Empire of Oil

In 1900 using their paper the Regeneracion, the Magón brothers continually fanned the flames of revolution against the regime of then President of Mexico Porfirio Díaz.[1] Like steam from a teapot, growing problems within the Mexican economy under President Díaz rose until the Mexican people no longer accepted the heat. The Los Angeles and other investor classes’ capitalization of Mexican resources resulted in enormous land acquisitions by industries in the United States, such as railroad, timber, mining, livestock, and agriculture.[2] But the industry that proved themselves the most recalcitrant, difficult to manage, and fantastically profitable were the oilmen, particularly one of whom made his seat of power in Los Angeles and tried to extend that power by any means, including armed force, into Mexico. The oilmen refused to pay taxes or bow to the demands of Mexican governments after the Revolution, appealing to the State Department of the United States to represent their interests in the oilfields of Mexico forcefully. This is the story of one oilman, in particular, Edward Doheny, one that became successfully wealthy, donated millions to charity, and attempted to use the United States armed forces against Mexico through naked imperialism designed to enforce a rigid code with white elites on top and Mexican peons laboring at the bottom.

In a quest to modernize Mexico, Díaz enticed American investors through large land grants, tax breaks, and further government concessions. The Land Law of May 12th, 1890, allowed the government to expropriate lands for development.[3] The Mineral Law of 1892 permitted landowners to explore their property for oil and minerals regardless of the location.[4] In 1881 crude oil faced no taxes, expanding to all petroleum products in 1887.[5] In 1894 the Property Denunciation Law allowed the government to revoke private property titles and sell them to corporations if the property was abandoned.[6] This latest law proved highly dubious as it gave the corporations the right to determine if a property was abandoned, allowing them to intimidate families off their land before saying the owners abandoned the property.[7]

Edward Doheny was a mining surveyor, but instead of silver and gold, Doheny looked for oil. Born in Wisconsin in 1872 to a large Irish Catholic family, Doheny moved to Los Angeles after several failed mining ventures.[8] In 1887 Doheny made use of the Land Act of 1883, buying properties in the states of Tamaulipas, Nuevo Leon, and San Luis Potosi.[9] In 1900 Doheny and Charles Canfield formed the Mexican Petroleum Company (MPC) with a long list of other Los Angeles investors.[10] In 1901 at El Bano, west of Tampico, Doheny made his first significant oil discovery, causing him to invest heavily into the industry, forming the Huasteca Petroleum Company; by 1902, Doheny owned 448,295 acres in Mexico.[11] After his first decade, Doheny produced 85 percent of the oil extracted from Mexico, becoming the largest independent oil producer in the world.[12]

But even though the oilman invested heavily into the Huasteca region, most of the profits from the oil went to Doheny and very little to the Mexican people or government.[13] Doheny held notions of labor and uplift that translated into terrible working conditions, prompting one Mexican historian to dub him “Doheny el Cruel.”[14] Historian Jessica Kim stated, “His job, as he saw it, was to make a fortune while simultaneously “uplifting” the nonwhite workers he employed in Mexico.”[15] Doheny used labor practices designed to enforce a racial hierarchy with white bosses and skilled labor housed comfortably and with several amenities such as radios and telephones.[16] Historian Myrna Santiago argued white MPC bosses “never let Mexicans forget that they were only fit for ‘low-grade labor,’ for work ‘not fit for a white man’.”[17] The company built its towns around significant sites for their employees but strictly monitored all aspects of their lives; used jails or physical violence to keep the “peace,” and the Mexican workers repeatedly struck in protest.[18]

When the tides of revolution finally broke the levees in 1910, the revolutionaries targeted the large landowners as one of the causes of their woes and targeted them for their vengeance.[19] While other companies suffered, the MPC continued to drill and pump for oil; according to one historian, oil was the only industry that continued its rise in power and profits from the 1910s to the 1920s.[20] Francisco Madero, the next president after Díaz, knew he needed the American and British investors to continue the country’s economy but that their institutions needed to accept regulation and pay taxes, in addition to considering expropriation of investors’ lands.[21] Doheny did not support Madero but did write to the State Department, advising them not to interfere for siding with the wrong faction could risk the investments into Mexico’s oilfields.[22]

Mexican leaders started to try and reign in the oilmen. On June 3rd, 1912, Madero levied a stamp tax on oil, at 20 centavos per ton of exported oil and 5% tax value on the property, which Doheny and 19 other oilmen refused to pay.[23] Venustiano Carranza, who ousted Madero in 1914, ordered the oilmen to stop production while their land leases and government concessions went through examination boards, and government survey teams surveyed the properties, prompting the oilmen to petition the State Department for assistance to no avail.[24] Yet what terrified the Los Angeles oilmen was the rewriting of the Mexican constitution to include article 27, adopted on May 1, 1917, which empowered “the federal government to exercise its power of eminent domain and claim any property needed for the public benefit of the state.”[25]

Edward Doheny was not about to let his views undergo a challenge to his authority by people he considered inferior. Doheny and other investors formed the National Association for the Protection of American Rights in Mexico (NAPARM) to create a media network devoted to influencing public opinion and a lobbying campaign to get the federal government to intervene on their behalf.[26] With Doheny’s and NAPARM’s support, senator Albert Fall organized a subcommittee for hearing testimony from American business owners; concluding in his report armed intervention was necessary for Mexico to ensure American business interests.[27] The recommendation for armed force was exactly what Doheny and his associates hoped for, armed forces invading Mexico in naked imperialism designed to promote racially based hierarchical standards among the oilmen and other wealthy elites with holdings in Mexico.

Despite NAPARM’s frequent forays to Washington, D.C., trying to influence foreign policy, the stark reality they refused to face was that they had no real control over the State Department, that it, in turn, controlled the oilmen by forcing them to make their own way with the Mexican government.[28] Even though the oilmen’s fortunes continued would continue to grow, and the State Department would acquire them some concessions to maintaining American property in Mexico by not recognizing the presidency of Álvaro Obregón, but that was more due to concessions made by Mexico instead of the direct business pressures from the United States.[29] Doheny attempted to influence the Mexican Revolution with an armed force to promote his imperial ideology but was, in turn, influenced by the State Department into accepting the concessions granted but still having to pay taxes, and he sold his Mexican holdings in 1928.[30]