Lease Agreement - Erie County Pennsylvania: Fill & Download for Free

ARAMCO, obviously.ON MAY 29, 1933, Lloyd N. Hamilton of the Standard Oil Company of California and 'Abd Allah Al Sulaiman Al Hamdan, finance minister of Saudi Arabia, signed an agreement giving Socal exclusive rights to extract petroleum from an area larger than the state of Texas, in return for a small cash payment and royalties on future production of 4 shillings per ton (about $.10 a barrel in 1933). The agreement went virtually unnoticed in the rest of the world because almost no one—including experts from the other major oil companies and King 'Abd al-'Aziz ibn 'Abd al-Rahman Al Faisal Al Sa'ud himself—believed that there was oil in the newly formed kingdom of Saudi Arabia. The United States did not even have a consul—much less a diplomatic representative—in the country at the time. Only a handful of Socal geologists were convinced that oil was there, but events proved them to be right a thousand times over.So, naturally, the rise of ARAMCO goes back to the founding of the Standard Oil Company (Socal) itself.One of the busiest corners of the globe at the opening of the year 1872 was a strip of Northwestern Pennsylvania, not over fifty miles long, known the world over as the Oil Regions.Twelve years before this strip of land had been but little better than a wilderness; its chief inhabitants the lumbermen, who every season cut great swaths of primeval pine and hemlock from its hills, and in the spring floated them down the Allegheny River to Pittsburg.The great tides of Western emigration had shunned the spot for years as too rugged and unfriendly for settlement, and yet in twelve years this region avoided by men had been transformed into a bustling trade centre, where towns elbowed each other for place, into which three great trunk railroads had built branches, and every foot of whose soil was fought for by capitalists.It was the discovery and development of a new raw product, petroleum, which had made this change from wilderness to market-place.This product in twelve years had not only peopled a waste place of the earth, it had revolutionised the world’s methods of illumination and added millions upon millions of dollars to the wealth of the United States.Petroleum as a curiosity, and indeed in a small way as an article of commerce, was no new thing when its discovery in quantities called the attention of the world to this corner of Northwestern Pennsylvania.The journals of many an early explorer of the valleys of the Allegheny and its tributaries tell of springs and streams the surfaces of which were found covered with a thick oily substance which burned fiercely when ignited and which the Indians believed to have curative properties.As the country was opened, more and more was heard of these oil springs. Certain streams came to be named from the quantities of the substance found on the surface of the water, as "Oil Creek" in Northwestern Pennsylvania, "Old Greasy" or Kanawha in West Virginia.The belief in the substance as a cure-all increased as time went on and in various parts of the U.S. it was regularly skimmed from the surface of the water as cream from a pan, or soaked up by woollen blankets, bottled, and peddled as a medicine for man and beast.Up to the beginning of the 19th century no oil seems to have been obtained except from the surfaces of springs and streams.That it was to be found far below the surface of the earth was discovered independently at various points in Kentucky, West Virginia, Ohio and Pennsylvania by persons drilling for salt-water to be used in manufacturing salt.Not infrequently the water they found was mixed with a dark-green, evil-smelling substance which was recognised as identical with the well-known "rock-oil."It was necessary to rid the water of this before it could be used for salt, and in many places cisterns were devised in which the brine was allowed to stand until the oil had risen to the surface.It was then run into the streams or on the ground. This practice was soon discovered to be dangerous, so easily did the oil ignite. In several places, particularly in Kentucky, so much oil was obtained with the salt-water that the wells had to be abandoned.Certain of these deserted salt wells were opened years after, when it was found that the troublesome substance which had made them useless was far more valuable than the brine the original drillers sought.Naturally the first use made of the oil obtained in quantities from the salt wells was medicinal. By the middle of the century it was without doubt the great American medicine."Seneca Oil" seems to have been the earliest name under which petroleum appeared in the East. It was followed by a large output of Kentucky petroleum sold under the name "American Medicinal Oil."Several hundred thousand bottles of this oil are said to have been put up in Burkesville, Kentucky, and to have been shipped to the East and to Europe.The point at which the business of bottling petroleum for