Main Street, Wyoming; 313; Oilmen of Wyoming

Mainstream Wyoming is made possible in part by grants from Kennicott energy. Proud to be a part of Wyoming's future in the uranium exploration mining and production industry and by the Wyoming Council for the Humanities and ridging lives of Wyoming people through the study of Wyoming history values and ideas. Welcome to Main Street Wyoming. In the PBS documentary The prize and the Book of the same name by Daniel Yergin we can see the many ways that oil has shaped the modern world. It's played a major role in international conflict from the Japanese invasion of the East Indies in World War II to the invasion of Kuwait by Iraq in the 1990s. It shaped our lifestyles from the automobile to the plastic plate to the suburban community. There have been conflicts over the environmental impacts but no one will disagree that black gold has provided many comforts and created great wealth in Wyoming in the modern world at an. Inn.

In. Wyoming has a bit part in the international drama of oil. But it is indeed a player with its own heroes and villains. It's dry holes it's gushers its own fortunes and loot and losses. The first to discover oil in Wyoming were Indians who used the gooey seats and springs to heal injuries. Entrepreneurs along the Oregon Trail Mix this rock oil with flour and sold it to immigrants to grease their axles. The first Wyoming oil wells drilled in 1884 to a depth of about 300 feet in the Chugwater formation. Back then oil was hauled in barrels by horse and wagon and sold to the railroad for $26 a barrel. Quite a price in those days. The first big boom in Wyoming oil came with the growth of the automobile industry between

1910 and 1920 when wildcatters poured into the state working fields like Salt Creek Hamilton dome and poisoned spidered in the 1920s. Wyoming made headlines as the home of Teapot Dome where oil producers paid kickbacks to U.S. Interior Secretary to get a piece of the federal naval Petroleum Reserve. The thirties were tough times for the Wyoming petroleum industry but the second world war brought back prosperity and in the 1970s when the Arab oil embargo drove up oil prices and the need for domestic supplies the wildcatters rushed back to Wyoming drilling deep into the fractured geology around the Rockies in a high stakes gamble today. Domestic oil production is declining and so is the industry in Wyoming. International oil prices are lower than they've been since World War II. Oil production is dropping in Wyoming but the natural gas market is growing. The oil and gas industry still makes an enormous contribution to the tax base of Wyoming. Along with royalties and severance

taxes oil plays a big role in funding education highways and other state needs. But there are also questions about its environmental impacts and the disposal of oil waste to the impact of proposed drilling in areas like Brooks lake on tagati pass. With us today on Main Street is Jim Nielsen. One of the from one of the oldest oil and gas families in the state. Jim was formerly with husky oil and gas oil and gas and is now with Nielsen and Associates. He's a member of the Wyoming natural gas pipeline Authority and President elect of the Rocky Mountain Oil and Gas Association. Welcome to Main Street Jim. Thank you. I think one of the things that I found in reading and looking at the documentary The prize is that the history of oil and gas is littered with these colorful personalities these these people like Jack Filby in Saudi Arabia and Edwin Drake who hunted for rock oil in Pennsylvania. I'm wondering if Wyoming has similar characters in its past life. Certainly I believe that we have and we've just name a

few. There's people like Paul stock who. Had one of the first leases in a teapot dome or I should say Salt Creek. He was his brother and father. Made their first on Discovery in Florence Colorado he took the interest that they had in Salt Creek and converted that at one time to into the largest shareholder the largest single shareholder in Texaco. We've had people like like the Daviss. We've had Marvin Davis and Tiger Mike Davis. These are some of the latter people we've had of course. Dave true we've had people like Fred Goodstein we've had many others that have had been very colorful and certainly have made their mark and left their mark on our industry here in this state.

