Given the present interest in oil prices, I thought this might be timely background.
George Bissell was a New Hampshire native who was born in 1821 and graduated from Dartmouth College in 1845. He had helped finance his education by writing for newspapers and, after graduation, he went travelling, first to Richmond VA, where he worked for a paper. He soon left for Cuba and then New Orleans, where he became a stringer for a local paper and was also hired as the Principal of the new city high school. Bissell remained there until 1853, when health problems led him back north.
In 1854, Bissell became a partner with another Yankee in the Wall Street law firm of Eveleth and Bissell, Jonathan G. Eveleth being a Harvard–trained lawyer, recently moved from his native Maine. It would appear that Bissell, having no law training, was the visionary and Eveleth the organizer.
One day in late1853, while visiting a former Professor at Dartmouth, Dixi Crosby, Bissell was shown a bottle of ‘rock oil’ that a nephew of the Professor’s, a Dr. Francis Brewer, had brought to him. Brewer was a Vermonter who had trained as a physician but then moved to Titusville PA, to join his father, who ran a lumber business. Brewer was interested in marketing the oil as an external remedy.
Bissell was fascinated by the contents of bottle and, a few months later, in 1854, sent the Professor’s son to check out the source of this product. Crosby and Brewer traveled down Oil Creek, looking at oil seeps. Brewer later reminisced:
‘[We] stood on the circle of rough logs surrounding [one] spring and saw the oil bubbling up, and spreading its bright and golden colors over the surface; it seemed like a golden vision.’
As a result of the younger Crosby’s investigation, the New York businessmen launched the Pennsylvania Rock Oil Company, based on an agreement by Brewer to lease 100 acres of the property containing the oil seeps. The company proved unable to move forward as fast as expected, as the New York investment market had gone into recession, partly due to a number of stock frauds and financial scandals. Sales of shares at the time were also inhibited by New York laws that made each shareholder personally liable for the total par value of any company in which they held stock.
Bissell and his partner Jonathan G. Eveleth then went to New Haven CT to see if there might be interest from some contacts of theirs, including Benjamin Silliman Jr., Professor of Chemistry at Yale. The New Haven group was interested, but wanted a chemical analysis done of the oil and a committee of investors to go to look at the oil springs before committing funds. Bissell and Eveleth were also attracted by the advantages offered by the differences in Connecticut corporate law from that in New York.
The partners decided to push forward with their plans while waiting for the analytical reports. They secured the oil springs property from Brewer by a sale of shares to him at an inflated price, thus inflating the asset value of their company. At the same time, the marketing aim of the company was shifted from medicine to lubricants, illuminants and other refined products. Gesner’s coal oil refinery had opened in 1854 and the partners were aware of the parallels between the coal oil and petroleum. They were definitely aware of the coal oil refinery that had also opened in 1854 in Breckenridge KY. Further, Samuel Kier, a manufacturer of oil-based medicine remedies, had begun to distill oil from seeps near Pittsburgh and his operation was known to Bissell.
The Pennsylvania Rock Oil Company was reorganized in late 1855, Silliman becoming the nominal President of the Seneca Oil Company, with headquarters in New Haven. Through some maneuvers, including the Connecticut regulation that the majority of directors had to be residents of that State, as well as the need to recapitalize the firm, the minority Connecticut shareholders managed to gain control of the company. Eveleth and Bissell had to be content with a smaller piece of a larger company.
There were more delays. Bissell had contracted with a New York firm to develop the property, but it went out of business during the Panic of 1857. The new oil company President, banker James Townsend, then struck a deal with Edwin Drake, a retired railway conductor that he knew and trusted, to do the development work. In March of 1858, the company was reorganized again as the Seneca Oil Company, with Townsend becoming the majority shareholder. He then sent Edwin Drake off to Titusville. Yankees from New York City had been done out of control of their company by Yankees from Connecticut.
‘Colonel’ Drake moved his family to Titusville, his title having been invented by Townsend as a means of gaining respectability with the locals, and started by digging a well. By August,1858, the diggers hit water at 150 feet and had to stop. Drake announced that he would then begin to bore for oil. More delays attended, as Drake searched for a well-driller who would do the job. Finally, in May,1859, well-driller William, ‘Uncle Billy’, Smith began to bore the well. By early August, they had a derrick set up and began work. On Sunday the 28th of August, with less than 70 feet bored, Uncle Billy went to check on his rig. To his surprise, he saw oil in a pool just below the top of the well. It was no gusher, but oil was soon being pumped out of the ground at a good rate. And the rush was on. As Ida Tarbell noted:
If the uses to which oil might be put and the methods for manufacturing it had not been well understood when the Drake well was struck, there would have been imperious demand as came for the immediate opening of new territory and developing methods of handling it and carrying it on a large scale. But men already knew what the oil was good for…Drake’s well was not the first to tap liquid oil, but it was the well that changed how the world got its lighting thereafter. Many drillers looking for salt beds or brine, especially in Kentucky, had hit oil, but it had been useless to them. A Canadian firm had been exploiting asphalt, bitumen and liquid oil in western Ontario for a couple of years before 1859.