate wells, and there is a smaller gap in the of their wells. This led to the formation of a length of time from drilling to production.” plugging and abandonment/casing pulling Plus, in the U.S. and in Oklahoma specifically, operation, and Genie adopted some new tech- there has been a huge shift in the intended pur- niques to make the plugging process more pose of the well. efficient, Stovall says. “It used to be that the objective of most wells Since then, Genie has plugged several thousand was crude oil, as about 75% to 80% of the wells wells throughout Oklahoma and parts of Arkansas drilled were in hopes of producing oil. Today, and Texas. Its plugging operations are one of 75% to 80% of the wells drilled are for natural the largest in Oklahoma. gas,” he says. I

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Photo courtesy of Chesapeake Energy Corp. 05545 081-088_Sec.5:Layout 1 9/19/07 2:08 AM Page 88

Petunia No. 1

In 1936, when the Oklahoma City Council granted permission to drill for oil in neighborhoods on the northeast side of town, they did not include the grounds of the state Capitol. Governor E.W. Marland, an experienced oilman, defied the ban and leased state land around the Capitol for drilling. When city police threatened to shut down operations, Marland called out the National Guard. One of the wells drilled near the south steps of the Capitol displaced a flowerbed of petunias. That well, dubbed Petunia No. 1, became a prolific producer. By 1973, the wells on the Capitol grounds would produce more than 8 million barrels of oil.

Photo courtesy of Oklahoma Energy Resources Board

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OKLAHOMA Where Energy Reigns

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Oil and Gas Drive Oklahoma’s Economy

By Kelly Gilleland, Contributing Editor, Oil and Gas Investor

Exploration and production activity is still the largest contributor to Oklahoma’s gross state product, providing jobs to about 60,000 Oklahomans.

espite its existence for more than a Drilling activity in Oklahoma has gone through century, Oklahoma’s oil and gas three major cycles of expansion and contraction industry continues to be the largest during the past century. The most recent cycle, contributorD to the gross state product—delivering according to the OSU study, stretched from the more than $23 billion in output at last count. mid-1970s to the mid-1980s and culminated Through all the boom-and-bust cycles, the oil with an all-time peak in drilling activity of and gas sector has consistently played a major more than 12,000 well completions in 1982. role in defining the state, its people and their Following the peak, total completions declined collective heritage. rapidly to 1,264 in 1999, the lowest number of What’s more, Oklahoma’s significant oil and completions since the World War II era. gas production affects not only the state’s economy, However, the recent surge in energy prices has but also that of the entire country. The Sooner again stimulated drilling activity in Oklahoma. State ranks fifth in crude oil production for the Between 2000 and 2005, well completions have nation, just behind Louisiana; and is second only been on an upswing, reaching 2,369 in 2005, to Texas in production of natural gas. according to the study. Oklahoma produces an estimated 3.3% of At press time, there were about 194 rigs the crude output of the U.S. and 8.8% of the working in Oklahoma. nation’s natural gas, according to a December 2006 study by Oklahoma State University’s The Industry Evolves Center for Applied Economic Research, a unit of The oil and gas industry has made significant the Spears School of Business. The Oklahoma strides since its inception in the late 1800s. Prior Energy Resources Board (OERB) and Oklahoma to the early 1990s, oil wells typically outnum- Commission on Marginally Producing Oil and bered those of gas among total completions in Gas Wells commissioned the study. the state. However, for the past few years, natural 1960 1961 OPEC Created. The Organization of Petroleum Exporting First Human in Space. Russian Countries was formed by Venezuela, Saudi Arabia, Iran, Iraq Cosmonaut Yuri Gagarin became and Kuwait. The five founding members were later joined the first human in space, orbiting by nine other members: Qatar (1961); Indonesia (1962); the Earth for 40 minutes. Socialist Peoples Libyan Arab Jamahiriya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973–1992); Gabon (1975–1994); and Angola (2007). Oklahoma: Where Energy Reigns 89 gas wells have overtaken crude oil completions in more significant event than drilling a typical Oklahoma, mirroring a trend occurring in most shallow well, according to the study. Greater other petroleum-producing states. The industry capital investment is required, and deep wells also uses more high-tech methods, posts higher tend to produce significantly greater average success rates and the percentage of dry holes quantities of gas,both of which lead to more sig- continues to decline. nificant economic impacts. The OSU study identified another trend in state drilling activity— Oklahoma Oil and Gas Industry Employment and Income (2005) the steady shift toward Total Avg. recovering deeper reserves Employ- % Labor % Labor ment Share Income Share Income in Oklahoma’s natural gas fields. Oklahoma has Employment Type: long played an impor- Wage and Salary 33,709 55.6% $2,826,785,000 45.4% $83,858 tant role in the develop- Self Employed 26,907 44.4% 3,395,342,000 54.6% 126,188

ment of deep drilling. Total by Type 60,616 100.0% $6,222,127,000 100.0% $102,648 The first U.S. well drilled below 30,000 feet for Oil and Gas Activity: commercial production Production 56,142 92.6% $5,864,706,625 94.3% $104,461 Drilling 4,474 7.4% 357,420,375 5.7% 79,893 purposes was completed in Beckham County in Total by Activity 60,616 100.0% $6,222,127,000 100.0% $102,648 1972. From an economic- impact point of view, Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Oklahoma State Econometric Model drilling a deep well is a

Barrel of Oil Equivalent Production in 2005

WASHINGTON N O O T W TA A W A TA CIMARRON HARPER LFALF KAY CRAIG A TEXAS BEAVER WOODS GRANT A OSAGE D EL R AW OG A E WOODWARD NOBLE PAW R RE GARFIELD NEE S MAYES ELLIS MAJOR

TU LS W PAYNE A AGO C H A N ERO DAI DEWEY ER KINGFISHER CREEK K R E BLAINE LOGAN E ROGER O LINCOLN OKMULGEE MUSKOGEE MILLS K CUSTER CANADIAN LA H O O KF SEQUOYAH M U A S K S E PO E E McINTOSH CL M W TT I WASHITA EVEL A N BECKHAM T A O HASKELL CADDO O - LE AND M Mc IE CL HUGHES A I GREER KIOWA GRADY N H PITTSBURG LATIMER A LE FLORE RMO PONTOTOC Barrel of Oil Equivalent Production GARVIN N COMANCHE (1 barrel = 6 Mcf) JACKSON COAL STEPHENS MURRAY PUSHMATAHA TILLMAN no production ATOKA COTTON JOHNSTON JEFF CARTER 1 - 10,000 E McCURTAIN RS ON MARSHALL CHOCTAW 10,001 - 500,000 LOVE BRYAN 500,001 - 1,000,000 1,000,001 - 5,000,000 5,000,001 - 10,000,000 more than 10,000,000 Source: Oklahoma Geological Survey

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Oklahoma Energy Jobs From a recent study of deep drilling in Oklahoma, most wells drilled less than 10,000 feet deep cost less than $1.5 million to More than 60,000 workers are employed in the 3,100 establish- complete, while deep wells below 15,000 feet ments making up the state’s oil sector—more than 3% of the can range between $5- and $15 million. On workforce. Many are professional geoscientists with advanced average, a deep well is estimated to have an degrees or entrepreneurs who run their own exploration and economic impact six times that of a typical production companies. shallow well under 15,000 feet. Wages in the industry tend to be quite good compared with other industries and businesses. In 2005, wage and salary workers Big Impact earned an average of $83,858 per year, and self-employed workers The oil and gas sector is well known to produce more than $126,000 in compensation. among the largest economic impacts of all More than 10,000 jobs have been added in the sector since industry sectors, according to the OSU study. 2002. Forecasts for employment suggest the industry will add jobs This results from several factors, including the in 2007, adding 3,100 in the base case, and then retreat gradually high value of output produced by the industry, to a new long-run level of employment by 2010. the capital-intensive nature of production and “Students should absolutely pursue careers in this industry,” drilling, the large number of purchases made says Steve Rhines, vice president and general counsel of The by oil and gas companies from other state Samuel Roberts Noble Foundation. firms, the high average wages paid to work- Based in Ardmore, the foundation was “organized in 1945 by ers and the large stream of tax revenue gener- Lloyd Noble, a southern Oklahoma native and successful oil man” ated from severance taxes. and named to “honor his father, Samuel Roberts Noble,... who The industry reaches almost every area of established a hardware business in Ardmore a century ago,” the state, as oil and gas workers reside in every according to www.sourcewatch.com county—production of oil or gas occurred in “There are new opportunities and more challenges than ever 71 of the state’s 77 counties in 2005. before—extracting oil and gas from deeper formations, attempting Oil and gas activity has played a major role to recover production-level quantities from aging fields, and, of in the growth of Oklahoma’s biggest cities, course, the need to produce more from less,” Rhines said. Oklahoma City and Tulsa, creating energy Oklahoma City and Tulsa are among the hardest hit in the state jobs and plenty of ripple effects in other ways. when the cyclical nature of the oil industry begins to contract. Smaller towns such as Enid and McAlester However, the booms and busts should not deter students and also continue to be helped by the oil and gas other workers from pursuing a career in the industry, Roberts says. activity that emanates from them. “Oil and gas does have specific needs, like geologists, Oklahoma City’s oil industry is so key to landmen, etc.,” she says, “but many of the skills are applicable its economic make-up that the city has an to multiple industries. entire chapter of its Municipal Code devoted “The industry has endowed chairs, funded research, and to oil and gas matters. A full-time staff is created cutting-edge programs at Oklahoma State University on hand to administer the requirements of and University of Oklahoma, as well as other schools, in areas of these ordinances, many of which closely specialty and focus for them. There has been no need for the parallel those of the Oklahoma Corporation state to incentivize people to work in the industry. The companies Commission. pay well, offer great benefit packages and are very proficient on “Oklahoma City recognized the need for hiring/staffing.” oversight of an industry vital to the local Although oil and gas employment opportunities range to all economy as far back as 1930,” the city’s Web corners of the state, the majority of workers are concentrated in site explains. “The wild and wooly days of the the Tulsa and Oklahoma City areas. first Oklahoma City boom brought to the Oklahoma’s colorful and exciting past has formed the basis for forefront the need for certain controls upon continued growth and opportunity. No longer totally dependent the oil and gas drilling industry.” on its oil and gas resources for economic development, the state All oil and gas rules proclaimed by the city still treasures its strong oil ties and energy-related roots. are intended to protect the health and safety “With two of the best petroleum and geological engineering of the general public, the city says,“and, at the schools in Oklahoma, I think young people should continue to same time, not discourage the outlook of the pursue careers in this industry,” says Dennis Clowers, Oklahoma multitude of small companies who own and City director of public works. “I believe these same oil and gas operate oil and gas wells within the city.” companies will join in the alternative fuel development.” I

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Fast Facts

I More than 10,000 energy jobs have been added in the state since 2002.

I Companies employ more than 60,000 people.

I The oil and gas industry contributed $23 billion to the state’s economy in 2006.

Robin Roberts, executive vice president of the Dean A. McGee Greater Oklahoma City Chamber of Commerce, says the oil and gas industry in Oklahoma City has an estimated $3.5 billion impact, or 8.1% of the Robert S. Kerr Oklahoma City Metropolitan Statistical Area’s gross metropolitan product. Partners in “That is direct impact only,” she says. “We Public Service know the indirect impact is much bigger.” Oil-related businesses remain integral to the In 1937, two oilpatch pioneers joined state’s economy, but major cities like Tulsa and forces to create one of the most innovative Oklahoma City have learned to soften the blows companies in the history of oil and gas of periodic industry contraction by creating a exploration. Those two men were Robert S. variety of business bases. In Tulsa, nationally Kerr and Dean A. McGee, and their company prominent companies in aviation and aerospace, was Kerr-McGee. Starting as a contract telecommunications, data processing, manufac- drilling firm, Kerr-McGee was known for turing and distribution have joined the ranks of its innovative approach to diversification, major employers with large economic impact. vertical integration and offshore drilling Oklahoma City has nearly twice the em- technology. In 1947, the company was the ployment and income from oil and gas as the first to drill offshore out of sight of land in Tulsa metro area. This reflects Tulsa’s increased the Gulf of Mexico. efforts to diversify its economic base as well as The two founders made a similar impact the expanding presence of large publicly traded on their communities. Kerr served as a independent companies, primarily Chesapeake leader in the American Legion and Southern and Devon, that have chosen to keep their cor- Baptist Convention, then went into public porate headquarters in Oklahoma City. service as governor and U.S. senator. “Twenty years ago and beyond, the oil McGee, remaining in the private sector, and gas industry was much more significant directed his energies to inner-city redevelop- than it is now,”says Oklahoma City director of ment, the Oklahoma City Botanical Gardens public works, Dennis Clowers. “The price of and charities such as the Dean McGee Eye oil dropped significantly in the mid-1980s and Institute. Both made a lasting impact on had a huge impact on the economy. I am not their state and industry. suggesting it is still not a major industry. However, the whole state’s economy is much more diversified now.” I 1961 1962 1963 Berlin Wall Constructed. A dramatic Enhanced Recovery Techniques. Steam Kennedy Assassination. The assassination of symbol of the Cold War, the Berlin injection and solvent displacement are U.S. President John F. Kennedy by Lee Harvey Wall was built to stop East Germans used as enhanced recovery methods in Oswald shocked the nation. Vice President fleeing to the West. oil fields. Lyndon B. Johnson became president and announced his determination to secure passage of Kennedy’s domestic agenda.

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OKLAHOMA Where Energy Reigns

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Oklahoma Midstream and Downstream Sectors

By Jeannie Stell, Financial Editor, Oil and Gas Investor

Midstream processes tie together upstream exploration and production and downstream refining and consumers.

klahoma has a rich history in the that plant, owned by D. W. Franchot and Co., midstream sector, and those opera- liquid hydrocarbons were extracted from gas tions continue to support the state’s produced with the oil from the field. More gas economyO today. plants were built near other gas and oil fields. The term“midstream”in the oil and gas industry By 1920, more than 300 plants had been built refers to gas processing and pipeline transporta- in Oklahoma. tion systems. Gas processing plants remove con- Oklahoma’s early gas processing plants served taminants from natural gas and distill natural gas several purposes. They distilled natural gasoline, liquids from the gas stream so they can be used as a liquid, to fuel the first models of automobiles. feedstock for other processes. Pipelines move raw Natural gas was sent along pipelines to nearby oil and gas to the processing plants and, further towns for heating and lighting. Residue gas down the line, move refined products to com- fueled oilfield operations. mercial and residential consumers. The gas processing industry grew rapidly in Midstream operations tie together the up- Oklahoma and other states. By 1970, natural gas stream activities of oil and gas production and and its products made up 58% of total U.S. the downstream activities of refineries. Re- petroleum energy production. By that time, fineries process crude oil into transportation Oklahoma had processed 30 trillion cubic feet of fuels such as jet fuel, gasoline and diesel fuel. gas and produced 1.5 billion barrels of natural Storage tank farms store oil and gas until needed. gas liquids. Today, Oklahoma ranks third in U.S. gas pro- Third-ranking Gas Processing Capacity cessing capacity and is home to 56 gas-process- One of the first gas processing plants in the U.S. ing facilities that can process almost 3.5 billion was built in 1909 near the Glenn Pool Field. At cubic feet of gas per day. 1964 1965-1973 Civil Rights Act. Congress passes the Civil Vietnam War. The U.S. sent large numbers Rights Act, which outlawed discrimination of soldiers to fight in the Vietnam War. The based on race in voting and jobs. war cost more than 50,000 American lives and sharply divided the nation.

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Major Oklahoma Pipelines

Crude Oil Amoco, Arco, BP, Conoco, Duke, Farmland, Jayhawk, Koch, Mobil, Natural Gas Clearinghouse, Ozark, Plaines All American, Seaway, Shell, Sun, Texaco, Ultramar-Diamond Shamrock

Petroleum Product Citgo, Conoco, Emerald, Explorer, Phillips, Williams

Liquefied Petroleum Gases Conoco, DSE, Exxon, Koch, PDIM, Phillips, Trans Texas

Interstate Natural Gas Pipelines ANR Pipeline Co., BP, Centerpoint Energy Gas Transmission Co., Colorado Interstate Gas, El Paso Natural Gas Co., KM Interstate Gas Co., Mississippi River Transmission Corp., Natural Gas Pipeline Co. of America, Northern Natural Gas Co., Oneok Gas Transmission LLC, Oneok Gas Transportation System, Panhandle Eastern Pipeline Co., Southern Star Central Gas Pipeline Co., Transok Inc., Transwestern Pipeline Co. Oklahoma’s extensive pipeline system transports crude, gas, liquefied petroleum gas and finished products. Source: Federal Energy Regulatory Commission

Natural Gas Pipelines Oklahoma. BP views Oklahoma as a major part- As the Oklahoma oil and gas industry continued ner in oil and gas growth. Its crude storage and to grow, pipelines were needed to move oil and pipeline control center in Oklahoma is the sec- gas hydrocarbons long distances to refineries and ond-largest liquids pipeline company in the U.S. markets. Oklahoma has more than 18,000 miles BP Pipelines (North America) has capacity to of natural gas pipelines. transport more than 450 million barrel-miles of The first major oil pipeline was built by oil, refined products, natural gas liquids, carbon William C. Mellon and his family, who later dioxide and chemicals daily—about 9% of the formed Gulf Oil Corp. (now a part of Chevron U.S. liquids pipeline market. Corp.). The Mellons built an oil refinery in Port The BP Pipeline Tulsa Control Center remotely Arthur, Texas, and desperately needed good- operates more than 11,000 miles of pipeline quality oil to process, according to Daniel crossing 30 states. Much of the product moves Yergen’s book, The Prize. through the Cushing Terminal, known as the When news of the Glenn Pool discovery in “crude oil crossroads of America,” where BP Oklahoma reached them, they quickly began stores and moves some 160,000 barrels of crude construction of a 450-mile pipeline to connect oil per day. Port Arthur to Tulsa. Houston-based Plains All American Pipeline To finish as soon as possible, Mellon dis- LP is another major operator. It has 20,000 miles patched four construction crews. One started of crude oil, liquefied petroleum gas and prod- south of Tulsa, another started north of Port ucts pipelines, and 61.3 million barrels of storage Arthur, and the last two started in the middle as well as a large fleet of truck, rail and barge and worked their way north and south. transportation assets. Soon, other pipelines were built to connect “We’ve got a lot of affection for Oklahoma,”says remote oil fields to refining centers and con- Greg Armstrong, president and chief executive of sumers. In 1910, the Oklahoma Natural Gas Co. Plains All American. “I grew up there, and Plains installed the first compressor on a natural gas headquarters originally started there in 1981.” pipeline, which enabled oil companies to trans- Plains still has a strong presence in Oklahoma. port their gas and oil over greater distances. “That’s where many of our offices are today. BP and Plains All American Pipeline LP are Oklahoma is the location of our cornerstone two of the major pipeline operators in assets, including our Cushing terminal,” he says.

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Cushing is known around the world, says Armstrong, because it’s one of the largest liquid terminals and trading points for crude oil. “It’s the pricing point, if you will, for the pricing of crude oil in the world because it is also the delivery point for the Nymex futures contract,”he says. “We currently have a large expansion under way in Cushing. It’s a $50-million expansion of our terminal activities. We’re going from just over 7 million barrels of tankage up to 10.4 million barrels,” he says. The Adventure of Some of the crude will come from the Gulf Sherwood Forest Coast, and there will be tankage for some of the heavy Canadian crude that is working its way In 1942, desperate for petroleum in their battle down through the Midwest into the Cushing against Germany, British officials looked for an area. There will also be some foreign water-borne American drilling firm to search for oil in a likely crude, says Armstrong. looking area north of London in the Midlands. The prospective oil field was deep in the heart Oil And Gas Storage of legendary Sherwood Forest. Storage, usually in the form of tank farms, is a Noble Drilling Co. of Ardmore, Oklahoma, vital part of the midstream sector. Storage capac- accepted the challenge. ities and the amounts stored on a day-to-day The company’s president, Lloyd Noble, said basis help set the price of gas and oil. This was his crews would drill 100 wells, and other than true right from the beginning. expenses, would take no profit as a contribu- SemGroup LP, based in Tulsa, and one of tion to the war effort. Despite Nazi submarines, the 10 largest privately held companies in the worn out equipment and shortages of all kinds, U.S., has a strong presence in Oklahoma and the crews were completing three wells a week will expand. by late 1943. Of the 106 wells drilled, 76 Thomas Kivisto, president, sees opportunity produced oil. for energy companies.

