The Greatest Political Scandal of the American Oil Industry

Tempest at Teapot Dome:

Warren G. Harding’s presidential administration was arguably the most corrupt in American history, and the oil industry was right in the middle of the scandal. The 1920s affair surrounding Teapot Dome oil field was the most infamous presidential scandal to happen in the 100-year period between the Grant administration in the 1870s and the Nixon administration.

The story includes sex, bribes, scandal, oil barons, crooked politicians, bathtub gin, smoke-filled rooms, the Roaring Twenties, blackmail, suicide and murder.

In short, it’s just like today – except gin is made in distilleries now and smoking is less popular than frac’ing.

A series of presidential orders between 1910 and 1923 created Naval Petroleum Reserves and Naval Oil Shale Reserves in California, Wyoming, Colorado, Utah and Alaska. For the United States and the United Kingdom, the advantages of petroleum over coal for naval fuel had proved irresistible, and the reserves were meant to provide a secure American wartime supply.

Leading the charge for Great Britain in this effort was First Lord of the Admiralty Winston Churchill, who was committed to meeting Germany’s challenge to Britain’s naval supremacy on the eve of the Great War.

“Mastery itself was the prize of the venture,” he said later of the Royal Fleet’s fuel conversion.

President Woodrow Wilson’s Secretary of the Navy Josephus Daniels and the Assistant Secretary Franklin D. Roosevelt also embraced the promises of greater firepower, efficiency and speed that oil-burning ships offered.

Teapot Dome

In 1911, C.H. Wegemann of the U.S. Geological Survey first described the Teapot Dome structure, southeast of the giant Salt Creek field, 30 miles north of Casper in Natrona County, Wyoming: “No drilling has yet been done in the Teapot Dome, but the structural conditions here are very favorable for the accumulation of oil.”

One hundred years ago, in 1915, Naval Petroleum Reserve 3 was created by the Wilson administration at Teapot Dome. The prospective structure was exclusively set aside for U.S. naval supply in case of emergency.

(The field was named for Teapot Creek, which in turn had been named for Teapot Rock, an iconic landmark cropping out nearby. The “spout” and “handle” have since eroded away.)

Wobbly Warren

Handsome and likeable, Ohio Sen. Warren G. Harding was elected easily as the U.S. president in 1920 after a protracted Republican nomination process that gave us the phrase “smoke-filled rooms.”

Among the wealthy smokers who supported Harding’s candidacy – generously, but not necessarily altruistically – were legendary oilmen Jake Hamon, “the Oil King of Oklahoma,” and Harry Ford Sinclair, who had failed as a pharmacist but launched his fortune by selling timber for derricks in southeast Kansas.

Harding chose a poker and drinking buddy, New Mexico Sen. Albert B. Fall, to be secretary of the Interior.

Fall was said to resemble “the frontiersman, the rough and ready, two-fisted fighter … who looks like an old-time Texas sheriff … a Zane Grey hero,” according to a description in a 1924 issue of The New Republic.

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Warren G. Harding’s presidential administration was arguably the most corrupt in American history, and the oil industry was right in the middle of the scandal. The 1920s affair surrounding Teapot Dome oil field was the most infamous presidential scandal to happen in the 100-year period between the Grant administration in the 1870s and the Nixon administration.

The story includes sex, bribes, scandal, oil barons, crooked politicians, bathtub gin, smoke-filled rooms, the Roaring Twenties, blackmail, suicide and murder.

In short, it’s just like today – except gin is made in distilleries now and smoking is less popular than frac’ing.

A series of presidential orders between 1910 and 1923 created Naval Petroleum Reserves and Naval Oil Shale Reserves in California, Wyoming, Colorado, Utah and Alaska. For the United States and the United Kingdom, the advantages of petroleum over coal for naval fuel had proved irresistible, and the reserves were meant to provide a secure American wartime supply.

Leading the charge for Great Britain in this effort was First Lord of the Admiralty Winston Churchill, who was committed to meeting Germany’s challenge to Britain’s naval supremacy on the eve of the Great War.

“Mastery itself was the prize of the venture,” he said later of the Royal Fleet’s fuel conversion.

President Woodrow Wilson’s Secretary of the Navy Josephus Daniels and the Assistant Secretary Franklin D. Roosevelt also embraced the promises of greater firepower, efficiency and speed that oil-burning ships offered.