medicine was carried on most systematically and extensively was Pittsburg. Near that town, at Tarentum in Alleghany County, were located salt wells owned and operated in the forties by Samuel M. Kier.The oil which came up with the salt-water was sufficient to be a nuisance, and Mr. Kier sought a way to use it. Believing it had curative qualities he began to bottle it. By 1850 he had worked up this business until "Kier's Petroleum, or Rock-Oil" was sold all over the United States.Although Mr. Kier's trade in this oil was so extensive he was not satisfied that petroleum was useful only as a medicine. He was interested in it as a lubricator and a luminant.That petroleum had the qualities of both had been discovered at more than one point before 1850.More than one mill-owner in the districts where petroleum had been found was using it in a crude way for oiling his machines or lighting his works, but though the qualities of both lubricator and luminant were present, the impurities of the natural oil were too great to make its use general.Mr. Kier seems to have been the first man to have attempted to secure an expert opinion as to the possibility of refining it.In 1849 he sent a bottle of oil to a chemist in Philadelphia, who advised him to try distilling it and burning it in a lamp. Mr. Kier followed the advice, and a five-barrel still which he used in the fifties for refining petroleum is still to be seen in Pittsburg. His trade in the oil he produced at his little refinery was not entirely local, for in 1858 we find him agreeing to sell to Joseph Coffin of New York at 62-1/2 cents a gallon 100 barrels of "carbon oil that will burn in the ordinary coal-oil lamp."Although Mr. Kier seems to have done a good business in rock-oil, neither he nor any one else up to this point had thought it worth while to seek petroleum for its own sake. They had all simply sought to utilise what rose before their eyes on springs and streams or came to them mixed with the salt-water for which they drilled.In 1854, however, a man was found who took rock-oil more seriously.This man was George H. Bissell, a graduate of Dartmouth College, who, worn out by an experience of ten years in the South as a journalist and teacher, had come North for a change. At his old college the latest curiosity of the laboratory was shown him — the bottle of rock-oil — and the professor contended that it was as good, or better, than coal for making illuminating oil.Bissell seems to have been impressed with the commercial possibilities of the oil, for he at once organised a company, the Pennsylvania Rock-Oil Company, the first in the United States, and leased the lands on which these oil springs were located. He then sent a quantity of the oil to Professor Silliman of Yale College, and paid him for analysing it.The professor's report published and received general attention. From the rock-oil might be made as good an illuminant as any the world knew. It also yielded gas, paraffine, lubricating oil. "In short," declared Professor Silliman, "your company have in their possession a raw material from which, by simple and not expensive process, they may manufacture very valuable products. It is worthy of note that my experiments prove that nearly the whole of the raw product may be manufactured without waste, and this solely by a well-directed process which is in practice in one of the most simple of all chemical processes."The oil was valuable, but could it be obtained in quantities great enough to make the development of so remote a locality worth while? The only method of obtaining it known to Mr. Bissell and his associates in the new company was from the surface of oil springs. Could it be obtained in any other way?As the story goes, Mr. Bissell was one day walking down Broadway when he halted to rest in the shade of an awning before a drug store. In the window he saw on a bottle a curious label, "Kier's Petroleum, or Rock-Oil," it read, "Celebrated for its wonderful curative powers. A natural Remedy; Produced from a well in Allegheny Co., Pa., four hundred feet below the earth's surface," etc. On the label was the picture of an artesian well. It was from this well that Mr. Kier got his "Natural Remedy." Hundreds of men had seen the label before, for it went out on every one of Mr. Kier's circulars, but this was the first to look at it with a "seeing eye." As quickly as the bottle of rock-oil in the Dartmouth laboratory had awakened in Mr. Bissell's mind the determination to find out the real value of the strange substance, the label gave him the solution of the problem of getting oil in quantities — it was to bore down into the earth where it was stored, and pump it up.Professor Silliman made his report to the Pennsylvania Rock-Oil Company in 1855, but it was not until the spring of 1858 that a representative of the organisation, which by this time had changed hands and was known as the Seneca Oil Company, was on the ground with orders to find oil.The man sent out was a small stockholder