New Oil: The Giddings Gamble
The Austin chalk is the most perverse, contrary, incorrigible oil field known to man. The big oil companies tried it and gave up. But one man learned the way to make the chalk yield its secrets—and its oil.
James says: Who is that on the cover of the February 1981 publication ? I think his name is David Perkins, anfriend of my brothers from younger years. IF that’s him where is he now ? (October 21st, 2009 at 4:22pm)
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For the explorationists themselves, the independents and majors who were actually financing this great oil hunt, there was plenty of excitement but also plenty of risk involved in drilling the Austin chalk. The risks increased in 1980 with President Carter’s imposition of the windfall profits tax. Though still regarded as new oil, eligible for sale at the world market price, the per-barrel value of oil from the Austin chalk effectively dropped from a high of $39 to about $30. That did not stifle the Giddings oil boom, but it did mean that it would take more good producers to make up for losses on dry holes. As Ray Holifield put it, “We started being a lot more selective about where we picked to drill after windfall profits.” And due to rapid inflation of drilling expenses, even a shallow well cost about $650,000 to complete. Deeper wells cost $1 million and more.
For roughnecks and laborers the Giddings boom was a godsend. In most cases a new field laborer merely had to show up for early breakfast at Schubert’s or Dub’s Grill and a job was his for the asking. Some mornings it wasn’t even necessary to ask. Crew bosses would line up in front of the restaurants, shouting to passerby, “Hey, buddy, how much do you make? Whatever it is, I’ll double it.”
Drilling activity picked up at an astounding pace. By late 1979 there were more than 250 wells in the Giddings field, and 50 rigs running. By the fall of 1980 there were over 700 producing wells, and more than 80 rigs running. Two hundred wells were drilled in the field in the summer of 1980 alone. Because of the Railroad Commission spacing requirements the wells did not stand toe to toe as in the boom days of old, but they did cover the countryside in checkerboard fashion as far as the eye could see. No longer confined to the area around Giddings or to the town of Dime Box, the field now reached into seven counties —— Lee, Burleson, Fayette, Gonzales, Washington, Brazos, and Bastrop.
Giddings remained the capital city of the field. By its own reckoning, Lee County had been one of the ten poorest counties in Texas before the oil boom. Now bank deposits in Giddings were growing by $1 million each month. Sales tax receipts soared. The city, the county, and the school district, which shared both directly and indirectly in the boom, watched their treasuries more than double.
The oil boom spawned a whole new crop of homegrown millionaires. The Gerdes family soon found its property dotted with no fewer than twenty separate oil wells and crisscrossed by 35 miles of underground pipelines. Instead of facing dire financial problems because of inheritance taxes due on the patriarch’s estate, the Gerdeses began receiving an income estimated to be in excess of $200,000 a month. Elder Burttschell, the former county official on whose property Humble drilled the decisive Burttschell No. 1, was making more than $25,000 a month. Bennie Jaehne, the former hay cutter turned landman for Humble, built his collection of 0.5 per cent overrides on the Humble leases into assets worth more than $1 million. The Knox twines of the Lee County Land and Abstract Company compiled overrides reputed to be worth that much or more. There was even a young state trooper named Jimmie Luecke who parlayed an oil discovery on the family land into more Austin chalk oil investments and found himself driving his patrol car down the road to a seven-figure fortune of his own.
The oil boom did not create any millionaires among the black residents of Lee County, but several poor black farmers did profit handsomely. Humble drilled a well on John Hancock’s property in Post Oak that brought him $50,000 in income over the next eighteen months. U.S. Resources drilled a well on Quinton Donovan’s land that made a steady four hundred barrels a day, enough to provide him and the seven other family members who shared in the property an income of more than $150,000 in only a year.
Remarkably enough, the new money seemed to do little to change the lifestyles of those who got it. The Knox twins bought a pair of black Lincoln Continentals, and one of them started letting his gray crew cut grow out. Bennie Jaehne got divorced and let his hair grow a little too. Jimmie Luecke resigned from the Department of Public Safety to go into oil full time. Quinton Donovan built a new one-story brick house right behind the white frame shack he had lived in for most of his 79 years. But these changes were about as extravagant as it got. As one Giddings resident put it, a Cadillac dealer would have starved before the boom, and he would have kept right on starving after it.
Of course, the oil boom did not bring only honey-colored happiness and light. It also brought an estimated 7500 newcomers to the Giddings area, which quadrupled the local population and created a whole new set of problems. The cost of living in and around Giddings shot up like a gusher. Before the boom a full meal at a local restaurant could be had for under $3. Now the same meal cost $5 or $6. Groceries, gas, clothes—everything went up. One local store owner candidly admitted to a friend, “The only things I have to watch my prices on are beer and cigarettes. The oil people don’t know what anything else is supposed to cost.”
