Oil discoveries have not only generated substantial benefits for the oil industry, but also exerted an influence on the economic and social lives of communities inhabiting these geologically fortunate territories. An outstanding case was the discovery of large oil and gas resources around the turn of the 20th century on the Osage Nation Indian Reservation in Oklahoma, which found the Native Americans unexpectedly blessed with enormous wealth that would significantly shape their history—for better AND for worse.
A piece of the Osage oil history is vividly portrayed in Martin Scorsese’s latest award-winning film “Killers of the Flower Moon,” which was nominated for ten Academy Awards including Best Picture and Best Director. The movie is based on real events that were described in the 2017 nonfiction best-seller “Killers of the Flower Moon: The Osage Murders and the Birth of the FBI,” by journalist and writer David Grann. These events unfolded during the 1920s in Fairfax Township, within the Osage Nation Indian Reservation.
The Osage Pilgrimage
The Osage ancestral territory encompassed a vast area between three major rivers, the Missouri to the north, the Mississippi to the east and the Arkansas to the south. This included parts of what became Missouri, Kansas, Oklahoma, Arkansas and adjacent states. Their economy relied upon hunting and gathering, complemented by a sizable agricultural component and an extensive trading system.
In the early 19th century, the U.S. government forcibly relocated the Osage people to a smaller area in southeastern Kansas, confiscating their vast ancestral domain. Under intense pressure from encroaching white settlers, the Osage agreed in 1870 to sell their Kansas lands, and they purchased a substantial tract of approximately 1.5 million acres from the Cherokee Nation in what was then Indian Territory in present-day northeastern Oklahoma. Some 3,000 Osage people walked across the Kansas-Oklahoma border into their new homeland in 1871.
The newly acquired Osage territory, characterized by gently rolling hills and open tallgrass prairie, was initially deemed worthless and considered unfit for cultivation. In 1872, the U.S. Congress established a reservation for the Osage Nation on the land they owned, marking the final and permanent home of the Osage people, now encompassed within Osage County, Okla.
A Multimillion-Dollar Hidden Treasure
This new land, initially dedicated by the Osage to extensive grazing leases and buffalo hunting, held a hidden treasure. Oil and gas seeps on some creeks in the eastern part of the reservation had been known to exist since the 17th century; However, it was not until 1896 that the first oil and gas lease was granted on Osage land.
Henry Foster, a banker, secured a 10-year “blanket lease” covering the entire Osage territory. Foster’s contract gave him exclusive rights to exploration, drilling and production on the whole reservation, and recognized his right to sublease any portion of it. The agreement provided for a 10-percent royalty to the Osage Nation on all oil produced and a $50 annual payment for each producing gas well.
Upon Henry Foster’s passing, his brother Edwin, a railroad contractor in Kansas, established the Phoenix Oil Company in 1896, and all of Foster’s interests were transferred to this company. The first oil exploration well, drilled near the reservation’s northern boundary, only yielded minor oil and gas traces after reaching a depth of 1,000 feet.
The breakthrough came in October 1897 with the completion of the third well, which achieved an initial production of 20 b/d of high-grade oil from a sandstone, known as the Bartlesville Sand, embedded in shallow marine shales of Pennsylvanian age at a depth of 1,600 feet. The well was located close to the eastern boundary of Osage County, just a short distance from the city of Bartlesville, Washington County. (That was near where the Nellie Johnstone No.1 well started gushing on April 15, 1897, Oklahoma’s first commercial oil well.)
Because of the lack of transportation to the area, a market for the Osage oil discovery didn't develop until a railroad to Bartlesville was constructed in 1900. Then, the first Osage oil sold for $1.25 per barrel. During the first year, Osage production amounted to 10,356 barrels.
The Phoenix Oil Company, which made that first discovery, went bankrupt. It reorganized in 1902 with the Osage Oil Company to form the Indian Territory Illuminating Oil Company, which took all interests in the original lease and assignments thereof. ITIO embarked on a strategy of dividing the acreage into blocks and subleasing them to other companies on a bonus and royalty basis. ITIO also retained certain leases for its own exploration and production interest.
By July 1904, the oil activity in Osage County had undergone significant transformation. The region now boasted 155 producing oil wells, 18 gas wells and a surprisingly small number of dry holes–just 43. The construction of a pipeline in 1904 connecting the region to the Standard Oil Refinery in southeast Kansas further facilitated transportation and crude oil processing.
The year 1905 witnessed a boom of oil production in Osage County, with more than 300 oil wells brought into operation. This surge prompted ITIO to renew its lease for another 10 years, starting in March 1906. The acreage was reduced to half its original size, limited to the eastern portion of the Osage reservation. The annual payment was increased to $100 on gas wells, and oil sales were subject to 12.5-percent royalty. The renewed lease attracted more and more sublessees between 1906 and 1916.
