Placer claims, claim jumping, and the Mineral Leasing Act of 1920
Until 1920, oil claims were “placer claims,” which were technically 160 acres jointly staked in the names of eight persons. Land could be legally claimed by groups paying $2.50 per acre and improving the parcel with a building or other improvements. This entitled them to ownership of all oil, coal, and other mineral commodities discovered on that land. By dropping off one name from the ownership roll and adding a new one on a neighboring parcel, companies could put together large blocks of land for exploration. But since there were no precise surveys of the land in those days, claims sometimes overlapped and were disputed.

McFadyen set up 24 x 7 guard duty on the rigs to protect his interests. Drilling crews typically worked one shift and guarded the rig during another. Most of the early wells were completed in about 60 days. Scouts for rival companies were everywhere, so when men went into town they were told not to talk to anyone about their work. Once when drilling a discovery well, McFadyen pretended to be building a pipeline during the day and wildcatted at night.

A Star Machine, a mobile, steam-powered drilling rig, used to drill wells in the early days. The machines were initially pulled from place to place by a team of horses and later by a McCormick tractor. The machines were steam powered with a boiler that was pulled along on another wagon. Photo: F.E. Smith Collection at the American Heritage Center, University of Wyoming

In addition to the problem of claim jumpers, the oil fields were remote. Drill pipe and other equipment were freighted in by mule teams from a distant railroad siding, and transportation costs often totaled more than the $3 per foot it cost to drill.

In 1920 the Mineral Leasing Act was passed, After that, producers of oil, coal, natural gas and phosphates paid up-front to lease federal land, and then paid the government a one eighth royalty on the mineral revenues from that land. For lands owned by homesteaders or railroads, contracts were drawn up on a royalty basis. Claim jumping became a thing of the past.

Elk Basin around 1916. Photo: Marathon Oil

Workers camps and working conditions
By 1916, both the Midwest and Ohio companies had built camps for their workers in Elk Basin. This settlement became a small town with streets and sidewalks, a hotel, community hall, hospital, gas pump, post office and a barber shop. In winter, Anna Haney, whose husband worked in the field, battled foot-high snowdrifts blown into her tin and tarpaper house. In summer, the dust was so thick and the wind blew so hard that food had to be eaten quickly before it got too gritty.

There were two school buildings that served up to 80 students, one for grades one to six, and the other for grades seven to eight. High school students attended classes in Powell, boarding there because roads between Powell and Elk Basin were bad.

An early Wyoming oil camp. Note the residences right next to the derricks.

The idea that a company should take responsibility for the welfare of employees and their families was a foreign concept in the 1920s. When the residents of Elk Basin wanted to construct a community house, the families raised several hundred dollars themselves and the Midwest Oil Company offered to contribute $500. But Midwestern’s contribution was contingent on a match from Ohio Oil, and McFadyen killed the idea.

Lynd, Rockefeller and the controversy over working conditions
John D. Rockefeller, whose company, Indiana Standard, had massive oil interests in the region and who owned 13% of Ohio Oil stock, was not a promoter of workers rights. However, he was moved to improve conditions because of accounts of camp life written by sociologist Robert Staughton Lynd, who had spent the summer of 1922 working as a chaplain in the Elk Basin Field.

Lynd grew impatient with Rockefeller’s evasive stance on union recognition, so in the fall of 1922 he published two articles that held the oil magnate’s feet to the fire: “Crude Oil Religion” in the September issue of Harper’s and “Done in Oil” in the November Survey.  In “Done in Oil,” Lynd not only indicted life in the Elk Basin oil fields, but went on to cite a Federal Trade Commission report on Indiana Standard’s domination of the whole region. He added quotations from his own correspondence with Rockefeller and the Ohio Oil president, saying that improvements in working conditions were not economically feasible.

Rockefeller contended that the Elk Basin situation described by Lynd was an exception and rejected unionization, but developed a list of recommendations, including better homes for camp workers, schools for the children, higher wages, and a six-day, 48-hour work week. Conditions improved, but life in the Elk Basin field was still tough.

An oil rig in Elk Basin today. Click to enlarge

The population of Elk Basin peaked at between 800 and 1,000 sometime before the early 1940s when the town had to be moved to Polecat Bench, a few miles south. Poisonous hydrogen sulfide gas, escaping from deeper wells, was endangering the health of the workers and their families. Housing at Polecat Bench was more modern, and roads had improved, siphoning residents away to Powell. In 1955, the town was disbanded along with the company camps, and some residents purchased their houses in Polecat Bench and moved them to Powell.

Elk Basin and the South Elk Basin Field, discovered in June 1945, together produced a cumulative total of 92.8 million barrels by the end of 1956.

While I don’t have later data specific to Elk Basin, the field has been operating continuously since 1915. Total oil production in Carbon County from existing oil fields has been declining slowly since 2000, from a high of nearly 56,189 barrels per month in July, 2000 to 31,788 barrels per month in August 2013, and Elk Basin has been a continuous source of oil during that time.

Source: DrillingEdge.com (subscription required)

Learning the lessons of history
The rich history of Elk Basin is pure Montana — hardy pioneers overcoming the harshest of conditions to build a rich tradition. But if you think about the way Elk Basin has developed, it becomes clear why zoning is necessary a few miles away.

When the first wells were built in Elk Basin, a whole community was imported to begin the oil industry. Then, as technology and roads improved, the community moved away from the oil production, largely because of health concerns, down the hill into nearby communities such as Belfry and Powell. If you drive up there today you see a few workers, but there are no homes. Over the course of a century, people have learned that it doesn’t make sense to drill where people live.

What has evolved over a century is a balance between the needs of corporations to extract oil and the needs of a community to engage in farming and ranching without risk to water, health or livelihood.

But horizontal drilling and hydraulic fracturing have changed all that. The lesson hasn’t changed — it remains dangerous to drill where people live — but the economic opportunity has. These technologies allow drillers to get oil out of tight shale where they couldn’t get it before. Consequently they drill near where people live.

According to the Wall Street Journal, 15.3 million people in the United States now live within a mile of a fracked well.

As these technologies have changed, few statewide regulations have been developed in Montana to keep up with the shift in where drilling takes place. As a result, residents who live near wells are not protected from the dangers of drilling. Based on the unwillingness of the current Montana legislature to act, this is not about to change any time soon.

That’s why local zoning is necessary. Silvertip residents down the hill from Elk Basin have a long and stable relationship with oil drilling. Fracking and horizontal drilling threaten that stability. It is right for landowners to want to take matters into their own hands and set their own regulations to protect themselves.