Prospects for Alaskan Oil...In 1920

In my personal battle to delay Peak Natural Gas, I have gutted a bedroom in my 1920's vintage Seattle house and am adding insulation and new windows. During restoration of an older house, one hopes to find treasures left behind by the years -- such as an old bottle of scotch or something. No such luck so far on something of that nature, but I have found some interesting items including a remarkably well preserved bat skeleton.

Yesterday, however, I was pulling up fir flooring when I found that it had been underlain with pages from the local newspaper from 1920. The editorial section had a piece on Alaskan oil that was rather interesting, so I thought I would share this look into America's oil past.

Here is the editorial, printed in the Seattle Daily Times on April 14, 1920:

Alaska Oil

The enlightened policy outlined by Secretary Payne today should go a long way toward stimulating the search for and the production of oil in Alaska.

The secretary's purpose is to remove some of the restrictions which have discouraged prospectors while, at the same time, retaining government equity in production where the amount obtained is sufficient to register a substantial profit to the operator.

Conditions in Alaska are, in many ways, comparable with those obtaining in Pennsylvania at the time of the initial prospecting and successful drilling of that state. The early operators there were frightfully handicapped by bad roads -- a difficulty by the way which is being encountered by persons owning wells in the new Texas fields. A barrel of oil that might be bought for $1 in the fields nearest tidewater, would cost $10 by the time it had been transported to seaboard.

Should oil be discovered in paying quantities in interior Alaska, transportation and other costs will be exceptionally heavy. There are few roads and only a limited number of trails, while pipe lines are an unknown quantity and will remain so until the Northern fields develop production on a big scale.

The Payne regulations recognize these circumstances and do not require a royalty from wells on government land producing less than 100 barrels a day. More productive wells will pay a 5 percent royalty after five years and 10 percent after ten years.

Moreover, the successful prospector always will be allowed to use one-fourth of the land he leases royalty free, no matter how much oil he obtains.

The new rules appear just and reasonable. Only by the application of wisely generous regulations of this nature will it be possible to develop not only the oil but all the other resources in the territory.

To put this editorial in perspective, here is a recap of Alaskan oil:

Milestones in Alaska Oil (excerpted from here)

  • 1853 Oil seeps in Cook Inlet discovered by employees of Russian-America Company
  • 1890 First oil claims are staked in Cook Inlet
  • 1900 First exploratory well is drilled in Cook Inlet
  • 1902 First oil production in Alaska
  • 1957 Atlantic Richfield discovers oil at Swanson River on the Kenai Peninsula, beginning Alaska's modern oil era. The Swanson River field on the Kenai Peninsula was the first commercial production site for oil and gas in Alaska's modern oil era.
  • 1958 Congress passes Alaska Statehood Act conveying ownership of 104 million acres.
  • 1959 Alaska is admitted to the Union as the 49th state, and William A. Egan becomes Alaska's first governor. British Petroleum begins to explore for oil on Alaska's North Slope.
  • 1960 Amoco finds offshore oil in Cook Inlet.
  • 1968 Atlantic Richfield pumps oil from exploratory well at Prudhoe Bay; recoverable reserves of oil estimated at 9.6 billion barrels
  • 1973 Congress passes legislation allowing construction to begin on the trans-Alaska pipeline. War in the Middle East in October causes oil prices to rise from $3 to $16 per barrel.
  • 1974 Construction begins on the pipeline; thousands of workers flock to Alaska in search of jobs. Construction lasts 39 months, costs $8 billion, including the Marine Terminal in Valdez
  • 1988 North slope oil production peaks at 2 million barrels per day
  • 1989 Exxon Valdez spills 11 million gallons of oil into Prince William Sound
  • 2008 Governor Sarah Palin discovers Russia

There might have been a lot of interest and hype in 1920, but not much happened for many years. As indicated in the timeline above, production peaked in 1988 and will not likely again reach that level. Current (July 2008) Alaska oil production of about 650,000 barrels per day is distributed as follows:

(Chart from Northern Crude)

Back to the Past
The editorial is referring to oil policies of Secretary Payne, but I have been unable to find information on what the policies were. However, John Barton Payne was Interior Secretary under President Woodrow Wilson for only about a year. He was at one time a proponent of the formation of a United States Oil Corporation which would have been responsible for all development of oil in other countries, but this effort didn't fly.