Collective Ownership and the Headright System
On June 28, 1906, the U.S. Congress passed a law titled, “An Act for the division of the lands and funds of the Osage Indians in Oklahoma Territory,” commonly known as the 1906 Act. This historic law marked a new era for the Osage Nation.
The 1906 Act separated the surface estate from the subsurface mineral estate, known as “Osage Mineral Estate” or “underground reservation,” effectively creating two distinct legal entities within the reservation. This decisive move preserved all oil, gas, coal and other mineral development as a common reserve to the Osage Nation. This meant that the royalties from oil produced in Osage land went, not to the individual landholders but to the Indian tribe. Initially, the mineral rights were preserved for 25 years, but several later amendments extended the validity period, which finally was declared in perpetuity in 1978.
To ensure equitable distribution of these mineral rights, the 1906 Act introduced the concept of “headrights.” These headrights represented the proportional share of each Osage tribal member in the collective ownership of the Osage Mineral Estate. A roll of the Osage tribe was established to record the legal membership. Thus, every enrolled member, regardless of their individual landholdings, received a headright. This system was meant to ensure that the wealth generated from the Osage Mineral Estate was shared equally among all members, rather than concentrated in the hands of a few fortunate landowners on whose land oil could be found.
To maintain the integrity of the Osage Nation’s collective ownership of the Osage Mineral Estate, the sale or transfer of headrights was prohibited. Headrights could only be inherited, theoretically ensuring that the wealth generated from oil and mineral resources remained within the tribe.
While the subsurface mineral estate was held in common, the surface estate was allotted to individual Osage tribal members. These surface allotments could be sold or transferred, allowing Osage individuals to benefit directly from their landholdings.
The separation of surface and subsurface estates, the introduction of headrights and the prohibition on headright-selling ostensibly ensured that the Osage people shared collectively in the wealth generated by their oil resources.
But it also had its dark side.
Rise of Osage Wealth
By 1907, the Osage oil fields had produced more than 5 million barrels of oil, and the number of producing wells had surpassed 1,000 by 1910. This rapid expansion spurred the development of an oil industry infrastructure that attracted numerous companies and fueled economic growth.
In 1912, the Osage Nation began leasing their lands individually for oil exploration by sealed bids. The unexplored western portion of the Osage Reservation was divided into 160-acre tracts for sale. In November 1912, the practice of lease sales by public auction to competitive bidders was initiated. These auctions, held under the shade of a giant elm tree, located atop a hill in Pawhuska known as the “Million-Dollar Elm,” became legendary for their staggering bids. This practice continued throughout the 1920s, with a total of 18 tracts surpassing the million-dollar bonus mark. The record bid was in 1924, when a single 160-acre tract sold for $1.99 million.
In 1916, the ITIO “blanket lease” expired, opening all the Osage lands to general leasing for exploration. This further fueled the oil boom, pushing the average daily production of Osage County to an astonishing 30,000 barrels of oil and 450 million cubic feet of gas by 1918. The county became a hub of oil production, attracting major oil companies, like Phillips Petroleum, founded in 1917 by the Phillips brothers, which years later became an international company.
From 1901 to 1930, a staggering 319 million barrels of oil were pumped from the ground on Osage lands, which implied a great amount of wealth input into the Indian community. Oil royalties paid to the Osage people during the early 20th century made them one of the richest group of people in the world, producing more wealth than had all the American gold rushes combined.
The Osage peak production and income were reached in 1923 when more than 40 million barrels were produced. That year, the Osage tribal members collectively received royalties and bonuses amounting to more than $400 million in today’s value.
Often, newspapers from the time, replete with racist stereotypes, depicted the Osage as living excessive lifestyles, residing in lavish mansions, dressing in fancy clothing or hiring chauffeurs to guide their luxury cars. These portrayals often overlooked the significant contributions made by the Osage people to their community, including their commitment to providing their children with the best education possible.
Reign of Terror
The Osage Nation’s wealth brought with it a period known as the “Reign of Terror” during the 1920s, which is the period in which Scorsese’s movie is set. The sudden rise of wealthy people attracted a swarm of fortune seekers, unscrupulous individuals and even murderers who sought to exploit the Osage people and seize their mineral wealth by any means necessary.
News of the Osage’s newfound riches spread like a prairie fire, drawing tens of thousands of new settlers to their lands. Boomtowns emerged, including Pawhuska, Fairfax, Foraker, Bigheart and Whizbang. Oil discoveries attracted not only honest entrepreneurs, drillers and oil men, but also a scoundrels’ gallery of swindlers, bootleggers, outlaws and other undesirables.
