By: Emily Haggstrom Issue: Vision Section: Community
The Beginning of the Production Division
The first commercial oil well in the United States was developed largely through happenstance in Titusville, Pennsylvania in 1859, with petroleum originally being produced as a byproduct when distillers were manufacturing kerosene for lighting fuel prior to electricity. Once the light bulb was discovered, the need for kerosene diminished, and oil lost its favor. Technological advances continued to be made, however, as scientists established base formulas showing the importance of the substance as a source of energy as well as a lubricant.
By 1870 Standard Oil was established and petroleum production had drilled down to the core of America, injecting itself into industries and seeping into the lives of private citizens. By the early 1900’s, after some refining, the automobile had won favor amongst those that could afford them. The design of these coaches became more practical once their engines used gasoline in place of original engine designs that had required electricity. The need for gasoline solidified its place in society as filling stations were built to provide a steady stream of fuel to vehicle owners.
Recognizing the increasing need of oil, John D. Rockefeller, founder and chairman of Standard Oil, started guzzling up smaller independents in his quest to expand the company’s empire. By 1909, it controlled everything from production, refining and sales to manufacturing. Standard Oil was king, and its monopolized commodity was amassing a fortune. Although an antitrust case had already been filed against Standard Oil in 1906, it wasn’t until 1909 that the U.S. Department of Justice sued the company to abolish its monopoly. By 1911, under the Sherman Antitrust Act, the Supreme Court ruled that Standard Oil was to be dissolved and divided into roughly 33 subsidiary companies.
As nations diverged on the battlefields of Europe in 1914, the United States chose neutrality. The barbarism of trench warfare eluded officials and in an election year, the prospect of initiating a war against the Central Powers was very unfavorable. Neutrality only lasted so long, however, after Germany declared that it would invoke unrestricted submarine warfare, which ended up killing American’s on the Lusitania passenger ship in addition to seven merchant ships. On April 6, 1917 Congress issued a declaration of war.
As America became more involved in the war, President Woodrow Wilson assessed programs at home that effected proper mobilization. He came to realize that many of these agencies and their programs were in dire need of reorganization. One such organization formed from these changes was a group called The National Petroleum War Service Committee, designed to develop a closer cooperative relationship between oilmen and federal agencies.1
Soon, the independents that were formed from the dissolution of Standard Oil, came together in an effort to quickly mobilize vital resources and supplies that would help the war efforts and servicemen overseas. Motorized vehicles and oil had transformed the war front evidenced by Britain’s propulsion over the course of the war. However, it was after the war that it became apparent how important of a role the industry played during the war and how much more important they would become to the public through automobiles and manufacturing.
Demand plummeted and the industry became focused on how to stabilize production following the war. Policies were changing and the administration at the time was concerned mostly with foreign policy. Those within the petroleum industry worked together toward cooperation and adopted decisive measures to self-regulate and ensure best practices. Every facet of the industry from refining and production to drilling and equipment manufacturers all agreed that a central trade organization to represent the industry, as it had been in wartime, was necessary. It would also help to establish consistency, enhance cooperation and solidify a voice for oil within public policy spheres.
Leaders from the Fuel Administration and members from the National Petroleum War Services Committee came together to develop a new trade association and the bylaws that they would operate under. On March 20, 1919 the American Petroleum Institute (API) was formed to “afford a means of cooperation with the government in all matters of national concern, foster foreign and domestic trade in American petroleum products, promote in general the interests of the petroleum industry in all its branches, and to promote mutual improvement of its members and the study of the arts and sciences connected with the oil and natural gas industry.”2
To this day the API is known for its advocacy, standardized oil field equipment and certifications. But at its inception, Mark Requa, Director of the Fuel Administration for API, stressed conservation and also advocated that the API should standardize its own business procedures and accounts before the federal government instilled its own. At the end of 1919, the Wilson administration had abolished all wartime agencies and the petroleum industry once again, was on its own.3
Texas, on the other hand had always been on its own; locals in the area had heard of documented cases of Spanish explorers using asphalt, tar and petroleum to fix their ships in 1543.4 Like discoveries on the East Coast, settlers had seen oil seeping from the ground in Texas, which led to the state’s first successful well and commensurately the states first successful oil field. Oilmen from out east recognized the development occurring in the Gulf Coast and descended on the region. Most of the production at the beginning of the 20th century was from wells in Beaumont, the boomtown; but like most boomtowns, production declined and companies eyed new areas to explore and lease.