Sometime in early 1920, Payne accompanied Josephus Daniels, Secretary of the Navy, to Alaska to inspect the resource bounty there. Daniels was interested in both coal and oil to fuel naval ships. A New York Times article quotes Daniels as saying:

"Many persons are taking out oil leases and the Alaskans believe that their territory's oil wealth will surpass the wealth that comes from its gold mines, which are being worked despite the fact that gold is the one commodity which remains stationary while everything else soars"

Payne's short tenure in that position was bracketed by two of somewhat greater controversy. His predecessor was Franklin Knight Lane. Although the National Park Service was created during Lane's tenure, he fought hard within the Interior Department for a dam to be built in Yellowstone's Bechler Valley to supply water to Idaho beet farmers. He was ready to fire his subordinates, but instead took a lucrative position with the Pan American Oil Company. Payne, who replaced him, was opposed to the whole dam idea. Yellowstone was spared, and Payne later went on to chair the American Red Cross.

Payne's successor in the newly elected administration of Warren G. Harding was Albert B. Fall (no, really), who was eventually convicted of conspiracy and bribary in the Teapot Dome Scandal.

Fall was appointed to the position of Secretary of the Interior by President Warren G. Harding in March 1921. Soon after his appointment, Harding convinced Edwin Denby, the Secretary of the Navy, that Fall's department should take over responsibility for the Naval Reserves at Elk Hills, California, Buena Vista, California and Teapot Dome, Wyoming. This last setting was used for the namesake of the scandal. Later that year, Fall decided that two of his friends, Harry F. Sinclair (Mammoth Oil Corporation) and Edward L. Doheny (Pan-American Petroleum and Transport Company), should be allowed to lease part of these Naval Reserves.

His failure to have competitive bidding for the reserves resulted in the Teapot Dome scandal. The investigation found Fall guilty of conspiracy and bribery, $385,000 having been paid to him by Edward L. Doheny. Fall was jailed for one year as a result—the first former cabinet officer sentenced to prison as a result of misconduct in office. It is often joked among historians that Fall was "so crooked they had to screw him into the ground" upon his death.

Mr. Doheny was not only acquitted on the charge of bribing Fall, but Doheny's corporation foreclosed on Fall's home in Tularosa Basin, New Mexico, because of "unpaid loans" which turned out to be that same $100,000 bribe.

The line "I drink your milkshake!" from the Academy Award-winning film There Will Be Blood is paraphrased from a quote by Fall speaking before a Congressional investigation into the Teapot Dome scandal. Paul Thomas Anderson, the film's director, writer and producer, was enamored with the use of the term "milkshake" to explain the complicated technical process of oil drainage to senators.

Talk about justice.

As we await the release of the forthcoming 2008 IEA World Energy Outlook, it is interesting to read Payne's comments about a USGS report he made public, which portrayed storm clouds ahead:

"According to my information,", Secretary Payne says, "the March consumption of crude petroleum exceeded that of a year ago by 12,000,000 barrels. This single month's record of 44,000,000 barrels means that the United States is now using more oil each month than the world used in 1885. These are facts that must be faced by every citizen who uses any petroleum product, whether fuel oil, gasoline, or lubricating oil, and these figures likewise raise questions of public policy, for in the matter of oil the Unites States is certainly living beyond its means"

Cornucopians will no doubt believe that history is repeating itself given our current concerns which echo this earlier time, but the rest of us await the new super giant discoveries needed to complete the repeat. And while we're waiting, we're still burning (oil, that is).