Giddings did not become a bawdy house and gambling hole like some of the Texas boom towns of yore. A couple of vice trailers did attempt to set up operations in the outlying areas of the county, but Sheriff John Goodson quickly cracked down, and the whorehouses on wheels moved on. Still, as the population rose, so did crime. The Lee County sheriff’s department reported a 100 per cent increase in cases of disorderly conduct and simple assault last year.
Along with the jump in conventional crimes came a whole new kind of crime: oil field theft. The sheriff’s office was recording about five cases of equipment theft each month by the summer of 1980, but according to several oil field sources, those figures reflected a mere fraction of what was going on. Small gangs and freelancers were raiding the oil fields for trucks, tools, pipe, bits, drilling mud, and, of course, oil. Some said the value of the illicit oil field traffic amounted to several thousand dollars a month.
The oil boom also brought cries that the land was being ravaged. These protests came not from nonresident environmentalists but from the local farmers and landowners. They accused the oil companies of knocking down trees, breaking fences, rutting roads, polluting creeks and ponds, and spoiling deer stands. Most controversial of all were the pipeline companies that came armed with powers of eminent domain and began digging up the countryside to lay underground lines. Still other complaints revolved around Perry Gas’s plan to build a natural gas processing plant near a cluster of residential ranches just outside the Giddings city limits and Texas Refining’s proposal to erect a 10,000 barrel-a-day oil refinery in the same area.
Although many of the county people were benefiting directly or indirectly from the new oil money, the boom did not make every man a king. H. T. Moore, the old shoe repairman who shared in the M&K well, grossed a few thousand dollars but had to keep on repairing shoes. Many Lee County residents had no oil on their property at all; others discovered to their dismay that they or their ancestors had lost the mineral rights to their property back in the Depression, when an outfit called Texas Osage acquired 32,000 acres of Lee County land in a controversial royalty pool arrangement.
The one universal complaint about the oil boom was that it increased traffic. No longer a sleepy little crossroads, Giddings teemed with cars and heavy equipment trucks by day and by night. Besides being inconvenient, the traffic was dangerous, especially on oil-well-lined FM 141 to Dime Box. Between early 1979 and the summer of 1980 there were 35 accidents and three fatalities on that road. Local folks began calling it Death Alley.
Reaction to the encroachments of the oil boom was as varied as the citizenry of the seven-county field area. Some residents formed ad hoc protest groups to oppose the oil and pipeline companies, but many expressed their disapproval individually. One Lee County lady who lived barefoot in a shanty out in the country beat a pair of big rocks together to express her outrage when oilmen crossed her property. Several Lee County landowners pulled guns on—but did not shoot—allegedly trespassing oil workers. Fallout from the oil boom also spilled over into Fayette County. V. A. “Boss” Hrbacek, owner of the Cottonwood Inn in La Grange, told a reporter for the Austin American-Statesman that he’d “rather have the Chicken Ranch any day than pipeline trash.” Although Hrbacek later denied his statement, some good citizens of Giddings who supposedly welcomed the influx of oil money allegedly conspired to ostracize what they considered oil field trash from church and social positions.
Most of the protests were lodged by a small minority, but they represented a profound ambivalence shared at least in part by nearly every Lee County native. The people welcomed the prosperity of the oil boom. Many also welcomed the oil boomers. But they still had serious reservations about the way oil was changing their towns and their lives. One Giddings store owner expressed their ambivalence succinctly when he exclaimed, “Damn the oil companies! Damn the pipeline companies!” and in the very next breath said, “I have nothing bad to say about the oil people. Their checks are almost always good.”
The Real Money-makers
Pat Holloway is in many ways the H. L. Hunt of the Giddings field. A man of cunning and controversy with an unflagging sense of humor, he has emerged as the individual big winner of the boom. Although he was the last of Ray Holifield’s three principal clients to get into the Austin chalk, he has capitalized on the play better than anyone else. By the end of 1980 Humble Exploration Company had a cumulative oil production of more than 6 million barrels and a cumulative gas production of more than 6 billion cubic feet, or the equivalent of nearly $250 million in revenues after the windfall profits tax in only three years. No longer just a family affair, Humble employs more than eighty people. In 1981 the company will be getting half its drilling budget, roughly $45 million, from Texaco. Of the income generated so far, Holloway himself has a claim on an estimated $30 to $40 million.
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