The Houston Oral History Project is a repository for the stories, accounts, and memories of those who have chosen to share their experiences. The viewpoints expressed in the Houston Oral History Project do not necessarily represent the viewpoints of the City of Houston, the Houston Public Library or any of its officers, agents, employees, or volunteers. The City of Houston and the Houston Public Library make no warranty as to the accuracy or completeness of any information contained in the interviews and expressly disclaim any liability therefore.
The Houston Oral History Project provides unedited versions of all interviews. Some parents may find material objectionable for minors. Parents are encouraged to interact with their children as they use the Houston Oral History Project Web site to complete research and homework activities.
The Houston Public Library retains the literary and publishing rights of its oral histories. No part of the interviews or transcripts may be published without the written permission of the Houston Oral History Project.
Requests for permission to quote for publication should be addressed to:
The Houston Oral History Project.
Houston Public Library
Houston, Texas 77002
The Houston Oral History Project reserves the right, in its sole discretion, to decline to post any account received herein and specifically disclaims any liability for the failure to post an account or for errors or omissions that may occur in posting accounts to the Virtual Archive.
For more information email the Houston Oral History Project at firstname.lastname@example.org.
Interview with: E. O. Buck
Interviewed by: Louis J. Marchiafava
Date: April 16, 1981
Archive Number: OH 281
LM: The interviewee is Mr. E. O. Buck. The interviewer is Louis J. Marchiafava. This interview is for the Houston Metropolitan Research Center of the Houston Public Library. Mr. Buck, I’d like to begin the interview by getting some personal background information on you and some of your early activities, but first let’s talk about your early years. Where were you born and educated?
EB: I was born in Stamps, Arkansas, in April of 1904. My father worked for the Buchannan Sawmill Company and worked on building a sawmill railroad from Stamps, Arkansas to Texarkana, Texas. My father was a self-educated engineer. We moved to Beaumont in 1907, shortly after the street car system had changed from horse drawn carts to electric carts. My father was in charge of the electrical shops with the street car system. I was raised there in Beaumont and finished high school there in Beaumont. My family lived in Beaumont. I still have one younger sister that lives on a ranch just right outside of Beaumont. All of my early time was in and around Beaumont and the oil fields in and around Beaumont.
LM: What was your first job?
EB: My first job was working with an Italian friend of the family’s that had a vegetable wagon. I would get up in the morning and go to Wilbur’s house, and we would then drive the vegetable wagon to the farmer’s market and load up for the day. Then I held the horse and various other chores, a 9-year-old boy.
LM: How old were you?
EB: Nine years old, for to me a magnanimous sum of $1.00 a week.
LM: After graduating from high school, what activities did you get involved in then?
EB: Well, I enrolled in Texas A&M as a freshman in the fall of 1921. Because I had had some experience working around in the electric shops there with the street car company, and had worked as an apprentice electrician, I had ideas of becoming an electrical engineer, and so choose that as my studies at A&M the first year that I was there. Although the studies were for electrical engineering—why, in those days, and I imagine it still is—most freshman year engineering courses were virtually the same, so I didn’t lose too much after I eventually changed courses.
LM: When did you decide to change courses?
EB: Well, in midterm of 1922, ’23, I was not financially able to stay in school. I had a friend that was able to get me employed with the Gulf Pipeline Company. In the spring and summer of 1923, I worked for the Gulf Pipeline Company as a time checker and a payroll clerk in and around Beaumont and up as far as Milan and Powell on the pipeline. This experience told me that I should change my major from electrical engineering to petroleum engineering, and so this was what I elected to do when I went back to college. In the fall of ’23, I had enough money to get back in school again.
LM: When did you complete your coursework?
EB: I graduated in the class of ’26 from A&M. At that time, they didn’t have a school of petroleum engineering or a school of geology. Although the school taught numerous courses in those two educational schools, they did not offer a degree in it, so I got my degree in industrial education, with a major in geology and a minor in engineering. I immediately then went to work for the Gulf Oil Company as a geologist.
LM: What were some of your first assignments?
EB: [07:16] Well, my first assignment as a geologist was with Gulf was down in Laredo. The Gulf had very, very active operations in northern Mexico, as well as, in southwest Texas, and quite a group of young geologists that were doing surface work, mapping the country and trying to determine the geology of the territory. We were all young and single, and we had a bachelor house in Laredo. There were some eight of us that shared this bachelor house. We were rarely ever boarding, two, or three of us in town at the same time. Four of the geologists worked in northern Mexico with headquarters in Laredo, and the rest of us worked in southwest Texas, but it was this same bachelor house that we all lived in.
LM: It sounds like you had a clubhouse there?
EB: Well, it was an interesting assignment. The Gulf allowed us $3.00 a day expenses. That was for room and board. By taking your camping equipment and camping out and doing your own cooking, this would let us pay $30 a month for room rent at the house and $1.50 for the meals, if we had meals at the house. This permitted us to have a Pilipino cook, a couple of Mexican boys to keep up the yard and do the household chores, and we lived very high on this $3.00 a day expense account. (laughs)
LM: The techniques that you used in the field at that time—my understanding is they were rather crude.
EB: Well, the only thing that we could do in those days was to map the surface outcrops with the plane table and try to interrupt the geology from the outcrops. Then there were a great number of wells being drilled in the Laredo district, and we would get samples of the drilling cuttings from the wells. We’d also have to run the sea level elevation to these wells, so that we could then start preparing some subsurface geological maps. This was the standard procedure of all of the work that was being done geologically by oil companies everywhere. Geophysics and that sort of thing hadn’t come in yet.
LM: How long did you stay out there?
EB: [11:32] The Mexican government expelled all of the oil companies from Mexico in the first of the year 1927. The Mexican Revolution is going on there, finally had pretty well discouraged companies from having too many surface parties out in the field and taking away the drilling and producing rights in Mexico just discouraged that operation, so the Gulf gave up its Laredo, Mexican, and both sides of the border operation. I was transferred out to west Texas as a surface geologist out there for the Gulf, although I had headquarters in Fort Worth. We worked in with geological portage out of Eastland and Cisco, Wichita Falls, Midland. The Gulf with these service crews mapped a little over 19,000 square miles in about 3 years time within the geological borders.
LM: Were there any significant finds in this early period when you were out in west Texas, that you were involved in?
EB: Well, I was very, very fortunate to have gotten out there just at the right time. The Gulf had an outstanding geologist by the name of Kip Harper. Kip had TB, and the Gulf sent him out to San Angelo to die. The climate out there was good for him, and he became very healthy. Kip Harper was, to me, one of the outstanding geologists that understood the tectonics of that Permian Basin and was able to get the Gulf in out there very, very early, which the Gulf then had substantial oil fields in west Texas and the panhandle in a very, very few years afterwards.
