HOT OIL CONTROVERSY
The term "hot oil" was popularized by Claude V. Barrow, the oil and gas editor for the Daily Oklahoman during the controversy over Oklahoma Gov. William H. Murray's use of martial law to drive up the price of oil by enforcing proration in the state's oil fields. Hot oil referred to oil produced in violation of the proration orders. The term gained national recognition in early 1934 when it was used on the floor of Congress when national oil-control legislation was being considered.
Overproduction had long been the curse of the Oklahoma oil fields. Whenever the market was glutted with oil, the price plunged. In an attempt to establish an equitable method to curb production and maintain a fair price, the Oklahoma Corporation Commission (OCC) issued Order Number 813 and Order Number 814 on May 7, 1914. These often are called the nation's first proration regulations.
With the onset of the Great Depression the price of oil dwindled, with some oil men receiving ten cents per barrel for crude. Outdated conservation laws and lawsuits resulted in a legal morass. The situation had become almost impossible by summer 1931, when the Champlin Refining Company secured a federal injunction against the OCC's enforcement of state proration laws. Citing the need to protect the state's oil reserves for future generations and noting an alleged attempt by Harry Sinclair to bribe members of the state legislature, Governor Murray declared martial law for a distance of fifty feet around the prorated wells in twenty-seven oil fields. As authority, Murray quoted a 1921 statute allowing the governor to use state troops to enforce the law. As National Guard troops moved into the oil fields, Murray appointed his cousin, Cicero Murray, a lieutenant colonel, in charge of enforcing prorationing. Oilmen snidely called him "Generalissimo Cicero."
Violence often flared between the oil-field workers who lost their jobs and the guardsmen who shut down well production. Rifle butts and tear gas were used to quell the more unruly workers, and production drastically dropped. However, the guardsmen were untrained in oil-field practices. The workers quickly took advantage of their ignorance, reversing the gauges so that when they showed to be shut down, the well actually was flowing. It was not uncommon for workers to lay pipelines at night from the wells to hidden shipping points. In the Oklahoma City Field most of these illegal pipelines terminated in the warehouse district east of downtown. The oil companies would rent unused warehouses and fill them with temporary storage tanks. The hot oil would be pumped from the supposedly shut-down wells to the warehouses, where it would be held until night and then secretly hauled out by tanker trucks.
Sinclair quickly challenged Murray's action in federal court. A three-member panel heard the case and ruled that the OCC had the power to prevent the waste of oil and natural gas but did not have the authority to levy penalties for violations. Murray, however, viewed the federal interference as an infringement on states' rights, and he ignored the judgment. Murray's effort to drive up the price of oil by martial law eventually failed. The decline in Oklahoma production forced refineries to turn elsewhere for crude, and Oklahoma oil was replaced by that from other states. Oilmen threatened more federal lawsuits, and when the price of crude rose to between sixty-five and seventy-five cents a barrel, Gov. Ross Sterling of Texas resumed full production in that state's fields. Faced with Oklahoma crude being replaced by Texas oil, Murray relented and allowed production to resume on October 10, 1931.
Twice more, on June 21, 1932, and March 4, 1933, Murray resorted to martial law to enforce proration regulations in Oklahoma's fields. The chaos ended when the Oklahoma Legislature passed House Bill 481 on April 10, 1933. The new law gave the OCC the authority to enforce its rules and took away much of the governor's power to regulate the oil industry. In particular, the bill outlawed the production of hot oil.
BIBLIOGRAPHY: Kenny A. Franks, The Oklahoma Petroleum Industry (Norman: University of Oklahoma Press, 1980). Carl Coke Rister, Oil! Titan of the Southwest (Norman: University of Oklahoma Press, 1949).
Kenny A. Franks
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