(click to enlarge)

Thanks for this JB.
This is the history that needs to be learned, the details, small things, the false starts and all.
Unfortunately very little history is taught any more with only those who take more than one course in high school the ones who will become "history teachers". And here in Canada we are taught that our own history is unimportant and that real history happened long ago and far away. I am not a conspiracy believer but the de-education effort is quite complete here. Few people know of the dirty deeds and self serving efforts that shaped Canada and work everywhere in the world. we don't want the modern voter to have any context with which to compare the present gang. We also don't know that most of our legacy, the rail roads, institutions, cities etc were built mainly by mortals with feet of clay and whos legacy is mainly an accidental consequence of their own personal agendas. the diference with the modern verson of these is that the majority are creating hollow meaningless constructs such as hedge fundfs and invesment banks or projects that are designed to exploit maximum short term profiut and then be thrown away. I am afraid we are all living in the Tea Pot Dome.

interesting story, joules.

details of the corruption that lead to the teapot dome scandal are discussed in "the teapot dome scandal" by laton mcmartney, among others.

and despite the corruption, the gop held the white house until 1933.

history does repeat.

Thanks for the article, interesting stuff. It is amazing how history tends to repeat, and corruption in contracts, especially oil, shows up again and again. I suppose Mr. Stevens just got overwhelmed by his schedule and forgot to cover his tracks by giving a "receipt" for the gifts from the oil guy.

Another thing I was thinking about ANWR, I guess with things as they are the debate about drilling in this country will be very different now.

Small correction. Peak oil flow from North Slope occurred in 1988, not 1998.

did you mean to say the north slope peaked in 1988, instead of 1998?

...not that it makes all that much difference... unless you're trying to put together evidence for US elite awareness of peak oil... and evidence of motive to get an oil acquistion project started.

i mean, when we start with lower 48 peaking in 1970 or so, conventional oil in canada peaked in 74, indonesia in 77, alaska in 1988, the north sea peaking in 2000 or so... you'd have to be a complete idiot to be ignorant of peak oil and its implications.

Yes, thank you (and others) for the correction.


You really have found a jewel !!! But for me it is the article to the left. About drugs.

How prescient is the statement of the writer that "Too much emphasis on public control and on restrictions may make it more of a menace than a correction"

My my, in 1920 there was someone smart enough to realize that Prohibition does not work !!!!

Great find. :-)

Thanks. That's why I included it along with Gasoline Alley.

There are a lot of other prohibition-related stories. Here is a goodie:

Yes, reading those old newspapers is an eye opener. It brings the message that nothing really changes expect the scenery and the actors. :-)

Thanks again.

I would like a copy of the 1920 drug addiction story for a psychiatrist friend of mine.

My eMail in my link.

Thanks :-)


Long before Portland acquired this reputation as some eco-paradise chock full of bike lanes and farmers' markets it was quite a seedy and hell raising burb. This tome details some of the goings on from the 40s to early 60s:

In the logging town days it was even more raw - one establishment downtown sported the world's longest bar, Erickson's, with 387 feet of mahogany to set your drink on. Drink sales were so prolific the food was free.

It is worse than that, back in the 1920s Portland used to grab the drunks off the street, drug them, and then sell them to ship captains who needed a crew. Some of the bars shortcut the whole "street" bit, and had trap doors in their floors to drop the drunk patrons directly into the arms of the kidnappers... And, of course, the police were in on the racket.

But for me it is the article to the left. About 1920 there was someone smart enough to realize that Prohibition does not work !

I found the drug addiction article ironic, as "America is addicted to oil" and this should be "treated as a disease". Anybody have suggestions for a generic individual treatment plan? 12 Step Process anyone?

Step 1. We admitted we were powerless over our addiction - that our lives had become unmanageable

A work in progress...

Three of the key components in dealing with oil dependency recovery are dealing with the cravings, withdrawal symptoms and underlying issues compelling one to fill up one's tank. Oil rehab programs need to deal with each of these areas and show the oil dependent person that he or she has some control in each of these areas for the recovery process to be effective.