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“There was a period of time, 10 to 12 years ago, Refining for Long Term when the major companies weren’t looking to “We see a bright future for refining in Oklahoma,” enhance production,” he says. “They were looking says Ron Armstrong, refining manager of Conoco- to get out of the Mid-continent. Independents, Phillips in Ponca City. with lower overhead costs, can take advantage of Refining has been around these parts for a new technology. I think Oklahoma will see a nice long time too. The first refinery in Oklahoma, rebound.” built in 1905, was the Muskogee Oil Refining Co. Since its inception in 2000, SemGroup has on South Cherokee Street, beyond the city limits. acquired assets of some 35 companies, including It produced lamp kerosene, lubricating oil and 2.5 million barrels of crude storage in Cushing industrial fuel. It was the beginning of oil refin- and 2.3 million barrels of refined products stor- ing in Oklahoma. age in present-day Glenpool. The historical site Oklahoma has five petroleum refineries with for the huge oil discovery in the 1920s was origi- total crude processing capacity of nearly 500,000 nally named Glenn Pool. barrels per day. Oklahoma ranks eighth in U.S. SemCrude owns more than 4.3 million barrels refining capacity. of crude oil storage in Cushing. This business ConocoPhillips’ refining has had a long and model rewarded the company with net profits of close relationship with the state of Oklahoma. $103 million on revenues of $12.57 billion in 2004, “Even though most of the oil we refine will and it’s still growing. come from other locations, including Canada, SemGroup is undertaking a storage capacity South America, the Middle East, the Gulf of expansion in Cushing. It will build 2 million bar- Mexico and other parts of the United States, refin- rels of additional crude storage there plus 1 million ing in Oklahoma is here for the long term,” barrels of refined product storage in Oklahoma. Armstrong says.

1966 1967 1968 Harold Hamm Begins Career. Harold Hamm Pursuing the Vision of Company King and Kennedy Assassinations. Civil launched his career in the energy business at Co-founder Robert A. Hefner III, The GHK Co. rights leader Martin Luther King Jr. was Ringwood, Oklahoma, by forming Harold Hamm Began Drilling the No. 1 Green. Two years assassinated in Memphis, Tennessee. Tank Truck Service and eventually developed later, Hefner found a huge gas reservoir at a Senator and presidential candidate Robert Continental Resources Inc., and Hiland Partners, depth of 24, 454 feet, proving the enormous F. Kennedy was assassinated in Los Angeles. both headquartered in Enid, Oklahoma. gas producing potential of the Deep Anadarko Basin. 96 Oklahoma: Where Energy Reigns 05545 093-103_Sec.7:Layout 1 9/19/07 2:23 AM Page 97

The Importance Of Storage The following excerpt from Daniel Yergin’s book, The Prize, has been included to illustrate the point.

“…Harry Sinclair, the son of a small town druggist in Kansas, trained to be a druggist himself. But, at age 20, he lost the family drugstore in a speculation. Broke, he tried to make a living selling lumber for drilling rigs and then took to buying and selling small oil properties in southeast Kansas and the Osage Indian territory of Oklahoma. Luring investors, he began to build up a host of tiny oil companies, one per lease. He was a masterful trader and a forceful, assertive businessman with unbridled self-confidence, who would defer to no one, least of all his investors. Said one of his colleagues, ‘Where he sat, there was the head of the table.’ He simply insisted on getting his way. He put all his chips on the Glenn Pool in Oklahoma and made a fortune from it. He went into the newly discovered Oklahoma oil fields, awash in oil because of flush production and not yet connected to pipelines, and bought all the oil he could get at 10 cents a barrel. He then threw up steel storage tanks, waited for the pipelines to be completed and sold the oil for $1.20 a barrel. By World War II, Sinclair was the largest independent oil producer in the Mid-continent.”

1969 1969 U. S. Wins Race to the Moon. American Osage County Production. Astronaut Neil Armstrong became the By November 1969, cumulative first person to walk on the moon. production of Osage County wells totaled 1 billion barrels of oil.

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The Ponca City refinery processes 194,000 For the future, the refinery is laying the barrels of crude oil per day. International and groundwork to produce environmentally friendly domestic crude oils are delivered by pipeline from renewable fuels and more alternative fuels. the Gulf of Mexico, Canada, Oklahoma, Kansas and “In the future, we expect to see more renewable Texas. Refined products include gasoline, diesel, jet fuels, such as biofuels, renewable diesel and other fuel, liquefied petroleum gas and petroleum coke. innovations that are still being researched,” ConocoPhillips, as a worldwide, fully integrated he says. energy company,operates in more than 40 countries and has about 38,700 employees worldwide with Enogex assets of $173 billion. Oklahoma Gas and Electric formed Enogex in “ConocoPhillips is the third-largest integrated 1986, returning the company to its roots as a energy company and the second-largest refiner in provider of electric power and natural gas. Enogex the United States. Here in Oklahoma, we manu- was formed through the acquisition of Mustang facture quality fuels for consumers. We’re proud Fuel Corp., which had been a provider of fuel to to help fuel the world,” says Armstrong. OG&E’s Mustang, Oklahoma, power complex. 05545 093-103_Sec.7:Layout 1 9/19/07 2:24 AM Page 99

For a time, Enogex was one of the top-10 pipeline companies in the nation with more than 10,000 miles of pipeline. The company has since that time sold certain assets to focus on gathering and processing, transportation and storage and marketing.

Two operating subsidiaries of Enogex also business in Oklahoma and continues to provide were formed. Enogex Products Corp. manufac- safe, reliable energy and services to its diverse cus- tured and marketed by-products of the natural tomers. At the end of last year, Oneok had total gas refinement process while Enogex Services revenues of nearly $12 million and employed Corp. oversaw the pipeline delivery process. 4,545 people. In 1999, Enogex completed the purchase of Oneok is tied to the Tulsa community through Transok LLC in a $701-million acquisition of its community investment programs. Some of the what had been Oklahoma’s second-largest pipe- programs funded by Oneok’s community program line. Transok started life in 1955 as a natural include the Oneok Foundation, corporate contri- gas supplier to Public Service Co. of Oklahoma. butions, employee matching grants program and Enogex purchased the company from a sub- the Volunteers With Energy organization. sidiary of Royal Dutch/Shell Group. The Oneok Foundation funds opportunities For a time, Enogex was one of the top-10 for employees to participate with corporate and pipeline companies in the nation with more than civic leaders in the discussion and resolution of 10,000 miles of pipeline. The company has since important local, state and regional issues. that time sold certain assets to focus on gathering The corporate contributions program, histori- and processing, transportation and storage and cally and presently, contributes some 75% of its marketing. funds to education, primarily institutions of higher In 2007, the company announced an IPO as education, and to health and human services part of the process to convert Enogex into a organizations. Contributions are also to the arts, master limited partnership. cultural centers and community improvements, including leadership development programs. Oneok Inc. Serves its Customers, The employee-matching grants program sup- Shareholders and Communities ports employee charitable donations by match- Oneok Inc., the diversified energy company ing eligible contributions on a one-for-one basis, based in Tulsa, is one of the largest natural gas from a minimum of $25 to a maximum of distributors in the U.S., serving more than 2 mil- $1,000 per employee family per calendar year. lion customers in Oklahoma, The Volunteers With Energy Kansas and Texas. Its energy serv- program is a companywide organi- ices operation focuses primarily zation of employee volunteers on marketing gas and related serv- whose purpose is to improve the ices throughout the U.S. quality of life of its community It also is a general partner of members through volunteer par- Oneok Partners LP, holding 45.7% ticipation. Since its January 2003 ownership in that company. Oneok kick-off, the program has received Partners is one of the largest more than 300 requests from chari- publicly traded limited partner- table organizations for volunteer ships in the U.S. and a leader in the assistance with their various events gathering, processing, storage and and activities, thus confirming Oneok transportation of natural gas. It is indeed addressing a critical need in owns a major natural gas liquids John Gibson, chief executive officer, the communities it serves. system that connects much of Oneok Inc., and president and chief In 2005, the volunteer program the gas and natural gas liquids executive officer, Oneok Partners LP provided 1,611 employee volunteers. supply in the Mid-continent with Photo courtesy of Oneok Inc. They gave a total of 8,836 hours key market centers. in assisting more than 75 nonprofit The company, now a Fortune 500 member, was charities in Kansas, Oklahoma and Texas through founded in 1906 as an intrastate gas pipeline various promotional and fund-raising events. I

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Deep Oklahoma Roots

onocoPhillips’ history includes the merging of two sidiary, the largest merger in U.S. history at that time. great companies, Conoco Oil and Phillips In January 1996, Archie Dunham of Oklahoma became Petroleum, founded by great men, as well as the president and CEO of Conoco. Although Dunham had spent Chistory of two great cities, Ponca City and Bartlesville. This his entire career at Conoco and DuPont, he wanted to coalescence of giants culminated in what is now the third- separate Conoco from DuPont. On October 22, 1998, the largest publicly held oil and gas company in the world. largest IPO in history—nearly $4.4 billion—paid off: Conoco stock began trading under the symbol COC. Conoco The story of Conoco begins with E.W. Marland, who started Phillips Petroleum in the oilfields of Pennsylvania, and then headed west to Brothers Frank and Lee Phillips were successful wildcatters. Ponca City, which was then a small Oklahoma trading town. In 1905, they drilled the first of 81 wells they would drill in He bought a lease from the Ponca Indian tribe, and struck oil a row without hitting a single dry hole. Taking advantage of in 1911. The gusher provided the first real evidence of oil in the natural gas associated with their wells, the brothers the Mid-continent. founded the Phillips Petroleum Co. with their first gas liquids Marland quickly built a small refinery to process the crude plant in 1907. and incorporated the Marland Oil Co. to market the refined In 1927, Phillips began marketing gasoline through the first output. He then proceeded to build hundreds of gasoline of its service stations and invented lighter, more efficient avia- service stations. tion fuel for flights between the contiguous U.S. and Hawaii. In 1929, Marland Oil merged with Continental Oil in a Phillips also developed the first aviation refueling trucks. symbiotic union. Continental needed the steady supply of In 1931, Phillips built its first long-distance multi-product crude oil from Marland Oil, and Marland Oil needed more pipeline. During the next few decades, other modernizing marketing outlets. technological breakthroughs followed. The new corporation, based in Ponca City, was named In 1952, Phillips was the first U.S. oil company approved the Continental Oil Co. (Conoco) and owned about 3,000 oil by the U.S. Department of the Interior to drill in Alaska. In wells and thousands of retail outlets in 30 states. 1969, Phillips’ Kenai, Alaska, liquefied petroleum gas plant Through several decades, Conoco continued to grow. began operations. This facility liquefies natural gas so it can With expanded refining capacity, and a new pipeline con- be easily transported by ship to worldwide markets such necting Ponca City to Chicago, the company flourished. as Japan. During World War II, Conoco operated a separate refin- In 1975, Phillips received its 10,000th patent. ery to manufacture high-octane aviation gasoline for the By this time, Phillips had expanded its operations all over government. More than 1,000 women were hired to replace the world. In 1996, Phillips signed a historic joint-venture the men who were enlisted into service. agreement to produce polyethylene plastic in China. After the war, Leonard F. McCollum replaced Moran. He In 2000, three major events would change Phillips. The funded a new $2-million research facility in Ponca City, first was its joint-venture transaction to combine Phillips’ gas expanded refineries in Ponca City, Baltimore, Denver and processing operations with Duke Energy’s operations, thus Lake Charles, Louisiana, and erected a new refinery in creating a new company—Duke Energy Field Services. The Billings, Montana. second event was the largest acquisition in Phillips' history— He took Conoco international by creating a network of the purchase of Arco Alaska Inc. service stations in Austria, Belgium, Germany, Luxembourg That same year, a joint-venture transaction combined and the U.K. Phillips and Chevron Corp.’s chemicals and plastics opera- Before he retired in 1972, McCollum added coal, chemi- tions, creating Chevron Phillips Chemical Co. In 2001, cals, plastics, fertilizers and minerals to Conoco’s repertoire. Phillips acquired Tosco Corp., one of the largest refiners and The company had transformed into a fully integrated, world- marketers in the U.S. wide enterprise with more than $2.3 billion in assets. Finally, in 2002, Phillips Petroleum merged with Conoco In 1981, Conoco became a wholly owned DuPont sub- Oil Co. and became ConocoPhillips. I

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Cushing: Pipeline Crossroads of the World

By Jeannie Stell, Financial Editor, Oil and Gas Investor

Cushing’s vast pipeline and storage hub helps keep oil prices steady.

il is an integral part of Cushing’s com- through oil pipelines. There isn’t a direct route.” merce. The city is so well known as a One of the reasons that energy products are major hub for oil distribution that it’s cheaper in the U.S. than in many other countries calledO the “Pipeline Crossroads of the World.” is because of low transportation costs from the Cushing is “the largest crude oil storage termi- pipeline industry. nal in the world,” says Bob Felts, executive direc- “Most other countries have to use either truck tor of the Cushing Industrial Authority. transport or rail. They don’t have the pipeline There are about two-dozen pipelines that infrastructure that we do,” he says. “You think come in and out of Cushing, he says, all run by how big a country we are, and yet we are able to companies in town—Sunoco, TEPPCO, Plains get product all around the U.S. and there’s really All American, BP, SemCrude, and Enbridge— not any significant difference in the price.” with the exception of ConocoPhillips. Cushing also serves as a crude blending sta- “ConocoPhillips does not have any incoming tion. Because refineries are calibrated to handle lines and acquires its crude oil from other tank certain types of crude oil based upon sulfur con- farms in the area and then ships it on, primarily tent, pipeline companies blend different grades to its refinery in Ponca City,” says Felts. of oil to obtain the specific sulfur content Cushing serves as the price settlement point required by each refinery. for West Texas Intermediate crude oil on the New “When you’ve got storage tanks as large as York Mercantile Exchange and is the most signif- 500,000 barrels, you can pretty well mix it to icant trading hub for crude oil in North America. whatever specification you need,”Felts says.“The “We’re an oil hub,” Felts says. “We’re kind of sweeter the oil, which means it has less sulfur in like a railroad or airline hub. If you are flying it, the more expensive it is.” from Oklahoma City to someplace in Iowa, you When crude leaves Cushing, it is shipped to might first fly to Denver, then on to Iowa. The refineries in the upper Midwest and other areas. same thing happens with crude oil as it travels Crude oil is then refined into transportation 1969 1971 1971 Ekofisk Field. Phillips Petroleum Co. World’s Deepest Well. The Bertha Devon Energy. John W. discovered the prolific Ekofisk Field Rogers No. 1 in Washita County, Nichols and J. Larry Nichols off the coast of Norway in the drilled in 1971 to 31,441 feet, was of Oklahoma City founded North Sea. the world’s deepest well. Devon Energy Corp.

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“Cushing will always be the big player in the petroleum industry until the U.S. develops an alternative fuel source, because this is where the crude comes in, and this is where the crude is shipped out, and this is where the crude is stored.” —Bob Felts, executive director of the Cushing Industrial Authority

fuels, and other products, close the markets into and equipment to Cushing to work the oil fields. which they will be sold. “Men slept on the floors of buildings, in the “We have in excess of 30 million barrels of train stations and in rooms rented out by town storage capacity here,” he says, “and it’s on the residents. A tent village sprang up to house men way to 40. They’re building more, so we’ll prob- and store equipment for horses and oilfield ably exceed that in the next couple of years. The teams,” he says. main tank area is about nine square miles. The Cushing’s production shifted into high gear crude comes from Alberta, Wyoming, Colorado, during World War I. Eventually there were some east and west Texas, Arkansas, the Gulf Coast, 710 wells producing 72 million barrels of oil Louisiana and some is imported.” annually. At its peak, Cushing Field produced Cushing has always been a vital part of the oil more than 300,000 barrels per day—amounting industry, starting from its earliest days. Rick to 17% of the total quantity of oil produced in Reiley, executive director of the Downtown the U.S. and 30% of the output of high-grade oil. Cushing Main Street Program, is well versed in In total, some 3,600 wells were drilled. the town’s history. Post-World War I, a pipeline system was built Cushing was established in the early oil boom to transport the oil from Cushing Field into town days, Reiley said. The town began when the Sac so it could be processed through the almost two and Fox Indian Reservation opened to home- dozen oil refineries there and shipped out via the steaders September 21, 1891. railroads. The town’s oil refineries slowly closed “During the land run the next day, a fellow because of over capacity, until there were only by the name of William R. Little headed into two. Deep Rock later became Kerr McGee the wilderness, stopped in a rolling prairie and Refining, which was shut down in the 1970s, and decided it was a good place to establish a home- Midland Co-op, which later became Hudson stead for his allotted 160 acres,” says Reiley. Refining, was shut down in the 1980s. Little filed a homestead application under the Companies continued to build pipeline infra- provisions of the Act of May 2, 1890, by which the structure and tank farms for oil. During that Oklahoma Territory was established. In Little’s application, he wrote that there was no small A Noble Cause town nearer than 14 miles and no large town nearer than 40 miles. He proposed that an 80-acre Lloyd Noble was an oilman with the magic site be set aside to build a town, and his proposal touch. From his home in Ardmore, he prospered was accepted. The town was named after Marshall with contract drilling companies, oil production Cushing, the private secretary to John and trucking. In 1945, wanting to best utilize Wanamaker, postmaster general, in President the resources he had accumulated, he created a Benjamin Harrison’s cabinet. foundation named for his father, Samuel “In 1912, a wildcatter named Tom Slick hit a Roberts Noble. well about 12 miles northeast of Cushing, the The Noble Foundation may be best known for Wheeler No. 1. That well began the discovery of the prominent public buildings bearing the name the enormous Cushing Field. The sleepy little of the founder, but if Lloyd were living today, he agricultural town was about to become a major would be most proud of the foundation’s work in national producer of crude oil,” says Reiley. agricultural research and environmental conserva- The Cushing Field development forced the tion of soil and water. Thanks to the capital for- frontier town to expand. At one point, 30 to 40 mation of oil and gas, Noble’s legacy is a better brick buildings were under construction simul- future for sustainable agriculture. taneously. Special trains from Tulsa brought men

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Photo courtesy of Tom and Lynda Cumming time, 12 oil companies had pipelines and storage crews, but now they don’t. It’s all contracted out. Aerial view of in Cushing. Because of consolidation, those “Cushing will always be the big player in the Cushing Tank Farms. companies have dwindled to seven, but they are petroleum industry until the U.S. develops an The city has more growing their storage capacity. alternative fuel source, because this is where the than 30 million Today, Cushing is once again in the midst of crude comes in, and this is where the crude is barrels of oil storage an oil boom—or more specifically, an oil-storage shipped out, and this is where the crude is capacity, going to building boom. stored,” says Felts. 40 million. “There is a half-billion-dollar capital expendi- Cushing has another claim to fame. The gov- ture program for tank building going on here, ernment considers the city a national asset. As a and that will probably carry on for the next two result, in addition to the usual police and fire or three years,” says Felts. “We suspect there will departments, it has safety personnel not found in be additional capital projects announced later most other U.S. cities. on, and that construction will go on in the tank “Cushing is considered a national asset by farms for the next five to seven years. Homeland Security,” says Felts. “The unique size “We’ll need to have highly skilled people in and the economic importance of the oil hub the pipeline industry, most with mechanical, civil require special vigilance. We have an organiza- and structural engineering degrees. We’ll need tion called the Safety Alliance of Cushing (SAC) technicians to run the tank farm operations, and that meets on a monthly basis. We put this they are going to primarily need computer-oper- together in 2001, prior to 9/11.” ation training because of the large terminals and After 9/11, he says, SAC became more of a control pumps,” he says. safety and security committee. The FBI has con- Career opportunities exist outside the oil and ducted field exercises in the hub and SAC holds pipeline companies as well. Cushing will need monthly meetings attended by town leaders, FBI entrepreneurs to start up new businesses to sup- personnel, representatives of the Department of port the tank farms and pipelines. Homeland Security and first responders from “The crude oil industry, like most large indus- two nearby counties. tries, has adopted the management principal that The pipeline companies are totally fenced they take care of their core business and anything now, totally locked down, says Felts. that is not core, they contract out,” says Felts. “In “Even if you get inside the fence, the office the past, the pipelines used to employ lots of doors are locked; you don’t walk into any build- labor crews, ground crews and maintenance ing in that complex at all,” he says. I