LM: Now, the period that we’re talking about is approximately what?
EB: From 1927 until 1931.
LM: Mr. Harper had a similar background to your own?
EB: Yeah, he was a geologist. I don’t remember. It seems to me like Kip came out of Leland Stanford, but I’m not sure. In those days, most of the geologists that we came in contact with were either out of the University of Oklahoma, Leland Stanford, Cornell, the Missouri School of Mines, and the University of Texas.
LM: During 1931, then your activities again shifted?
EB: That’s right.
LM: Where did they send you at this time?
EB: [15:52] Well, they didn’t. (laughs)
LM: You left?
EB: The oil companies had a tremendous success finding oil out there in west Texas. In fact, there was more oil than the state could comfortably digest. It got to a point to where the state, with this oversupply of crude, began to think of a great number of things that they could do, but no one had any particular ideas. The oil companies themselves formed what they called the Central Proration Committee. They had a proration umpire in the Yates pool in west Texas, another one in the Hendricks pool in west Texas, and another one at Barger up in the Panhandle. This Central Proration Committee attempted, by gentleman’s agreement, to control the amount of oil that was being produced from those various fields, to keep it from being a glut on the market and just completely ruining everything. Oil had fallen from roughly $4.00 a barrel to about $1.45 a barrel during this period of time.
By 1931, when the depression came on, two things happened. The oil companies didn’t need a whole lot of geologists because they’d already had more oil than they knew what to do with. The East Texas oil field came in. When East Texas oil field came in, the Central Proration Committee, which was nothing more than a gentleman’s agreement, ran out of gentlemen.
LM: I didn’t want to interrupt you, but I wanted to find out who made up the committee?
EB: The various major oil companies in a field like at Mansfield and out at our Henderson field. I knew more about that than the others. They would just get together and say, “Look, we have a market demand for 60,000 barrels of oil out of this field. We can produce that, and we can digest it, so we will divide these 60,000 barrels amongst ourselves by so many acres or so many wells or so much pipeline capacity.” They agreed amongst themselves how much oil they would produce out of it.
LM: They were really representatives from the various companies?
EB: [19:13] That’s right. It was a cooperative effort between all of the producers out there. When East Texas came in, this was an entirely different ballgame. The wells were cheap. They were shallow. The proximity to the refining market was easier than from west Texas. The East Texas production just began to back out all of the other oil fields in Texas. The price of oil finally fell to 10 cents a barrel. Well, at the time, in the summer of 1931, the Gulf was cutting back and cutting back. I didn’t particularly like the thought of being cut back. I couldn’t see too much future in the thing from where I sat. I was one of the youngest of the group of geologists they had, so I was low man on the totem pole. I felt that my chances of survival depending upon other people dying. This didn’t seem very healthy to me. (laughs) They were all friends of mine, so I just thought, “Well, I’ll just get out of the way.”
I went to east Texas. They didn’t need any geologists over there. They’d already found that, but this was some pretty hectic times. A friend of mine by the name of Andy Keepers had been a proration umpire in Mansfield, and I knew Andy real well. He’d been loaned by the Texas company to be the umpire. The Texas Railroad Commission in those days had no authority, constitutional right, to curb or prorate any oil field. This Central Proration Committee was over there, but completely helpless. No one was doing anything. Governor Ross Sterling finally declared martial law and shut the oilfield down. I arrived in east Texas the day the martial law was put in up there. I was looking for a job and trying to see what I could do, where I could fit in. There was a well that had blown out and had caught on fire right close to the Overton town site. I, like all of the onlookers, didn’t have anything else to do, so we went to look at the fire.
Andy Capers was there, and this was a unique fire in that the well blew out while the drilling rig was on it. The old wooden derrick, as it fell, it twisted the Christmas tree to where the fire was deflected down into the cellar, and then was ricocheted back up, and it was impossible to get to the fire to put it out. Everyone was standing around talking and what to do. I said, “Andy, I can deflect that fire upward for you.” He said, “Well, if you can, I’ll give you a job.” A friend of mine named Harry Johnson was a major in the national guard. He and I had worked in the Gulf together. I went over to Harry, and I borrowed a rifle and a bandolier of ammunition and went back over there and made a temporary shield out of some galvanized iron and pushed that in front of me and crawled in there. I had them pouring water out of an old fire hose on behind me. I got close enough to where I—there was an old cast iron valve on the master value, and I just shot it off with about 10 shots. The fire started straight up in the air, and they were able to get in there and control it. That was going to work for the state of Texas (laughs) in the East Texas oilfield.
LM: Don’t stop there!
EB: Well, it began to get very interesting then.
EB: [25:33] The legislature was in session trying to figure out some way that they could curb this field when the martial was out at the field. Texas, at that time, had a capacity to absorb about a million and ¾ barrels a day. Just before the martial law, East Texas alone was producing a million barrels a day. That meant that west Texas, all of the coast fields and everything else, were just shut in because they couldn’t find anybody to buy the oil. This made some pretty chaotic conditions, and everyone was trying to come up with a solution. The Railroad Commission, without any constitutional authority, decided they needed to put in a proration scheme.
There was an engineer by the name of Danny Parker that was chief engineer for the Railroad Commission and a great, great old man. He hired a friend of mine named Bill Knode to be the chief engineer under him. Andy Capers had hired me because I had deflected that fire for him. Bill stayed in Austin, and I stayed up there in the field and prepared to open that field when the martial was lifted. Between August of ’31, and mid-September, the end of September of ’31, we came up with a scheme of proration.
LM: You were actually involved in devising this scheme?
EB: [28:03] Yeah, I was the engineer that was there in the field. Now, everyone wanted this problem solved. I say everyone—the major oil companies, the business people of the state. Everyone wanted it solved, but how to solve it? You had all sorts of thoughts, all sorts of ideas. You had all sorts of schemes given to you. The first scheme we came up with was just so much a well. If we just cut every well in east Texas to 150 barrels a day, this would cut the production back to around 300,000 barrels a day, and this would then begin to stabilize this thing. There were three things wrong with it. One, there was no authority to make someone cut it back to 150 barrels. There must’ve been 75 drilling rigs drilling new wells every day. The third one was that they had absolutely no authority to enforce the scheme, so the Railroad Commission would write out a proration order, and someone would enjoin the order. We’d go to court. The courts would deny the commission’s right. They didn’t have the constitutional right to do it. We’re back at square one again.
