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George Bissell: Oil Industry Patriarch

Jul 16, 2007 | Posted in Essays, People

George Bissel

George Bissel

J. T. Henry in his 1873 volume, The Early and Later History of Petroleum, tells us George Bissell in New York City learned by telegraph of the Drake Well’s success the same day the good news reached nearby Titusville in late August 1859. Four days afterward, George Bissell was standing on the ground of the old Hibbard Farm in Venango County, Pennsylvania where the Drake Well was drilled. Bissell, a Wall Street attorney and investment broker, canceled all business plans in New York and hurried to Pennsylvania to see the development first hand for several compelling reasons. First, the Pennsylvania Rock Oil Co. owned the land the Drake Well was drilled on and had a significant land, or royalty, interest in the well’s production. Bissell and his law partner, Jonathan Eveleth, were the majority stockholders of the Pennsylvania Rock Oil Co. and had legitimate reasons to look after their investment.

REPLACE

Bissell and Eveleth bought the 105 acre Hibbard Farm from the Pittsburgh and Crawford County timber firm, Brewer, Watson & Co., which owned the farm and the extensive timberlands around it. In November of 1854, the parties agreed to transfer the Hibbard Farm to Bissell and Eveleth for a consideration of $5,000, almost $50 an acre. The two New York attorneys paid $500 up front and Brewer, Watson & Co. took their personal notes for the balance. Henry tells us he personally saw those notes among Bissell’s papers in later years and they were noted as paid and canceled. Men from New Haven made the claim Bissell never paid for this land, and, whatever, land in the Pennsylvania wilderness sold for no more than 50¢ an acre, being practically worthless. Bissell was deeply offended by this false claim and took pains to have J. T. Henry address this matter in Henry’s 1873 work. The reader may find it of interest to learn Samuel Kier, the Pittsburgh oil pioneer, actually offered Brewer, Watson & Co. $10,000 for the same land. Kier’s offer was turned down because Brewer, Watson & Co. was intrigued by Bissell’s intention to develop the property as a joint New York stock company where the timber firm could take a position in the new corporation. At the end of December 1854, Bissell and Eveleth incorporated the Pennsylvania Rock Oil Co. in New York and transferred the Hibbard Farm title to the new corporation.

Other, perhaps more personal reasons, compelled Bissell to visit the Drake Well in 1859. The successful commercial development of the oil seeps on the old Hibbard Farm was the fulfillment of a vision Bissell had five years earlier when he was first shown samples of petroleum taken from the site. Bissell stated in an 1866 interview his original concept was to produce the oil and sell it as an illuminant. Some writers have speculated Bissell in New York on Wall Street could have seen an early prospectus circulated by the New York Kerosene Co. where it was proposed to manufacture lamp illuminating oil from distilled coal oil. Several months before closing on the Hibbard property, Bissell commissioned both Luther Atwood of Boston and Benjamin Silliman, Jr. of Yale University in New Haven to do a thorough chemical and economic analysis of the petroleum samples gathered from the Pennsylvania farm. Bissell informed Francis Brewer of his arrangement with Silliman in a letter dated November 6, 1854. Atwood, a well respected coal oil chemist, from the outset was enthusiastic about petroleum’s potential as a lamp oil. Silliman, an investor in a recently organized New Haven manufactured gas company was initially pessimistic about petroleum’s use as an illuminant, but by May 1855 changed his professional opinion and concluded it would make a superior illuminating oil. Silliman’s father had founded Yale’s renowned and prestigious College of Chemistry. The Silliman name meant something nationally and carried great weight among New Haven men who ostensibly had capital to invest. Silliman’s endorsement and study cost Bissell and Eveleth $1,200.

