Big money can be illusory during an oil & gas stampede

I'll confess, one of the most rewarding aspects of covering our local installment of the national controversy over the ongoing oil and gas boom (aka, fracking) is that I'm carrying on a family tradition. My great grandfather on my mother's side, Don H. Biggers, was a muckraking journalist and political player in Texas during the oil boom of the 1920s, aggressively attacking shady oil promotion schemes.

In brief, these promotion schemes involved fancy-talking businessmen persuading gullible investors into throwing mountains of money at oil-drilling ventures, usually based on grossly exaggerated or mythical prospects for colossal oil strikes.

As a partner in the Independent Oil News and Financial Reporter in Fort Worth, according to James McEnteer's "Fighting Words: Independent Journalists in Texas" (1992, University of Texas Press), Biggers "angrily refused ads from fraudulent promoters and stubbornly stood up to their threats. His son remembered 'plenty of trouble,' including several physical fights. When threats of violence failed to stop Biggers, several promoters conspired to buy the paper secretly, using intermediaries to hide their purpose."

According to "The Biggers Chronicle," a biography of Biggers published in 1961 by Seymour V. Connor for the Texas Technological College's Southwest Collection, after the shady promoters bought out his newspaper, "Biggers turned the material in his files over to the federal district attorney in Fort Worth, who broke the promotion ring wide open in 1923. The nominal leader of the group, Dr. Frederick A. Cook, famous Arctic explorer who had raced Peary to the North Pole, was sentenced to a $12,000 fine and 14 years in the federal penitentiary..."

Cook wound up serving seven years in prison, according to the entry in Wikipedia, which, interestingly, added, "the actual oil finds eventually exceeded the expectations outlined by Cook." (My guess is that some descendant of the good doctor probably added that tidbit to the Wiki, doing some belated sprucing up of skeletons in the family closet.)

Another book that mentions the arrest of Cook and other oilfield promotion schemes is "Wildcatters: Texas Independent Oilmen," by Roger M. Olien and Diana Davids Hinton (Texas Monthly Press, 1984).

The chapter about the oilfield flimflams of the 1920s covers Dr. Cook's swindle and similar ones that were common at the time. According to the book, "One journalist, commenting about the superabundance of oil promotion schemes in 1923, observed that oil stocks seemed to have 'become the psychological magnet for that portion of the investing public that likes to gamble. They provide the quickest and surest route to a thrill, financial and emotional...

"Promoters approached all varieties of potential investors, but wealthy persons ignorant of oil doctors and lawyers and their widows were favorite clients. Sharp promoters would send potential investors carefully doctored photographs of gushers and brochures full of visions of fabulous wealth."

The book includes an excerpt from longtime Oil Weekly columnist H.H. King (written at the time): "There was a big promoter... he would send out a mass of letters with wild promises, and the postman would come in and just dump a huge stack of return envelopes containing cash, money orders and checks, and he would sit down there – he and that girl, that's all he had for an office – and open the mail and throw the envelopes in the waste paper basket."

According to "Wildcatters," after the bust of Dr. Cook and others, including a descendant of Confederate Gen. Robert E. Lee, "the numbers of names on promoters' sucker lists astounded federal investigators; one Fort Worth list contained over two million names. Dr. Cook was thought to have sent out over 300,000 letters a month, from which he grossed roughly $2 million in 1922."

In all, according to "Fighting Words," "Biggers later claimed to have 'exposed a total of 126 fraudulent promotion schemes in Texas. Of those, 96 were convicted in the federal courts.'

"He furnished authorities with 'thousands of letters' from swindled victims to help the prosecution." Then, based on his experience, "Fighting Words" continued, Biggers drafted a Blue Sky Law for Texas, designed to protect citizens from, in his words, "promotion schemes, stock gambling schemes and all kind of schemes wherein leeches prey upon an ever gullible and always to be pitied public."

AN OBVIOUS QUESTION here is what do the Texas oilfield scams of the early 1920s have to do with Athens County? Is this just Smith bragging on an old, dead ancestor? (Of course it is!)

But it also offers an object lesson about what can happen when greed and speculation join forces.

A person would have to be excessively nave to believe that with millions of dollars being promised to Athens County landowners for their oil and gas rights, with the many millions more that oil and gas companies say they expect to profit from our natural resources, and with the millions more that they'll need to proceed with their drilling, that with all that money at stake, somebody's not trying to work a scam.

You have to remember that a grand total of ZERO horizontal wells have been sunk in Athens County. Not one. Nary a drop of oil or natural gas has been horizontally fracked in this county.

It's all speculation at this point all abstract maybes and probablies that may well turn into nothing. For instance, none of the signing bonuses promised in leases signed so far by Athens County property owners will net them a dime if the drilling companies don't 1) get permits; 2) get financing; and 3) find oil.

One oilman working the area as much as admitted that any wells sunk in Athens County will be wildcat operations, meaning exploratory. If they don't find anything, they'll be gone before you can whistle "Dixie."

History, including that of Texas in the '20s, tells us that when money is all speculation and talk, somebody's going to get fleeced.

That's why, if you're a property owner in Athens County, and signed a lease with an oil and gas company without consulting an attorney experienced in this complex area of law, you very likely could end up being very sorry. My guess is that the same applies on the investment side of the coin.