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OKLAHOMA Where Energy Reigns

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Key Players in Oklahoma Oil and Natural Gas History

By Leslie Haines, Editor-in-Chief, Oil and Gas Investor

In 2000, then Hart Energy Publications produced a supplement to its magazines noting key events, technologies and the top-100 most influential people of the petroleum industry. Among the 100 named, 20 had strong Oklahoma ties. The following is an excerpt from the 100 Most Influential People of the Petroleum Century.

istorians and lay people alike will supported the gamble with their inventions always look back on the 20th and dollars. century with a great deal of We dedicate this special section to the hard- Hastonishment. After all, human beings not only working roughneck in the field, for it is always on left the earth for the first time at Kitty Hawk in the rig floor that dreams become reality—or get 1903, they actually escaped the planet itself to walk dashed to pieces. I on the moon in 1969, and they saw real-time color photographs from Mars by 1998. Tanks to Towers Ingenuity and curiosity drove 100 years of progress. But so did oil and gas. Another titan in the Tulsa oil and gas community was William The industrial might that fueled soaring eco- K. Warren. Unlike most of his contemporaries, Warren did not nomies and invention was made possible because of make his money by finding or producing oil and gas. He made energydevelopmentintheU.S.andaroundtheworld. his fortune by transporting both. We wanted to honor the people who made it With a $300 investment, Warren starting hauling crude oil from possible. Our distinguished list contains many the wellhead to railroad loading docks. He eventually owned the well-known names—industry icons, really—and largest fleet of railroad tank cars in the world. several forgotten or unsung heroes. For every per- In 1953, the Warren family decided to share the bounty of their son who made the list, there are a dozen more business success by building a state-of-the-art hospital in Tulsa. who also deserve recognition. Saint Francis Hospital, one of the leading health care institutions in During 100 years, there is no way to uncover the country, is still growing under the family’s watchful eyes. all the special people who dared to drill, or 1971 1973 Port of Catoosa. The first barge reached Arab Oil Embargo. Arab oil-producing nations, in re- Tulsa’s Port of Catoosa on the Kerr-McClelland sponse to the support of the U.S. and other nations of Arkansas River Navigation System. The system Israel during the Yom Kippur War with Syria and Egypt, made the Arkansas River navigable from suspended oil exports to the “offending” nations. This Catoosa to the Mississippi River, thereby making it possible to export caused long lines at gasoline pumps and signaled the Oklahoma products to the world via water transportation. end of perpetually “cheap” oil prices. Oklahoma: Where Energy Reigns 105 05545 104-121_Sec.8:Layout 1 9/19/07 2:36 AM Page 106

were camouflaged with soundproofed structures JACK H. ABERNATHY (1911-1996) on man-made islands in the harbor itself). Big Chief rigs also set a number of significant Drilling and Employee drilling depth records including: Compensation Firsts • the deepest test in the Texas North Plains and Panhandle area (14,278 feet in December 1949); born leader with a 56-year career in oil, • the discovery well for the then-deepest pool A gas and geothermal drilling operations, in the Mid-continent, the Carter-Knox Field in Jack Abernathy is widely recognized as an inno- Oklahoma (16,000 feet in February 1956); vator and avid proponent of new technology • the deepest well south of the equator (16,250 applications in drilling, and is enshrined in a feet in Bolivia in 1959); and number of petroleum industry Halls of Fame. • the deepest well in the Black Warrior Basin Born in Shawnee,Abernathy was among the first of Alabama (14,324 feet in 1962). class of graduates in petroleum engineering at the In addition to these feats, Big Chief was possi- University of Oklahoma in 1932. He then entered bly the first drilling contractor to devise a com- the petroleum business. plete insurance and retirement plan primarily for By 1936, he had become the chief engineer for field and operating personnel, a benefit package Sunray Oil Co. That year, it discovered and devel- for which Abernathy was a champion in the oped the Oklahoma City Wilcox Pool, a major oil industry for many years. Also, the company held field directly beneath the grounds of the Oklahoma an unequalled safety record for many years. state capitol in Norman. He also was instrumental Big Chief Drilling was sold in 1972, but in 1987, in discovery of several other fields. Abernathy and others repurchased it and operated During those years, he often employed a small, it until the company was liquidated in 1991. local drilling contractor, Big Chief Drilling Co., Among his many professional honors were for field development work. In 1942, Abernathy memberships in a number of industry organiza- left Sunray to join Big Chief as vice president. In tions. He was a chairman of the National Petro- the ensuing years, he helped build Big Chief into leum Council, and a director and chairman of the a leading contract drilling company in the U.S. International Association of Drilling Contractors and Latin America. and the Midcontinent Oil & Gas Association. At Big Chief, Abernathy managed drilling He died in Oklahoma City in October 1996. I crews that drilled the discovery wells for a number of major oil and gas finds, including the Golden Trend, Sooner Trend, Norge and several others, all HUGO A. ANDERSON (1887-1983) in Oklahoma. Under his management, Big Chief grew exponentially and operated all across the The Independent Oilman’s Banker U.S. It was one of the first contractors to enter the post-World War II market in Latin America. Swedish native, Hugo Anderson and his The company accomplished several firsts: A parents came to Chicago when he was • first-time field use of oil-base drilling fluid two years old. His illustrious banking career, civic (Texas-Panhandle, 1947); service and philanthropy in the Windy City • design of the first “packed hole” drillstring earned him many honors. Kings of Sweden twice assembly for use in crooked-hole country (south- knighted him. In 1969, he was given the Ameri- ern Oklahoma, 1947); can Petroleum Institute’s Gold Medal for Distin- • origination of the technique of “controlled guished Achievement, its highest honor, for 58 natural drift,” in which easing up of weight-on- years of banking to the petroleum industry, all at bit allowed the drillstring to drift toward the top First National Bank of Chicago. of the target structure, a technique that has since He began his career at First Chicago in 1901 as saved operators millions of dollars; a page at the tender age of 14, and meanwhile, • field installation and operation tests of mud went on to earn a bachelor’s degree from North- system desanders (Louisiana, 1956); and western University. By 1926, he had advanced to • drilling for THUMS (Texaco, Humble, vice president at the bank. Union, Mobil, Shell) in the Wilmington Field, In the teens, the science of credit was in its Long Beach Harbor, Calif., in 1967 (where the rigs infancy, wrote Anderson in his book, Day of

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Rejoicing. The bank worked with meat packing had a lifelong fascination with the emerging oil plants, the forerunner of 3M Corp. and other industry—his son, Robert O., went on to become industrial companies in the Midwest. the chairman of Arco years later, and another son, Beginning in the 1920s, when credit for the Donald,was an independent. His grandsons still are independent oil producer with commercial independent producers in Roswell, New Mexico. banks was hard to come by, if not practically He formally retired from the bank at age 70, yet nonexistent, Anderson thought there had to be was associated with the bank for 75 years. I a better way. He was one of the first bankers to think that petroleum reserves in the ground, if they could eventually be produced, were signifi- PAUL ENDACOTT (1902-1997) cant assets and valid collateral for a bank loan.It was said “he viewed oil reserves as inventory on Propane-Industry Builder nature’s shelves.” and North Sea Pioneer “My participation in the oil industry dates to 1926, but I did not become really involved until aul Endacott, third president of Phillips the Oklahoma City Field came in,in 1929.When P Petroleum Co., pioneered individual it was followed by the East Texas Field [in 1930] homeowner use of propane for heating and this novice found himself…learning the oil busi- cooking, and in the early 1960s, he persuaded ness through hard experience…We pioneered Phillips to explore in the emerging province of and tailored our loan agreements to meet par- the North Sea. ticular needs. Some unusual and innovative He began his career with Phillips in 1923,days plans developed.” after receiving a degree in civil engineering from His first oil loan was to an Oklahoma City the University of Kansas at Lawrence, his home- independent, Anderson Pritchard Oil Co. (no town. He signed up with Phillips after hearing relation). During his tenure at the bank, he banked L.E. Phillips, a brother and co-founder of the Kerr-McGee Corp., Warren Petroleum, Pure Oil company with Frank Phillips, speak at engineer- Co. and many others.Anderson supported oil con- ing day at the university. L.E. Phillips said,“I am servation efforts and was the first banker to loan in the oil business, not the oil game.” Endacott money on a gas separator plant, which separated was intrigued. liquids from condensate, creating a new product He spent his first four years with the company that could be marketed. traveling from oil boom to oil boom, He was an organizer of the Chicago staking well locations, and building natu- YMCA Liberal Arts College and a trustee ral gas liquids extraction plants, company or board member of numerous educa- camps, pipelines, roads and tank farms. tional and religious institutions, includ- Meanwhile, Phillips was positioning ing Northwestern University. He was a itself as the nation’s largest producer of director of Warren Petroleum Co. and natural gas liquids—a position it still Anderson Pritchard Oil Co. Anderson holds.At the age of 25,Endacott was taken

Museum Made of Oil

Thomas Gilcrease was a Creek Indian whose allotment was part of the great Glenn Pool oilfield. Believ- ing he had been cheated during the boom, he learned the ways of the oilpatch and bought a drilling rig. He made a fortune. While traveling in Europe raising funds for wells, Gilcrease started buying art and documents that traced the frontier heritage of his own American experience. By the 1950s, his collection consisted of more than 5,000 paintings, 30,000 books, 30,000 documents, and 10,000 sculptures and artifacts. Among the treasures were paintings by Catlin, Russell, Remington and Moran, as well as the only ex- tant copy of the Declaration of Independence signed by its framers. Today, these treasures can be seen at the Gilcrease Museum in Tulsa.

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off the road, assigned to work at headquarters, in WIRT FRANKLIN (1883-1965) Bartlesville, and in 1927, put together a plan of marketing its propane to individual homeowners. A Producer Who Decided He virtually had to invent the liquefied petro- to Speak Out, Founded IPAA leum gas business and received 20 patents in the process. Problems Endacott had to solve included irt Franklin was just another Ardmore tank corrosion, finding the right rail cars and how W producer in June 1929 when he went to a to transfer the gas to customer tanks on customer federal oil conference in Colorado Springs,Colorado. premises. Most important, he had to achieve Then Ray Lyman Wilbur, secretary of the inte- market acceptance. rior during the Hoover administration, outlined a Later, he developed the propane self-service program that would close public lands to explo- system. ration, hold domestic oil for posterity and In 1938, he was named assistant to then-exec- encourage imports of foreign crude. utive vice president Boot Adams, who became That annoyed Franklin. First, he drafted an president later that year. When Adams became impassioned response that he delivered to the meet- chairman in 1951, shortly after the death of Frank ing the next day. Then he called 20 other independ- Phillips, Endacott became president. In 1962, he ent oilmen to the Antlers Hotel, where he was was appointed vice chairman. staying, and formed the Independent Petroleum As president, he encouraged the development Association of America on the spot. of new markets for the chemicals Phillips was “He was a courageous guy, probably the best producing, particularly Marlex plastics, which stump speaker the oil industry had,” recalls the made the Hula-Hoop craze of the late 1950s late Lloyd Unsell, who joined IPAA’s staff in 1946 possible, as well as a multitude of other, more and became its executive director and president. important, products. “Even in his later years, he could captivate an “He had great curiosity and tremendous phys- entire room if he had something to say.” ical energy,” said Phillips chairman and chief At the age of 46, Franklin arrived in Washing- executive William A. Douce. “He believed in ton, D.C., in 1900 as a stenographer with the looking under every rock.” House of Representatives’ commission on Indian In the 1960s, Endacott encouraged Phillips to affairs and a law student at Columbian (now look into exploration of the North Sea, which led George Washington) University. He continued his to the discovery of the prolific Ekofisk Field off- law studies two years later when he moved to shore Norway in 1969, the first giant oil field in Muskogee, as a stenographer with the Dawes western Europe. When Ekofisk reached peak pro- commission to the Five Civilized Tribes, directing duction in 1980, Phillips’ share amounted to preparation of the Choctaw and Chickasaw rolls. 130,000 barrels of oil and 550 million cubic feet In 1905, Franklin resigned to form a law firm of gas a day. And, at this time, oil prices were at an with S.A.Apple that moved to Ardmore a year later. all-time high; the oil was worth the equivalent of He continued to practice law until the Healdton oil $64.69 today. It is still a core property for Phillips field was discovered in 1913. today, and it kicked off a drilling boom in the At that time, the young attorney joined with Ed North Sea. Galt, Roy Johnson and Apple to organize Crystal Oil He was a lifetime honorary director of the Co., which they sold three years later for $2 million. American Petroleum Institute, and a lifetime Franklin operated independently until 1927, when member of the National Liquefied Petroleum Gas he organized the Wirt Franklin Petroleum Corp. Association and its Seely Gold Medal award recip- Franklin was elected IPAA’s president at that first ient. He was associated with Phillips Petroleum meeting in Colorado Springs. He soon persuaded for 44 years until he retired in 1967. I another Ardmore attorney,Russell B.Brown,to quit 1973 1974 1976 Natural Gas Production Peaks. U.S. natu- Watergate. President Richard Nixon resigns “Superwells.” There were 22 ral gas production reached a record-high because of the Watergate scandal. superwells in the Anadarko Basin, 21.7 trillion cubic feet before starting a each producing at least 6 billion long period of decline. cubic feet of gas per year.

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a promising law practice to follow him to Washing- father’s estate and used his millions to acquire ton“for a couple of weeks”to persuade Congress to existing oil and gas reserves rather than drilling for enact a tariff on imported crude oil. In the presi- them. Getty Oil Co. became one of the country’s dent’s message in the first issue of the IPAA Monthly largest independent producers, mainly by pur- in April 1930, Franklin described how about 1,000 chasing other companies’ production. He went on producers and refiners assembled in Tulsa “on two to acquire and control more than 100 companies. days notice” to make plans to present their case. But it was Getty’s 1949 purchase of a 60-year Brown, whose two-week assignment eventually oil concession in the Saudi portion of the Neu- stretched to 30 years, recalled that when he arrived tral Zone between Saudi Arabia and Kuwait— in Washington, only one of the Senate’s 96 mem- and the subsequent huge oil discoveries it gave bers believed in the idea of a crude oil tariff. up—that eventually made his name a household But Franklin noted that “the entire Congress word. His was among the first non-integrated has patiently listened to our delegates present companies to capture an oil concession in the their cause. The frank, open statements of these Middle East, an area previously explored only by men…have made a profound impression…It is our purpose to carry on until we have obtained relief from what appears to be an impending cataclysm.” Price is Right It took them two years. During that time, Brown rented an office in the Mayflower Hotel and began The search for and production to circulate around Washington with humorist Will of oil and gas in Oklahoma Rogers, whom he persuaded to write about the oil has created thousands of busi- industry’s problems in a light-hearted way. nesses that range from oilfield Franklin was IPAA’s president for seven years supply firms to rig builders. before stepping down to attend to his oil business. Harold C. Price developed a But his reputation was such that President new system for laying pipeline, Franklin D. Roosevelt asked him to return to and by the 1950s, he was Washington as chairman of the Petroleum a wealthy man living in Administration for War during World War II. I Bartlesville. As a patron of the arts, Price turned to America’s best-known architect, J. PAUL GETTY (1892-1976) Frank Lloyd Wright, to design a new office building for him. Wright had a suggestion. He had designed Brash and Eccentric Deal-Maker an innovative skyscraper in the 1920s intended for in the U.S. and Middle East New York City, but it had never been built. How about placing it on the great American prairie, orn in Minnesota, Jean Paul Getty was deep in the heart of oil country? Bthe son of George F. Getty, a lawyer who, Price bought the idea, and together they built in the early days of the 20th century, went to the 19-story Price Tower on the edge of downtown Oklahoma and ended up a millionaire oilman. Bartlesville. The only Wright-designed tower ever The younger Getty, who studied at the Univer- to be built, the Price Tower passed to the Phillips sity of California at Berkeley and at Oxford, Petroleum Co. and finally to a non-profit board that organized his own independent producing com- runs the building as a combination hotel-museum. pany during World War I. By 1916, he had made Today, it is listed as a National Historic Landmark, his first million. His company grew steadily the highest level of recognition bestowed by the through the 1920s. National Park Service. In 1930, Getty inherited $15 million from his 1977 1977 Trans Alaska Pipeline. Completed this year, Price Regulation. The U.S. the Trans Alaska Pipeline carried more than 2 Department of Energy rolled back million barrels per day in 1988 and continues crude prices and launched a complicated to deliver about 1 million barrels per day. oil pricing formula.

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major companies. Leaders in the petroleum had installed a pay telephone for their use while industry considered his winning bid brash—and staying at the mansion. predicted ill fate. Since his youth, Getty had been an art collector. But in his view, only the huge oil reservoirs By the time of his death, he had acquired one of beneath the Arabian Desert would enable him to the world’s most extensive collections of valuable build the giant business empire he desired. His paintings, sculpture and antiques, much of which win-at-all-costs attitude had recently served him he displayed at Sutton Place. Later, it was donated well in a bitter, 25-year takeover battle with Stan- to the J. Paul Getty Museum near Los Angeles, dard Oil of New Jersey over Tidewater Oil Co., which Getty founded in 1974. which finally became part of Getty Oil in 1953. After his death in 1976, his will bequeathed the He was equally tenacious with the Neutral bulk of his estate to the museum’s trustees for use Zone concession. It took Getty Oil and its partner in furthering art education and diffusion. The seven years to make a significant strike there.But trust built the Getty Center, a cultural complex in once the company had delineated several giant Los Angeles that opened in 1997. I discoveries, Getty used Neutral Zone oil to grow vast, integrated oil operations in the U.S., Europe and Japan. JESS HARRIS SR. (1891-1971) By the end of the 1950s, Getty Oil was the seventh-largest gasoline marketer in Respected Mentor to the U.S. By 1957, Fortune magazine Dozens of Landmen declared Getty America’s richest man and its very first billionaire. The Neutral Zone ince the first commercial discovery bonanza had proved him to be an interna- S of oil in Pennsylvania,landmen have tional dealmaker of the highest order. been a part of the oil and gas industry.Early day Getty married and divorced five different “leasehounds”always appeared with either rumor women, yet continued to add to his legendary or fact of an oil and gas discovery, swarming in with reputation for miserliness and eccentricity. He the boom and disappearing with the bust. No lease lived for many years in a New York hotel he play was ever complete without the ubiquitous, col- bought in 1938, but after he became a multibil- orful presence of the landmen. lionaire, he moved to England and purchased a One family endured to build an industry legacy 72-room Tudor mansion called Sutton Place. And for the landmen, still serving in that capacity after while he entertained many of the world’s richest 60 years. and most famous people at Sutton Place, those Jess Harris Sr. of Oklahoma City was one of the guests were said to have been appalled that Getty most respected and best-known landmen in the The World’s Richest Individual

By the mid-1950s, J. Paul Getty was known as the richest person in the world. Born in 1892 in Minneapolis, Minnesota, he was introduced to the oil business at age 11 when his father purchased a lease in the Osage Nation and started drilling oil wells. Young J. Paul was visiting the lease when a gusher blew in, and he determined at that time he would be an oilman. His father moved to California but kept his Oklahoma oil operations. J. Paul worked on oil leases in California and Oklahoma during the summers until he graduated from college. At age 21, he returned to Oklahoma with the backing of his father to trade leases and drill wells on his own. In less than two years, he made his first million dollars. Getty was a frugal, ruthless workaholic, and when the Great Depression hit, he used his inheritance and the millions he already had earned on his own to buy the depressed stocks of quality oil companies, eventually taking control of the Tidewater Oil Co., Skelly Oil Co. and others. He made his big move by leasing a vast tract between Saudi Arabia and Kuwait known as the Neutral Zone. By the 1960s, he lived on a palatial estate in England and operated Getty Oil Co. and 200 subsidiary companies in an autocratic manner. He always credited his father’s backing and his experience in Oklahoma for making his great success possible.

