Archive for June, 2012

The south Arkansas oil boom — past and future

Tuesday, June 5th, 2012

South Arkansas wasn’t prepared for the oil boom that occurred in the early 1920s, an event recounted in the previous Southern Fried blog post.

After the Busey No. 1 well struck oil on Jan. 10, 1921, one mile southwest of El Dorado, Union County became the center of activity in south Arkansas for a time.

The gusher sprayed between 3,000 and 10,000 barrels of oil up to a mile away. Speculators rushed in from across the country. The Arkansas Legislature even sent an exploratory train down from Little Rock so legislators could see what was going on (those legislative junkets have a long history, don’t they?).

In March 1921, Arkansas produced 38,000 barrels of oil.

That increased to 325,000 barrels in April of that year, 578,000 barrels in May and 908,000 barrels in June. There were 900 wells in operation by 1922.

Kenneth Bridges writes in the online Encyclopedia of Arkansas History & Culture about what happened at El Dorado: “It changed from an isolated agricultural city of 4,000 residents to the oil capital of Arkansas as 22 trains each day ran in and out of El Dorado to Little Rock and Shreveport.”

There was even regular air service from Shreveport to El Dorado.

The boom moved a bit north in the summer of 1922 with Sid Umsted’s discovery of oil near the Union County-Ouachita County line.

Don Lambert describes in the Encyclopedia of Arkansas History & Culture what happened next: “Abruptly, a rumble came from deep beneath the earth’s surface. The crew stepped away, listening. Suddenly, a thick black column of oil burst forth and spurted high above the earth.

“Within six months, 1,000 wells had been drilled with a success rate of 92 percent. The little town of Smackover had increased from a mere 90 to 25,000, and its uncommon name would quickly attain national attention.

“Smackover was officially incorporated on Nov. 3, 1922. Lawlessness was so rampant that among the 25 petitioners on the incorporation document, none was willing to hold public office. The town’s population steadily declined as oil companies and their employees moved away when more lucrative oil discoveries were made in Texas and Oklahoma. About 100 independent oil companies replaced the 12 major petroleum corporations in this period.

“Unfortunately, conservation laws were absent in Arkansas and, as a result, wells were allowed to run wild until the natural gas had been vented into the atmosphere. This practice eventually ruined the giant oil field, which could be compared to a punctured aerosol can that has half of its contents remaining but no remaining interior pressure to remove it. By the early 1930s, the Smackover oil field’s production had declined dramatically, and the petroleum industry’s attention turned to new discoveries in Texas and Oklahoma. The 1923 population of 25,000 decreased to 2,500.”

Things improved some during World War II with new discoveries and a tremendous demand due to the war effort.

“Although the Smackover field is still going strong into the 21st century, it has none of the robust vigor that was so prevalent in the 1920s,” Lambert writes. “Its landscape is scarred by oil and saltwater running freely over the earth and into its streams due to the work of the oil industry.”

Arkansas Business has a story on the front page of its current issue with this headline: “Oil Field Viability Remains Mystery: First wells in Brown Dense yield fewer barrels than hoped.”

Luke Jones writes, “In the wake of the natural gas boom in north-central Arkansas, residents near the Louisiana border are hoping for a similar bonanza in the oil-rich area known as the lower Brown Dense formation. So far, however, it’s simply not clear whether there’s enough oil trapped in the carbonate mudstone to be worth the millions of dollars it costs to sink each well.

“Southwestern Energy Co. of Houston went on a leasing spree in the Brown Dense a couple of years ago, spending some $195 million to lease mineral rights on 520,000 acres across the formation. It has completed one test well so far and has a permit for a second.”

Columbia County Judge Larry Atkinson told Arkansas Business: “By the numbers I had heard, Southwestern needs 400 barrels a day to make it feasible. … They spent a lot of money and leased a lot of land, but I haven’t seen as much activity as I anticipated. I’m not saying it’s not coming, but the community expected an overflow of equipment. It hasn’t happened yet. We are waiting. We hope they haven’t decided to go anywhere else.”

It you think the predictions of El Dorado’s Richard Mason are overblown (see the previous Southern Fried blog post), consider the initial failures of the previous century.