Cravings can be both physical and psychological and the addicted person needs to know that though they cannot control the cravings, they can control the action of filling up a tank in order to dampen the cravings. Withdrawal symptoms can be mild to life threatening. For those with a long history of heavy oil consumption, professional medical assistance will be necessary during the detox period in order to safely deal with the withdrawal symptoms. Therapy will also be necessary for most in order to deal with the underlying issues compelling one to drive solo. Unresolved grief, anxiety and beliefs will need to be addressed in a safe environment, so that the emotional energy behind the compulsion to drive solo can be dissipated.

(Paraphrased from )

12 Step Process anyone?

Already happening:

12 Key Steps to embarking on your transition journey

Along with the The 7 barriers that stand in the way of a Transition Initiative, also know as the The 7 - Buts



What a great find! Thank you for posting this Joulesburn.

If it weren't oil, the Great Depression would never have ended.

We would now likely be ~90 years into Duncan's Olduvai Gorge.

Most of us would probably never have been born, or if we were, would likely be living under extremely different circumstances right now.

If it weren't [for] oil, the Great Depression would never have ended.

More likely that the roaring 20s wouldn't have happened either. The US might not have been victorious (or even entered) WWII on either front. The tiff with Japan was in part instigated by the cutting off of their oil imports -- which their economy was by then dependent on.

Overall, the 20th century is so defined by oil that it is hard to construct an alternate reality. Peak coal? Probably. West Virginia as flat as a pancake? Probably.

"Overall, the 20th century is so defined by oil that it is hard to construct an alternate reality. "

Very true. Your remarks about the roaring 20s and WWII are certainly correct. We might not have even had a WWII - we probably wouldn't have had the energy available to fight a war on that scale.

Peak coal? Probably. West Virginia as flat as a pancake? Probably."

Yes, "peak wood" for many regions of the world, followed by peak coal. And as you note, for our version of 'easter island' we would have flattened mountains instead of building big stone heads.

Great find JB!
Comparing the timelines we should be able to produce oil from the "promising" (USGS) Ellesmere Island in 2072.
Go ahead with digging thru your house. Maybe one day you'll find gold under the floor.

What was the real cause of the Great Depression? Everything I've read says that it was about nothing substantial: just bubbles bursting and lack of confidence and trust. That's the same story we are hearing today. Like most TODers I don't agree about today: we think that this is an expected aspect of Peak Oil (even if we didn't predict the detail, we expected the economic decline, and everything else makes sense as a result of economic decline in real terms).

So it is natural to go back and ask what the Great Depression was really about. This was a time of massive change in the way the world worked: from coal and horses to oil and motorized vehicles. Think of the huge destruction of real capital that was involved. Not just the physical stuff like stables, but all the expertise. And the attempts to ramp up the new infrastructure must have been continually frustrated by the lack of necessary expertise. Ben Bernanke is an expert on the Great Depression, but I wonder if it is possible to understand it by just looking at the way the money went round in circles?

I'm not so sure about the destruction part. Stables and such are not the most resilient of structures, unless they are made of stone. They were just not rebuilt, if not needed.

We didn't stop using coal (or wood before it) as better fuel sources were found; indeed, its use has continued to increase. We just don't focus on it as much because we are less reliant on it (or we don't make the connection with electricity).

I haven't found any numbers, but I wonder what the US horse population has done over the past century. Blacksmiths? Saddle sales?


My ancestors in rural Kansas, early 20th century.

And perhaps a preview of our descendants, early-mid 21st century?

The population of horses dropped from about 21,000,000 in the beginning of the 20th century to about 2,000,000 in 1950. It has crept up from there to about 7,000,000 today. US human population doubled from 1950 to today.The number of recreational horses has begun to drop, but I suspect the number of work animals is about to rise,

Attempts to ramp up the new infrastructure in the early 20th century were not frustrated by a lack of expertise. The most dramatic event of the 1920s was the rapid spread of cars. People weren't saying "Oh, I can't buy a Model T because there won't be any gas stations".