Oil companies soon came to capitalize on the salt dome gushers that were quickly being discovered around Southeast Texas. As geologists and drillers sought new locations to explore and develop, administration and management for the oil companies moved to Texas. After the Galveston Hurricane of 1900, Houston, the railroad hub of East Texas and the newest city to open its own shipping port, saw increased development. Infrastructure and transportation, transformed the city from just another boomtown to the epicenter of oil.
With extensive production occurring outside of Houston and the Gulf Coast region, it could only be expected that a chapter of the API would form in Houston. On October 30, 1934, at the Rice Hotel in downtown Houston, a meeting was called amongst the Southwestern District of the API to organize the city’s chapter. 75 oilmen attended the meeting discussing the benefits provided by local chapters that would produce direct and positive results to the local industry. It was then that the acting advisory committee elected the first officers to serve for the Houston chapter; electing A.W. Thompson, of Thompson Drilling; C.A. Warner, of Houston Oil Company; Warren L. Baker, of the Gulf Publishing Company and; W.S. Crake of the Shell Oil Corporation.
From the conclusion of that first meeting, the city’s new group would be known as the Houston Chapter of the American Petroleum Institute, sponsored by the organization’s Division of Production. The group was tasked with organizing and fostering the spirit of economic cooperation among those directly engaged in the production of oil and gas, by promoting a free exchange of ideas among members.5 Anyone who was actively engaged in the petroleum industry or whose aim was to further their work, was accepted into the group in exchange for their one dollar annual membership fee. The groups first meeting was held November 20, 1934.
At its onset, the chapter’s officers included executives and other managers from major producers like the Texas Co. (Texaco), Humble Oil & Refining (ExxonMobil), the Gulf Production Company (Chevron) and Shell. The unregulated environment brought members together at general meetings to discuss topics pertinent to the oil and gas industry and provided a forum where specifically skilled individuals could talk to their side of the trade; bringing crucial pieces of information through cross-sections of the industry. As oil continued to dominate the city, Houston’s Chapter of the API became the largest chapter in the United States.
By the 1940s the U.S. lead the world in oil production. Oil and its industry were soaring. The Chapter thrived from the inclusive knowledge and benefits its members provided. The chairmen from previous years continued to support the group’s efforts and business outside of the group went on as usual. Products, technology and procedures continued to transform the industry. The group hosted events and conducted meetings as usual.
Texas was leading the nation in production. In an effort to prevent resources waste, the Railroad Commission of Texas established the Oil and Gas Division to regulate the exploration, production and transportation of oil and natural gas in Texas.6 Hearings were conducted each month to determine how much oil the pipelines and refineries needed to transport and process, announcing “allowable” maximum production limits for every oilfield in the state and restricting production to those levels. This effectively set nationwide pricing for many years.
Supply and demand continued to rise in the 1950s, but at the expense of foreign nations. The Organization of Petroleum Producing States (OPEC) unified, imposing an embargo, which sent prices skyrocketing. Because the United States was so dependent on foreign oil, when OPEC unilaterally reduced supply, America faced its first oil crisis. Demand for oil fell and producers struggled to find new sources of oil through exploration. The countries next oil shock in the 1980s led to another sharp increase in pricing. The effects of the second shock proved to be economically overwhelming, as drilling drastically curtailed and employment decreased the sustainability for demand.