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history of the profession. He began his career as a “Weintend to build up railroad man in the 1920s but soon succumbed to the oilpatch fever that was going on all around him and maintain a complete in Hughes and Seminole counties in Oklahoma.His organization. We will cover all early successes there led him to the discoveries that phases of oil well cementing service. were occurring in the Texas oil fields. It was there that Harris pooled assets with Tom We will maintain an aggressive and Nix to form a partnership that would last for more sustained program of research. We shall than 30 years. Before the passing of Harris and Nix, the partnership would lease millions of acres give uniform quality and service. We’ll for its clients in several states, as well as participate get there somehow,regardless of location.” in drilling a significant number of wells. —Erle Halliburton His son, Jess Harris Jr. (born 1919), joined the firm in 1953 and his grandson, Jess (Jay) Harris III patented a method of cementing oil wells that (born in 1955),joined in 1974 and still runs the firm. would grow increasingly important as the oil busi- For seven decades, the Harris family has been ness developed. associated with the development of petroleum land Halliburton was a quick study and when his management skills and professional ethics. It has constant stream of ideas put him in conflict with long been a training ground for many fledgling land- his boss, he was fired. men entering the industry. It was not uncommon Years later, Halliburton would say, “The two for many majors and large independents working in best things that ever happened to me were being the Mid-continent region to send their potential hired, and then fired, by the Perkins Oil Well hires to the Harris firm for training. The partner- Cementing Co.” ship also helped found the Oklahoma City Associ- Halliburton went to Wichita Falls in north ation of Petroleum Landmen. Texas, a town full of wildcatters and roughnecks The Harris family has traditionally shared its working the drilling boom at the Burkburnett good fortune with the industry and the community, and Waggoner fields. He went into business by being well known for philanthropy and a willing- making a deal with a neighbor. ness to grubstake those in need. One of the many The neighbor would have use of Halliburton’s honors bestowed upon the Harris family today is outdoor privy, and Halliburton would have use of the annual Jess Harris Memorial Golf Tournament, the neighbor’s wagon and team of horses. Hal- hosted by the Oklahoma City Association of Petro- liburton then borrowed a pump, bought some leum Landmen for more than 25 years as a benefit hoes, built a mixing box and entered the oil well for local charities. I cementing business. In 1919, Halliburton established the New Method Oil Well Cementing Co. in Wilson, Okla. ERLE HALLIBURTON By the end of 1920, he owned three trucks, the (1892-1957) patent on the cement jet mixer and had worked on some 500 wells. Lots of Pluck, In 1924, he convinced seven large oil companies, Plus Some Trucks all customers, to invest in the Halliburton Oil Well Cementing Co., HOWCO. The company went pub- rle Halliburton proved that if lic and Halliburton became its CEO.Here is what he Eyou keep learning and stay alert for good said about it: deals, you can go a long way. Born on a farm north “Weintend to build up and maintain a complete of Memphis, he left home at the age of 12 when organization. We will cover all phases of oil well his father died. To help support the family, he cementing service. We will maintain an aggressive picked up a variety of skills: locomotive driver, and sustained program of research. We shall give steam crane operator, salesman and merchant sea- uniform quality and service. We’ll get there some- man. With a stint in the Navy, he learned engi- how, regardless of location.” neering and hydraulics. It is a vision that still seems valid.Halliburton died A job with Perkins Oil Well Cementing Co. set in 1957, a few years before the company’s merger his life’s direction. Perkins had invented and with Brown & Root. I

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FRANK J. HINDERLITER (1875-1965) Petroleum Institute, and held membership in a number of other industry organizations and Invented a Fishing Tool, and Much More trade groups. Hinderliter sold his company in 1946, but kept nown as the Thomas Edison of the oil his hand in the industry as an independent pro- K industry, Frank J. Hinderliter became ducer. He died in Tulsa in May 1965. I known internationally as the inventor and maker of oil tools, with more than 90 patents for oilfield equipment, including cable and rotary drilling COLUMBUS M. (DAD) JOINER (1860-1947) and fishing tools. Born near Oil City, Pa., Hinderliter was the son He Found the Pot of Gold of Isaac Hinderliter, a machinist who himself had patented the first set of pipe elevators in 1879, olumbus (Dad) Joiner was responsible for and the first belt clamp patented for use in oil- C the discovery, in October 1931, of the great field operations. East Texas Field. Until the discoveries in Alaska in At the tender age of 12, young Hinderliter the 1970s, this field was the largest oil reservoir on designed a tool that succeeded in recovering a the North American continent, with reserves of “fish” from an oil well near Oil City. This fishing more than 6 billion barrels of high-quality, low- tool was such a success that he finished only the sulfur crude. equivalent of high school, in favor of making Born in Alabama, Joiner began practicing law good wages as a machinist in the oil fields of in Tennessee in 1883 and was a member of the Pennsylvania and West Virginia. state legislature from 1889 to 1891. He then filled In 1907, Hinderliter and his friend, William odd jobs until he was in his 40s, when he moved Skelly (who later founded Skelly Oil Co.) left the to Oklahoma and built a small fortune in cotton Northeast for Indian Territory, now Oklahoma, farming. But the Panic of 1907 wiped him out. where both went to work for Oil Well Supply Co. Undaunted, he used his farm-buying experience (now National-Oilwell) in Tulsa. to broker leases during the early days of the Okla- After moving up in that company, Hinderliter homa oil rush. He also steeped himself in the study resigned in 1919 to form his own operation, of geology. In the early 1920s, Joiner and a sidekick, Hinderliter Tool Co., which went on to become A.D. (Doc) Lloyd, a self-styled geologist-petroleum an internationally recognized drilling/fishing engineer and former snake oil peddler, wildcatted tool manufacturer. in several Oklahoma areas without much success. During World War I and II, he was involved in By 1926, Joiner had left for greener pastures, the design and manufacture of high-quality gun finally satisfying his “nose for oil” by leasing pine- barrels for artillery pieces. After World War II, he studded acreage in deep East Texas, an area the continued to be a consultant in ordinance manu- major oil companies had written off. facturing for a number of years. Joiner’s leases were mostly in Rusk County. He An unreconstructed promoter of the petro- got them cheaply, since the major companies had leum industry, particularly in the Mid-continent drilled in vain. He also got them easily, since his region, Hinderliter was one of the organizers of message of hope for an “ocean” of oil beneath the the famous International Petroleum Exposition piney woods resonated well with poor East Texas and Congress, which was held for many years in farmers, whose fortunes had been depressed since Tulsa. This was the industry’s leading venue for World War I. He earned the nickname “Dad” the introduction of new oilfield equipment and because of his age and fatherly way with people. services, preceding the Permian Basin Oil Show. Lack of ready cash plagued Joiner.He soon began He was a longtime member of the American selling percentages of his leases by promoting local 1978 1979 Natural Gas Acts. Pressed by the administration of President Jimmy Carter, Congress passed Deep Gas Production. The No. 1 the Fuel Use Act of 1978, which prohibited newly constructed industrial and electrical generation Sanders well near Sayre became plants from using natural gas and called for existing facilities to switch to alternative fuels, Oklahoma’s deepest gas producer such as coal, by 1990. Congress also passed the Natural Gas Policy Act, which immediately at 24,996 feet. decontrolled the price of gas produced from below 15,000 feet and provided for gradual deregulation of gas found above 15,000 feet.

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merchants, sweet-talking widows, and traveling to But Dad Joiner had at least gained a lofty place Dallas, 100 miles away, to sell even more. Finally, he in petroleum history as the penultimate “wildcat- raised enough money to drill his block on Mrs.Daisy ter” who had used sheer determination and Bradford’s farm near the small town of Henderson. unflagging faith in a dream to uncover what, for Lloyd had rejoined him, and the two had drawn more than 40 years, was the largest oil field in the up a geological report indicating the Woodbine for- Western World. I mation at a depth of about 2,500 feet was the source of a “giant” oil accumulation. The report also indicated that the oil was associated with a“salt JOHN CLARENCE KARCHER dome,”a geological anomaly that geologists today (1888-1969) say is missing from that part of Texas. The field in fact was later identified as a huge stratigraphic trap. Bringing Seismic to the Industry The first two wells were junked holes. His debts continued to mount, but with the aid of persua- larence Karcher’s early scientific work, sive“geological expertise”from Lloyd, Joiner raised C which included designing and develop- enough cash to finance one last well: The Daisy ing new geophysical interpretation techniques, Bradford No. 3. It took several months to drill. paved the way for making the reflection seismo- However, after a promising drillstem test, the well graph a practical and economical oil and gas was swabbed for several days and on a chilly Oct. exploration tool. 5, 1931, it came in at an initial test rate of 6,800 An Indiana farm boy, Karcher graduated from barrels a day. The producing formation was, in the University of Oklahoma and in 1916, entered fact, the Woodbine. the University of Pennsylvania to pursue a doctor- Though the well was on the least-productive, ate. In 1917, he joined Thomas Edison’s famous eastern edge of the reservoir, it signaled the dis- lab at Menlo Park, N.J. covery of a giant that when fully delineated, meas- During World War I in France, he studied ured 45 miles long and 5 to 12 miles wide (more sound waves generated by artillery fire, which than 140,000 acres) passing through five counties. gave him the impetus to study further upon his As the East Texas boom got under way, the sum return. He began his innovative work in 1917, of the lease interests sold by Joiner was found to building on related work performed earlier by be more than the whole. A receivership lawsuit German and American scientists. He focused on was filed and he stood to lose everything. His sal- the application of seismic reflection phenomena vation came from H.L. Hunt, a prosperous in the search for oil and gas. Arkansas wildcatter-gambler who had profited In 1921, Karcher and some colleagues proved from adjoining leases and from pipelines he built the validity of the reflection seismograph technique to take the high-quality oil to market. by successfully detecting hard limestone strata near Hunt bought Joiner out with $1 million in cash Oklahoma City. The electromagnetic detector he plus royalties, then used his growing fortune to used is now displayed at the Smithsonian. settle with the oversubscribed sublessors. That In 1925, Karcher was employed as vice presi- laid the foundation for one of the largest fortunes dent of Geophysical Research Corp. (GRC), a amassed in the U.S. partnership he organized with Everette L. Meanwhile, Joiner used the money from Hunt DeGolyer, a vice president at Amerada Petroleum to search fruitlessly for new oil fields, mostly in at the time. During the next two years, GRC crews Texas. Though his estate had an estimated value of found 100 salt domes in the Gulf Coast region. $3 million as late as 1938, Joiner’s personal and real The first commercial seismic applications, how- property at the time of his 1947 death in Dallas at ever, were of the refraction type, aimed at mapping age 83 was described as of only “nominal” value. salt domes in the Gulf Coast area, where the first 1979 1979 1979 “Pipeline Crossroad of the World.” General Motors. The Hostage Crisis. U.S. hostages are By 1979, Cushing was the focal point Oklahoma City General taken in Iran, beginning a 444-day of 23 extensive pipeline systems with Motors plant opened to crisis, which finally ended with their a total capacity load of 30 million great fanfare and represented a high point in release in 1981. barrels of oil. the industrialization of the state that began after World War II. GM closed the plant in 2006.

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discovery based on GRC data was made in 1926. Kerr helped convince President John F. Kennedy to The continued success of this technique on land tighten the program, in opposition to many in the led eventually to the first offshore use in 1928 by State Department.The program went into effect Jan- Louisiana Land & Exploration Co. That same year, uary 1, 1963, the day Kerr died of a heart attack. GRC fielded the first reflection seismograph crews. His physicians reported that Oklahoma’s senior In 1930, Karcher, DeGolyer and others organ- senator was telling a humorous story at the time ized Geophysical Service Inc. (GSI), which of his death. The sparkling wit that had come to became successful almost immediately. By 1960, characterize his business and political encounters GSI had 1,000 seismic crews worldwide. remained true to the end. I In 1933, geophysicists under the direction of Karcher and DeGolyer were the first to map the deep- seated Old Ocean Dome,one of the largest discover- P.C. LAUINGER SR. (1900-1988) ies of gas and condensate made on the Gulf Coast. Karcher’s contributions were recognized when He Disseminated he received the Anthony Lucas Gold Medal from Knowledge to the American Institute of Mining, Metallurgical Thousands of Readers and Petroleum Engineers. I titan of petroleum industry journalism, P.C. Lauinger ROBERT S. KERR (1896-1963) was the long-tiAme president and chief executive officer of Petroleum Publishing Co. (now PennWell Offshore Pioneer and Politician Corp.) of Tulsa, Oklahoma, and publisher of Oil and Gas Journal and other trade magazines and obert Samuel Kerr, born in a log cabin in information services. R1896, attended Oklahoma Baptist Univer- At all times during his nearly 60 years at the sity, the University of Oklahoma and East Central helm of the company, Lauinger stressed editorial State College in Ada. He later became an attorney, excellence and insisted that the Journal and its sis- oil tycoon, Oklahoma governor, a U.S. senator and ter publications provide information that was a philanthropist, not to mention the founder of vital to oilmen in conducting their business. His Kerr-McGee Oil Corp. publications played a large role in spreading He married the daughter of an oilman from industry news and details of technological Tulsa. By the end of the 1920s, Kerr had teamed up advances to everyone in the oil patch. with his brother-in-law to create the flourishing Lauinger’s grandfather, P.C. Boyle, once a scout Anderson and Kerr Drilling Co. “Anderson had a for John D. Rockefeller, had established the mag- nose for oil while Kerr had a talent for finding azine. Boyle had built a newspaper, the Oil City investment capital.” (Pennsylvania) Derrick, into the first true petro- Following Anderson’s retirement in 1937, Kerr leum publication, giving it its present name when convinced Dean McGee and R.B.Lynn,both veteran he founded Petroleum Publishing in 1910. Phillips Petroleum employees, to join him in busi- Lauinger himself was born in Oil City. He was ness. When Lynn left the business in the early 1940s, a 1922 graduate of Georgetown University in McGee was named executive vice president, and the Washington, D.C., and after graduation, joined company was renamed Kerr-McGee Oil Industries. the Journal as a staff representative in Pittsburgh. Under his leadership, Kerr-McGee was the first On the death of his father in 1931, he became the company to drill an offshore well out of sight of land. third-generation president of the company. Because of Kerr’s success in oil, he was imme- As oil and gas operations moved westward across diately labeled a special interest politician when the country,Lauinger decided to move the company energy issues were brought to the forefront. to Tulsa,which by the mid-1930s,was hailed as“The Many independent oilmen were disgruntled Oil Capital of the World.” The headquarters offices with Kerr for his failure to push for legislation to are still there, but with most of the petroleum curb oil imports. Undaunted, Kerr maintained the industry magazine staff based in Houston. The best route to tighten the import controls was company has diversified into a number of other through administrative action—not legislation. areas such as online publishing and conferences. And, in what turned out to be his last big victory, Gene Kinney, former editor of the Journal,

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wrote in 1988 that Lauinger “was always an edi- held until 1951 when he returned to Tulsa to be a tor’s publisher. Convinced that editorial excellence consulting geologist. Much of his consulting work was the route to business success, he was single- was in an advisory capacity to foreign governments, minded in his pursuit of that goal. Guided by that including Brazil,India,Australia and France.During philosophy, he made [the Journal] into the ‘bible this time, he was also a director of the First National of the oil industry.’” Bank of Tulsa and a trustee of the University of Tulsa. Kinney also noted in his 1988 piece that “To In recognition of his contribution to petroleum staff members, business associates and others with geology, Levorsen received the Sidney Powers whom he came in contact [Lauinger] was a leader, Award in 1948. This is the highest award bestowed father figure, mentor, friend, loyal supporter—a by the American Association of Petroleum Geol- gentleman who showed the same gentility and ogists, the Geological Society of America and the warmth at every turn, every hour of the day.” American Geological Institute. In addition to his publishing laurels,Lauinger was Levorsen wrote many papers that stimulated widely recognized as an active oil and gas producer, geologic thinking and added something new to civic leader and churchman. He also served on the methods of oil exploration. But most important, he boards of a number of major oil industry compa- was the author of two textbooks, Geology of Petro- nies, banks and educational institutions, including leum and Paleogeologic Maps, both still widely used his alma mater, Georgetown University. I today.Levorsen was also one of the first geologists to emphasize the importance of the stratigraphic trap of oil and gas accumulation, thus helping increase A. I. LEVORSEN (1894-1965) the search for this type of prospect. In presenting Levorsen with the Oklahoma Oil- Prominent Geologist and Teacher man Award in 1963, Frank Clark said, “I like to think of him as a crusader in the cause of changing rville Irving Levorsen is recognized as orthodox thinking to encompass all possible phases A one of the outstanding international of the occurrence of oil and gas in the earth’s crust.” petroleum geologists. He is remembered for his And Arthur E. Brainerd, when presenting him with influence as an educator, revolutionary explo- the Sidney Powers Medal, said, “His influence will ration thinker, and for the inspiration that he gave long be felt and when these times are history, the others to look for oil in unlikely places. name of Arville Irving Levorsen will stand high There was one outstanding event in his career among the geologists of all time.” I for which he was considered unorthodox, because he was persistent in his efforts to test a prospect considered to be too long-range. His persistence E. W. MARLAND (1874-1941) paid off with the discovery of a major oil field, Fitts. Levorsen was born in Fergus Falls, Minnesota. This Wildcatter Led to Formation After receiving his early education there, he entered of Conoco and the IOGCC the University of Minnesota from which he graduated in 1917 with a degree in mining engineering.In orsomefolks,it’snotenoughtobethefounder 1942,the Colorado School of Mines granted him an Fof asignificantindependentoilcompany.E.W. honorary doctorate of engineering; and in 1947, his Marland was one of those folks.He not only founded alma mater, the University of Minnesota, granted Marland Oil Co., which later became Conoco; he him an honorary doctorate of science.DuringWorld also served as governor of Oklahoma and helped War I, he served in the 27th Army Engineers. establish the Interstate Oil and Gas Compact Com- From 1919 to 1930, Levorsen was a field geol- mission (IOGCC),an entity that ensures the efficient ogist with Greenwood Oil Co., a district geologist recovery of U.S. petroleum reserves. with the Gypsy Oil Co., and chief geologist for the Marland got his start boring for coal in West Philmack and Independent Oil Cos. From 1930 to Virginia and finding oil instead. He soon moved to 1934, he was a consulting geologist in Tulsa, and Oklahoma,where he discovered several large fields in then chief geologist for the Tidewater Oil Co. 1909. In 1945, he became chairman of the Geology De- One of the keys to his success was his willingness partment at Stanford University. In 1947, he became to use geology,and the knowledge of geologists,as an dean of the School of Mineral Sciences,a position he exploration tool. He was the first to realize that by