I've always thought of the oil industry is attracting risk takers people who dealmakers risk takers that type of person. Can you give me any stories about people who did unusual things to kind of get their start and. Well there are of course lots of them. And I know that I am acquainted with just a few. But one of them that they talk about is Harry Sinclair. I have no idea whether this is is true or whether this. But anyway the story that floats around the industry that Harry Sinclair of the Sinclair all got his start in the business by shooting himself in the foot with a 22. Then he collected the money from his insurance and used that as his his entry into the business. That was his stake. That was his stake in the business. Well what about your own family. Where did they enter into the picture of Wyoming oil and gas. Well my father. Was born and educated in Canada and he

graduated at the time of a recession as well as a drouth and he had at that time three of us two sisters and myself and of course my mother. He was trying to determine how he could provide his family a living. And so he started selling crude oil or of diesel fuel in it from an oil refinery in Cut Bank Montana. That time we lived in in Dayton Montana which is and north between Shelby and and Great Falls a place many of us have been I'm I'm sure sure you haven't. And anyway he threw some pardner's to this refinery in Codie and was able to acquire the refinery and his long suit has always been his ability to sell and to market and that's how

you got started in Codi officially in January of 1938. Now we hear about the independents in the majors that sort of distinguishes a couple of different classes of oil company. I take it Huskie would be considered an independent. Well we used to say that we are an independent. I'm not. Sure that there is any acceptable definition as to who is independent and who isn't independent. Generally it's I always thought somebody that was a small company was small. I don't know. So you're you're not well you can't even say I can't even you I don't even know how to define it. One of the things that I read in the book The Prize was a quote from Robert Anderson of Arko saying that the type of person that has to get into the oil industry is someone who's who's comfortable with failure who can put up with failure primarily because 90 percent of the time you're drilling a dry hole ultimately.

Does that strike you as a proper characterization. Yes I would I would certainly accept that as as as a proper characterization characterization. I would also say though that that person has to be an optimist. He's got to have lots of faith in what he's doing. Now when we're talking about the type of people that really develop the oil industry in Wyoming I'm inclined to say they're independents although you've muddied that water a little bit. But let's say that they are they primarily independents that would have come into this region and worked up some of these oil fields here. Yes I would I would say that they are. There are some that have have been here though we've had people like Fred Goodstein and Fred got started in the oil business by. He was a used equipment dealer and then he started taking in a payment for some of his equipment he would take an interest in some of these wells. And Fred Goodstein was a real character and certainly made his mark and in the business here

within our state and then to the majors come swooping in when someone like that is successful we developed an oil field that we started seeing. I don't know and because Standard Oil Well I think there always has to be somebody that kind of leads the pack and and it has to be somebody that is a is a real risk taker. You know while this didn't happen in Wyoming one of those risk takers was Mr. Hunt and how he influenced and got the petroleum industry started in Texas. So yes there's always been some risk taker. Let me let me read you a description that I found in that book The Price of I think it's meant to be a description of an independent but we'll just call it a risk taker in the oil field. He's flying off to North Dakota in atrocious weather to try to buy royalty interests from suspicious farmers coming courthouse records to find out who owned the mineral rights adjacent to new discoveries. Arranging for a good drilling rig crew is quickly and cheaply as possible. And of course making the pilgrimage

back east to round up money from investors is not how you go about the business. Yes that is how you go about the business and I. Let me just relate one on experience that that happened in Huskie while we got started in in Codie and involved in the Oregon basin which was a major field. One of the first large significant discoveries my father made was in the Rangely oil field and he was able to get some leases and Windley just exactly like you're talking in some adjacent land that have not been least and the way it looked like it was on trend. And so he got these leases Well he found that one of the conditions of the lease was that he had to have a well going down by a certain date well when it came time to drill that well. He had great problems trying to find a drilling rig that was available. It seemed like all

the drilling rigs in the area all of a sudden became occupied. Fortunately he and the company owned the rig that they were able to move and had it down. And as we would say turning to the right at the appointed hour and so that enabled Huskie to have its first big discovery. And we'll have to tell you the description that I read to you is actually a description of George Bush as a young man in Texas. So the 70s were a boom time and I think probably a boom time for your family and their companies. The interesting thing about these booms is that it's this cycle of boom and bust and one of the things that you hear complaints about is that the towns that put up with all the workers and all the action of an oil boom aren't prepared for it. Don't have the capacity to absorb it. I guess I'm wondering is there any way around that boom and bust cycle in your mind is that just the way the oil industry tends to go.