The Houston Chapter felt the sting from the oil shocks of the 1970s and 1980s. “We’ve handled these swings as best we could,” said Clyde Perrere, the Chapter’s Chairman in 1974, “But we’ve never closed our doors.” Because Houston’s base was, and continues to be, not so labor intensive, its economy bounced back as oil field services, production and refining jobs continued to be a pillar for economic prosperity. As the landscape changed, imposing new and increasing regulations the chapter’s membership continued to be encouraged by many organizations throughout the community. And while some of the larger companies were not participating like they used to, small and medium-sized companies within the industry continued to play a vital role in the Chapter’s legacy by volunteering to assist running the group.
Lower pricing and the deflated dollar helped not just the city but the Chapter rebound once again. The group continued to conduct its tournaments offering activities like clay shooting, tennis and golf. Over the course of several years, the events helped to raise $10,000, which the board decided to invest into the educational system, as well as other charitable and civic organizations.
The group noted that over the years, through spikes and slumps, the industry had received and continued to receive support from the community at large that were either a part of the trade or directly benefited from it. In an effort to uphold the image of the oil and gas community, API’s Houston Chapter continued to encourage citizens, individuals and groups to become involved or affiliated to better understand the benefits that the industry provided both socially, economically and educationally.
The board’s decision led to the establishment of scholarship endowments in 1985 as well as an additional contribution fund for affiliated and complementary organizations that same year. The endowments were written so that the universities would select the recipients and present them to the board for approval. This gave all students vying for the scholarships an equal chance and helped forgo any favoritism that could arise within the group. The only conditions of the scholarships were that the student must attend a state supported public university and pursuing a degree in petroleum or geological engineering.
The terms of their charter stipulates that the group must work in cooperation and not competition with groups and individuals that lead to the success and betterment of the industry. So for years, from September to May the Chapter conducts monthly luncheons to educate members about new technology, trends, policies and regulations. Many people across the industry attend these lunches, but the ones that hold the most value are those conducted in unison with other leading industry associations like the Society of Petroleum Engineers, American Association of Drilling Engineers and the International Association of Drilling Contractors.
To really make the lunches valuable for all, the Houston Chapter also invites teens from local high schools whose focus is pre-engineering. Because networking and education are so important, API Houston also holds five recurring events each year, where the income generated is applied to the Chapters endowment and other contribution funds. To date, Houston API has contributed over $2.3 million to Texas A&M, University of Texas, Austin, Kingsville, the University of Houston, Texas Tech and Louisiana State University. Other large contributions are given to organizations like the Offshore Energy Center, The Houston Science Engineering Fair, The High School Engineering Professions and the Weiss Energy Hall at the Houston Museum of Natural Science.
“I see API, really as a way to get involved and get young people involved and interested in the industry,” said Perrere, “By creating fun things for our members, it gives them a chance to get close to their customers and learn about different companies. It helps develop camaraderie. Overall, it’s just a great group of guys and gals.” Overtime, policy issues, advocacy and public outreach about issues impacting the industry are now acted upon decisively in Washington. They continue to push educational endeavors while staying involved in issues facing the trade and supporting its members through cooperation and industry updates.
While the allure of the unregulated days of old still lingers on the faces of past chairman looking down from their framed perches lining the walls of the Houston Petroleum Club. A new era of regulation and policies continues to usher guests back into a world of fresh pressed suits and regal indulgence; where men come together to discuss the times. It is from atop the 43rdmfloor of the ExxonMobil building, just off the elevator, where Tuscan Travertine tiles lay along the oak carved paneled corridors guiding members and guests alike into warm stately designed lounges and dining areas. From here they are dazzled by a prodigiously designed Spanish tapestry and 30 foot floor-to-ceiling windows giving way to breathtaking views of Houston, where the API Chapter holds their meetings. Unruffled, this group and the spirits of their past come together year-after-year for the sake of industry cooperation, to deliver trade knowledge and awareness to the next generation of oilmen and their communities.