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adapting core drills used to determine the thickness struction and operation of Kermac 16, the plat- of coalbeds, more oil deposits could be located. form that produced the first oil from a structure He founded Marland Oil in Ponca City, Okla- out of sight of land in the Gulf of Mexico, in homa, and quickly expanded into all facets of the November 1947. The well launched the offshore business in the U.S. and Europe. He was a pioneer oil industry and put Kerr-McGee in the lead in in establishing health and wellness benefits for his offshore drilling technology. employees, even providing housing and health “As a geologist, I have had the rare privilege of insurance while giving employees access to his exten- enjoying the greatest satisfaction that can come to sive personal estate. He also became known as “the anyone—to make a discovery, to find a resource Father of Ponca City” through his generous dona- that has not been tapped, to make it available, and tions to churches, hospitals, education and culture. then to see the impact it makes on the culture and After Continental Oil Co.(later renamed Conoco) the economy of an area and the nation: new jobs, bought Marland Oil, he became an Oklahoma con- new wealth and new hope,”McGee said. gressman, and then governor in 1934. Shortly after By 1965, Kerr-McGee had expanded into an his election, he formed the Interstate Oil Compact integrated natural resources company with inter- Commission, with the governors of six other pro- ests in oil and gas exploration and production; ducing states, because of his concern about compa- refining and marketing; offshore contract drilling; nies’ propensity to overproduce.This helped prevent uranium mining, milling and conversion; coal a possible takeover by the federal government,retain- mining; wood products; chemical manufacturing; ing the states’ authority to regulate the industry. and minerals exploration. Though he ended his life on his lavish estate, A true industry giant, McGee not only guided he never lost the thrill of wildcatting. Kerr-McGee from its infancy as a tiny contract “I have slept in the derrick of many a discovery drilling company, he helped shape the energy well, gone for a week at a time without even taking industry as well. my boots off, wet to the skin in freezing weather,”he “I have to admit, if I had seen the company’s said.“And [I] loved it for the excitement it gave and balance sheet before I came, I might not have the sense of satisfaction that came from tapping a joined,”joked McGee in a 1983 interview. “In the treasure house of nature, filled with liquid gold.” I early 1940s, I decided to close down all of our exploration offices in the Rocky Mountains, Kansas, Arkansas and north Louisiana, and put all DEAN MCGEE (1904-1989) of our money in the Gulf Coast. I just decided to put our money where the rewards would be His Offshore Well was the the greatest.” First “Out of Sight” During his 64-year career, McGee received numerous awards in recognition of his profes- ongtime leader and chairman of Kerr McGee sional, civic and humanitarian contributions. L Corp., Dean Anderson McGee was born in Some include induction in the Oklahoma Hall of Humbolt, Kansas. He earned a mining engineering Fame, the National Petroleum Hall of Fame and degree from the University of Kansas in 1926. With the University of Oklahoma Medical Sciences Hall his partner, Senator Robert Kerr, McGee built of Fame. Kerr-McGee into a prosperous Oklahoma-based He was a strong believer in corporate citizen- independent oil company before World War II. ship and community involvement. During 50 When opportunity beckoned offshore in the years, he supported higher education, medical Gulf of Mexico after the war, McGee and Kerr bet research, the arts and civic improvements of all their company’s future on the new offshore indus- kinds. McGee died in Oklahoma City at the age try. Among their pioneering ventures was the con- of 85. I 1981 1982 1982 Decontrol of Crude Oil Prices. Presi- Oil Boom. Oklahoma crude Penn Square Bank Failure. The oil boom dent Ronald Reagan signed Executive oil reached a historic high of of the 1970s, ignited by the Arab Oil Order 12287, which provides for the $37.60 per barrel. Boycott and fueled by the discovery of decontrol of prices of crude oil and deep gas in the Anadarko Basin, roared to record heights until federal policies refined petroleum products undercut the economics of deep gas exploration. 116 Oklahoma: Where Energy Reigns 05545 104-121_Sec.8:Layout 1 9/19/07 2:41 AM Page 117

drilled in that area, as well as in the Permian Basin JOHN W. NICHOLS (1914- ) and in Oklahoma,”he says. As for Ardmore-born John Nichols, he was Created the First Public Oil inducted into the Oklahoma Hall of Fame and Gas Drilling Fund in 1987. I

n 1950, John Nichols and three partners I formed a small Oklahoma City-based oil BOONE PICKENS (1928- ) and gas company—Blackwood & Nichols— which put together the first public oil and gas Deal-Maker Prompted drilling fund registered with the Securities and Megamergers and New Thinking Exchange Commission. The rationale for this fund? Nichols was a cer- oone Pickens, an Oklahoma State Univer- tified public accountant who for several years had Bsity graduate, was the founding chairman, been doing accounting work for the local oil and president and chief executive officer of Mesa gas companies. Petroleum Inc. and general partner of Mesa Ltd. “My father realized that private investors in oil Partnership. These companies have since merged and gas drilling activities had the ability to deduct with another firm to form Pioneer Natural intangible drilling expenses against ordinary Resources. Today he is chairman and CEO of BP income—a fact not widely known at the time,”says Capital and a prominent Dallas-based private his son, J. Larry Nichols, chief executive of Devon investor in oil and gas and alternative fuels. Energy Co., the company he and his father founded “He was the one who, more than anyone else in 1971. in the 1980s, got investors and oil companies This eventually prompted him, in 1950, to thinking about shareholder value,”said Rosario S. approach wealthy individuals in the top 90% tax (Sal) Ilacqua, vice president and energy analyst for bracket, who had no alternative minimum tax avail- Rothschild Inc. in New York. “He stirred up the able to them.He proposed to them the idea of invest- leaders of the oil and gas industry into thinking ing in a partnership focused on the drilling of oil and that they had to do better, in terms of developing gas wells—and using that vehicle’sintangible-drilling a return on their assets for investors. And if you –cost-deductions to help offset their income tax. look back, there’s a number of consolidations that During time, this tax-advantaged partnership swept the oil industry in the 1980s that can be concept became a highly popular vehicle, Nichols directly attributed to Boone’s actions.” observes. Ilacqua said that on the heels of Pickens’ tender “In fact, during the early 1980s, public oil and offers for Gulf Oil and Cities Service in the 1980s, gas drilling partnerships were raising more than Chevron stepped in as a white knight and $2 billion a year,”he says. acquired Gulf Oil in the largest merger of the The early investors in John Nichols’ drilling-fund 1980s, while Occidental Petroleum played the brainchild did much better than merely gain tax- same role when it purchased Cities Services. deductionbenefits.Thefirstpartnership,whichraised “Pickens also later took a run at Phillips Petro- just under $3.5 million, drilled a highly successful leum and Unocal, and those companies as a result exploratorynaturalgaswellinaportion of NewMex- restructured themselves. Whether you view these ico’s San Juan Basin that later became known as the tumultuous events as good or bad, they clearly Northeast Blanco unit, explains Nichols. forced oil companies to pay attention to where “Subsequently, through a succession of some their stocks were selling—lest they become vul- 15 similar partnerships formed annually by my nerable—and to improve returns to shareholders dad, a great many more productive wells were on the assets they were managing.” 1983 1983 Renewable Energy Sources Prediction. A think Financing State Government. Gross production tank in Washington predicted that by the year tax raises $757.2 million representing 28% of 2000, 50% of the world’s energy resources would Oklahoma tax collections for the year. be met from renewable energy sources.

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Subsequently, betting that natural gas prices would rise through the early 1990s, Pickens carved SIDNEY POWERS out from Mesa Petroleum—the corporate entity he (1890-1932) ran—a master limited partnership, Mesa Ltd. Partnership. Leveraging Mesa Petroleum Inc., he Powers’ Legacy: distributed through the MLP about a billion The Geologist’s Geologist dollars in cash to unitholders. This proved to be an error. hen Sidney Powers died, he “In the long run, persistent low natural gas Wleft such a profound impact prices and the parent’s high debt hurt those enti- on geology and the American Association of ties and Wall Street soured on them.” Petroleum Geologists that the AAPG named its Says Ilacqua, “A Fort Worth banker once said highest award in his honor. about Boone, ‘He has all the guts in the world, Powers was born in Troy, New York. While isn’t afraid of taking on risk, and is scrupulously attending Williams College, his interest in sci- honest.’ He was right.” ence, mathematics and geology grew. He received Kurt H. Wulff, now an independent oil and gas his bachelor’s degree from Williams, a master’s investment analyst in Needham, Massachusetts, from Massachusetts Institute of Technology and and formerly an analyst with Donaldson Lufkin a doctorate from Harvard University. At Harvard, Jenrette in New York, echoes Ilacqua. his teachers said that he was “more conversant “Boone is the figure most identified with with the literature of geology than anyone else at unlocking shareholder value in the oil and gas the university.” industry in the 1980s. He was the initiator to four Powers’ thesis, The Academic Triassic, remains out of seven giant deals involving integrated oil a standout. It was devoted to the stratigraphy, companies during that decade,” he says. structural geology and igneous rocks of the After buying a stake in Gulf Oil in 1983,“Pick- Triassic of Nova Scotia and New Brunswick, ens proposed that Gulf should put its oil and gas Canada. assets into a royalty trust, indicating that such an “His stratigraphy, mapping and structure have entity—of which he was a great proponent— withstood the test of time,” according to a would be worth much more in the stock market brochure on his life from the AAPG. than where Gulf Gulf’s shares were then trading,” Early field work took him to Massachusetts, says Wulff. Nova Scotia, Montana, Rhode Island, Hawaii and To management’s surprise, 47% of Gulf’s Japan. He accepted a job as chief geologist for the stockholders voted for the royalty trust. Subse- Texas Co. (now Texaco) in 1916, working the quently, in early 1984, Atlantic Richfield, headed Texas salt domes, the Honduran coastal plain and up by Robert O. Anderson, took a hostile run the oil potential of southern Oklahoma. at Gulf, which caused tremendous buying in His published conclusions regarding Okla- Gulf’s stock. homa proved to have historic significance, “At that point, Gulf’s management knew it because he was one of the first to advance the the- didn’t have the allegiance of shareholders. Ulti- ory of buried hills and unconformities in the mately, Chevron stepped in as a white knight that search for new oil fields. He deciphered subsur- year, buying Gulf for more than $13 billion.” face formations from logs and cuttings of wells Says Wulff, “If you look at all the takeover drilled for oil and gas. attempts in which he was involved—those on From a study of material shot from a well in Cities Service, Gulf, Phillips and Unocal—he the Healdton Field in Oklahoma, he recognized effectively shifted the focus of the managements that, on top of that structure, the Pennsylvania to shareholder value. After his hostile runs at rocks rested directly on Ordovician rocks. In those companies, industry management paid 1917, he published his conclusions and for the much more attention to their stockholders.” first time, he gave to the profession the concept of Wulff also points out that Pickens is the father buried hills. As a result of these findings, came of the modern-day version of the oil and gas roy- the later extensive use of drilling cuttings. alty trust.“In hindsight, it’s fair to say that royalty In 1917, he became an assistant geologist for trust investors have done better than investors in the U.S. Geological Survey, to lead a field party most producing companies.” I engaged in structural mapping of the Osage

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Nation in northeast Oklahoma. Then, he spent a child, Salvatori grew up in New Jersey and one year in the Army stationed in France during attended high school in Philadelphia. He World War I as an officer “for special geological obtained a B.S. degree in electrical engineering duty.” He was discharged in 1919 and, from from the University of Pennsylvania, then then on, his career finally centered on petroleum obtained a position at Bell Telephone Laborato- geology. ries in 1923. Bell Labs sent him to earn an M.S. in It was at this time that Powers became associ- physics from Columbia University. ated with Everette L. DeGolyer, who had organ- In 1926, Salvatori saw an ad on a billboard for a ized Amerada Petroleum Corp. He held the job in the Oklahoma oilfields and headed west. position until 1926, when he was designated There he met John Karcher, who was assembling a Amerada’s consulting geologist for life. crew to test “seismic method,” a new way to chart Amerada enjoyed considerable success during underground structures by creating and measur- those years, thanks most to Powers’ geology work. ing shock waves traveling through the earth. Salva- His precise reports became legendary. He was tori became Karcher’s new crew chief and went on given a free hand in his pursuit of geology and in to prove the new method in field tests. He was then his publication of papers dealing with the science sent to Los Angeles to head up the western opera- of geology. He found time for several projects tions of Karcher’s new company, which eventually even while working, including the preparation of became Texas Instruments. the Oklahoma Geological Map in 1926. In 1933,during the Depression,Salvatori took out Powers was one of the founders of the AAPG a loan to start his own exploration company, West- and was the 14th president. He was a frequent ern Geophysical. It grew from a $9,000 initial contributor to the AAPG Bulletin, writing 124 capital investment to a multi-billion-dollar leader articles, in addition to the many works he helped in the exploration industry. In 1960, he sold the edit, rewrite or even ghost write under a young company to Litton, ran Grant Oil Tool and served author’s byline. on Litton’s board of directors. Helping young geologists was a Powers trade- In 1964, Salvatori arranged for Ronald Reagan mark. He single-handedly ran an informal em- to speak at a fundraising dinner for Barry Gold- ployment bureau based on his contacts; chief water, and that speech launched Reagan’s political geologists consulted him whenever they needed career. Salvatori led a small group of men workers, according to the AAPG brochure. who supported Reagan through his successful Powers died in St. Louis in 1932 at the age of campaigns for governor and president acting as 42, following an operation. In 1943, the AAPG his “Kitchen Cabinet.” created the Sydney Powers Award, its highest Salvatori gained prominence as a philanthro- honor, in his memory. I pist for innumerable educational institutions, cultural and civic groups, and conservative political causes. The Salvatori Foundation has also HENRY SALVATORI endowed programs at the Claremont Institute and the Heritage Foundation, which awards (1901-1997) the annual $25,000 Salvatori Prize for American Seismic Reflections Citizenship. I

estern Geophysical was W founded in 1933 by Henry TOM SLICK (1883-1930) Salvatori, one of the pioneers of the seismic reflection method. He served as president King of the Wildcatters of the company until 1958, and under his leadership, Western Geophysical grew from a one-man, legendary oil man, Tom Slick was an one-truck operation to the leading seismic com- independent with vast holdings in Okla- pany in the world. He continued as an adviser to homAa, Texas and Kansas. A town, a formation subsequent presidents even after his retirement and a field were named after him. In March 1987, in 1968. Western Geophysical is now a division of A U.S. postage stamp was issued in honor of the Baker Hughes. 75th anniversary of the well that opened the huge An Italian immigrant who came to the U.S. as Drumwright-Cushing Field. Slick was the man

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The Admiral

At the end of World War II, John Kirkpatrick returned to Oklahoma City from active duty in the Navy. He organized the Kirkpatrick Oil Co., drilled a succession of productive oil wells and joined his wife in a life-long quest to spend their fortune for the benefit of others. During the 1950s, the Kirkpatricks participated in virtually every endeavor to promote fine arts in Oklahoma City. They built a structure for the Oklahoma City Museum of Art, funded an expansion of the performing arts venue at Oklahoma City University, and promoted Lyric Theater and an annual series of musical theater. The Kirkpatricks led fundraising efforts for the Oklahoma City Zoo, the Oklahoma Medical Research Foundation and the National Cowboy Hall of Fame. Almost single-handedly, John funded and largely designed the Kirkpatrick Center, which included a science-technology museum called Omniplex. Through the efforts of their family, the Kirkpatricks are still giving to causes such as the Reynolds Oklahoma City Museum of Art and the Oklahoma History Center.

who selected the site and got it drilled. drilling and selling that in 1929 culminated in a His office was his buggy during his early days huge deal. Slick sold his Oklahoma holdings to of the Mid-continent oil field about 1910. Even Prairie Oil and Gas Co. for $35 million—the after great success brought him to a posh Okla- largest sale of oil properties by an individual homa City office suite, he remained hands-on, yet made in the U.S., according to King of the with impromptu deals brokered on street corners Wildcatters: The Life and Times of Tom Slick, by and over the telephone. Well into the 1920s, he Ray Miles (1996, Texas A&M University Press). was the last of a breed that had no stockholders The field was producing 35,000 barrels of oil or board members. per day at the time of sale. Slick began his career in the oilfields of west- Slick was a pioneer spokesman for the orderly ern Pennsylvania, where he was born only 25 regulation of the industry as well as an early miles from Colonel Drake’s Titusville well. His advocate of unitization for maximum efficient father was a contract driller. In 1903, he headed recovery. As a result, the Oklahoma Corp. Com- west with his father and brother to the Kansas mission issued its first order to assume regula- fields to work as drillers. tory authority over the oil industry in 1914 in In 1904,he moved to Oklahoma in an attempt the Cushing Field. to locate oil; after poor results, he left in After the mammoth Cushing sale, the Okla- 1907 to try his luck elsewhere. But he returned homa City Field was discovered. He became the to Oklahoma, determined to some day be a largest operator there, in the largest oil field in millionaire. the state.He had 30 wells in the field,with more In 1912, he received the financial backing to than 200,000 barrels per day productive capacity and drill one more well, which turned out to be the 45 wells drilling. Ironically, his largest oil well, discovery well for the vast Cushing Field, which the No. 1 Campbell, was completed for 43,200 by 1970 had yielded 450 million barrels. barrels of oil per day the week after he died in What followed was a frenzy of acquiring, August 1930. I 1983 1984 1985 The Personal Computer. In January, Oil Production’s Last Peak. Annual oil Technological Innovator. Marvin M. Johnson of Time magazine named its 1982 production in Oklahoma reached its Phillips Petroleum Co. was honored for discovering “man” of the year—the personal last peak at about 475,000 barrels. a process called metals passivation. About half of computer. the gasoline refined in the U.S. is produced using this process, which allows refineries to produce gasoline from low-quality crude oils.

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Drilling activity in the Woodford Shale Play in Southeastern Oklahoma continues to expand. In this aerial photo, taken by Newfield Exploration Mid-Continent in spring 2007, you can see five or six drilling rigs and completion operation in a two-mile area. 05545 122-137_Sec.9:Layout 1 9/19/07 2:50 AM Page 122

The OERB

OERB Executive Director Mike Terry presents Assistant Director Mindy Stitt with a plaque honoring her as “First Past and present OERB board members at the 10-year board reunion in 2003. Lady of the OERB” in 2004.

OERB and the Oklahoma Corporation Commission (OCC) celebrate Virginia Krumme, wife of OERB their 6,000 site restoration. From left to right: OERB Environmental co-founder Harlan Krumme, with Director Steve Sowers, OERB Executive Director Mike Terry, OCC OERB co-founders Pete Brown Pollution Abatement Manager Tim Baker, OCC Commissioner Bob and G. Carl Hale. Anthony, OERB Chairman Steve Agee and OCC District 2 Manager Tony Cupp.

OIPA President Mickey Thompson (second left), OERB Assistant Director Mindy Stitt (center) and OERB OERB co-founder Harlan Krumme (left) Executive Director Mike Terry (second right) with finalists in the 1999 Petroleum Challenge quiz show. with former OERB board member Tom Hull.

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Section 9

OERB’s celebration of 1,000 sites restored in Seminole County.

OERB Chairman Mike Cantrell at one of OERB’s first news conferences in 1995.

OERB Executive Director Mike Terry, Board Member Pete Brown, Gov. Brad Henry and Secretary of Energy David Fleischaker.

Former OERB board members receive plaques of appreciation in 2003. From left to right: G. Carl Hale, Randy Foutch, Mike Cantrell, Jim Palm, Henry “Boots” Taliaferro, Pete Brown and Paul Crow.

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OERB, Oklahoma Oil and Gas Industry is Family Affair

By Kristi Allison, Former Communications Director, Oklahoma Energy Resources Board

Many Oklahoma towns and cities boast well-known “oil families.” Two of those, the Terrys and the Cantrells, have been friends and business allies for decades. Both families had significant impact on the formation and development of the OERB.

father, son and granddaughter and world. It is easy to understand the passion for step out of the car on a lease road an industry that has provided more than a living, between storage tanks and a but a way of life, for three generations within this Apump jack. They each stop to observe the well site one Oklahoma family. and appreciate the sounds—and the smells—of “I have been around the oil patch since I was their surroundings. Almost in unison, the son and five months old, and I am honored to be a part of his daughter say,“Don’t you just love that smell?” something that has been so good to me, my family The daughter adds, “I can remember as a little and Oklahoma,” says Jack Terry, an independent girl my dad coming home from the oilfield with producer from Konawa.“I am so proud of my son my grandpa. I would race to the backdoor to give and granddaughter for what they have done in the him a hug as he walked in. My dad always smelled industry. Mike could have gone another direction, like the oil patch. To this day, I love that smell.” and did for a while, but he couldn’t stay gone for Obviously, for veteran Seminole County oilman long. He came home and we started a business. I Jack Terry, his son, Mike Terry, and Mike’s daugh- never had so much fun in my life, as I thoroughly ter, Michelle Terry Webster, absorbing the sights, enjoyed the closeness Mike and I experienced. It smells and sounds of the oil lease that day was not was great.” the first time they had been to the “oil patch.”And The Terry tradition in the oil and natural gas this trip, like so many before, conjures up memo- business is not unique in Oklahoma. Many families ries and feelings well beyond the economic realities share the same legacy across several generations, of this oil lease and its impact on the state, country including Jack Terry’s neighbors from nearby Ada. 1986 1986 1989 Natural Gas Deregulation. U.S. Secretary of Oil Bust. The price of Berlin Wall dismantled. The dismantling Energy John Herrington asks U.S. Congress Oklahoma crude plunged of the wall was allowed by the crumbling to open access to interstate natural gas in July to $11.15 per barrel. Communist regime of East Germany in a pipelines and lift all remaining controls on vain attempt to mollify its citizens. East natural gas prices. and West Germany soon thereafter were unified as a democratic nation.