Oh I unforeseen I think that it is but maybe as the as the industry matures you have a way of flattening the booms. I don't know about the bus but you have the way of flattening the booms and you say as the industry matures some people think that it's already kind of at the end of it. Well I wouldn't in my own mind I I would say that the analogy of our our industry is somewhat similar to a person and a person's life. I would say that our industry is in midlife as as we all know through through technology through better medicine through better preventative medicine through all of these things that we have today. A person's life is extended and you and I don't know exactly where that's going to end but I would say that that our industry in Wyoming is in its midlife

many years ago we said we would be all through we have continued through better technology better engineering. All of these things have enabled our industry to continue to progress. In midlife you're supposed to go through a midlife crisis as is the industry in that are going to go into it. Well I would hope that we have gone through the midlife crisis. Let me talk a little more about the 70s. One of the things that was prevalent and I think quite active in this area was the environmental movement. There certainly was some butting of heads between different aspects of the energy industry and the environmental movement. And I think there's still some sense that the oil and gas industry get special treatment in Wyoming. They've got a commission that handles questions like waste oil and gas sites instead of the Department of Environmental Quality. What's your reaction to that. I mean is there a split Do we give special treatment to your industry and should we. I don't think that we receive special treatment. I think

that we receive knowledgeable treatment and I think one of the biggest problems with. The criticism of our industry is that that we have rules and regulations that are sometimes not based on fact and fact and experience and I think that there needs to be better understanding and there needs to be a willingness to look at it at both points of view. I don't think at times that do people in the oil and gas industry view the environmental movement as having really hampered development. In other words do they point to that and say there is one of the reasons we don't have x more barrels of oil coming forth. Well I think there are probably some people within the industry that will say that I I believe that you know one of the one of the statements I've heard time after time after time when I've been in industry meetings is that people will say well

gee I'm an environmentalist and these are people within the industry and I would like to I like to classify myself as an environmentalist. I'm I'm concerned about whether the the land and the the rivers and the and the lakes and the air is going to be clean and pure for my family and for for their children. So I think that one of our problems is that we don't sit down. We don't communicate very well and we don't compromise very well either. And the struggles still go on. I think we just this year have seen a fairly big controversy over the project to drill it looks like yes but an area where a lot of people like to vacation and where people clearly don't feel that it would work to have a drilling rig. So the problem is I think with a lot of the with the controversy that we have is that people don't understand and wells can be drilled with minimal amounts of

of temporary damage but it takes time it takes planning takes money and it takes people and it can be done. And we have many many examples that we can point to where where this is true. I used to with my involvement in Huskie we were involved up on the petroleum reserve and we drilled many wells up there in what I believe was an environmentally sensitive manner. When you say there's a need for more compromise do you think that's. Which side do you think needs to come further on the table. I mean does the industry have some problems there too in terms of really hearing the concerns and responding to them. Well of course I'm. I'm indoctrinated in the industry and spend more of my time on industry matters and and think that that we understand the environmental problems

fairly well. But again you know we the industry has both ends of the spectrum. But I also feel that that some of the environmental groups have not been willing to listen to facts and they sometimes have been too prone to accept what ifs maybes. Well it could. Let's talk a little more about the 70s because that seemed if we were going to talk about a midlife crisis that may have been it. There was so much going on there it was there was a lot of tumult. One of the things that we saw was a great deal and a great variety of attempts to regulate the industry. Not so much in an environmental sense but in an economic sense. We had the embargo in 73. We had questions about whether we put a tariff on oil imports. We had allocation. I can't remember all the things the windfall profits tax out of all that. Were there any

instances of that type of government intervention that you see as having been positive. Well I think that what really needs to be done as far as the future is concerned I do think that we in industry and government and the environment need to be working more closely together. I find that I think in the long term the regulations and controls don't work very well now without some of these controls things. We have some steep ups and downs and they hurt. But in the long term I think that that supply and demand is is by far the best what should I say selector. But one of the phrases that we heard bandied about a lot I think during the Carter administration was energy