I had, by this time made the acquaintances of practically every engineer that was working for these various oil companies in there, and we began to exchange ideas and thoughts, what we could do, and how we could do it. It was perfectly obvious to anyone that wanted to study the problem that unless we curbed the amount of wells that were going to be drilled in the field, there was no need of attacking the problem of how much oil they were going to get. I prepared a report for Mr. Parker, and he, in turn, took it to the legislature asking the legislature to give the Railroad Commission authority to permit a well from being drilled on less than 10 acres. This report predicted that unless such an order was promoted, there would be an excess of 30,000 wells drilled in the field here in the next 3 or 4 years. Danny Parker was laughed out of the legislature’s halls. Whoever heard of an oilfield with 30,000 wells in it? It was so preposterous and so ridiculous. They were just at an impasse. They couldn’t curb the drilling.
LM: The legislature took no action at all?
EB: The legislature took no action. The people that wanted to follow proration and produce 150 barrels a day did, and the ones that didn’t, didn’t. The Railroad Commission consisted at that time was 3 men, Lon Smith, Pat Neff, and C.V. Terrell. They were politicians. They didn’t have the slightest idea of what was necessary. Pat Neff was an ex-governor, and I just think it got a little too hairy for him. He didn’t work much of it. He resigned and took over the presidency of Baylor University. Governor Sterling appointed then a feisty young lawyer and soldier out of Amarillo, Colonel E. O. Thompson. I had Ernest Thompson in Amarillo when I’d worked up there in the Gulf, and he was the mayor in Amarillo. Ernest was one of the youngest colonels to come out of World War I, a very courageous guy and a very intelligent guy, loved to fight, loved to challenge.
When he came to East Texas, instead of staying in Austin, the way that the other commissioners did, he just moved in with the military down there. If he was going to take over that oilfield when the military left, he was going to be prepared for it. Having a legal background and having understood politics from his Amarillo mayor, he began to pull together some people that could make some influence with the legislature. When Colonel Thompson got here, this thing was just as chaotic as it could be, and we had a great number of theories about what to do with this oilfield, but there was no way we could put them in effect.
[35:33] One of the engineering theories that were being propounded that made an awful lot of sense was that this field pressure was maintained by a water drive down in the Wood Mine basin and pushing the oil up into this huge, huge trap. If some curtailment wasn’t put in that field, millions and millions of barrels of oil would be lost by underground waste. There were some new instruments that they had just come on the market. The Amerada Oil Company had developed one in their research department. Humble had developed one in their department called a bottom hole pressure bomb. It was a pressure gauge that you could run down in the bottom of a well and measure the pressure at the bottom of the well instead of the top of it.
I worked with all of the engineers in the field, and at that time there was some, maybe 20 of those pressure gages, available in the United States. We got the companies to send all of them to East Texas. Then we plotted a grid of the field, east to west, and I think we had about 12 lines running east and west across the field, and what we called a key well. We were going to gauge that well and then the one up depth, and the one up depth, and then move to the north so many miles and do the same thing. We felt that if this grid could conclusively prove this water drive and the effects it was going to make on the recovery of that field if something wasn’t done to curb it, there had to be an efficient rate to produce that oilfield engineering. It just had to be.
I went to Colonel Thompson, and I said, “Colonel, we’ve got this dadgum thing. I think we can come up with something intelligent to give the legislature.” He said, “What would be the best way to get this thing done?” I said, “Well, as long as this field is producing a million or so barrels a day, it’s almost impossible to get the pressure gradient. If the thing was shut in for 2 weeks, I’m sure that I could have the answer for you, Colonel.” He said, “Well, we’ll just shut it in.” He just issued an order to shut the oilfield in. The soldiers were still there, and they enforced the order. We had no more authority to shut that oilfield that a spook, but by the time that protestors could get to court and attack the order, we had gained the 2 weeks time that we needed to prove this gradient theory. By the time the courts told us to open the field, we didn’t have any legal right to shut it down, we had the answer.
[39:57] We took this answer then to the legislature, and they gave the commission authority then to prorate an oilfield on a physical waste standpoint. This gave them the right then to curb the production of a field to its economic maximum rate of production without causing physical waste. This took a lot of doing to get people to accept. Not everyone was interested in seeing that oilfield saved. A lot of people had contracts to sell oil. They kept insisting that they had constitutional rights. It was their well. There was a law captured. They didn’t care if it came from somebody else’s land. It came out of their well, and they had a contract to sell it, and that was the law of the land. You can see the real, real, legal problems hat began to get developed in this thing.
The state of Texas was fairly well divided. You had a tremendous number of independent operators in east Texas, and they didn’t want any curb on their activity. You had all of the Gulf coast fields down here that couldn’t sell oil because they didn’t have a market. West Texas was practically at a standstill, so you had a great amount of different geographic sections of the state that were interested in seeing a proration scheme being put into effect that would at least bring some system to order back into the just almost chaos. This thing was tried in the courts constitutionally for about 2 years. Although the commission would give the authority—I mean—the legislature had given the authority, the commission being a body of political had to consider the political aspects of this order, and you tell them, “This thing won’t stand up.” “Well, we’ll see.”
By trial and error, we spent most of 1932 and ’33 in the courthouse. Finally, the federal courts upheld this proration scheme, and it gave the commission the right to curb the number of wells that could be drilled. It could curb the amount of production that a well could produce, and it put some limits and some other rules in it, but overall, the law was acceptable. There was only one problem that was related to producers. If the producer produced the oil anyway, and it got to a refinery, the Railroad Commission had no jurisdiction over a pipeline or a refinery. It only went to the producer. Oil could get by pipeline or by truck from east Texas to Shreveport. It was out of the state. It could get to the pipeline and come to Houston, go to Pullman. The problem then was getting to be national because Oklahoma was having to prorate. Louisiana was having to prorate. The geologists had been so successful at finding oil that it was a glut on the market.
LM: Even with these antiquated techniques, they were finding it.
EB: [45:27] That’s right, and they were developing new methods every day to find more, which we didn’t know what to do with what we had. This was almost a case of suicide by being successful. We had a senator in Texas at that time by the name of Tom Connally. Tom Connally asked a fellow who was there in Washington, a bright, bright young lawyer by the name of Howard Marshall, what could be done. Howard was with the Interior. That was a government agency that was trying to help everything without any authority either. Howard said, “Senator, I can write you a bill that will solve that whole problem.” Howard told me that it took him about 4 days, and he wrote this bill, and it was passed by Congress, and it was called the Connally Hot Oil Act.