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With the recent formation of Cantrell Mike Cantrell (right) Energy Inc., 27-year-old Blake Cantrell is co-founder of the joins his dad, Mike, and grandpa, Pete, Oklahoma Energy representing three generations of Cantrells Resources Board who have carved out a living in the southern and a long-time Oklahoma oilfields. independent producer “My dad was a driller, and I left home and energy industry at 15 to join the ranks as a roughneck. political leader. He is Sixty-two years later, I am still a rough- former chairman of neck,” says Americana Energy President the OERB and the Pete Cantrell. “My son Mike got his first Oklahoma Inde- pumping job at age 11, and I had to make pendent Petroleum a deal with the highway patrol to let him Association. His dad, drive the truck. I can’t speak for Blake, but Pete, and son, Blake, I didn’t give Mike any choice. He was also make their living going to work in the oil business.” “For me, the years of blood and sweat have in the southern Both older Cantrells say they stayed in the oil become more than a job,” Jack Terry says. “The oil Oklahoma oil patch and natural gas business through the industry’s ups patch is now my passion.” around their homes and downs because it provided their families with Sharing the same deep feelings for the industry, in Ada. the life they wanted to live, but mainly because it Pete Cantrell and Jack Terry passed on their passion was all they knew. for the oil patch to their sons, both named Mike. All photos are courtesy of the OERB “I tried many other things, but nothing could Years later, the younger Cantrell and Terry would support my family like the oil patch,” says Pete emerge among the most instrumental Oklahomans Cantrell. “From a young age, I never had a doubt in the formation and growth of the nation’s first oil where my life would lead.” and natural gas education and environmental restoration program. The Oklahoma Energy Resources Board was the brainchild of several oil and natural gas leaders, but few would argue the original, and long-lasting, impact that “Mike & Mike” would exert on the ground-breaking program. Mike Cantrell says several oilmen across the state knew something had to be done to preserve the industry and combat the oil industry’s long-standing negative perception. “We had a good idea 10 to 15 years before we got anything done, because we The Terry family is three generations deep in the Oklahoma oil and gas didn’t have a plan,” he says. “Success isn’t industry. Jack Terry (left) has been involved in the business, as a producer obtained without a well-laid plan. So, the and service company owner, most of his 70-plus years. His son, Mike, is first effort to collect a voluntary donation president of the Oklahoma Independent Petroleum Association and formerly for an industry-wide public relations executive director of the Oklahoma Energy Resources Board. Mike’s daughter, effort failed miserably. But if that first try Michelle Terry Webster, is a petroleum land professional in Oklahoma City. had not failed so big, we would not have 1989 1989 1989 Chesapeake Energy. Founded by Aubrey New Well Completions Hit 45-year Coalbed Methane. Coalbed-methane McClendon and Tom Ward of Oklahoma City, Low. U.S. President George H. Bush production began in Oklahoma. Chesapeake Energy began its growth as a signs natural gas decontrol legislation. By 2005, about 3,500 such wells had major domestic producer of natural gas. Significant natural gas discoveries are been drilled in the state. made in the Arkoma Basin.

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OERB restoration of a well site in Tallgrass Prairie in 2005. State producers fund restoration by donating a few cents from the oil and gas produced.

the heritage of failure, which is important. We at had dreamed for years and years about a program least knew what did not work.” like this. To say they were passionate would be an Following the initial attempts, Mike Cantrell understatement. They loved the concept. They were and independent producer Pete Brown decided a like a bunch of race horses—they couldn’t wait to voluntary checkoff similar to the beef and wheat get started.” programs would be more effective. The OERB founders utilized creativity and out- “We drafted the legislation and traveled all over of-the-box innovations to put OERB’s grand mission the country trying to sell the idea of a national pro- to work. Initially funded by a two-cent voluntary gram,” Cantrell says. “We learned a very important assessment on crude oil production, the OERB lesson. We can’t do anything until we have the sup- almost immediately started bringing the vitality, port of the entire industry. So we dropped our idea contributions and environmental responsibility of for federal legislation.” the Oklahoma oil and natural gas industry to light Fortunately for the industry, Cantrell, Brown through positive action and education. and other industry leaders involved in the crusade “I have asked myself numerous times why this had the determination and political influence to program has worked so strongly in Oklahoma and return to Oklahoma and develop a statewide pilot been so difficult in other places,” Mike Cantrell program. It was supported by the independent says. “The reason is we, including independents, producers, but met some opposition among the majors and royalty owners, put all differences aside major oil companies. when we enter the OERB boardroom and have a “Once again, we went back to the drawing single focus of doing what is best for all segments board,” Cantrell says. “This time we included of the industry.” the majors in our discussions, as well as royalty That focus has allowed the OERB to not only owners. Everyone finally came together, and we create a turnaround in the public’s perception of emerged with a plausible program that we could the industry, but also to impact thousands of all be proud of and that our lawmakers could Oklahomans’ lives through the environmental support and enact.” and education programs, both of which have So, in 1993, with the help of key elected enjoyed remarkable success since the OERB’s officials, especially State Representative Kevin infancy. However, despite all the accomplish- Easley and State Senator Stratton Taylor, the ments, the OERB is far from finished, and each OERB became law. generation understands the necessity to support “I am very proud of Mike and his devotion to the OERB’s mission. making the OERB happen,” Pete Cantrell says. “As a part of the younger generation of oil and “Never has a piece of legislation been more valuable natural gas producers, I know it is my obligation to to our industry, and I think the fruits of his labor are help promote the most efficient energy source on paying off.” the planet and continue the education process From the start,the OERB board,comprised of 21 to help ensure the future of our industry,” Blake oil and natural gas industry representatives,was very Cantrell says. involved.Mike Terry,OERB’s first executive director, Michelle Terry Webster says she hopes her says they were so interested in making the OERB a children will also have a passion for the industry. success because it was the first time an oil and gas “I want them to have the same appreciation as all checkoff program had ever been tried. the generations of Terrys do for the hard work and “They were very proud of the fact that Oklahoma discipline of those involved in the oil patch. Taking had received the support from the legislature to get a line from my grandfather, there is nowhere else it done,” Terry says. “Many of the industry’s leaders I would rather be.” I

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Oklahoma Oilmen —and Women—Proactive in Telling their Industry’s Story

By Kristi Allison, Former Communications Director, Oklahoma Energy Resources Board

Student programs, industry image enhancement and environmental restoration are linchpins for the nation’s first, and most successful, oil and natural gas education effort.

ore than a decade ago, oil and Oklahoma oil and natural gas industry to light natural gas industry leaders in through positive action and education. But the Oklahoma had a vision to dem- full-blown impact of the OERB changed dramat- Monstrate their concern for the state of Oklahoma ically three years later when the Oklahoma and educate the public about the contributions Legislature changed the funding mechanism of the oil and gas industry. Today, the Oklahoma from a voluntary assessment on crude oil alone Energy Resources Board (OERB) is doing all that to include natural gas. and more. “Changing the assessment was the single-most The motivation for the OERB came in part as significant step ever taken by the OERB. It was a result of research concluding the oil industry absolutely brilliant, and I give OERB co-founder was second only to the tobacco industry in Pete Brown much of the credit,” says Mike Terry, terms of having the worst public image, and the the OERB’s first executive director. “A lot of public viewed the oil industry as one of declin- board members wondered if the time was right, ing economic importance with little regard for but Pete and other less skeptical board members the environment. saw natural gas was more and more important to “We wanted to do something other than just the state of Oklahoma. The funding for OERB sit around and talk about our image,” says Mike was going to suffer if the natural gas element was Cantrell, one of the OERB’s founding fathers not added to the mix.” and past chairman. “So, we did. With the help And it changed things dramatically. The of Oklahoma’s legislature, our vision became OERB’s funding more than tripled, which a reality.” allowed the OERB to expand its programs. In 1993, the OERB—the first agency of its “When I look back to when the funding kind—was born and began to work toward its changed, I think what a visionary board we had,” grand mission of bringing the vitality, contribu- Terry says. “In 1996, they saw natural gas had tions and environmental responsibility of the become the energy star in the state of Oklahoma.

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Now,that’s not to say crude oil is not still impor- taking care of past issues. It is important that we tant; but we are the second-largest natural as an industry take responsibility and do some- gas producing state in the country. Bringing thing tangible that makes a difference,” Cantrell all the different stakeholders together completed says.“This was a very smart thing for the industry the package.” to do from the start. It was, and continues to be, The essence of the OERB can be compared the right thing to do, but it is also important as it with a four-legged stool—environmental restora- gives Oklahomans a visual representation of our tion of abandoned or orphaned well sites, public goodwill. The environmental program is still the education through media outreach, education of hallmark of the organization.” students and conservation education. The idea was simple and innovative as today’s oil and natural gas producers and royalty owners Environmental Restoration imposed a voluntary assessment on themselves to “The environmental program has filled a void in clean historical problems that occurred years ago when the environment was not a priority. In fact, J. J.“Jake” Simmons Jr. more than $40 million of voluntary contributions has restored more than 8,000 abandoned well Throughout much of the 20th century, African sites since 1995, bringing the land back to pro- Americans were rarely found in the ranks of petrole- ductivity and re-establishing the livelihood and um industry leaders. This was the norm throughout family legacy the land provides. American society. One individual who defied the “Although the current oil and natural gas odds was J. J. “Jake” Simmons Jr. of Muskogee. industry did not create the damage of an unreg- Of Creek Indian and African American ancestry, ulated era, producers and royalty owners are now Simmons was educated at Booker T. Washington’s taking full responsibility for past actions by famed Tuskegee Institute in Alabama. He began his providing a means to beautify Oklahoma’s land- oil industry career when oil was discovered on the scape,” said OERB Environmental Director 160-acre allotment he received as a citizen of the Steve Sowers. Creek Nation. He became a lease hound and was “Working with the Oklahoma Corporation especially effective dealing with Creek Indians and Commission and Beacon Environmental Con- African Americans. sulting, the OERB is providing a practical and By the end of the 1930s, Simmons was operating economical remedy for environmental problems in Oklahoma, Texas, Louisiana, Arkansas and Kansas, caused by orphaned well sites, most of which and he was dealing with industry luminaries such as includes hauling off equipment and pipe, burying Henry Sinclair, William G. Skelly and Frank Phillips. By concrete and amending saltwater scars. For the the 1960s, Simmons had become an internationally first time for many landowners, the land is known figure in the industry by serving as in interme- returned to a useable state, generating more diary between major oil companies in the U.S. and income from the productivity of the property. the governments of emerging nations in Africa. Terry says the strong commitment to Okla- Simmons also was an active leader in the civil homa’s land came from a change in the industry. rights movement in Oklahoma, serving as president Unlike the wanderers of the past, most of today’s of the Oklahoma Chapter of the National Association producers are rooted in Oklahoma with no plans for the Advancement of Colored People and playing to leave. a prominent role in desegregating his hometown of “Because we are Oklahomans who are living, Muskogee. Simmons in 1969 became the first working and raising our families here, we will African American to be appointed to the National continue to be stewards of the natural resources Petroleum Council. that make this a beautiful state and ensure we leave a positive legacy behind,” Terry says. 1990 1991 Natural Gas Production Peaks. Oklahoma natural gas Persian Gulf War. The United States and its production reaches an all time high of 2.26 trillion cubic feet. allies defeat Iraq in the Persian Gulf War, Gross production taxes increase, but represent only 11.4% of re-establishing the independence of Kuwait. tax collections because of the state’s economy diversification.

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The Sutterfield farm in Okemah, before the OERB’s cleanup.

The Sutterfield farm in Okemah, after the OERB’s cleanup. The OERB has restored more than 8,000 abandoned well sites.

1993 OERB Created. Leaders representing Oklahoma's oil producers and royalty owners, working with the Oklahoma State Legislature, created the Oklahoma Energy Resources Board. Oklahoma's natural gas producers joined soon afterward. The organization has restored more than 8,000 abandoned well sites in Oklahoma, with programs funded by a voluntary assessment paid by royalty owners and producers. The organization also has reached more than 1 million school children with education programs relating to the oil and gas industry.

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Landowner Robert Sutterfield at the site of OERB’s cleanup.

industry was voluntarily cleaning up abandoned well sites, but also that the industry was returning the land to a usable state. Emotions ran high as the landowners explained how the cleanups brought back heritage and family legacy. “The series of TV spots featuring landowner testimonials really began to move the needle on our research and change the public’s perception of the industry,” Terry says. “We no longer had to tell the story ourselves but could rely on those Oklahoma landowners The late Deacon Roy The environmental program remains a top who were being positively impacted by the Harris of Ebenezer priority for the OERB, with at least 50% of its program to do it for us. This presented a new Baptist Church in budget allocated to restoring abandoned well level of credibility to the program.” Oklahoma City. Deacon Harris starred sites. Although the OERB has recently completed Moving forward, the most recent multi- in one of the OERB’s its 8,000th well site restoration, this is still just faceted outreach program is designed to high- most memorable TV the beginning. The Oklahoma Corporation light the various contributions Oklahoma’s spots after the OERB Commission estimates there are between 25,000 oil and natural gas industry makes to the state restored a patch of and 80,000 abandoned well sites left. as well as the nation. The campaign is titled land, allowing the church to build a “Oklahoma Proud—Advancing our state. playground. Public Awareness Empowering our nation.” “Oklahoma Proud” The environmental program worked to establish emphasizes the significant impact of the credibility with the public thanks to the imple- state’s oil and natural gas industry. mentation of an awareness campaign, which “As Oklahomans, it’s important for us to allowed the industry to perform the clean-up understand the economic impact that the oil and efforts and then utilize media to tell the public. natural gas industry has on this state and how Known as perhaps the most successful state-level this industry affects the future of Oklahoma,” institutional public outreach campaign created, says OERB Executive Director Mindy Stitt. “The the OERB capitalized on the emotional aspect oil and natural gas industry contributes billions of the clean-up program. The advertising effort of dollars to the state in gross production taxes incorporated the success of the industry’s for education, roads, bridges, wildlife conserva- restoration program, as told by those who expe- tion and many other programs that make rienced its benefits first-hand. The focus of the Oklahoma a vibrant state. We need to make sure plan was not only that the oil and natural gas Oklahomans understand this.”

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OIPA’s Leadership Spans Decades, Changes Legislation

he Oklahoma Independent Petro- more than two decades. Leaders among the new leum Association (OIPA) has a long group were Kent Harrell and Bland Williamson of and storied history as the voice of the Tulsa, Mike Smith and Dick Bogert of Oklahoma stTate’s independent crude oil and natural gas pro- City, Pete Brown of Kingfisher, Mike Cantrell of ducers. Organized in 1955 by a small group of Ada and Harold Hamm of Enid. independents, the OIPA relied on the strong and In 1991, with oil and natural gas prices at record active leadership of a handful of independents lows, the OIPA turned to another journalist/ across the state to survive in its formative years. public relations professional to lead the organi- In its early years, the association operated with zation. Mickey Thompson, a newspaper editor a small staff and existed primarily to defend the and political activist, was hired as president of state’s small crude oil producers (natural gas was the organization. Thompson and OIPA lobbyist still considered a nuisance by-product of oil Richard Hutton guided the organization through production until the 1970s) against unfair pricing the most controversial, and successful, legislative practices by major oil company crude purchasers/ era in its history. In a 10-year span, the OIPA was pipelines as well as unfair or excessive govern- successful at the Oklahoma capitol in creating leg- mental regulation. The early-day OIPA benefited islation to curb waste in natural gas production, from the strong leadership of oilmen such as providing innovative tax incentives for exploration Roy Woods of Oklahoma City, Tulsa drilling and production, and, perhaps most significantly, contractor Ed Smith and Okmulgee producer creating and expanding the groundbreaking Sam Viersen Jr. Oklahoma Energy Resources Board (OERB). The organization flourished as the oil and nat- The past decade has seen the OIPA expand ural gas industry began to prosper in the 1970s. its staff, and services, to include a much more Industry leaders during those days included Lew significant focus on regulatory affairs and non- Ward of Enid, Tom McCasland of Duncan, Ray advocacy services to its membership, including Potts of Oklahoma City, and Jack Graves and communications, networking, capital formation Harrison Townes of Tulsa. and more. After a 13-year tenure as executive direc- The OIPA emerged as a force on the Oklahoma tor of the OERB, Mike Terry joined OIPA early political scene during the 1980s under the leader- in 2007 as the association’s eighth staff leader. ship of Steve Kelley, Tulsa oil and gas journalist. The current OIPA Executive Committee includes: Kelley’s deft touch in lobbying the state legislature Chairman—Joh Pilkington, Muirfield Resources, and his ability to recruit new leaders into the asso- Tulsa; Vice-Chairman (West)—Mike McDonald, ciation would prove to be lasting legacies of his Triad Energy, Oklahoma City; Vice-Chairman decade-plus at the OIPA staff helm. (East)—Pat Cobb,Toklan Oil,Tulsa; Secretary—Lee During times of industry feast and famine, the Boothby, Newfield Exploration, Tulsa; Treasurer— OIPA battled many key issues, including highly Jeff McDougall, JMA Resources, Oklahoma City. contentious “take or pay” legislation and litiga- The current OIPA staff includes: President— tion. The oil boom of the late 1970s brought a raft Mike Terry; Senior Vice President, Governmental of punitive federal legislation, including the so- Affairs—Bruce Stallsworth; Vice President, Regu- called Windfall Profits Tax. latory Affairs—Angie Burckhalter; Vice President, This legislation was the impetus for the emer- Development—Matt Thompson; Controller— gence from the ranks of the independents of a Sunny Allen; Communications Director—Cody group of oil and gas“young lions”that would shape Bannister; and Director of Special Projects— the organization’s policy and political positions for Kim Kohler. I

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Representative The OERB’s first effort to get Danny Morgan energy education in Oklahoma’s presents a classroom was a program called Citation of Commendation Petroleum Professionals in the to McKenzie Classroom, or Petro Pros. The Petro Schooley, a Pros program is a hands-on, inter- finalist in the active presentation that teaches stu- OERB’s 2007 dents about the earth and fossil Well Site Safety Poster Contest. fuels. Industry volunteers use rocks, fossils, core samples and geological maps to show energy experiments and explain basic concepts about the exploration and production of oil and natural gas. Michelle Terry Webster, a Petro Student Education Pros volunteer and the first female to graduate Continuing with the theme of education, the from the University of Oklahoma energy man- OERB saw a serious need to develop science-based agement program, says she grew up in a small, energy education programs for the classroom. oil-dominant community, but never learned The OERB’s education programs developed in a anything about the oil and natural gas industry natural progression beginning with research. in school. “The oil and natural gas industry contributes billions of dollars to the state in gross production taxes for education, roads, bridges, wildlife conservation and many other programs that make Oklahoma a vibrant state. We need to make sure Oklahomans understand this.” —Mindy Stitt, OERB Executive Director

After examining science text books from around “ If I hadn’t grown up in the oil patch, I would the country, the OERB found there was very little have had no idea about the great potential of information about energy, and a large portion of careers available. I have served as a Petro Pro the information on oil and natural gas was nega- and get a great feeling when the students are tively biased, even in Oklahoma. A 1995 survey of enthralled in what I am saying and are paying Oklahoma middle school science teachers enough attention to ask questions. I think the revealed nearly two-thirds of the teachers believed student education is the most important compo- fossil fuels would not be the primary form of nent for the future of the industry.” energy by the year 2020. Since the Petro Pros program, the OERB has “It was unimaginable that teachers, those edu- added several education components including a cating our students, believed alternative sources well site safety program; curricula for elementary, would provide the majority our energy needs,” middle and high school students; college scholar- says Stitt. “Because of this research, the OERB ship program; and career tech training program. began the effort of educating Oklahoma students “We started at the elementary level and worked about the energy industry and its role in our way up. We now have energy education pro- Oklahoma and the nation.” grams for students in K-12, college and beyond,” 1995 1997 Murrah Building Bombing. An act of terrorism in Oklahoma City destroyed The Potato Hills Field, discovered in the Alfred P. Murrah Building and numerous other buildings, killing 169 southeastern Oklahoma by the GHK Co., people and injuring at least 850 others. The response to the man-made quickly became a highly productive disaster, seen around the world on 24-hour-a-day television, became gas field. known as the “Oklahoma standard.”