in the company, Edwin L. Drake, "Colonel" Drake as he was called.Drake had had no experience to fit him for his task. A man forty years of age, he had spent his life as a clerk, an express agent, and a railway conductor. His only qualifications were a dash of pioneer blood and a great persistency in undertakings which interested him.Whether Drake came to Titusville ordered to put down an artesian well or not is a mooted point. It seems probable that the idea of seeking oil on the lands leased by the Petroleum Rock-Oil Company by drilling artesian wells had been long discussed by the gentlemen interested in the venture, and that Drake came to Titusville with instructions to put down a well. It is certain, at all events, that he was soon explaining to his superiors at home the difficulty of getting a driller, an engine-house and tools, and that he was employing the interval in trying to open new oil springs and make the old ones more profitable.One day late in August, 1859, Titusville was electrified by the news that Drake’s Folly, as many of the onlookers had come to consider it, had justified itself. The well was full of oil.Drake is popularly said to have "discovered oil."There was no doubt of the meaning of the Drake well in the minds of the people of the vicinity. They had long ago accepted all Professor Silliman had said of the possibilities of petroleum, and now that they knew how it could be obtained in quantity, the whole country-side rushed out to obtain leases. The second well in the immediate region was drilled by a Titusville tanner, William Barnsdall — an Englishman who at his majority had come to America to make his fortune.On February 1, 1860, he struck oil — twenty-five barrels a day — and oil was selling at eighteen dollars a barrel. In five months the English tanner had sold over $16,000 worth of oil.At the time of the discovery of oil three lines, the Philadelphia and Erie, the Buffalo and Erie (now the Lake Shore), connecting with the Central, and the Atlantic and Great Western, connecting with the Erie, were within teaming (horse-drawn wagon) distance of the region.The railroads built, the vexatious, time-taking, and costly problem of getting the oil from the well to the shipping point still remained. The teamster was still the tyrant of the business. His day was almost over.He was to fall before the pipe-line. The feasibility of carrying oil in pipes was discussed almost from the beginning of the oil business. Very soon after the Drake well was struck oil men began to say that the natural way to get this oil from the wells to the railroads was through pipes. In many places gravity would carry it; where it could not, pumps would force it.In 1863 at least three short pipe-lines were put into operation. The one which attracted the most attention was a line two and one-half miles in length carrying crude oil from the Tarr farm to the Humboldt refinery at Plumer.Various other experiments were made, both gravity and pumps being trusted for propelling the oil, but there was always something wrong; the pipes leaked or burst, the pumps were too weak; shifting oil centres interrupted experiments which might have been successful.Then suddenly the man for the need appeared, Samuel Van Syckel.He came to the creek in 1864 with some money, hoping to make more. He handled quantities of oil produced at Pithole, several miles from a shipping point, and saw his profits eaten up by teamsters. Their tyranny aroused his ire and his wits and he determined to build a pipe-line from the wells to the railroad.He was greeted with jeers, but he went doggedly ahead, laid a two-inch pipe, put in three relay pumps, and turned in his oil. From the start the line was a success, carrying eighty barrels of oil an hour.The day that the Van Syckel pipe-line began to run oil a revolution began in the business. After the Drake well it is the most important event in the history of the Oil Regions.The teamsters saw its meaning first and turned out in fury, dragging the pipe, which was for the most part buried, to the surface, and cutting it so that the oil would be lost. It was only by stationing an armed guard that they were held in check.A second line of importance, that of Abbott and Harley, suffered even more than that of Van Syckel.The teamsters did more than cut the pipe; they burned the tanks in which oil was stored, laid in wait for employees, threatened with destruction the wells which furnished the oil, and so generally terrorised the country that the governor of the state was called upon in April, 1866, to protect the property and men of the lines.The day of the teamster was over, however, and the more philosophical of them accepted the situation; scores disappeared from the region, and scores more took to drilling. They died hard, and the cutting and plugging of pipe-lines was for years a pastime of the remnant of their race.The uses to which oil might be put and the methods for manufacturing it had been well understood when the Drake well was