Teapot Dome

In 1911, C.H. Wegemann of the U.S. Geological Survey first described the Teapot Dome structure, southeast of the giant Salt Creek field, 30 miles north of Casper in Natrona County, Wyoming: “No drilling has yet been done in the Teapot Dome, but the structural conditions here are very favorable for the accumulation of oil.”

One hundred years ago, in 1915, Naval Petroleum Reserve 3 was created by the Wilson administration at Teapot Dome. The prospective structure was exclusively set aside for U.S. naval supply in case of emergency.

(The field was named for Teapot Creek, which in turn had been named for Teapot Rock, an iconic landmark cropping out nearby. The “spout” and “handle” have since eroded away.)

Wobbly Warren

Handsome and likeable, Ohio Sen. Warren G. Harding was elected easily as the U.S. president in 1920 after a protracted Republican nomination process that gave us the phrase “smoke-filled rooms.”

Among the wealthy smokers who supported Harding’s candidacy – generously, but not necessarily altruistically – were legendary oilmen Jake Hamon, “the Oil King of Oklahoma,” and Harry Ford Sinclair, who had failed as a pharmacist but launched his fortune by selling timber for derricks in southeast Kansas.

Harding chose a poker and drinking buddy, New Mexico Sen. Albert B. Fall, to be secretary of the Interior.

Fall was said to resemble “the frontiersman, the rough and ready, two-fisted fighter … who looks like an old-time Texas sheriff … a Zane Grey hero,” according to a description in a 1924 issue of The New Republic.

The president promised “normalcy” and made several excellent appointments, but Fall was not among them. He was a successful rancher, miner and lawyer, but one whose enthusiasm for the private exploitation of the nation’s strategic resources led a contemporary to say, “It would have been possible to pick a worse man for secretary of Interior, but not altogether easy.”

Harding was distracted in office by a collection of personal scandals; among them was a mistress with whom he had a daughter, and a former lover blackmailed him during his campaign for the presidency. He was a popular (and deeply mourned) president in his day, but is now a widely discredited chief executive.

Historians generally consider him one of the nation’s worst presidents, though one recent biographer, John Dean (yes, Richard Nixon’s White House counsel) offers a more sympathetic portrait.

Scandal and Aftermath

In 1921, the Navy Department estimated that Teapot, aka NPR-3, contained 30 million barrels of oil reserves. They went on to suggest “under the terms of the oil-land leasing act of Feb. 25, 1920 … the Navy’s interests in these reserves can be considered very well protected.”

The estimate proved to be realistic, but the protection was fleeting.

That same year, Fall wrangled NPR-3 away from the Navy Department, and then leased the field to independent oil titan Harry Sinclair in a secret, non-competitive deal.

A Wyoming operator spotted Sinclair operations on the reserve and informed his senator, who demanded an investigation.

The Wall Street Journal broke a sensational story on the furtive deal and the scandal captured headlines across the country.

“Teapot Dome Lease To Sinclair Threatens Wyoming Oil Scandal,” read a headline in the Denver Post. A picture of Teapot Rock in the New York Times was captioned, “The ‘Teapot’ Which Has Things Boiling in Washington.”

Sinclair later made a payment to the colorful owners of the Post – and their coverage of him and the scandal took a much gentler tone.

Senate hearings followed, however, led by Thomas Walsh of Montana and Robert “Fighting Bob” La Follette of Wisconsin. After the scandal broke, Harding reportedly told an associate “ ... if Albert Fall isn’t an honest man, I’m not fit to be president of the United States.”

Fall resigned in disgrace less than a year later, Walsh became a national icon of probity, and Harding died suddenly of a heart attack a few months later.

Harry Sinclair had made his first big oil strike in 1905 at the fabulous Glenn Pool in Oklahoma, and was said to be the richest man in Kansas by 1907. He organized a subsidiary, Mammoth Oil Co., to acquire and operate Teapot in 1922. Bullnecked and ambitious, by the mid-1920s Sinclair had built Sinclair Consolidated into the largest oil company in the Midwest and the seventh largest in the country.

Investigators determined that Sinclair had given “loans” to Fall of about $400,000 (more than $5 million in today’s dollars). Fall was tried, convicted, fined and imprisoned for felonies (bribery) committed in office – the only cabinet officer ever to suffer such ignominy (so far!). 

His health broken, he served nine months and died penniless in 1944.