In this act, a producer had to have a manifest to sell his oil. He sold it to a truck. He sold it to the pipelines. He sold it direct to a refinery, he had a manifest. This manifest followed that barrel of crude into the pipeline, and the pipeline had to have documentation on it. Then the end user had to have documentation, to where a barrel of oil left a production leash. By the time it got ready to leave that refinery, the thing was completely documented as to the source and who used it. The kicker to the Connally Hot Oil Act was it was a federal offense to carry oil across the state line that wasn’t documented. This then gave the regulatory authorities in the various states, for the first time, a handle on the problem. They had the identity of the oil. The state had put the proration umbrella over a field and drew a ring around it. So many barrels of oil could be produced. It was documented, and if it got anywhere else, it was illegal. For the first time, stabilization from—well, it started back in about ’29, and it was about 1934 before this problem was completely solved, running smooth again, and the price of oil started back up.
LM: What influence did your success in this, your involvement in this program, have on your career?
EB: Oh, what?
LM: What was the influence that your success in this area had on your career?
EB: [49:19] Well, obviously, I was on the firing line over there at East Texas all the time. I had not only a privilege to be there and be associated with some of the best mines in the petroleum industry that were trying to come up with engineering proof of solving problems, the legal profession that was trying to write legislation that would make this thing work, and the economic impact that it was making on the country. I either was associated with or had a ringside seat and could watch this activity. By the summer of ’33, I felt that as far as that East Texas job was concerned, I had contributed all that I could do. The Conroe oilfield had just come in. Rather than to have another East Texas fiasco, the operators in the Conroe oilfield got together in the early beginning, and they formed a Conroe operators’ association.
This was consistent of all of the property owners in the field. They elected a very, very outstanding geologist by the name of Alexander Deussen to be chairman of that operators’ committee. I was interviewed and hired to come down here and be chairman of the engineering committee and the operators. Again, I just went back to what I was doing in east Texas, was coordinating all of the petroleum engineering information, coordinating it and seeing that here we had a field that could be scientifically developed from scratch. Again, I had an opportunity as a ringside seat to work with and be around these people. By the summer of ’35, or fall of ’35, we had drilled some 450 wells. I felt that the pattern was set. There were no problems, no litigation. All of the basic groundwork had been put together. There was nothing particularly challenging from then on, so I resigned and went into consulting business here in Houston as a petroleum consultant.
LM: Before we get involved in that, before we move away from Conroe completely, I had a question for you, and that involved the founder of the Conroe fields, George W. Strake. Do you know him?
EB: I knew him very well.
LM: Can you tell me something about him?
EB: Yes, I can tell you a great deal about George from personal contact with him. I can tell you a lot of I think very authentic information about George that I got from people that were very close to him that I knew very intimately.
LM: You knew him also?
EB: [54:12] Oh, yes, yes, yes, yes, he was one of the members of the Conroe Operators Association. I worked him during this period. George was an accountant, and he worked in Old Mexico with the Buckley Brothers. I knew the Buckley Brothers when they’d come back and forth from Mexico and Laredo. I’d not met George Strake. He was in their accounting treasury department, and George left them and went to Cuba with a sugar outfit. One of the things that he had with the Buckley Brothers was an override on a concession that hadn’t been drilled, and knew then that if it ever got into production, why George would get word of it. George then lost his job in Cuba. They had to ship back that sugar operation. George’s mother-in-law lived in Conroe. George and his wife came up from Cuba and stayed there in Conroe.
About that time, this concession that George had an interest in came in in Old Mexico. The Buckley Brothers and George settled for cash or a certain amount of I don’t know. I’ve heard of various figures, but that’s immaterial. Here was this—George was there in Conroe. Here was this huge bunch of leases that were available for practically nothing. Here was a guy out of a job and with some money, and he went out there and drilled him a well and discovered the oilfield. George—and I don’t want to take anything away from him—did a terrific job of putting that thing together, and even after he had discovered it. people didn’t believe it. He had a tremendous amount of trouble holding his holdings together while he was trying to prove he had a very valuable oilfield out there.
There was a drilling contractor, Plumber and McDaniel that furnished George the pipe for his either second or third well, or the acreage joining would sell a little acreage. He’d do anything to get some money together to get another well. He finally was able to convince Humble that he had an oilfield. They came in then with substantial money and took about half of the oilfields, but this gave George everything that he could’ve possibly wanted and proved that he’d been right all along. He just couldn’t get anybody else to believe it.
LM: He must’ve had a fairly sound background in the oil?
EB: He had worked for Buckley Brothers, and he knew the oil business from the financial standpoint, but geology, this, and that—he didn’t have. The old Conroe had been shot two or three times with geophysics, and no one would believe it because it was not a typical soft dome. It was too big. Here was something that was sticking up like a sore thumb out there that no one would believe. Texaco had the thing under lease one time and had dropped it. It was just too large. They had looked for these piercement-type salt domes that were very, very small. This was a Gulf coast production, but here was a dome that hadn’t pierced the formation, but had bulged them, and it was so large that there wasn’t anybody believing it. George believed it and spent his own money on it, bet his own money. (laughs)
LM: What effect did this have on Mr. Strake as a man afterwards? Obviously, he became wealthy. He had his own company. Did you team up with him after that?
EB: [1:00:04] Yes, quite a bit after that. George was a very devout Christian. He not only believed it, but he lived it. A great amount of his thinking was that God had helped him accomplish what he had done. He gave a great amount of credit to that, and in turn, he plowed back a great amount of money to the church, the charitable deals, and that sort of thing. When the St. Joseph’s Hospital foundation board was formed, I was one of the charter members on that board. George, although not on the board, was one of the most active prominent lay Catholics that I ever knew. A lot of people didn’t like George.
LM: Why was that?
EB: I say a lot of people didn’t like George. He had mannerisms that some people liked, some people didn’t, but then he, to me, was a great guy.
LM: Just out of curiosity, what were some of his mannerisms that—?
EB: Well, suppose that you went from, at the age of say 35, and had worked all of your life and barely made a living, and then wound up one morning as a multi-millionaire. How would you perform? I’ve seen it dozens of times, and there’s all sorts of mannerisms that come into people’s thinking, just doing something like that. Some people say George was a takeover-type-of guy. You had to believe him. He was too important, this, and that, but I never found it that way. I always thought and watched people that have suddenly amassed tremendous wealth—they all have peculiarities. They have a formula that makes them think. Something made it tick. Whatever it was, they’re going to keep that formula. That’s the one they knew. That’s the one that made them successful. This, a lot of times, makes us people unhappy. I think George, not only was great, he made a great contribution in discovering that field out there and later as a citizen in Houston.