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Stitt says. “For me, starting on the ground floor “There is a huge demand for tech positions and seeing where we are today has been like and OERB’s PetroTech program addresses this watching a dream unfold.” need,” Stitt says. “Tech positions do not require a Because of the high demand for industry pro- college degree, but they do require training, and fessionals and the threat of mass turnover in an this is a way for individuals who do not have the aging industry, the OERB’s two most recently desire or financial ability to go to college to get a established programs focus on encouraging good paying, stable job.” interest in petroleum careers. In 2005, the OERB This year, the OERB reached its 1 millionth established a college scholarship program for student through energy education programs and students majoring in petroleum engineering, plans to reach millions more in the future. geology and energy management. In 2007 alone, “Energy education is important because kids the OERB distributed more than $450,000 to 150 need to know the history of our state, along with students at the University of Oklahoma, the present and future opportunities this indus- Oklahoma State University and Tulsa University. try can offer them,” Stitt says. “We will continue The OERB Petroleum Scholar program also to let young Oklahomans know that the future is coordinates internship, mentoring and executive bright for them right here in this state. We will Q&A opportunities. continue to tell the story of our high-tech indus- “Perhaps the greatest challenge facing the try and opportunities for innovative thinkers.” domestic oil and natural gas industry in the next decade is the enormous need for capable, tech- Conservation Education nically educated and trained employees,” Stitt The fourth and most recent addition to the prover- says. “OERB’s scholarship program for high bial stool is conservation education. The OERB is school and college-aged youth leverages the educating consumers that conservation will not industry’s commitment to building a strong workforce, for today Susan Jacobs and in the future.” (left), a teacher Stitt says the scholarship pro- at Glenwood Elementary in Enid, gram has helped the OERB’s and Tina Jobe education efforts come full-circle. (right), a teacher “A good example of this is one of at Angie Debo our scholars who mentioned in his Elementary in scholarship application that he Oklahoma City, view an exhibit at became interested in geology after the ConocoPhillips going through OERB’s Fossils to Museum in Fuel curriculum in elementary Bartlesville during school. To see the impact the OERB the Oklahoma has had in his life is really fulfilling.” Energy Resources Board’s sixth annual In 2007, the OERB created its Educators’ Retreat. PetroTech program, which trains individuals to become geo techs, land techs and engineering techs. The OERB is working with Francis Tuttle Technology Center in Oklahoma City to train people who are interested in a career in the industry. 1999 2001 May 3 Tornado. Moore, Oklahoma City, and other communities September 11. Hijacked jets crashed into the World in Central Oklahoma were hit by an F5 tornado considered to Trade Center and the Pentagon, causing the Twin Towers have been one of the strongest and most destructive tornadoes to collapse and killing about 3,000 people. in history. The tornado had an approximate recorded wind speed of 318 mph. It was one of numerous tornados that touched down in the state that day.

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only save money on energy bills, but also be a way educating the people about conservation, we are to conserve nonrenewable natural resources. showing people outside our industry that as our “Oklahoma is blessed because we have this needs grow for more and more energy, not only tremendous abundance of energy, but there is in the United States but around the world, we only so much energy left for us to produce,” says have to become better stewards and start getting Terry. “It is our responsibility, not only as oil and seriously involved in conservation.” natural gas producers, but also as members of The OERB’s conservation education program the entire community, to be good stewards. By includes TV spots and a section on oerb.com

OERB Past and Present Board Members

Terry Adamson—Amoco Production Co. Brian E. Engel—Devon Energy Corp. J. C. “Chris” Luppens—Phillips & BP America Production Co. Petroleum Co. Randy Foutch—Colt Resources Mark Allen Aebi—ConocoPhillips and Lariat Petroleum Bruce E. McIninch—Marathon Oil Co. Steven C. Agee, Ph.D.—XAE Corp. William “Bill” Gifford—Duke Energy Field Leland McVay—Caleb’s Resources LLC & Agee Energy LLC Services L.P. & DCP Midstream Jim Medico—Sunoco Logistics LLC Bob Alexander—Alexander Energy Corp. G.C. “Chip” Gill—Vastar Resources Inc. M. L. “Mark” Menghini—Phillips Andrew M. Armpriester—Chevron North Thomas Goresen—Kerr-McGee Petroleum Co. American Exploration & Production Co. & Anadarko Petroleum Mike Morgan—Koch Industries Inc. Ron Baker—Mobil Exploration J. M. “Jack” Graves (deceased)— & Producing U.S. Inc. Calumet Oil Co. Rodney Myers—Apache Corp. and Latigo Petroleum Inc. Dewey F. Bartlett Jr.—Keener Oil & Gas Co. Paul Hale—Bison Drilling LLC Gary Newberry—Marathon Oil Co. James Bass—Apache Energy Corp. G. Carl Hale (deceased)—JMC Exploration and Drilling Co. James “Jim” Palm—Crescent Energy H. L. “Lloyd” Biggers Jr.—Phillips Petroleum Co. Harold Hamm—Continental Resources Inc. Tom Price Jr.—Chesapeake Energy Corp. Richard D. Bogert—BOGO Energy Corp. Sue Ann Hamm—Continental Resources Inc. Dan Schooley—Lumen Energy Corp. Lee Boothby—Newfield Exploration Mike Hanson—Phillips Petroleum Co. Ed Shipp—ExxonMobil Production Co. Mid-Continent Inc. Suzette Hatfield—Rio Dinero LLC Steve Slawson—Slawson Exploration Inc. Pat Brazan—Conoco Inc. J.D. Holbird—ONEOK Resources Co. Carl Michael Smith—Lawrence & Ellis E. Richard “Dick” Brewster—Amoco David House—Primary Natural Resources Inc. Production Co. Jim Stafford (deceased)—National Association of Royalty Owners Ron Howell—Koch Industries Inc. Richard Bross—Louis Dreyfus Natural Gas Corp. Tommy Hull—Hull Oil Co. Bob Sullivan Jr.—Sullivan & Co. Jack Browder—Bratco Operating Inc. Ronnie Irani—Dominion Exploration & John Sutey—Conoco Inc. Production & RKI Exploration & Production F. W. “Pete” Brown—Brown & Borelli Inc. Henry “Boots” Taliaferro (deceased)— & Cimarron Production Co. Inc. Rob Johnston—Apache Corp. Coastal Corp. Mike Cantrell—Oklahoma Basic Robert Kelley—Noble Affiliates Inc. Bob Unger—Marathon Oil Co. Economy Corp. David Kimes—Kerr-McGee Oil Co. Vaughn Vennerberg II—XTO Energy Inc. Carole Gungoll—Carl E. Gungoll Exploration Eric Koelling—Sunoco Logistics LLC Marc Wade—Marathon Oil Co. Michael P. Cross—Michael P. Cross Inc. Bob Waller—Ramsey Property & Windsor Energy Group Julie Kruger—National Association of Royalty Owners & JMW LLC Management Jim Crossen—Koch Oil Co. R.H. “Harlan” Krumme (deceased)— Bland W. Williamson—Pray, Walker, Paul Crow—Kerr-McGee Refining Co. & Illinois Refining Co. and Falcon Oil Jackson, Williamson & Marlar Seminole Transportation & Gathering Properties Randy G. Wilson—ChevronTexaco Lee Davis—Davis Brothers Linda Lambert—LASSO Corp. John Yeager—Sunoco Partners W.F. “Bill” Dost— WFD Oil Corp. Jud Little—The Quinton Little Co. Inc. Marketing & Terminals LP

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highlighting simple, inexpensive ways Okla- homans can save energy and money. Oklahoma and Industry: “With energy being a key issue in this coun- Partnering for a Cleaner, Safer State try and across the globe, it’s important for Americans to understand its past, present and future so we can use energy wisely and make he Oklahoma Corporation Commission informed decisions about the types of energy (OCC) was established in 1907 by Article 9 we use,” Stitt says. of the Oklahoma Constitution. The First As a part of conservation education, the LegislatureT gave it authority to regulate public service OERB contributed $1.5 million to energy corporations; those businesses whose services are conservation assistance for Oklahomans in considered essential to the public welfare. need in conjunction with Oklahoma Depart- The commission began regulating oil and gas in ment of Commerce’s Weatherization Assistance 1914 when it restricted oil drilling and production to Program, which weatherizes homes for low- prevent waste when production exceeded pipeline income Oklahomans, saving them up to 30% transport capacity. In 1915, the legislature passed the on their home heating bills. Oil and Gas Conservation Act. This expanded oil and “I think it is very appropriate for OERB to gas regulation to include the protection of the rights take the lead. It is part of the future for our of all parties entitled to share in the benefits of oil and industry,” Cantrell says. “It does complete the gas production. stool and make it balanced. We are taking care While the basic regulatory responsibility of the com- of past problems with today’s resources but also mission has remained intact, many changes in state and looking toward the future.” federal laws have changed what is regulated. Public opinion research confirms Oklahomans The commission regulates public utilities, except are beginning to understand the importance of those under municipal or federal jurisdiction or the industry, the environmental stewardship of exempt from regulation; oil and gas drilling, produc- the industry and the economic impact of the tion and environmental protection; safety aspects of industry. Through the education of students motor carrier, rail and pipeline transportation; and beginning at the elementary level, oil and natural the environmental integrity of petroleum storage tank gas producers and royalty owners are preparing systems. It also has responsibility for the proper oper- future leaders of Oklahoma to make informed ation of fuel dispensing units (gas pumps) at retail decisions regarding all aspects of energy. I filling stations. The commission also enforces federal regulations for underground injection of water and chemicals, underground disposal of certain oil and gas waste fluids, and The Ames Hole remediation of soil and groundwater pollution caused by leaking petroleum products storage tanks. In 1991, Continental Resources of Enid was The commission has judicial, legislative and admin- drilling a well in the Sooner Trend north of istrative authority. Three commissioners elected by Hennessey. At 8,800 feet, where they expected statewide vote rule on all regulatory matters within to hit the productive Arbuckle formation, they commission jurisdiction. The commission is com- started bringing up traces of shattered quartz prised of three commissioners (Jeff Cloud, Bob and minerals usually associated with meteor Anthony and Jim Roth), who are elected by statewide impacts. Then they hit oil. vote to serve six-year terms. As it turned out, the well had penetrated The commission works closely with the Oklahoma a rich reservoir of oil near the center of an Energy Resources Board (OERB) to make the program underground crater formed millions of years a success. All OERB sites must be referred to in the ago when a meteor struck the earth. The OERB program by the OCC. The OCC’s Oil and Gas resulting hole, about 2,000 feet deep and Division inspectors locate the sites, research them to see 6 miles across, eventually filled up with fine whether there is a responsible party and determine sediment that ultimately produced a thick what lies below ground, arrange for and oversee plug- source-rock shale that trapped oil. A new oil ging of the wells on the site and the cleanup (if needed) field had been discovered. of any pollution that exists below ground, and refer the sites to the OERB for above-ground cleanup. I 05545 122-137_Sec.9:Layout 1 9/19/07 2:53 AM Page 136

The OERB Staff

Front Row: Landi Thompson, education director; Steve Sowers, environmental director; Mindy Stitt, executive director; Sara McKisson, environmental coordinator. Back Row: Gayla Wright, CORE energy coordinator; Rachel Johnson, education coordinator; Mary Ann Osko, communications director; Cheryl Standage, assessment auditor; Diana Mathis, controller.

Gayla Wright, CORE energy coordinator, assists a guest with registration at the 2006 OERB Energy Education Awards Banquet at the National Cowboy and Western Heritage Center in Oklahoma City. Steve Sowers, OERB environmental director, and Sara McKisson, environmental coordinator, served as judges at the Oklahoma Corporation Commission District 3 (Duncan region) annual homemade ice cream competition called “Freeze Off.”

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Mindy Stitt, OERB Executive Director

By Kristi Allison, Former Communications Director, Oklahoma Energy Resources Board

t 14, she was pitching for the boys’ baseball team. In the early ’80’s, she was leading her basketball team to Athe state championship game. Now, 25 years later, Oklahoma Energy Resources Board (OERB) Executive Director Mindy Stitt is still leading her team—a team dedicated to educating the public about the petroleum industry and restoring Oklahoma’s land. With a talent for leadership and a strong work ethic, it was only a matter of time before Stitt’s journey led to a position of statewide influence. No one familiar with Stitt’s talent or drive is sur- prised she has emerged as a female leader in perhaps the male-dominated oil and natural gas mom with three children, many times Stitt’s industry’s most unique organization. efforts to balance her family and work responsi- Stitt began her career at the OERB as the orga- bilities took on unusual forms, such as in the nization’s first staffer, hired as the administrative early days of the student education program assistant in 1994. Twelve years and thousands when she would enlist her kids’ help in assem- of late nights at the office later, she became bling energy education kits for teachers. the second executive director of the agency. The nation’s most comprehensive energy “Having worked for the OERB since its incep- education program, which now has reached tion, I had developed a true passion for the more than one million students with curricula Oklahoma oil and natural gas industry and all of in place at every grade level, really was Stitt’s its efforts to better this state,” Stitt says. “I was fourth child during those hectic and formative honored to be selected as the leader of some of days in the late 1990s. those efforts.” Under her leadership as executive director, the Mike Terry, president of the Oklahoma OERB has established a training program for Independent Petroleum Association who served Oklahomans interested in petroleum technician as the OERB executive director from 1994-2006, positions, distributed $700,000 in college schol- says Stitt has been instrumental in the OERB’s arships and restored its 8,000th abandoned well success since its creation. site. Stitt was also selected as one of “50 Women “She has total dedication to doing what it Making a Difference” by Oklahoma business takes to present the highest quality of work. She newspaper The Journal Record. has always strived to make OERB the best she “People earn respect when they demonstrate could. She is a cut above most people in regard to through their thought, word and deeds an inten- dedication,” he says. tion to take productive and positive action in The board soon promoted Stitt to assistant their area of interest and to do so in an impartial director and student education director. It has and fair manner,” says Steve Agee, OERB chair- been under Stitt’s watchful and highly critical man. “Mindy has done all this and, thus, has eyes that every segment of the OERB’s student gained the confidence and respect of her peers education program has been developed. A single and her staff.” I

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Oklahoma Oil and Gas

Rachel Johnson, a 1998 OERB Petroleum Challenge finalist. Six years after competing in the competition, Johnson joined the OERB staff as education coordinator. Photos courtesy of the Oklahoma Energy Resources Board

University of Oklahoma Energy Management students at the Million Minds Celebration. Christian Kanady (left), Jason Rayburn, Lindsey Owen and Tyler Frakes.

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Section 10

The Future

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Oklahoma’s Driving Force

By Taryn Maxwell, Contributing Editor, Oil and Gas Investor

As a state that has always been driven largely by the oil and gas industry, Oklahoma looks to higher education to keep renewing a vibrant part of its economy.

s the leaders of tomorrow roam This has meant ever-evolving curricula as the Oklahoma’s state colleges, it’s industry continues to change, and keeping pro- hard to miss the influence the oil grams open even when there weren’t many stu- Aand gas industry has had on higher education. As dents interested in pursuing a degree in an area graduates of the University of Oklahoma and that proved to be as volatile as energy did in Oklahoma State University have gone out into the the 1980s. industry to make their fortunes, they have returned Through it all, Oklahoma’s state universities the favor in spades, pouring money back into all have continued to produce some of the highest- aspects of both universities. quality graduates in the nation. What follows is a Students at OSU may not know who Boone look at the programs that are turning out stu- Pickens is, but they gather each fall to cheer dents who have gone on to lead oil and gas com- on the Cowboys at Boone Pickens Stadium. panies all over the U.S. through the innovation, Students at OU may not have heard of creativity and determination they learned right ConocoPhillips, but those who wish to pursue here in Oklahoma. geology or geophysics will receive their degree from the ConocoPhillips School of Geology The College of Earth and Energy, and Geophysics. University of Oklahoma Giving back to invest in the future leaders of the The College of Earth and Energy was created oil and gas industry has been a tradition in January 1, 2006, as a response to new challenges Oklahoma, ensuring the engineering, energy man- in energy and Earth sciences that require a coordi- agement, geology and geophysics schools at OU nated, multi-disciplinary approach involving aca- and OSU have been well funded. It has been up to demic programs, research centers and institutes as the directors and deans of the schools to ensure the well as policy-and service-related organizations. students graduating with those degrees are pre- The college combines the Mewbourne School of pared to face the challenges on the energy horizon. Petroleum and Geologic Engineering, the Conoco- 2001 2002 2002 Natural Gas Imports. The share The I-40 Bridge Disaster. This tragic event Conoco Inc. and Phillips Petroleum of natural gas consumed in the occurred when a barge collided with a bridge merged, Creating ConocoPhillips. U.S. coming from imports support near Webbers Falls, Oklahoma, causing The headquarters of the company peaked at 16.2%. a 580-foot section of the I-40 Bridge to plunge was established in Houston. into the Arkansas River. A number of vehicles fell into the river, killing 14 people.

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Phillips School of Geology and Geophysics, Sarkeys Energy Center and the Oklahoma Geologic Survey. According to Larry Grillot, Dean of the College, the strategic intent of the College of Earth & Energy is to maintain the historical focus at OU on exploration, exploitation and extraction processes in petroleum geosciences and petroleum and geological engineering, while continuing to provide close ties to engineering fundamentals as well as the science base in geology and geophysics. Grillot says since oil and gas has become a better industry for jobs, enrollment has doubled in the College of Earth and Energy during the past five years. A majority of that increase has occurred in petroleum engineering, with smaller Houston and other locations around the world. Oklahoma increases in geosciences. In 2007, OU awarded Regardless of the type or size of the energy com- Energy Resources its 5,000th degree in petroleum and geological pany, Grillot says the majority of the companies Board Petroleum engineering, and will award the 5,000th degree in look to OU for employee candidates. Scholars with geosciences in the next few years. “Everybody recruits heavily. I think it’s just Steve Slawson, Partly as a result of this high demand for grad- that some students want to stay in Oklahoma (or OERB Scholastic uates from the College of Earth and Energy, other U.S. locations) and others want the oppor- Outreach Com- Grillot says a higher percentage of the graduates tunity to work internationally,” he says. “The mittee Chair. are now staying in Oklahoma to work for local independents and the majors also offer different companies, while the others go to work for the types of jobs. Both can be very good careers, it’s major international companies headquartered in just that the emphasis is different. The independents tend to be focused on the U.S. and Canada (and on natural gas), while the majors are international, more integrated companies.” Many oil and gas companies, as well as the Oklahoma Energy Resources Board (OERB) spon- sor scholarships for students to study in energy-related fields. Grillot also believes educating young people about the energy industry before they get to college is one of the keys to attracting a large number of Oklahoma Energy Resources Board Scholarship Task Force Chair Ronnie Irani (left) high-quality students to the presents a scholarship to OERB Petroleum Scholar Lindsey Hufnagel. Pictured on the energy programs at OU. right are Dr. Nancy Mergler, University of Oklahoma Provost, and Dr. Dean Oliver, “I would certainly agree director of the Mewbourne School of Petroleum and Geological Engineering at OU. that going down into the high Photos courtesy of Oklahoma Energy Resources Board schools as an outreach for 2003 2004 Invasion of Iraq. U.S.-led forces invaded Iraq and Oklahoma’s Amazing Production. Oklahoma’s removed dictator Saddam Hussein. However, Coalition cumulative oil production reached 14.6 billion forces remained in Iraq as of 2007, attempting to barrels while cumulative natural gas production restore stability to the country. totaled 93.8 billion cubic feet.