“In 1914, oil explorers dug an unsuccessful test hole at Urbana, east of El Dorado,” Bridges writes. “A 1916 effort near the Union-Columbia county line also proved unsuccessful. Samuel S. Hunter commissioned a well some two miles east of Stephens in Ouachita County in April 1920. This well, the Hunter No. 1 well, produced some oil but never enough to sell commercially. This site was later acquired by Standard Oil Co. for exploration.”

As noted, everything changed when the Busey No. 1 gushed oil in January 1921.

A new oil boom could still happen in south Arkansas. And if it does, I can state with certainty that what’s now called the Golden Triangle is much more prepared now than it was back then.

Here’s how the website www.unioncountysheriff.net describes the scene in 1921: “People continued to pour into El Dorado. Chief of Police Hamp S. Lewis hired more policemen to cope with the rising crime rate. A full-time health officer was appointed, and two nurses and two sanitary officers were hired to help him. The city water supply had to be increased, and Harvey Couch, president of Arkansas Power & Light Co., came to the city to work out the arrangements.

“Something to do after dark was a problem, too. Men congregated on street corners in the evening to talk oil and some would break off into a quartet. … E.C. Robertson, who owned the Victory Theater in Fayetteville, came to El Dorado and opened a motion picture and vaudeville theater.

“Boxing matches were arranged, and on Feb. 3, 1921, Little Rock’s own ‘Red Herring’ and Patsy McMahon of Memphis ‘occupied the center of the sports arena.’ Jack Parsons, the ‘dean of Arkansas showmen,’ had a tent theater a block and a half from the square that presented shows nightly.

“Three months after the Busey well came in, work was under way on an amusement park located three blocks from the town that would include a swimming pool, picnic grounds, rides and concessions. Culture was not forgotten as an old cotton shed in the center of town near the railroad tracks was converted to an auditorium.”

Ninety years later, much more infrastructure is in place in El Dorado, Magnolia and Camden to handle the situation should a new boom occur.

The Arkansas Oil & Gas Commission, which has nice offices in El Dorado, was established in 1939 to prevent the kind of waste seen in the 1920s.

Southern Arkansas University at Magnolia, South Arkansas Community College at El Dorado and SAU-Tech at East Camden stand ready to provide higher education opportunities.

El Dorado, meanwhile, has done much in recent years to improve its quality of life with the most attractive downtown retail and entertainment area in the state, a first-class conference center, a new high school and more.

The downtown square in Magnolia also rates among the better downtowns in Arkansas.

El Dorado public relations executive Don Hale wrote earlier this year: “What we found in El Dorado was that our award-winning downtown was one thing that made us unique. It separates us from many other communities. El Dorado is fortunate to have one of the best downtowns in the South. Tree-lined streets surround a stately courthouse with retail boutiques and restaurants in a pedestrian-friendly setting ideal for shopping or enjoying a live performance at one of our weekend events.

“It’s the same setting that retail developers in Branson and other destinations have attempted to re-create with ‘lifestyle centers’ that lure tourists, shoppers and overnight guests to their destination. But even the most vibrant downtown is not a destination that can provide several hundred new jobs and have a major economic impact.

“We were asked, ‘What would tourists drive to El Dorado to get that they cannot get closer to home?’ This question challenged us to create an attraction that would draw visitors from 300 to 400 miles away. A plan that centers on the downtown was designed to develop an entertainment district featuring performing arts theaters, musical venues, festivals and events — a bold step for even the most imaginative of communities.

“The city’s existing annual events — for example, MusicFest, the South Arkansas Mayhaw Festival, the Boomtown Classic — serve as the basis for future events. More recently, El Dorado launched the first Southern Food & Wine Festival in our new conference center adjacent to downtown.

“Building on a deeply rooted artistic community, El Dorado will become the Festival City with the theme or tagline of ‘It’s Showtime!’ This new brand will not be launched with an extravagant marketing campaign. Instead, the community will work in the coming years to earn this distinction. Plans are to host an event every month along with year-round activities.”

Bring on the new oil boom.

I think south Arkansas is ready.

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Oil in Arkansas’ Golden Triangle

Friday, June 1st, 2012

I was honored in April of last year to be asked to keynote the annual meeting of the Golden Triangle Economic Development Council at El Dorado’s beautiful new downtown conference center.