LM: This is a good point to put another tape on and give you a break too.
LM: I’d like to resume the interview now by getting back to your own activities when you first became a consultant. Can you tell me about that?
EB: Well, I opened up a consultant practice here in Houston in 1935. Because of my contacts with the various oil operators and people in Texas that I had known through proration days in east Texas, or I had a great number of friends with these oil companies, knew a great number of independent operators. I had a rather successful consulting practice going. You see, east Texas and the proration schemes finally gave engineers enough information and data to prove oil reserves in the ground. Also, the regulatory authorities controlled the amount of oil that they could produce, so for the first time in the operation of the petroleum industry, banks and financial institutions could get into the financing of oil properties because they had a known asset they could lend against.
My first consulting work was principally working with the few banks in the United States that financed petroleum. The Chase National in New York and the First National of Chicago, the First National of Tulsa, and the National Bank of Tulsa, the Republic, the First of Dallas, and the Mercantile of Dallas, and the First City in Houston were the only banks in the United States that were financing petroleum. Instead of a guy like Strake here and hid in a well and be rich overnight, new developments come along and were immediately curbed. A man to have, for the first time, long-term financing to carry out his development. This was a brand new technique. There were very few banks that understood it, and very few banks wanted to do it, the ones that pioneered and developed the first concrete intelligent financing for oil properties. I was fortunate enough to be right in the middle of that when it was all beginning to happen. I had contact with all of the banks that I’ve mentioned. I made reports for them.
If people come to them for money, they would send them to me for reports, and this went along fine until I got a call one day from a friend of mine that told me that I was going to be offered a job in Washington. He thought I should give it some very, very serious consideration. In a few days, I had a telephone call from a man named Bob Allen that I didn’t know, but he worked for the Secretary of the Interior, Secretary Ickes, and he invited me to come to Washington. He had a plane ticket for me, so I went up there. He told me, he said, “The government is satisfied.” This was in the summer of 1941 that we are going to be at a war. “We’re going to have to be on top of this petroleum problem. We divided the United States into seven districts. District three consisted of the southern states, New Mexico, and Texas, Louisiana, Alabama, Mississippi, Georgia, and Florida, and Arkansas. We want you to be the director of production for this thing, because we’re going to be in a war, and we’re going to have to get ready for it.”
[06:10] I was 36 years old. I had had a reserve officer’s commission that I’d let lapse, and I explained to these people that I was in no way financially able to give up the practice that I had to go to work for the government for $4,800 a year. I realized that this was a problem, and I agree to set the thing up for them, to staff it, to organize it, to get the thing going. Then I, obviously, have to leave and go back to making a living. We agree to do that, and the only problem that happened was that Pearl Harbor happened before I got it organized. We were right in the midst again of a pretty touch-and-go situation. We had an oversupply of crude, had enough oil shut-in capacity to take care of all of our military needs and all of our allied needs, but someone had to control it. Someone had to see that the oil got to where it was supposed to go. There was no point in drilling more wells.
Steel was in short supply for the war effort. The petroleum industry is a great, great consumer of steel because when they use it, they put it in the ground and it stays there. In most industries, it gets back in the scrap pile, and it’s re-used and re-used, but the petroleum industry is a net user. This brought about then the problem of how you get the oil to where you want it, how you curb the development. All of this came about without any legislature at all. The president would write a directive. He would give it to Ickes. Ickes would give it to the field, and the field would enforce it. No one asked any questions. You had problems such as this. The Magnolia refinery, for instance, in Beaumont had a contract with a naval airbase at Corpus Christie for aviation gasoline. This meant tank cars to go from Beaumont to Corpus Christie and back there, when the refinery is in Corpus Christie. You could make all the gasoline you wanted, and all that was out there was a truck. Now, how do you go to Mobile and say you can’t do that? This was required to do. This required marshalling the transportation, marshalling the production and getting it in the direction that it was needed.
[10:10] At the time that the war broke out, it took 41 days to get a tank car of gasoline or a tank car of oil from Houston or Beaumont or New Orleans to the east coast and back. Inside of 60 days, we were moving a million barrels of oil a day by tank car and getting tank cars back in 14 days. Now, this took a cooperative effort of everybody, but you go to them, not as like you say like, “I’m the boss, and you’ve got to do this.” You go to them in a patriotic way and say, “Look, the bottlenecks are at the Mississippi river, New Orleans, the east side. Now, we’re going to give priority to these trains going east at those bottlenecks. They’ve got priority over everything except troop trains. Now, let us worry about getting the cars back. We’ll get them out to Chicago and come back on the west side of the Mississippi river. We’ll get them back, but you give us priority to across these crossings. Everybody cooperated. That solved that problem.
LM: You were directly involved in this?
EB: I was manager for this thing down here in seven states at the ripe age of 36. (laughs) You had military demands for certain steel, certain products, and they had at this time a company called the War Production Board. It was the overall agency that controlled all strategic materials. The petroleum industry would have to figure out how much strategic material a day it would have and be a claiming agent, just go to the War Production Board and say, “Look, to first operate, we have to this many tons of steel, this many tons of copper, this many tons of rubber, and everything. Sometimes you got it. Sometimes you didn’t get everything you asked for. Then you had again, a priority system that dispersed that material, just automatically said, “Look, you can’t drill a well on anything less than 40 acres.”
You had no authority, but if someone violated that authority, they could not get a priority to get anymore material. If the seller sold it to him, he couldn’t replace his inventory. You just cut him off at his source. In a very short time, this train was running pretty smooth. You had the big inch pipeline was being laid. You had all sorts of terminals that had to be built to handle and store this material, but there were no real earth-shaking problems like we had in east Texas with everybody getting an injunction held against you. To staff this petroleum administrator’s office, I’d just pick up the phone and call a friend of mine in such-and-such a company and say, “Look, you have a guy here. He is number four on your totem pole. He’s above draft age. I can only pay him $3,600 a year. I want him on a leave of absence, and I want you to pick up the difference in his check. I’ll send him back to you when I get through,” (laughs) and that’s the way you did it.
LM: You must’ve worked with J. R. Parten during this time?
EB: J. R. was head of the transportation there for awhile.
LM: How did you get along with him?
EB: [15:07] Well, of course, J. R. and I were friends in east Texas. We were both on the opposite sides all the time, but we have a great deal of respect for each other even yet.
LM: You say he was on the opposite side? He was opposed to the proration?