independence. This was something we were to aim for and it seems as if with the market forces at work what happens is we go overseas for oil and in fact we are increasingly dependent on overseas oil. Is that an unrealistic concept this idea of energy independence because of course that would. I would think help the domestic industry or at least encourage it to find things. You know the big comment that I would say there is no shortage of energy in this country. None. We have all kinds of energy but we do not have an overabundance of cheap energy. And so I think you have to put a qualifier on on that. I think having energy independence is is correct but having cheap energy independence. I don't think is possible and in this country. But in terms of that question of regulation I guess energy independence then sounds

as if it was going to be a kind of a wall to keep all that foreign cheap oil out and work primarily on American reserves. Is that a viable approach to dealing with this. I really don't think it is really my personal my personal opinion. So what does that mean for you. Maybe I should say one thing you know my personal opinion doesn't necessarily speak for the industry. Sure. And we as an industry don't speak with one voice. We we have again as I said we have both ends of the spectrum within the industry. So we'll hear different opinions here so yes what does it mean for companies like yours now in terms of where they go looking for energy. You've been through a succession of companies and you're in a new one now which I guess means you're kind of starting over again. That's correct. Where do you go. What are you what do you look for. Well I think that for someone like myself the best opportunity is right here in this country and in this state I

think that one of the things we have to do we have to be innovative. We have to be an economic operator. And so I think that there are there are opportunities for for people and companies like mine too to make a living and do well with things that are here now. Now tell me where those opportunities lie because in fact we keep hearing about a steady decline in not just Wyoming production but nationally domestic production. One other one factor that I didn't mention is we also need the source of capital. I need the source of capital we all need the source of capital. And so there has to be the ability to attract capital be it other partners such as myself or I mean such as banks insurance companies other partners.

So once we have capital then I think acquisitions being very particular on exploration. So far for the for the time being the way we on average can buy existing production more cheaply than we can go out and explore for it. But if again I'm speaking of averages but if we can can use all the tools that are currently available in exploration I think and believe strongly that there are many many places particularly here in the West and particularly here in Wyoming where there are opportunities on sort of looking for those very specific directions you know go to the quarter and turn left and that sort of thing I mean at the time in the 70s when things were booming there was a lot of interest in cutting fairly deep into that fracture geology of the Rocky Mountains as they come through here.

Is that where you look or are you looking for natural gas fields out on the plains. Well actually you can look in many many places Wyoming does not have the we have as much potential area as most any other state. What we don't have is a is a concentrated drilling and density. In other words we have lots of areas that have a minimal number of wells that have been drilled. And when you compare what we have versus like Texas Oklahoma you'll find that we have lots and lots of undrilled area or lots of area that have just been drilled on on the on the surface. So but Wyoming's biggest problems in my judgment anyway over the over the years has been market and our our relationship or our geography in relationship to the market. We've not we've not had the markets and I think and

believe that for instance the current River pipeline has provided a market for natural gas and we're seeing some very positive results of the development of this market. How about other people. I mean it sounds unusual to me that you're interested in Wyoming as I understand it the trend is to look overseas. Well unfortunately our industry just as many of of other industries are we follow other people sometimes we aren't real innovators ourselves. But I am in my own mind. While the geology looks tremendously attractive in places like Russia places like Southeast Asia in South America there are wonderful wonderful looking prospects

but many people confuse geology with with political and I think the first thing we need to look at is is the politics. What are the tax laws. And then you go from there. What do you have the ability to stay. What's the infrastructure. Well very briefly do you look and see any possibility of some sort of technological breakthrough that would render all this talk about oil moot. It's held on for a long time. Was sort of a primary source of energy. I don't see anything in the near term and what is near term I don't see anything and the next 15 to 20 years that will replace energy. Plenty of time to revisit visiting. Thank you Mr. Nielsen for joining us on Main Street. Thank you. Pundits like to say that the U.S. has moved into a post-industrial age where information is the key product but we still make things in oilfield factories and we still use

oil natural gas to keep us warm. We still drive cars fueled by gasoline. Thanks for joining us this week as we motored back in time and forward along Main Street Wyoming. On. To. Main Street. Wyoming is made possible in part by grants from Kennicott energy. Proud to be a part of

Wyoming's future into uranium exploration mining and production industry and by a Wyoming Council for the Humanities enriching lives of Wyoming people through the study of Wyoming history values and ideas