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Photo courtesy of the Oklahoma Energy Resources Board 2005 Oklahoma longer-term energy education is very important, more students enter the college, Grillot maintains it Energy Resources and not just because of oil and gas,” he says. is not about quantity, but quality, at OU. Board Petroleum “Oklahoma will have a long-term energy focus, “You have to maintain quality in your pro- Scholars from the but that focus is not only going to be in oil and grams and the quality of your graduates,” he says. University of gas; it’s going to be in wind and solar and biofuels, “Our goal is to continue to have the OU degree Oklahoma. for example. The University of Oklahoma is in these areas still be viewed as one of the premi- already conducting research and education into um degrees.” alternative energy in these areas, and the university Aside from educating students in the tradi- offers programs across that spectrum thorough tional disciplines of petroleum engineering and other OU colleges and centers.” geosciences, Grillot says the students taking Grillot says it’s not just the College of Earth classes at OU today will need to be prepared to and Energy that is heavily supported by contri- handle many changes in the oil and gas industry. butions from the oil and gas industry; it’s the “The petroleum engineers and the geologists entire university. are not only going to be working on the growing “Oklahoma was basically built on oil and gas demand for energy, but they’re going to be asked in many ways, and the people that have come to place increased emphasis on protecting the through OU who have been successful have given environment, to look at a more sustainable society back to the university to educate students in all and to look at links between resources in energy fields for tomorrow,” he says. “We’re seeing that such as water and land,” he says. “It’s important legacy very strongly at OU. And it supports all for us to remember we need to provide a broad programs, not just energy-related ones. That’s education, and we need to teach our students to the way business works. They take their income consider the bigger issues of what their decisions and the resources they have today to invest in the mean for people.” future. We’re seeing that at OU through the gen- For this reason, Grillot supports a broad base erosity of our oil and gas alumnae.” of classes for his students, including the sciences, The College of Earth and Energy at OU con- engineering and humanities. tinues to grow in enrollment, because of the “I still believe students who go out and think boom the industry is experiencing, Grillot says. differently will be the most successful,” he says. “All of this happens in cycles, but demographics “Those who can come up with long-term solutions suggest this cycle is going to perhaps be more per- and are not just looking at fixing the problems of manent than some in the past,”he says.“There are a today are going to be more valuable to business.” lot of people who are at an age where they can retire and they’re going to have to be replaced. Forecasts The Oklahoma Geological Survey are for a big turnover in manpower in the oil and gas When Oklahoma became a state in 1907, the business,and I think that bodes well for the students framers of its constitution recognized the who are coming into these disciplines today. I immense natural wealth their state possessed. believe the opportunities will be there.”As more and Oklahoma already had a territorial geological

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survey that had been initiated three years earlier Mankin says most of the attendees of the by Dr. Charles Gould, a faculty member at the workshops represent companies that operate territorial university. When statehood occurred, in Oklahoma. Gould was instrumental in getting the territorial “They range in size from the Devons and the geological survey incorporated into the state Chesapeakes down to oil companies that are constitution as the Oklahoma Geological Survey. one-person operations,” he says. “Every time we Funding was appropriated in 1908, and the put on a workshop, we have virtually a turn-away Survey was placed under the State Regents and crowd. We also produce publications from our affiliated with The University of Oklahoma. workshops, and we sell several thousand copies “The basic charge of the survey when it was cre- of each of these publications.” ated was to investigate the state’s land, water, min- The Survey also helps educate companies and eral and energy resources, and report the results of students about Oklahoma’s oil and gas resources those investigations to promote the wise use of through the OPIC, a 200,000-square-foot ware- the state’s natural bounty,” says Dr. Charles house in Norman with offices and a conference Mankin, director, state geologist for the Oklahoma center. The Center houses 500,000 boxes of well Geological Survey and Regents Professor of the cores and samples, several thousand well logs, University of Oklahoma. “That is the basic charge scout tickets, completion reports and other under which we operate today.” petroleum information the Survey has acquired In terms of Oklahoma’s natural wealth, oil since it began. and gas has always been at the very top of the list. “At OPIC, we have small companies and inde- To promote the responsible use of the state’s pendents coming in on a daily basis; examining energy resources and further educate companies the logs, the scout tickets, completion reports operating in Oklahoma and students studying oil and looking at all of our petroleum data and our and gas-related fields, the Survey routinely holds cores,” Mankin says.“The x-ray imaging lab gives workshops and operates the Oklahoma Petro- geologists and geophysicists an x-ray scan of a leum Information Center (OPIC). core that helps people understand flow units and The Survey holds annually about eight to 10 rocks without destruction of the core. There is workshops, which are based on current technical also a conference center where we can hold rela- topics. The workshops routinely sell out and may tively small workshops.” also include field trips led by Survey geologists Mankin says the future of the Oklahoma to further educate members of the industry and Geological Survey will be to continue to provide students about the various oil- and gas-producing Oklahomans with much of the information they regions in Oklahoma. need to develop oil and gas in Oklahoma.

State Geologist Dr. Charles Mankin shows rock cores from Oklahoma wells to these visitors.

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“The program is so unique because it resides in the school of business, but students have to take a minimum of 12 hours of law classes, and they also have to take classes in the College of Earth and Energy to understand the geologic and engineering technical side of the industry as well as the business side.” —Steve Long, director of the OU Energy Management Program

“We’ll continue to hold workshops and to “All of these companies approached OU and provide information and technical assistance, as said they would help financially support our well as help companies and individuals access program if we would tweak our curriculum to petroleum data,” he says. “We’ll continue to do train students to become not only landmen, but our own research to put together reports. The also people that can help market, trade and finance energy business, particularly oil and gas, is the commodity,” says Steve Long, director of increasingly the big dog in Oklahoma. We also the Energy Management program. will continue to support student theses on “So we tweaked the curriculum, and graduates Oklahoma geology. We plan to continue hiring can go into multiple disciplines now. They can geology and petroleum engineering students as become landmen, they can go into natural gas mar- part-time employees so they can gain some prac- keting and trading, or they can go into the finance tical experience while they’re going to school. I side of the energy industry.” don’t see any end to those kinds of things.” The program prepares students for the commercial aspects of the energy industry, including Energy Management, technical and legal. University of Oklahoma “The program is so unique because it resides College students in Oklahoma have always had in the school of business, but students have to numerous options to approach the oil and gas take a minimum of 12 hours of law classes, and industry from the engineering or geology side of they also have to take classes in the College of the business, but for those who wished to learn Earth and Energy to understand the geologic and the business side of the energy business, no spe- engineering technical side of the industry as well cialized program existed until 1958, when the as the business side,” Long says. University of Oklahoma created the first Energy The unique training students receive from the Management program in the nation. Energy Management program has garnered The Energy Management program is offered attention from more than just the oil and gas through the Price College of Business at OU and industry; financial institutions have started to is the largest of its kind in the U.S. take notice as well. Originally operating as the Petroleum Land “A major New York investment bank came to Management Program, it was created to give OU last summer and hired a couple of OU landmen the same kind of professional accredita- interns because they had heard about the Energy tion given to engineers and geologists. The pro- Management program,” Long says. “Historically gram served to exclusively educate professional in New York they recruit from the Ivy League landmen until 1986 when the oil and gas boom schools, but they discovered the Ivy Leaguers went bust and many of the industry’s landmen understood the financial side of commodities were laid off. At the same time, natural gas trading, but they didn’t quite have the under- became deregulated and a new market was created, standing of the physical side of the business the bringing about the proliferation of companies way the OU students did.” such as Enron, Dynegy, El Paso and Williams. Although students with a degree in business 2005 2005 Katrina and Rita. The record-setting hurricane season of 2005 caused Oklahoma History Center. The Oklahoma Historical Society massive damage to the U.S. natural gas and petroleum infrastructure. opened the Oklahoma History Center on Statehood Day, Hurricanes Katrina and Rita struck the Gulf of Mexico, one of the November 16. The Smithsonian-affiliated museum featured nation's largest sources of oil and gas production. Many Gulf of Mexico the outdoor Devon Energy exhibit, showcasing a variety of wells, terminals, processing plants, and pipelines went off-line. drilling rigs and other equipment covering four acres as well as an indoor petroleum industry exhibit.

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from any school graduate with the basic tools to This is a big change from the mid-1990s, when work in the business side of the industry, stu- Long says the program graduated only three dents graduating with a degree in Energy brave students who pursued a career in Energy Management receive broader exposure, making Management despite the depression the industry them more attractive to recruiters. was experiencing. “When these students graduate, it’s kind of “The university, under the leadership of like they’ve worked for a major oil company for President David Boren, had the foresight to two or three years,” Long says. “For someone to embrace the program because energy is a key recruit and hire an OU Energy Management economic-driver of the state,” Long says. “It was major, it’s kind of like hiring someone who has kind of tough to only have three students in the already had a couple of years of training, and program. Now we’ve seen our program have a they can hit the ground running without having growth of 50% each year. I would anticipate next to learn the industry first.” year will be bigger than this year. In 2008, we will The Energy Management program graduated celebrate our 50th anniversary, which comes about 45 students in 2006, many of whom right on the heels of the Oklahoma Centennial. interned for two or three different companies. It’s amazing to think our program has been a “When these students are getting hired, if they part of Oklahoma education for half of the have any kind of drive or ambition, they’re going to state’s history.” get pushed right through the system because the Baby Boomers are all getting ready to go to the side- Mewbourne School of Petroleum lines, and these students are going to step in and fill & Geological Engineering, the void because as an industry, we haven’t actively University of Oklahoma recruited since 1987, which means we’ve lost an Like all of the oil and gas-related majors at entire generation,”Long says. OU, the Mewbourne School of Petroleum & Geological Engineering is experiencing rapid growth in enrollment. Mid-Continent Oil Field “For the last five years, we have increased two and a half times,” says Chandra Rai, Eberly The Mid-Continent Oil Field, which consists of family chair and director of the Mewbourne a series of oil and gas fields in six states, School. “Right now, because of what is happening stretches from northern Kansas to the south- in the industry, there is renewed interest in the ern tip of Texas. Also included are oil fields petroleum industry and petroleum engineering. throughout Oklahoma, southeastern New Right now, we have about 310 students in the Mexico, northeastern and southern Arkansas, undergraduate program.” and virtually all of Louisiana. The Mewbourne School, named after an alumni The first commercially successful oil well in of OU and an industry pioneer who endowed the the region was the Norman No. 1 near Paola, school, offers an undergraduate, master’s and Ph.D. Kansas, which was completed in 1892. The in petroleum engineering, a master’s and a Ph.D. in Nellie Johnstone No. 1 at Bartlesville, geological engineering and a master’s in Natural Oklahoma, followed and then a series of Gas Engineering & Management. The school was major discovery wells throughout the region. recently grouped into OU’s College of Earth and As of 2007, the Mid-Continent Field had Energy, which didn’t change the curriculum at all, produced more oil than any other in the U.S. but improved the opportunities for students, and was the largest field in the world until the Rai says. discovery of oil in the Middle East. “At the graduate level, it offers the opportunity for the students to do the integrated type of projects 2006 2007 Natural Gas Wells. A record 31,687 Natural Gas Usage. Natural gas in the U.S. is used in more than 60 million natural gas wells were drilled homes, 78% of restaurants, 73% of lodging facilities, 51% of hospitals, 59% nationally. of offices and 58% of retail buildings. Natural gas powers many manufacturing operations in America and serves as a feedstock for products such as clothing, carpets, pharmaceuticals, computers, auto parts and a number of other widely used products.

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in geology and geophysics, and it also offers them engineering has a track record of significant con- new programs within the college,” he says. “In the tributions to the oil and gas industry. industry, people are working in teams. This new set- OSU chemical engineering professors Wayne up has helped to train students to work in that type C. Edmister and Robert N. Maddox are two of the of environment.” six academics to receive the Gas Processors To better prepare students for entering the Association Hanlon Award in its 69-year history. industry, Rai and his staff meet with an advisory All other awardees were from the oil and gas board of about 30 to 40 industry professionals industry. Edmister and Maddox influenced the twice a year to discuss how to tweak the school’s research of many OSU chemical engineering fac- curriculum according to industry trends. ulty members, which contributed to the Gas “It is a challenge for the professors to bring in Processors Association Data Book and Gas and new technology and new concepts, which emerge Liquid Sweetening handbook, which both remain as the technology becomes mature in the indus- in many industry training courses. In honor of try,” Rai says. “Our curriculum was revised about the OSU Chemical Engineering School’s contri- three years ago based on the feedback of our butions to the oil and gas industry, the Gas industry advisory board. We get from them their Processors Association in 1988 endowed the R. reaction on what is happening in the industry, N. Maddox professorship, which provides funds what the industry needs, and we change the cur- to ensure this tradition of excellence. riculum if we need to.” Today, many of the students who leave OSU Rai says the Mewbourne School is always eager bound for careers in oil and gas graduate from to hear the advisory board’s advice, but it is care- the OSU School of Chemical Engineering. ful not to change the college’s curriculum with Armed with a chemical engineering degree, stu- every shift in the industry. dents are able to shape the environment to make “I think a university should not immediately chemicals do what they want them to do, a skill respond to the industry, otherwise we would be necessary to any successful oil and gas company. always changing,” he says. “There has to be some “Understanding how chemicals move, thought process given to what needs to be more whether they’re moving across blood vessels or defined in our curriculum. You have to make sure whether they’re moving through sand under- the guy who joined the school in the first year will neath the ground in oil and gas reservoirs, chem- be able to graduate with the same curriculum over ical engineers can make them move faster, or the four-year period.” slower, or they can separate them and make some Rai says the focus of the industry in Oklahoma of them move and some of them stay still,” says has switched from oil to natural gas, and in Dr. Russ Rhinehart, head of the OSU Chemical response to that, the Natural Gas Engineering & Engineering School. Management program was formed. “In understanding the nature of chemicals, we “We realized the need of the industry, especially can create the environment to make the chemi- the local industry,” he says.“There are people who cals do what we want them to do; separate them, have worked in the industry for some years, have purify them or bring them up out of the experience, and now they want to come back to ground,” he says. update their skill set to the new reality of gas Though the school offers examples specific to production. That’s why this program was created.” the oil and gas industry within its teaching, it does not offer any courses specific to the indus- Oklahoma State University try. Rhinehart says there used to be a petroleum School of Chemical Engineering option within the program 20 years ago, but the Oklahoma State University has a historic focus option didn’t attract enough students to justify on agriculture and engineering through its her- its existence. itage as Oklahoma A&M College, so while it does “The interest in petroleum and the produc- not offer industry-specific oil and gas degrees, it tion of oil and gas is coming back again and does turn out plenty of oil and gas professionals we’ve actually had some of our students telling through its engineering and geology programs. Its us in their exit interviews that they wish they had historical focus on agriculture could help make some specific courses tuned to production or Oklahoma a front-runner in the development of refining in our curriculum,” he says. biofuels, and the graduate program in chemical “Some of the corporations that hire from us

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are also encouraging us to restart these courses. “When we graduate our students, they’re ready They would like our students to have a stronger to learn the business and technology specifics of production and refining experience. But there is whatever industry they enter, and it takes them a a cost/benefit analysis. If there are only five stu- little bit of time to learn the industry, but they’ve dents per year that would want to take these got the fundamentals to do it,” he says. “The only courses, we just can’t justify hiring a professor to difference is if we had petroleum engineering teach such a specialized course, ” Rhinehart says. classes within our program, students would come Rhinehart says the decline in students inter- out with that background so they could be pro- ested in the petroleum option did coincide with ductive a little bit faster.” the depression in the oil and gas industry, and In 2007, the OSU School of Chemical En- that as the industry continues to improve, the gineering graduated 29 students, of which about college continues to enroll students interested in six went to work in the oil and gas industry. petroleum careers, something that he feels would Rhinehart says this is the lowest class size the help Oklahoma’s oil and gas future. school has had in a long time, and matriculation “If we had courses that were aimed at prepar- rates are indicating a rapid return to the school’s ing people for their specific career, it would cer- historical average graduation rate of 35 students tainly help the industry,” he says. “The odd thing per year. is a course in petroleum production would not The students the chemical engineering program introduce new chemical engineering principles. is turning out are very hard-working and will make It would use the same fundamentals that we cur- a difference in the industry, Rhinehart says. rently teach, and would show how the funda- “The sort of students we get here with rural mental are applied in one area. If we had a new and pioneer values are incredibly strong stu- course, it would not change the essence of chem- dents,” he says. ical engineering, but it would give students more “They make hay while the sun shines. If the sun experience and practice in one aspect of the is shining and the rain is coming, they forget the entire discipline.” birthday parties and whatever else they have Though chemical engineering students do planned and bring the crop in. The students are enter the oil and gas industry with all the fun- willing to invest the time and effort required to get damentals necessary, industry-specific courses the job done. Because of this, OSU has incredible would help them to get into their careers faster, undergraduate students who have achieved top Rhinehart says. honors in many national-level competitions.” I

The Oilman’s Hotel

In 1909, only four years after the discovery of Glenn Pool, a veteran of the oilpatch found himself the owner of several lots next to the Frisco Depot in downtown Oklahoma City. When a business investor offered to buy the lots to build a hotel, the oilman decided it was a good idea. He would build it himself. His hotel rose with two wings to become a landmark. It became the center for oil business, social life and economic development in the young boomtown. With oil wealth flowing in the 1920s, he expanded his hotel hobby with a third wing and a top floor that included a grand ballroom. In 2007, the centennial year of Oklahoma statehood, that hotel was remodeled during yet another boom in the oil and gas industry. William Skirvin, the oilman who became a hotel entrepreneur, built that landmark, today known as the Hilton-Skirvin.

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Glossary of Terms

here are thousands of key words and phrases unique to the oil and natural gas industry. Sometimes the oilfield’s special language seems as convoluted as the high tech industry’s jargon. Here, we provide a handful of key terms and definitions to help newcomers wade into the energy exploration anTd production world. Blowout—An uncontrolled, accidental release of well Perforating—A downhole perforating gun, lowered by pressure, either to the surface or to another formation (in wireline, that fires shaped charges through the casing this case, called an underground blowout). into the desired rock formation, resulting in perforations Btu—British thermal unit; a unit of measurement for energy through which reservoir fluids may flow into the well- representing the amount of heat necessary to raise the tem- bore and up to the surface. perature of one pound of water one degree Fahrenheit. Permeability—The capacity of a rock to transmit fluids. A Casing—Steel pipe used to protect the wellbore from cav- tight rock, sand or formation will have low permeability and ing in. When casing is cemented in place, it forms a thus, low capacity to produce oil or gas, unless the well can hydraulic seal with the rock formations, preventing well be somehow fracture-stimulated to increase production. fluid from migrating up or down the outside of the casing. Plug & Abandon (P&A)—When a well is depleted of eco- Coalbed methane (CBM)—Methane found in coal seams; one nomically recoverable oil and/or gas, a permanent plug is of the fastest-growing new sources of natural gas supply in set to seal the bottom of the well, as much casing as the U.S. possible is recovered, and the surface location is restored Dry hole—When no oil or gas is found in the exploratory to its original condition. well, or the quantity of oil or gas that was found is insuf- Porosity—The volume of small to minute openings in a ficient to justify the expense of bringing the well into rock that allow it to hold fluids. Measured in percent- production. ages, typically from near zero to about 35%. Field—An area in which a number of wells produce from a reservoir. Prospect—An area that is the potential site of an oil or gas accumulation. A lease or group of leases upon which Fishing—Slang for retrieving pipe, tools, cable or objects an operator intends to drill. that have been dropped into the well. Reserves—The volumes of oil and gas that can be prof- Fracturing (frac job)—If the target reservoir lacks sufficient itably recovered from a well with existing technology and porosity or permeability to produce on its own in commercial quantities, this stimulation technique can improve the present economic conditions. flow. Enormous pressure is applied to the reservoir by Reservoir—A porous and permeable subsurface formation pumping in massive amounts of fluid (water or polymer) to that contains oil or gas and is surrounded by rock enlarge the channels between pores in the rock. that separates the oil or gas contents from other Henry Hub—An interstate pipeline interchange that also reservoirs. serves as the delivery point for Nymex natural gas futures Seismic exploration—Sound waves are pulsed into the contracts, located in Vermilion Parish, Louisiana. earth. They reflect off subsurface layers and the reflected Hydrocarbon—An organic compound made up of carbon waves are processed to create a subsurface image of the and hydrogen atoms used as sources of energy and earth from which promising rock formations can be iden- including natural gas, coal and crude oil. tified for potential drilling. Log—A continuous record as a function of depth of infor- Tubing—High-pressure pipe runs inside the casing mation on the rocks and fluids encountered in a wellbore. through which the oil or gas is produced. Methane—Commonly known as natural gas, it is the Wellbore—That part of a well that is below the surface. most common hydrocarbon gas and is colorless, odorless Hole diameters vary with the type and purpose of wells. and flammable. Wellhead price—The price received by the producer for MMcf—A volume unit of million cubic feet, commonly sales at the well. used to measure gas. Also used as Mcf (thousand cubic feet), Bcf (billion cubic feet) and Tcf (trillion cubic feet); 1 Wildcat—An exploratory borehole drilled in virgin terri- MMcf has a heating value of 1 MMBtu. tory, usually at least a mile or two away from the nearest Mud—Mixture of water and chemicals that occupies the production of oil or gas. borehole during drilling or completion of a well. Its main Working interest—Percentage of ownership that the task is to exert hydrostatic pressure on the reservoir to company has in a joint venture, partnership, consortium, balance the natural formation pressure and prevent an project, acreage or well. accidental influx of formation fluid into the borehole. It prevents the sides of the well from caving in as the Workover—An oilfield term meaning “overhaul.” Wells hole is cut. must be worked over to address cleaning, wear and corrosion of the downhole equipment, or pressure issues. Packer—A mechanical seal between tubing and casing, I usually set just above the producing formation.

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OKLAHOMA Where Energy Reigns OKLAHOMA: Where Energy Reigns

A supplement to