EB: Sure. He had the Woodlands Petroleum up there, and J. R. is a very, very astute oil man. He had storage, so he could buy cheap oil and put it in storage. The price would go up, and sale it. He had a—completely legal, everything that he did. Never once did I know J. R. to break the law, but he didn’t believe in people pushing him around unless you had the law to do it. If you didn’t have the constitutional right, he just said, “I’m not interested.” He was perfect for that transportation job. He had all of the nerve of a second-story burglar. He understood the game. He knew all of the players, and he made a perfect guy to have in the transportation. He went to Washington, and he handled it for all districts. You’d just go to J. R. and say, “This is the problem,” and he’d have an answer for you.
LM: You relationship with him at this time was good?
EB: It still is. I don’t get to see him very often. I haven’t seen J. R. in maybe 6 or 8 months ago. I’ve known him since 1931, and I consider him one of my friends.
LM: During this time, did you become acquainted with Jesse Jones?
EB: I knew who Jesse Jones was, and Jesse Jones was given the Reconstruction Finance Corporation, was given a problem of financing refineries for aviation gasoline. Now, crude oils won’t make aviation gasoline. Even after you get crude oils that will have octane numbers to go up, it still takes additional refining. Mr. Jones worked out the plan of just putting these aviation gas units in other people’s refineries, and just, “Look, I’m going to put this thing in. It’s going to cost $20 million, and we’re going to put it in your refinery, on your grounds. They’ll see that you get the material to make it. That’s going to belong to the war SS Commission. When the war is over, well, we’ll work out who it belongs to and how you pay for it, but it’s not going to cost you anything, but this is where you’re going to make your heaviest gasoline.”
He did that. I didn’t meet him at that time, but was very, very close to what he was doing. Obviously, he had to know what we were doing down here because the source of crude for these aviation gasoline units were dependent to come most out of this district down here.
LM: Following the war, did your relationship with him grow closer?
EB: [19:26] Following the war—well, right at the tail end of the war—I felt that I had done all that I could do, in the way of contributing, and this thing was running smooth, so I went to work for the Rowan Drilling Company as their southern manager. They had a number of drilling rigs operating down here. I had lost all of my contacts for consulting work. There wasn’t any consulting work going on anyway. I was so broke I had to go to work for somebody. Rowan offered me a job being manager of the southern division. I had known Arch Rowan and Charlie Rowan from east Texas days and west Texas days, had a great amount of admiration for them, and they liked me, so I went to work for them in the summer of ’43 and managed their drilling operations in Texas, Louisiana, and Mississippi during that period.
I had a feeling that the war was going to come to a close, that there was going to be a tremendous amount of pent-up money. People hadn’t been able to buy anything. Everything was rationed. They couldn’t spend their money. There was a tremendous amount of money back there in the banks and everywhere else that this thing, as soon as the war was over, was going to start right again. I’d like very much to be part of it. I thought about buying some oil properties, but the more I got into it, the more I realized that one, I had no credit. Two, although I had borrowed a tremendous amount of money for various people with these banks and had operated with them in paying it back, I had no standing of my own. About that time, the Old National Bank of Commerce, Jesse Jones’ bank, had decided about the same time that I had did this, would open up a brand new avenue of financing for them.
[23:01] They were looking for someone to head up that department, and I was looking for a place to get in there where I could learn the other side of that coin before I went out for myself. I joined the Old National Bank of Commerce as manager and set up an oil and gas division for them. This is where I met Mr. Jones. Although Mr. Jones never had a desk in the bank, he ran an empire by having key people, and he kept up with those key people very, very closely. He had an uncanny ability to digest detail. He lived in the Lamar Hotel, and he had his office at the Bankers Mortgage building. Every morning he’d walk down Travis. He owned several buildings. He’d come through the back door of his bank, and I was always a person that was at work pretty early in the morning. Sometimes I’d be the only bank officer on the platform, and he’d walk by and come sit down at my desk, and we’d chat. I was constantly amazed at how much he knew about what I was doing without even talking to me.
LM: How did he know?
EB: Through the manager of the bank—he just wanted to know everything that was going on, and he knew that as well as he knew his other business. He just had a capacity for absorbing detail, and he never wanted to see—is another amazing thing to me—he never wanted to see a report that was more than 2 pages. He preferred it all in one paragraph. The first two or three times that Mr. Daugherty, the president of the bank, said, “Mr. Jones wants something,” and I’d prepare it, and take it by. “He’s not going to read it. He wants to know yes or no. Get it in about two paragraphs,” and that’s the way he operated. He had the capacity to absorb it and act upon it.
LM: You mentioned that he had key people who he maintained contact with, but he really didn’t himself get involved in the detail?
EB: Uh-hunh (negative), he never.
LM: He must’ve been also very uncanny about the men he chose for those key positions?
EB: Well, he had, to me, a most, most interesting organization. He had Mr. Fred Hiney, who was his number one man. Fred Hiney carried a powerful attorney for him. When Mr. Jones was in Washington, Fred Hiney ran everything down here for Mr. Jones. He had Bob Daugherty running the bank. He had—I can’t remember the various names of the people, but the Rice Hotel had one manager, and the Lamar Hotel had a manager. That ownership channel had a manager. He had an editor of the Chronicle. He had these key people. They not only were dedicated to him, they were very loyal to him, and he never got it on a personal plane enough to where I ever heard anyone ever speak to him or refer to him other than as Mr. Jones. No one ever got—if his people that worked for him ever got so close to him that they could call him Jessie. I never knew anyone in that whole group.
[28:08] Now, he had a lot of, to me, very interesting traits. He didn’t believe in a retirement. He wasn’t going to, and he didn’t think that these people should. He’d take care of them, and he did, but this didn’t leave a lot of room for the perpetuation of management. He picked these people. They reported to him. If they didn’t do what he expected of them, he replaced them, but everyone understood that this was the person that spoke for Mr. Jones. To go around one of them, direct to him, was impossible. He went by invitation. He would call you up maybe one time. When Glenn McCarthy was in trouble, the insurance companies looked like they were going to close in on him.
LM: On Glenn McCarthy?
EB: Mr. Jones called me up to his office, and he said, “This man means a lot to Houston, and I don’t want to see him go under. What will it take to save him?” Well, I was somewhat familiar with Glenn’s operations with the Equitable Life Insurance Company. I was not familiar with his chemical operations that he had with McCarthy Mutual, nor was I too familiar with his hotel operation, but his oil operation, I was fairly familiar with, so I spent a couple of weeks working out what I thought was a shakedown price that it would. I went back to Mr. Jones, and I said, “Mr. Jones, Glenn has a third of the stock in the Bank of Southwest. The man owes a considerable amount of money, and I think he’s solvent, but I don’t know how, under the present conditions, he can service his debt. If we can figure out some way to put a value of $22 million on the Shamrock and the property around it, I think I can see a way to consolidate this debt and get it served.” He said, “Forget it.”
