A drunken brawl at an Austin hotel changed the course of the oil industry forever

From KUT News:

A strong drink and a bad attitude never mix well. But, occasionally, they can shift the course of world history. The evening of April 24, 1933, was such an occasion. It was in the lobby of the Stephen F. Austin hotel that these two things combined to deliver a system of energy regulation and price-fixing that persists to this day.

Here’s the story.

The early 1930s were a wild time to be in Texas. While the rest of the U.S. suffered from the Great Depression, “oil fever” gripped the state. In East Texas, impoverished farmers and itinerant workers were drilling oil wells as fast as they could in search of crude.

Because the East Texas oilfield appears to have been accidentally discovered by a con artist, no big oil companies had secured rights to the land. That allowed these smaller independent operators freer reign to drill.

“Instead of having a cabal of big oil companies developing the East Texas field, you had farmers doing it,” says Page Foshee, a writer and career oil and gas landman. “You had anybody who needed money working for small operators drilling one well at a time.”

“That led to too many wells being drilled,” Foshee adds.

It turned out, this orgy of drilling was flooding the market with crude and sinking the price of oil.

Dirt cheap oil prices posed a huge problem for the big oil companies, so they asked Texas politicians and regulators to impose production limits on oil wells. The limits, they argued, would stabilize prices and make sure oilfields weren’t tapped out.

Many of the small independent oil men rebelled at the idea.

“The farmers, who were desperate, said, ‘Our notion is that the big companies just want to put us out of business,'” Foshee says. “I don’t think that’s an unusual perspective for either side.”

Oil production limits

This conflict over oil production limits played out in gunfights between oil bootleggers and national guardsmen in the piney woods of East Texas, as well as in courthouses and the halls of government in Austin and Washington, D.C.

But it was a drunken fight in the lobby of the Stephen F. Austin Hotel that seems to have proved decisive.

In Texas, oil production limits were overseen by a state agency called the Railroad Commission, which still regulates oil today.

Groups representing independent producers had been lobbying lawmakers to remove the Railroad Commission’s authority. Many of them wanted production limits gone completely.

In April of 1933, opponents of the Railroad Commission finally got a bill before the state Legislature to gut the commission’s authority and create a new agency to regulate oil.

The bill passed the state House on April 24, 1933.

The next day it would head to the state Senate. But opponents of the Railroad Commission had already declared victory.

“The night of the vote, some of the oil men were celebrating that they had defeated the regulation of oil and gas,” says Kent Hance, who served as a Railroad commissioner in the 1980s and tells tales of Texas history on this podcast The Best Storyteller in Texas.

Those oil men included Charles F. Roeser, Bryan Payne and W.C. Stroube, who had been lobbying in favor of the legislation to gut the commission.

Roeser was head of a group representing a faction of independent producers called the Texas Oil and Gas Conservation Association. He and his group had reportedly been drinking at the hotel after the successful vote.

Earlier in the evening, they had confronted Railroad Commissioner Ernest Thompson, who had come to the Capitol to argue against the legislation.

Thompson later testified that Roeser was gloating over the bill’s victory and tried to force his way into a hotel room Thompson was in.

Roeser “used language that I don’t want to repeat in the presence of women,” Thompson remembered.

The group of men then ran into state Rep. Gordon Burns in the hotel lobby. Burns was a supporter of the Railroad Commission who had spoken forcefully against the bill.

According to witnesses, one of the oilmen said they would “teach him a lesson.”

They “attacked him, knocked him to the floor, stomped him, beat him and crippled him,” former Sen. Ralph Yarborough, who worked as an assistant attorney general at the time, said in an interview years later.

According to newspaper reports, Roeser suffered a “discolored” eye.

“It was a hot fight!” Yarborough said.

Whatever the circumstances of the brawl, the result was not what the oil men had intended.

The Texas Legislature suggested jail time for Roeser and his companions, but the group was let go with a simple reprimand. El Paso Herald Post

“The Legislature was outraged about it,” Hance says.

The next day, the state Senate was set to vote on the bill; Rep. Burns was brought from the hospital to the Senate chambers in a wheelchair.

Senators were so angered by the attack that they voted down the new legislation. The Railroad Commission maintained its authority over oil and gas.

“It’s a fascinating part of history that that happened the way it did,” Hance says. “Had they not acted foolishly and gotten in a fight, they would not have had the regulation.”

While legislators could not have known it at the time, that vote would have far-reaching consequences.

In the years that followed, the Railroad Commission instituted a system of oil-production controls known as pro-rationing.

While initially controversial, the regulation ultimately stabilized the Texas oil industry and allowed the commission to influence the global supply and price of oil.

It was the same system later adopted by the Organization of Petroleum Exporting Countries that still holds sway over world oil markets today.

The aftermath

The brawl at the Stephen F. Austin Hotel was big news in the days that followed.

It prompted then-Attorney General James Allred to declare the “end was near” for the powerful Texas oil lobby (it wasn’t), and caused editorialists at the Austin American to plead with lobbyists to stop drinking so much whiskey (they didn’t).

The state Legislature initially suggested jail time for Roeser and his companions. But, ultimately, the group was let go with a simple reprimand.

Some lawmakers thought even that went too far. One called the formal slap-on-the-wrist “the most disgusting, childish and insulting thing … that has ever happened in this House.”

The incident did not appear to harm Roeser’s standing in business, either. He went on to become the president of the Independent Petroleum Association of America.

This story is included in Episode 2 of Season 3 of The Disconnect: Power, Politics and the Texas Blackout. Listen to the full episode in the player above. You can find The Disconnect wherever you get your podcasts.

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