In 1921, the U.S. Congress, under the guise of protecting the Osage people, passed a law requiring each Osage adult to pass a competency test to prove their ability to manage their individual headrights responsibly. Those deemed incapable were assigned a non-Osage guardian to oversee their financial affairs. A full-blooded Osage was invariably appointed a guardian, whereas a mixed-blood person rarely was. This law opened the door for unscrupulous businessmen, dishonest attorneys and corrupt bankers who exploited their role and appropriated funds from Osage headrights.
Intermarriage between white and Osage individuals increased dramatically, driven by the prospect of gaining access to Osage wealth. Some whites even married rich Osage women solely to obtain guardianship and control their headrights. However, the most terrifying aspect of this period was the ruthless murders of Osage women and their relatives committed or ordered by their white husbands to inherit their headrights and land.
During the peak of the oil boom in the early 1920s, when headrights reached their highest value, at least 60 Osage members were brutally murdered. Others mysteriously disappeared or fell ill under suspicious circumstances. Local authorities, often complicit in these crimes, dismissed many of these deaths as suicides, alcohol poisoning or natural causes, failing to conduct thorough investigations.
Amid this horrifying atmosphere, the Osage people desperately sought justice. Their pleas reached the federal government, and the newly formed Bureau of Investigation took up the case. This became one of the first major homicide investigations by the agency, later renamed the Federal Bureau of Investigation.
A few murder cases were cleared by the Bureau and the guilty were tried and convicted, but many of these dreadful crimes remain unsolved to this date.
Osage Geological Treasure
From the early 20th century to the present, the Osage Reservation has emerged as a geological treasure, yielding more than 1.3 billion barrels of oil and an unknown amount of gas. Initially, gas was considered a waste product and often was burned or used for fuel in operating the wells. This remarkable legacy of hydrocarbon production came mainly from diverse, prolific Paleozoic formations, ranging from Carboniferous sandstones and limestones to Cambro-Ordovician dolomites.
These Paleozoic strata were deposited on a gently southward-dipping stable shelf overlying a pre-Cambrian basement, made up of igneous and metamorphic rocks. Oil and gas production comes mostly from gentle anticlines and domes initially identified by surface geology, but stratigraphic trapping also plays an important role.
The Pennsylvanian sandstones, commonly known as Bartlesville, Burbank or Red Fork, have yielded most of the oil produced in Osage County. Production is from relatively shallow depths, between 2,000 and 3,000 feet, with generally low reservoir pressures. Contributions have also come from deeper Cambro-Ordovician fractured dolomites and Mississippian cherty limestones.
By 1930, more than three dozen Osage oil fields had been discovered, including Bartlesville, Naval Reserve, Pershing, Wildhorse and Avant. One of the richest and most well-known oil fields is Burbank, primarily situated in the western part of Osage County and extending into Kay County, Okla. The field was discovered in May 1920 by well No. 1 of the Marland Oil Company (later Conoco) on a surface dome that had been favorably recommended for testing by the U.S. Geological Survey in 1918. The discovery well produced 760 barrels of oil per day at 2,950 feet from the shallow marine Burbank sandstone–the local informal name for the Bartlesville sandstone.
The Burbank is a siliceous sandstone, fine- to medium-grained, with calcareous cement and good porosity, ranging from 10 to 33 percent, averaging 17 percent. The Burbank sandstone occurs in broad lenses, reaching a maximum aggregate thickness of 70 feet, pinching out into shale beds. The entrapment mechanism of Burbank Field is a combination of structural and stratigraphic closure.
Burbank Field has a cumulative production of more than 550 million barrels of high-quality oil with an API gravity of 38 to 40 degrees and low gas content. Its peak production was achieved in July 1923, when Burbank yielded an impressive 122,000 barrels of oil per day from 1,020 wells. In the ensuing years, various enhanced recovery techniques were employed to extend the field’s lifespan. Gas injection began in 1926 and continued into the early 1950s, significantly boosting production. Waterflooding commenced in 1949, marking its debut as one of the largest waterfloods worldwide. Currently, the Burbank Field is undergoing a CO2 enhanced oil recovery project, which was initiated in 2013, aiming to recover an additional 88 million barrels of oil.
The Osage Nation’s Oil Heritage
To date, more than 45,000 wells have been drilled in Osage County, with approximately 4.8 million barrels of oil and 10.4 billion cubic feet of gas produced annually from the remaining active wells. Most of the production is from the Burbank Field and stripper wells.
The Osage Nation’s remarkable oil production legacy stands as a testament to its enduring geological significance. While the Osage people may no longer hold the title of the world’s richest, the oil industry’s impact continues to resonate today. Many Osage members continue to receive quarterly royalty payments, still known as headrights, even though an estimated 25 percent of headrights are now owned by non-Osage individuals. The oil industry in Osage County has been a significant source of employment opportunities for Osages throughout Oklahoma, contributing to the economic development of the state and the country.