struck, and, in a crude way, men knew how to distil it.The process of distillation also was free to all. The essential apparatus was very simple — a cast-iron still, usually surrounded by brick-work, a copper worm, and two tin- or zinc-lined tanks. Anybody who could get the apparatus could "make oil," and many men did — badly, of course, to begin with, and with an alarming proportion of waste and explosions and fires, but with experience they learned, and some of the great refineries of the country grew out of these rude beginnings.The chemists to whom are due chiefly the processes now used — Atwood, Gessner, and Merrill — had for years been busy making oils from coal. They knew something of petroleum, and when it came in quantities began at once to adapt their processes to it.Merrill at the time was connected with Samuel Downer, of Boston, in manufacturing oil from Trinidad pitch and from coal bought in Newfoundland. The year oil was discovered Mr. Downer distilled 7,500 tons of this coal, clearing on it at least $100,000.As soon as petroleum appeared he and Mr. Merrill saw that here was a product which was bound to displace their coal, and with courage and promptness they prepared to adapt their works.In order to be near the supply they came to Corry, fourteen miles from the Drake well, and in 1862 put up a refinery which cost $250,000.Here were refined thousands of barrels of oil, most of which was sent to New York for export.To the Boston works the firm sent crude, which was manufactured for the home trade and for shipping to California and Australia. The processes used in the Downer works at this early day were in all essentials the same as are used to-day.Among the many young men of Cleveland who, from the start, had an eye on the oil-refining business and had begun to take an active part in its development as soon as it was demonstrated that there was a reasonable hope of its being permanent, was a young firm of produce commission merchants.Both members of this firm were keen business men, and one of them had remarkable commercial vision — a genius for seeing the possibilities in material things. This man's name was Rockefeller — John D. Rockefeller.He founded Standard Oil.ARAMCO and the prosperity of the Gulf would not have been without the preceding events having taken place.In 1936 Socal formed a partnership with The Texas Company to market Saudi oil, and responsibility for production was given to a joint subsidiary—later renamed the Arabian American Oil Company, Aramco.By 1941 test wells had begun to reveal the extent of reserves that had been tapped into, but at that point the American government still had little interest.For years the United States had been a net exporter of petroleum, and to many people this appeared to be the natural order of things.In the midst of World War II, however, government planners came face to face with stark predictions that the United States would become a net importer after the war, and they were jolted into attempts to assure continuing American access to Saudi oil and rapid development of Saudi reserves to help conserve those in the Western Hemisphere.Through a Petroleum Reserves Corporation (PRC) created expressly for the purpose, Secretary of the Interior Harold L. Ickes tried to buy a controlling interest in the Arabian American Oil Company.When that move failed, the Department of State tried to accomplish the same objectives with a negotiated Anglo-American Petroleum Agreement, but it failed to win Senate ratification. Both initiatives ran aground on opposition from other American companies—chiefly the Texas independents—who feared competition from cheap Saudi oil.At the end of the war, Ickes left the government, and the State Department turned to benign support of private enterprise to achieve its objectives.By 1946, Socal and Texas had decided that they lacked the capital and the markets to develop the concession as rapidly as 'Abd al-'Aziz wanted it done, and they sold a minority interest in Aramco to Standard Oil (New Jersey) and Socony-Vacuum.The new partnership found itself immediately embroiled in the problem of building a trans-Arabian pipeline to the Mediterranean through territory in turmoil over the first Arab-Israeli War.By this time, however, the United States was deep into the Cold War, and the Department of State and National Security Council considered the economic welfare of Saudi Arabia a critical link in the defensive arc around the Soviet Union.A de facto coalition of government agencies, oil companies, and 'Abd al-'Aziz now formed around the issue of developing Saudi reserves and its first major accomplishment was modification of the 1933 Concession Agreement in late 1950 to permit fifty-fifty profit sharing between Aramco and the government of Saudi Arabia.By 1950 the style of American Middle Eastern oil policy and what was later termed the special relationship with Saudi Arabia were firmly established.The seventeen years between 1933 and 1950 had been eventful ones.