There was no way that he, Mr. Jones, could see that value in that hotel and property out there at that particular time. This was what, 55? Just to service that debt, if Glen got caught—let’s digress just a minute. When the war was going on, every field in the United States was producing pretty well to its capacity. Then right after the war, a great number of fields came in, so it kept cutting them back and cutting them back. The success ratio was beginning to mount up again. The techniques were beginning to discover oil fields where people just didn’t think they existed. Well, there was a limit to what the regulatory commission could do under their statute for physical waste. Finally the courts just said, “You cannot cut a well below 20 barrels a day.”
[34:00] Now, this is getting ridiculous, so Earnest Thompson, (laughs) and he always had an item, so the federal courts put an edict he couldn’t do this. He said, “Okay, I won’t cut this barrel below 20 barrels a day, but the state of Texas is producing 30 days a month, and I’ll just cut it back to 25 days a month. Everybody can have their 20 barrels, but they’re only going to have 25 days.” This is what caught Glenn. He was geared to a 30-day production month. This could service his debt, although he was screening it, but when they cut him back, finally I think it got back to around 18, 20 days a month. There was no way that he could pay the interest and the principal on his debt within getting it all restructured. This equitable insurance company was not willing to it. They wouldn’t have to string it out, instead of a 10-year loan, maybe a 25-year loan. This brought on his problem. It wasn’t the lack of assets. It was the liquidity of his assets. When I explained that to Mr. Jones, he said, “Well, there’s nothing we can do about it.”
LM: Were his oil fields solid? Were they bringing in oil or were they drying up?
EB: Well, they were discovering more oil than we were producing, and they continued doing this through the ‘50s.
LM: I mean Glenn McCarthy’s own holdings.
EB: Oh, Glenn, of course, after 20, that was his last major discovery. He had a lot of smaller fields like Blue Basin and a number of other things that didn’t materially add to his reserves.
LM: Did he overestimate his reserves?
EB: I don’t think he overestimated his reserves. He overestimated the ability to service his debt. The price of oil was soft, and the number of producing days were soft. He had agreed to pay a certain amount of money every month, but when you cut him from 30 days to 20 days, you’ve got 10% under water right there. This was his problem.
LM: That was the major—?
LM: There have been rumors that the building of the Shamrock Hotel had a lot to do with his difficulties. Do you think that’s a valid—?
EB: [37:47] I’ve never looked at the economics, but let’s take a hypothetical case. Here’s a hotel out here that costs $20 million. To lease that hotel and run it at a profit, it should’ve been built for $10 million, but if you had a $20 million depreciation, and you had various other things to go into another tax identity, it could make sense. Now, what motivated Glenn in all of this, I don’t know, but I’ve always assumed that Glenn per se, was unincorporated, and he was on a treadmill. He had to spend money, or he had to pay it out in taxes. He had—like all oil men that I ever knew—a phobia about paying taxes.
Well, here was a plan to have the Shamrock Corporation, and he put the money into it. He would get the depreciation back, and he turned around and leased that hotel to the Shamrock Corporation at a lease that would permit it to make a profit. He, Glenn, personally, could absorb the loss, because it was a taxable deduct. It was a perfect scheme until his income declined. Then he didn’t have the tax problem. He didn’t need to protect a tax problem. He didn’t have a tax problem, but he had a white elephant out here that he couldn’t raise the profit to keep the hotel solvent. It had to upgrade on that particular type of lease.
LM: He owned land in Sharpstown area too, didn’t he?
EB: You know—I’ve heard that. Really, I don’t know anything about Sharpstown, but there was a fellow named Dave Bintliff and Bob Smith and maybe Glenn who put together a lot of acreage out here. The first I really came in contact with it was Frank Sharp as a developer and what went together to put Frank in business out there, I do not know.
LM: I had heard also that in this land that McCarthy supposedly owned in this Sharpstown area, that he wanted to sell it to the city for the same price he paid in order to build an intercontinental airport. Do you know anything about that at all?
EB: No I don’t. I know that there were a group of people, Houstonians, that had the land up north where the present airport is, and they were rather politically affluent in Houston. Hobby airport was shut in so many times from fog and smog that they didn’t have any room for expansion that they had to move some place. Who convinced the town farthest to move up there and what pressures where there, I do not know. I’ve heard Glenn’s story about the airport there, but I know nothing about it.
LM: The other question then deals with this. I’ve also heard that Jesse Jones didn’t want the city to grow out towards the Shamrock, that he wanted to keep it centralized.
EB: [42:58] No, that’s not true. I came to this town in ’33. Mr. Jones always thought that this was a north-and-south town. All of his buildings went north and south. There were people that tried to change the direction of this town.
LM: Sterling was one, wasn’t he?
EB: Sterling was one, to make it an east-and-west town, and it never happened. Now, the Texas eastern points are all over on the east side over there. Right now, there’s quite a to-do about a new convention center, when the city already owns all of the land that it needs for a convention center on the west side. Who will prevail here, I don’t know. How much politics is involved in it, I don’t know, but obviously, from a taxpayer’s standpoint, the west side is the intelligent place to go.
Now, going back to Mr. Jones, he never, as far as I ever heard, was against anything going north and south. I remember when Bob Smith was buying all of that acreage out at Westheimer. Mr. Jones had the Baggage Mortgage Company. One of his lieutenants in the Baggage Mortgage Company was Bill Moore. Bill was a great, great land and cattle financier. I was talking to Bill one day, and he said, “Say, is that fellow Smith crazy?” He said he was going up Westheimer. “He’s paying $1,500 an acre for land, and he’s putting cows on it.” He said, “Buck, $400 an acre is tops for putting the cows on that land.” He said, “That man’s crazy.”
LM: Now, who said this, again?
EB: [45:28] Bill Moore. I said, “Well, I know Bob, and watched him for lots of years, and I don’t think he’s crazy. Why don’t you ask him? I’ll call him.” I called Bob, and I said, “Bob, Mr. Moore is worried about you and buying all that land, the price you’re paying for it and putting cows on it.” He said, “Buck, ask him if those cows will hurt that land.” He said, “Them cows aren’t going to hurt it.” (laughs) He bought it all out there and, of course, that’s—although he had a tremendous oil fortune put to that land fortune. Goodness, no telling what that has contributed. Mr. Jones was never worried about going south, as far as I ever heard.