The council is a nonprofit organization that was formed to ensure a united economic development approach for Union, Ouachita, Columbia and Calhoun counties. That’s what you can define as the Golden Triangle of Arkansas with El Dorado, Camden and Magnolia as the three main communities.

I’ve long been intrigued by this part of the state (as evidenced by my Southern Fried post on Camden earlier this week).

Great people, fascinating history.

You can imagine, of course, how interested I was in a guest column by Richard Mason of El Dorado that ran recently in the Arkansas Democrat-Gazette. Mason is one of the people responsible for downtown El Dorado being among the most attractive, interesting downtowns in the South.

He’s also the president of Gibraltar Energy Co. and knows what he’s talking about when he writes about the oil and gas business.

Here’s part of what he had to say: “I know. When you hear the words ‘south Arkansas’ it brings a shake of the head and a thought — those poor south Arkansas folks, losing population, jobs flying off to China — a sad part of the state.

“In my opinion, and yes, it is an optimistic one, I believe that perception is about to change. I am a professional geologist with more than 40 years of experience, and yes, I am convinced that in the next 10 years south Arkansas will be part of a new oil boom that will make the oil boom of the 1920s seem insignificant and could even dwarf the northwest Arkansas real estate boom of the past 20 years.”

Wow.

Mason is talking about the potential for revitalizing the Lower Smackover Brown Dense due to the technological advances of recent years.

“Geologists have known for at least 75 years that the formation contains oil, but only in the last 10 years have we figured out a way to produce all that oil,” he wrote. “The technology of lateral-horizontal well drilling and multi-fracs has given us the tools to unlock and produce this oil.

“Industry professionals have estimated that 3 billion barrels of oil reserves are present in the Brown Dense. Just to understand the potential of unlocking these massive oil reserves, multiply $100 — the price of oil — by 3 billion, and you will find there is not enough space on your calculator to get the answer.”

Mason believes that during the next decade, the Golden Triangle of Arkansas will become a boom area that will experience the kind of economic explosion now occurring in the Bakken Shale in North Dakota and the Eagle Ford Shale in south Texas.

I can tell you that I had trouble finding a motel room in Magnolia last year because of all the land men in town.

“The leasing of nearly a million acres of land across the southern counties of the state has already enriched thousands of land and royalty owners to the tune of an estimated $300 million, and that is just the top of the money pot,” Mason wrote. “Within the next 24 months, I estimate a minimum of 20 drilling rigs will be operating in the southernmost counties of the state. That alone will add more than 500 jobs to the economy, and when you consider the service companies that are critical to drilling and completing these wells, new jobs will likely jump to more than 1,000.”

The numbers Mason throws out boggle the mind. He predicts:

— A minimum of 1,200 wells initially drilled.

— The wells will average 300 barrels of oil a day and create a cash flow of more than $1 billion a month.

— Almost $270 million a month will flow back to landowners and royalty owners.

— Revenue from property, payroll, severance and sales taxes will soar in the region.

“Population losses will be reversed as thousands of jobs are created, and as the huge cash flows begin to affect the local economies, the resulting new businesses will create additional thousands of jobs. Tax receipts pouring into the area will enhance the quality of life by supporting many of the items that bring a skilled labor force into communities, creating additional businesses.”

Just a dream?

One need only look back at the state’s first oil boom to realize it can happen.

Consider what happened to the population of El Dorado. It went from 3,887 in the 1920 census to 16,421 in the 1930 census. Suddenly El Dorado was known as the Queen City of South Arkansas.

Mason noted how some Arkansans also called it Cadillac City due to the wealth.

The past 30 years have not been kind as the city’s population has dropped from 25,270 to 18,884.

Everything changed for this part of south Arkansas on Jan. 10, 1921, when Dr. Samuel T. Busey’s Busey No. 1 well just southwest of El Dorado struck oil.

Busey, an Illinois native with an interest in both medicine and geology, had traveled to Texas in 1901 to examine the first producing oil well in that state, the Spindletop near Beaumont.

Kenneth Bridges and John Ragsdale pick up his story from there in the online Encyclopedia of Arkansas History & Culture: “He and a group of investors attempted to drill oil wells near Vera Cruz with mixed results. As the Mexican Revolution erupted in 1910, Busey closed his medical practice and once again resumed traveling. He eventually made his way to Bolivia, involving himself in a number of business activities. He organized the financing of the first successful rubber plantation in Bolivia and in 1915 successfully completed an oil well in that country.