Silliman Report - Rock Oil

Silliman Report - Rock Oil

Silliman’s report proved for Bissell and Eveleth to be both a blessing and a bane. With Silliman’s endorsement, a number of New Haven capitalists expressed an interest in investing in the Pennsylvania Rock Oil Co., but hesitated to do so because the corporate laws of New York were much more onerous than those of Connecticut. Other New Haven men went so far as to condescendingly suggest the Pennsylvania Rock Oil Co. was just a stock fancy being offered by unscrupulous New York flim-flam men, Bissell and Eveleth, to the gullible investors of New Haven. With less than unqualified enthusiasm, some New Haven men said they would invest, but only if Bissell and Eveleth would reorganize the Pennsylvania Rock Oil Co. in Connecticut. Given the difficult economic times in the country and only small interest in the venture, seen as highly speculative, in the tight capital markets of New York City, Bissell and Eveleth agreed and reorganized as a Connecticut corporation on September 18, 1855. The New York men also agreed to some very demanding and unusual bylaws which stated all board meetings would be in New Haven and the majority of the board of, first, three directors and, later, five would always be residents of New Haven. This was how the men of New Haven came to control the Pennsylvania Rock Oil Company.

Under the board leadership of the New Haven men, the enterprise languished. One New Haven director paid for his substantial stock subscription with totally worthless stock in a local New Haven enterprise. Others just didn’t bother to pay at all. The corporation’s treasury remained empty, and the only real money put into the enterprise for several years was the money Bissell and Eveleth paid for the land, the Silliman report and the costs of incorporating. The New Haven-dominated board for over a year refused to authorize the printing of new stock certificates representing the Connecticut incorporation, thus leaving the New York men and the Brewer, Watson & Co. investors in Pennsylvania with no stock certificates to sell or trade. Work on the Hibbard Farm was suspended.

On their own initiative, Bissell and Eveleth in 1856 arranged for a New York City real estate firm with first-hand familiarity and experience in obtaining railroad right of way in Western Pennsylvania to develop the Hibbard Farm by means of a lease. In a document drafted October 1856, the New York City firm, Lyman and Havens, proposed to “bore” for oil on the property and pay a cash royalty to the land interest. After difficult negotiations between Bissell and Eveleth and the New Haven directors, this was agreed to on November 6, 1856. The work could begin the first day of 1857. Lyman and Havens hesitated to proceed because of the general collapse in commodity prices throughout 1857, including the price paid for coal oil, and, also, because of an unsettled land development dispute between Brewer, Wastson & Co. and the New Haven directors.

Petroleum Center

Petroleum Center

Lyman and Havens last best offer to develop the Hibbard Farm under a lease was to pay the Pennsylvania Rock Oil Co., the land interest, a cash royalty of 12¢ a gallon, or $5.04 for a 42 gallon barrel. This was a generous offer. Bissell and Eveleth informed the New Haven directors in a letter dated December 30, 1857 to James Townsend of this last, best offer and they looked forward to having the board approve this change in the lease at the annual meeting in New Haven the following week. It did not turn out that way.
When Bissell and Eveleth arrived in New Haven for the early January 1858 meeting, they learned the lease to develop the Pennsylvania property had been given by the New Haven directors just the week before to Edwin Drake and Edwin Bowditch, both New Haven men. Furthermore, the lease terms were decidedly in favor of those who held the lease, the working interest. Instead of agreeing to a guaranteed cash royalty of $5.04 a barrel, the last revised terms of the lease with Drake and Bowditch obliged them to only set aside at the site one eighth the oil produced. The parties who owned a royalty interest could come and get it, if they cared to, and they would need to provide their own barrels and shipment. Bissell and Eveleth, who still owned more than 50% of the Pennsylvania Rock Oil stock, were outraged.

The real intentions of the New Haven directors began to emerge when they secretively created another New Haven corporation, the Seneca Oil Co., on March 19, 1858. Just eight days later on March 27, 1858, Drake and Bowditch transferred their lease to develop the Hibbard Farm to the New Seneca Oil Co. The incorporators and small group of owners of the Seneca Oil Co. were James Townsend, William Ives, Edwin Drake, J. F. Marchal, Edwin Bowditch, Ashael Pierpont, and Henry Pierpont – all New Haven men. Townsend, Ives, Bowditch and the two Pierponts were also stock holders and officers of the Pennsylvania Rock Oil Co., the same men who originally gave the Hibbard Farm lease to Drake and Bowditch the last week of 1857. At the end of the day on March 27, 1858, the New Haven men, who controlled just 40% of the Pennsylvania Rock Oil stock, owned 100% of the Pennsylvania property’s working interest, amounting to seven-eighths of all oil produced, plus 40% of the one-eighth royalty interest. This left Bissell and Eveleth in New York and the Brewer, Watson & Co. interests in Pennsylvania with just 60% of the one-eighth royalty.