LM: One other question about Mr. Jones—you know—there’s been a lot read, and a lot has been said about the Lamar Hotel Club that would meet and would make policy decisions for the city. Can you throw any light on that?
EB: Well, there was a suite there in the Lamar Hotel. I don’t know if it’s 8A or 8J or whatever it had. I know that George and Herman Brown—I know that Gus Wortham—I know that Jim Elkins—I know that Macashan(??) and Remora Fleming and old Anderson Clayton Punch used that suite quite often. Why—I was never invited there. I know nothing about it except what I’ve heard, but apparently, this was a place where people could get together and talk about some of the problems with the city and—
LM: Certain people.
EB: (laughs) —and see what could be done about it. See, Houston is an interesting town to me. It’s had some very, very strong people come to this city, but I’ve never known one of them that were not interested in the development of the city. Now, I’ve been in cities, and I’ve seen cities that were controlled by a group, and unless that group got a cut of the new venture, it couldn’t come into the city. That’s what’s wrong with Galveston, but Houston, I never saw it in all the time I’ve been here, but what there was an open invitation to come and that whatever you do that’s successful is bound to help us. Never once did I ever hear of someone wanting to have a piece of the action when you moved to town. Beaumont had the oil companies. It had deep water. It had the railroad. It had everything that Houston had when I was born. Beaumont still sits there. People have moved it away from downtown because the clique, the grand Beaumont wanted a piece of whatever came to Beaumont, and everybody moved away. I never saw that in Houston, but under Galveston, about five families have controlled that town for 75 years, and I imagine still control it.
LM: Which families are these that you speak of today?
EB: Well, the Moody’s, the Kempner’s, the Hutchinson’s, and the Sealy’s are the principle ones. They are very, very, very substantial people. They have their roots on that island, and they keep them there. You have to pretty well do business with them if you move to the island to do business.
LM: There are so many areas we could go into, I’m sure, that we’d be here all day. I don’t want to completely wear you out, but at least for the immediate time, are there any areas that we could add that we haven’t discussed that need to be discussed in this interview?
EB: [51:44] Well, the only thing that I can think of that, as I look back over almost 60 years associated with the petroleum industry and some 45 years in the financing and in banking. I’ve had an opportunity to see and work with and around some of the top people in both industries, people that pioneered a great number of new techniques. To me, the biggest contribution that I can think of that happened during this period when we went from a feast to a famine to an oversupply to chaos, and now we’re back in this same cycle again. Saudi Arabia now is trying to take the role of the Texas Railroad Commission did back in the ‘30s by controlling the people on the outside that have contact only with the filling stations or with the truck driver that comes up with the heat oil for the furnace.
I don’t understand what these oil companies have contributed to this thing and what has been taken away from them. In 1958 when the Suez Canal was shut in, I was in St. Louis giving a paper before the American Mining and Petroleum Engineers conference. At that time, we had such an oversupply of crude that no one was willing to give the petroleum companies any help. All of the east coast, everywhere, the whole philosophy was, “Well, why bother. We can always get all the oil, the cheap oil, foreign oil we want.”
I had a couple of characters from a congressional investing committee come see me one day. They had already had their minds made up about this problem. It is government control was the answer to it. They weren’t even intelligent enough in the subject to ask intelligent questions. I finally listened to the thing for about 20 minutes, and I said, “Gentleman, look, I know what I’m getting ready to say might not make any difference. You already have you mind made up, but in 1958, when the Suez Canal closed, the United States had about 32 billion barrels of domestic reserves developed and producing. The free world outside of the iron curtain had about 145 billion barrels. The United States was consuming on the order of around 11 million barrels a day and importing about 2 ½ million barrels a day. The free world was consuming about 18 million barrels a day.
[56:28] Now, today the United States has proven and developed and producing about 38 billion barrels of oil. Although it has consumed since that time 12 million barrels a day, the free world has on the order of 400 billion barrels of oil proven and developed. Now, there wasn’t a single barrel of that oil that was found by Libya or Saudi or anyone in Nicaragua, anyone in India, anyone in Indonesia. Every barrel of oil that was found and brought to market is by the people that you are trying to castigate. I don’t care what you call them. I don’t care what you do about them. I don’t care what you call them, they have the technique to not only find it, to transport, and to refine it, and to sell it. There never has been a United States citizen that paid 35 cents a gallon for gasoline until our benevolent government got to messing with this problem. Now, gentleman, that’s all I’m going to tell you about this thing. You’ve got your mind made up what you want to do. I’m prejudiced, but the marketplace will solve this problem if you let it alone.”
LM: Do you think the right actions have been taken now?
EB: Sure. It’s the only answer to it. The only real thing that is bad to me is you’ve taken some people that have gone from a camel economy to a jet economy in one generation. They don’t know what to do with the money, nor do they know what responsibility there is to that kind of wealth. We have pretty well encouraged them. By we—I mean—our country, has encouraged them to take the oil companies out and take the thing over. Now, when Mexico took over those oil companies in 1927, and there is oil down there that is unbelievable in reserves yet to be developed. They are net importers of certain products. There is no way under the system of the Mexican government that those reserves can ever be developed.
Look, you’ve got a socialist country down there. You have Pemex, an agent of the government controls the whole thing. A geologist, and engineer, anybody that has a job, works for Pemex. So as long as he makes no mistakes, he’s got a job. If he makes a glaring error and he is fired, where in the world can he go to work? Do you think he’s going to take any responsibility? Do you think he’s going to assume any risk? Who is he to say, “Look, let’s go down in the bay of Campeche and build a $75 million platform down there, so that we can develop this field.”
One, where is he going to get the money? Two, if he makes a mistake and drills a dry hole, he’s out of work. Risk-taking is what these companies understand. They can go any place, North Pole, South Pole, desserts, or any place else, and are willing to go if they’re left alone. That’s what will solve your problem is just leave them alone and let the marketplace solve it. I think that this administration is beginning to see exactly what this problem is all about. Gosh, if you had $4.00 gasoline right now, you could raise gardens along that freeway out there. The marketplace is going to control this thing.
LM: On behalf of the Houston Metropolitan Research Center, I want to thank you very much for you generosity of donation of time. I hope I haven’t worn you out too much, but the information given I think is really very important, and I am very happy that we’ve been able to preserve it on tape. Thank you.
EB: Well, I enjoyed it.
[Tape ends] [2:06:24]