“He returned to the United States, excited by his success in Bolivian oil. He lived for a time in New Jersey, Oklahoma and Louisiana in the late 1910s, continuing to explore for oil. In 1920, a well east of El Dorado was drilled and showed a large natural gas flow. Busey was in Homer, La., about 40 miles away, and rode a horse to El Dorado to confirm the well information the next day. Unable to find a room, Busey bought the Arcade Hotel for $2,500.

“By this time, the Mitchell-Bonham Drilling Co. had acquired drilling rights on the 80-acre David R. Armstrong farm southwest of El Dorado. It had drilled a well to a depth of about 1,700 feet, but operations were suspended for financial difficulties.

“On Nov. 15, 1920, Busey arranged with local investors to take 51 percent ownership of the company along with rights to the well, all tools and the 80-acre tract that was being drilled. Drilling operations were resumed, but by early January 1921, Busey had to sell off shares of the company and rights to some of the land to meet expenses.”

Then came Jan. 10, 1921.

It was 4:30 p.m. The Busey No. 1 struck oil at a depth of 2,233 feet.

“Oil erupted to the surface, spraying the area with oil for more than a mile around,” Bridges and Ragsdale wrote. “Busey’s rich Discovery Well produced an astounding 15 million to 35 million cubic feet of natural gas and between 3,000 and 10,000 barrels of oil and water daily. This led to the oil boom that began petroleum development in Arkansas.

“A frenzy struck El Dorado as thousands of speculators swarmed into the area seeking their fortunes with Busey credited for it all. He quickly sold the hotel for $5,000 and was besieged by offers for the well. People sent money from all over the country to Busey for him to invest in the new south Arkansas oil industry. He declined the offers for the well and quietly returned all the money sent to him.”

Busey later became convinced that Monticello would become the next Arkansas boomtown, but his drilling efforts in Drew County were unsuccessful. He continued to operate oil leases in Union County until 1928.

Up the road in Smackover, Texas native Sid Umsted became the king. Umsted had been in the lumber business, moving his mill from Homer to Junction City in 1901.

Ragsdale and Don Lambert wrote in the Encyclopedia of Arkansas History & Culture that Umsted’s mill was the “primary source of employment in an otherwise undeveloped economic area. He immediately purchased and leased several hundred acres of land north into Ouachita County, with the bulk of it situated in what is now recognized as the Standard-Umsted/Snow Hill locale.”

When oil was discovered in northern Louisiana in 1919, Umsted decided there was potential for south Arkansas. After Busey struck oil in 1921, Umsted got busy.

Ragsdale and Lambert wrote: “Umsted organized an exploration venture that included four partners from Camden: W.W. Brown, T.J. Gaughan, J.D. Reynolds and J.C. Usery, who shared a half-interest with the V.K.F. Oil Co. of Shreveport, which agreed to drill one well for a small share.

“Umsted selected a drilling location one mile south of the Ouachita River on land leased from farmer Charlie Richardson. On July 29, the drill bit spun into the Nacatoch geologic formation 2,000 feet below. It was a gusher, and the Richardson No. 1 discovery created a frenzy of drilling activity. Within a year, 1,000 producing wells had been completed in the field that covered 60 square miles. By this time, Umsted owned an estimated 3,000 acres of oil leases and an additional 1,000 acres outright.”

Standard Oil Co. of New Jersey purchased the site of the old Umsted sawmill in 1923 for a field office and employee camp complex. Thus the name Standard-Umsted.

Umsted moved to Camden in 1924 and built the Mediterranean-style home that now serves as a bed-and-breakfast inn. He was killed in a 1925 train accident in Mississippi at the age of just 49.

In that same year of 1925, the Smackover field produced more than 77 million barrels of oil. It was the largest oil field in the nation at the time.

By 1923, El Dorado alone had 59 oil contracting companies, 13 oil distributors and refiners and 22 oil production companies. In a scene much like what’s now being experienced in parts of North Dakota, there were whole neighborhoods of tents and hastily constructed buildings to house workers.

There were an estimated 30,000 people living in El Dorado in 1925.

Keep your fingers crossed for south Arkansas. It could happen again.

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