Central House Petroleum Center

Central House Petroleum Center

Clearly the terms of the Lyman and Havens lease, $5.04 cash per barrel, had been far more favorable to Bissell, Eveleth and the Brewer, Watson and Co. interests. When Bissell arrived at the Drake Well site the first week of September 1859, he had a lot on his mind including joining with Brewer, Watson & Co. to sue in court to break the Seneca Oil Co. lease. That didn’t happen. The mere threat of a suit in a public court hearing in New Haven convinced the New Haven men to change the terms of the lease and adopt the more generous ones offered by Lyman and Havens. Fate rendered its own unexpected justice. With other wells coming into production in 1860, the price of a barrel of oil fell from $20 to $10 to less then $5 at the well by the latter part of the year. With the price of crude selling at the well for $5, the Seneca Oil Co. was losing money on every barrel it produced.

Bissell and Eveleth realized the Seneca Oil Co. could not afford to pay the royalty owed them. They offered to waive all claims to their royalty in exchange for the title to the southern half of the Hibbard Farm tract. This was eagerly agreed to by the New Haven men.

While the men from New Haven soon left the Pennsylvania Oil Region, George Bissell left his full time law practice in New York and moved to Franklin, Pennsylvania to devote his attentions to developing his new oil interests. Mr. Bissell’s partner, Jonathan Eveleth was sickly and remained in New York. He passed away in 1862. Bissell lived in Franklin as a legal Pennsylvania resident until 1864. During that time, he and his New York City financial partners invested heavily in purchasing and developing oil farms and property first around Franklin and then all along Oil Creek from the George McClintock Farm at Petroleum Centre to the mouth of Oil Creek at Oil City. He developed these producing and commercial properties as well as railroads with millions of out-of-state investment capital, and these investments paid immense returns. When the oil and bank panics hit the Oil Region in 1866, Bissell opened a bank, George H. Bissell & Co., in Oil City and a branch in Petroleum Centre betting on the viability of the young, struggling oil industry. Bissell’s strong regard among New York money center banks and financial interests was clearly an asset to the early oil region in the Pennsylvania wilderness.

Bissell’s young wife, Ophie, died in 1867. He had already sold the Franklin hotel he lived in and returned to New York to reside there with his two young children. In later years, Mr. Bissell continued his interests in banking and insurance. Bissell died at his New York City home at 16 West Fortieth Street on November 19, 1884.

Among the great oil pioneers of the first decades, Bissell was a giant. The oil men recognized it was Bissell’s early vision, initiative, unwavering commitment, personal sacrifice, proven integrity, and fifteen years of entrepreneurial risk that put the American oil industry on its feet. The oil men and writers of the nineteenth century as one recognized George Bissell as the patriarch of their industry.

Written by Neil McElwee, 2007.

References:

Report On The Rock Oil Or Petroleum from Venango County, Pennsylvania, B. Silliman, Jr., New Haven, 1855

The Early And Later History Of Petroleum, J. T. Henry, Philadelphia, 1873

Petrolia, Andrew Cone and Walter Johns, New York, 1870

Sketches In Crude Oil, John J. McLaurin, Harrisburg, 1898

The American Petroleum Industry, Age of Illumination 1859-1899, Williamson and Daum, Evanston, 1959

Venango County Pennsylvania Deed Book “O”

Venango County Pennsylvania Deed Book “P”

Pennsylvania Petroleum 1750-1872, Paul Giddens, Pennsylvania Historical and Museum Commission, 1947