Rapid development of automation tech allowed deskilling of large numbers of tasks. So the construction of the Model T became easier and easier as the 20s wore on.

As for what caused the Great Depression: A really dumb monetary policy of contraction followed by FDR's equally dumb attempts to keep up wages and prices (FDR prolonged the Great Depression by 7 years). This is well understood. Yes, it is possible to understand the Great Depression by following the money. Milton Friedman and Anna Schwartz (who parenthetically is still alive) figured it out.

Nice to see the revisionist historians are OTJ.

Under Depression "causes", no mention of "little things", such as the massive leveraged betting going on in the stock market (not unlike DotCom bubble), huge property bubble in FL (not unlike the much larger recent property bubble). All the blame laid on measures taken to treat the *effects*, mislabelled as causes.

Was it really so "dumb" for the 1920s Fed to engage in a "tight" money policy after the 1929 crash vs. an easy money policy? Given today's Fed's 1% and massive $2Trillion+ in bailouts (and counting), I guess we'll find out, won't we? Quite an experiment in macroeconomic engineering we have going today.

Were all of FDRs New Deal policies so horribly stupid? Arguably, some were: policies aimed at propping up asset prices vs. quick asset liquidation, price/wage controls, banning private gold ownership, etc.

Nonetheless, this is also the President who gave us Social Security and the SEC, at a time when the poor and elderly were allowed to starve in the street and securities regulation was virtually nonexistent. Much of that New Deal era ergulation has since been dialed back in the name of Free Market fundamentalism (Glass-Steagal repeal, etc.), and we are now reaping the consequences of those unwise decisions.

Interesting article. Thanks for that, JB.

I had to look up "fall guy" on ... the consensus is that the popular term predates Teapot Dome. The name was just an interesting coincidence.

The thing that stuck out to me was the lease deal/prices. Sounded like a government that supported entrepreneurs who were trying to feed a planet.

Great article!

A curious and interesting post, Joulesburn, except for your snarky lie about Gov. Palin of Alaska and your prediction that oil production in Alaska will likely never again reach the 1988 peak. Future oil production levels in Alaska will obviously depend on whether ANWR and the extensive and highly prospective offshore areas of Alaska are ever opened to development. It doesn't seem likely in the Obama administration, but as peak oil causes further reductions in global oil production, ANWR and offshore areas have a good chance of being developed, and very significant oil production may occur there.

Sorry to confuse your ideology with facts, but the upper limit (5% probability) for ANWR by USGS is a bit more than half of Prudhoe Bay and associated fields.

Prudhoe Bay is down -80% from peak production and should be down -90% (or more) by the time ANWR comes on-line and reaches peak production. Off-shore Alaska is unlikely to be a major producer (say 1 million b/day) and it will take even longer to develop (long enough to allow ANWR to get past peak).

So even if we "win the lottery" with ANWR (1 in 20 chance), it will *NOT* surpass Alaska's historic (and long gone) peak.

Interesting fact for the "Drill, Baby, Drill" group.

There are no significant restrictions on drilling, on or off-shore, in Texas and no restrictions on production since 1972. Yet, Texas is an oil importer ! Texas cannot produce enough oil to satisfy their own needs for cars & SUVs in Houston, Dallas, San Antonio, El Paso, Ft. Worth, Austin, etc.

So much for "Drill, Baby, Drill !"

Best Hopes for Fact Based Policies,


JoulesBurn, Does gutting a single bedroom to reinsulate make that big of a difference in the heating bill? Are you gradually redoing the whole house?

Its on the upper floor of a 2-story house (with basement), and the walls and about half of the ceiling area had no insulation. The 2 windows were single pane, and one was plexiglass. I'm beefing up the attic insulation overall, so I won't know which changes caused the biggest improvement. There were other reasons for gutting the room, though, and the rest of the upstairs has already been redone.