Sinclair was acquitted of the bribery, ironically, but jailed for six months for contempt of court (jury tampering) and contempt of Congress. He returned to the helm at Sinclair Oil and prospered for another 30 years.

The leases were invalidated by the Supreme Court in 1927, however, and Teapot Dome was returned to the Navy.

Harding was succeeded by his Vice President Calvin Coolidge, famous for his conclusion, “The business of America is business.”

Taciturn and proper, “Silent Cal” fired or forced the resignation of Harding’s secretary of the Navy, attorney general and others to minimize the stain on his party. The GOP was vilified by the press as the “Grand Oil Party,” but went on to a landslide win in 1924.

(La Follette ran as a Progressive but finished third, carrying only his home state.)

Teapot Dome Production

Sinclair had managed to buy out most of the existing claims at Teapot Dome before he got title to NPR-3 from Fall. However, a title dispute involving the Mutual Oil Co. resulted in the Navy Department sending in the Marines.

One captain and four well-armed Marines (along with a contingent of Interior officials and the press) shut down Mutual’s drilling operation on the Reserve with much fanfare but no bloodshed in August 1922.

Sinclair’s Mammoth Oil Co. drilled 87 wells, 65 of which were producers. One was called the greatest gusher in Wyoming history, blowing in at 28,000 barrels of oil per day.

Mammoth produced about 3.5 million barrels of oil at Teapot from 1922 to 1927 – but from then until the early 1950s there was little activity at Teapot, and even during World War II no more wells were drilled.

During the late 1950s and ’60s Navy contractors drilled about 150 wells inside the reserve, mostly Shannon Sandstone protection wells on the east flank of the field and Second Wall Creek wells adjacent to Salt Creek Field.

In 1977, Teapot Dome was transferred from the Navy to the Department of Energy, which drilled more than 1,100 wells there. Peak production was about 5,000 barrels of oil per day in 1979 and ’80. Ultimately, NPR-3 was the last of the four Naval Petroleum Reserves. Under federal management it produced about 22 million barrels of oil and returned approximately $569 million to the Treasury since 1976.

In 1993, DOE created the Rocky Mountain Oilfield Testing Center (RMOTC) at Teapot, to be used in a public-private-academic partnership for real world testing of new oilfield technologies.

In all, about 1,500 wells have been drilled inside the NPR-3 boundaries.

Teapot Dome Geology

The field is an asymmetrical, Laramide anticline on the southwestern flank of the Powder River Basin.

Teapot includes basement-seated north-south thrust faults that offset Pre-Cambrian to Cretaceous units on its western boundary. There are many deep, complex, east-west faults throughout the field, as indicated by a 2001 3-D seismic survey.

Teapot has about 200 feet of structural closure. Cumulative production is about 29 million barrels of oil and 64 billion cubic feet of gas.

The key producing zones are Cretaceous sandstones and shales.

The Shannon Sandstone is the best pay, consisting of two zones at only 300 to 400 feet deep. It is a tight, compartmentalized reservoir with low pressure and a recovery factor of less than 10 percent.

The Steele and Niobrara shales are the second-best pays and include some of the most prolific wells in the field. These reservoirs are fractured and thick, characterized by high producing rates and rapid depletion.

The Second Wall Creek (or Frontier) Sandstone produces from two structurally distinct pools and consists of shaly offshore bars. One 1923 well flowed 8,000 barrels of oil per day from this zone. The Pennsylvanian Tensleep Formation has made about two million barrels of oil and untold million barrels of hot, fresh water from wells on the field’s crest.

Teapot still produces several hundred BOPD and several thousand BWPD from about 400 wells. There is undeveloped potential for primary and enhanced oil recovery, as well as infill and horizontal drilling targets.

The Next Chapter

The scandal is over but the story continues.

In 2014, the DOE retained Meagher Energy Advisors to solicit offers for Teapot Dome, effective Jan. 30, 2015.

There were multiple bidders, and Stranded Oil Resources (a subsidiary of Alleghany Capital Corp.) purchased the field for $45.2 million via a competitive data room process. 

Transfer of title this year to a new, private operator after 100 years as a Naval Petroleum Reserve represents another exciting chapter in the history of America’s most notorious oil field.

Matt Silverman wishes to thank Meagher Energy Advisors, Gustavson Associates, Stranded Oil Resources, Don Missey and AAPG members David Bickerstaff, Jeff Spencer and Cat Campbell for their help in making this paper possible.