This Law Shaped the Future of Wyoming: #ThisWeekInWYHistory

Rocking machines for oil production in a private sector.
Rocking machines for oil production in a private sector.

It’s a story with familiar elements that arise from time to time throughout our nation’s history; the federal government notices land with valuable qualities and then reaches out and takes it “for the good of the people.”

This concept started nearly 100 years ago and, what started as a simple dispute would transform Wyoming’s economy and diversify it beyond the limited parameters of the livestock trade.

In the early years of the 20th Century, oil was starting to make waves in the U.S. economy. The demand for oil was skyrocketing as the U.S. Navy began retrofitting its warships to run on fuel oil, instead of coal, and gasoline powered automobile sales went through the roof.

Oil companies in California were living the high life, claiming land with favorable oil prospects and incredibly low fees as outlined in the 1872 Mining Law.

In 1909, the chief of the U.S. Geological Survey (USGS) took note and brought the matter to the attention of the U.S. Secretary of the Interior.

The USGS chief warned the Secretary that if trends continued, the U.S. Government would be repurchasing the very oil that it had “practically given away” under the Mining Law to run its Navy, according to the Wyoming State Historical Society (WSHS).

Of course, that didn’t sit too well with the government, especially with then U.S. President William Taft, who issued an immediate order to withdraw over three million acres of public land, with good oil prospects, from Wyoming and California, out of reach of big name oil producers.

Taft, however, had misgivings.

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The president wondered whether the move, which was good in a monetary sense, was bad in terms of constitutionality.

His solution: to request Congress pass a law that specifically allowed him to withdraw the land. There was a problem, however, the new law had passed Congress easily enough but it had not incorporated the original three million acres Taft had withdrawn from Wyoming and California.

The new law only applied to future withdrawals and it didn’t take long for a large oil company to take notice.

The Midwest Oil Company already had large holdings in the Salt Creek Field, near Casper, Wyoming, and decided to file a mineral claim on a 160 acre tract of land that included portions of withdrawn federal land.

When no objections were immediately raised, the Midwest Oil Company drilled, hit oil, and pumped 50,000 barrels of oil out of the ground.

When the U.S. Attorney’s office learned of what the company had done, it announced an intent to sue to reclaim the tract and value of the oil taken by the company.

It must have been a scandal for the ages, with the case advancing up the ladder to the U.S. Supreme Court.

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After two attempts to settle the matter in the highest court in the nation failed, a lower court decision ultimately sided with the federal government in 1915.

As fascinating the court case may have been, it nonetheless opened the eyes of the federal government to recognizing petroleum as a rare, valuable, and vital asset to the public interest, according to the WSHS.

On Feb. 25, 1920, U.S. President Woodrow Wilson signed the Mineral Leasing Act.

The act did away with an archaic patenting process that gave lease holders absolute control over oil discoveries; Congress decided that leasing land for a period of 10 years would be more apropos.

Mindful of how disastrous allowing any one company to claim a monopoly on oil could be, Congress banned any person or corporation from owning more than three oil and gas leases in any one state and more than one lease in any given oil field.

For the first time, the states were provided a piece of the oil action, with 37.5% royalty of the receipts of any coal mine or oil and gas well developed on federal land within a state’s border.

Half a century later, that would be increased to 50%.

By 1921, oil was being refined in Casper and shipped to the coasts, where it was pumped into tankers bound for Europe.

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Wyoming had created a land of plenty, so to speak, and the Wyoming Legislature knew exactly how to spend the sudden influx of cash.

The Legislature created the Government Royalty Fund, a means of distributing 2% of the first $2 million in annual royalties back to the originating counties, 38% to the Wyoming highway commission, 50% to teacher’s pay, and 10% to the University of Wyoming for capital construction projects.