How the Osage Tribe became rich before the Reign of Terror

But wealth, however fleeting, is what the People of the Middle Waters found, first in the tall grass growing on the rocky hills of present Osage County, and then from the oil and natural gas below the surface.

The rapid rise of petroleum-fueled industrialization in the early 20th century, the quantity and quality of oil in the Osage fields, and the singular method by which the Osage people retained their mineral rights created an astonishing bounty. From 1901 to 1950, the tribe received nearly $300 million — worth about $4 billion today — with two-thirds of that paid from 1919 to 1928.

And all of it concentrated in the hands of a few thousand people.

In 1906, when the Osages agreed to accept allotment of their reservation to facilitate formation of the state of Oklahoma, one of their conditions was that the mineral estate continue to be held collectively by the tribe, with the proceeds to go into trust.

The Osages were in a better bargaining position than most tribes because they owned their reservation in fee simple, meaning complete ownership allowed under law, instead of by treaty. Their leaders negotiated this arrangement after witnessing allotment’s disastrous effects on other Indians. In a large majority of cases, allotments — and the accompanying mineral rights — had quickly passed from allottees, leaving them destitute.

The Osages also insisted their entire reservation be allotted, leaving no surplus for non-Osage settlement.

A roll of 2,229 names was drawn up and approved. Each enrollee received three parcels of land as allotments, and one share, or headright, of the the mineral trust.

Headright owners received quarterly payments from the trust.

At the time, the amounts involved were rather modest — probably about $100 a year, based on the total payout to the tribe. Within a short time, however, headright value increased manyfold.

The Osages had already been through one boom of sorts before the oil began flowing in the early 1900s. Texas cattlemen had paid well to graze their herds on the Osage prairie before driving them across the line to southern Kansas railheads, and ranching had caught on with the Osages themselves.

That boom was nothing like the one that followed it, however.

Oil seeps had been detected in and around the Osage country for decades, but commercial development began in 1896, when Rhode Island bankers Henry and Edwin Foster secured a 10-year lease on the entire reservation. The Fosters then subleased to other investors and in 1901 combined their holdings into the Indian Territory Illuminating Oil Co., which in 1912 became Cities Service, or CITGO.

The first successful well in the Osage country was completed in October 1897 on Butler Creek, two miles west of Bartlesville, six months after and not far from the Nellie Johnstone No. 1, the first commercial well in what is now Oklahoma.

In 1903, Congress approved pipeline construction in Indian Territory. This greatly facilitated transportation of crude and refined products. By 1905, when the Foster lease was renewed in a modified form, more than 300 wells were producing in the Osage. Frank Phillips, founder of Phillips Petroleum, completed his first successful well — just outside the Osage Reservation at Dewey — and 12-year-old J. Paul Getty was on his way to his first million as an investor in his father’s lease southwest of Bartlesville.

With the lapse of the second Foster lease in 1916, Osage oil and gas leases began to be sold individually, first by sealed bid and then at live auction, often under the famous Million Dollar Elm in Pawhuska.

This proved very profitable for the Osages. Bonus payments went from virtually nothing in 1915 to $15.3 million eight years later. Total oil and gas revenue rose from $561,810 to $30.5 million.

While the headright system did protect the tribe’s mineral estate to a large extent, it did have some quirks.

Early on, courts ruled that individual headrights were covered by state inheritance and probate laws. Within a very short time, some people held multiple headrights and others held fractional ones.

This set up the scenario portrayed in the upcoming movie based on the best-selling book “Killers of the Flower Moon,” by which multiple headrights could be directed toward one person. In “Killers of the Flower Moon,” that one person is ultimately Mollie Burkhart, but hers was far from an isolated case.

Mary Elkins, a fullblood Osage who held between 7 and 8½ headrights, was essentially kidnapped by a local thug named Wilbur Corbet. Under the influence of alcohol and drugs, Elkins married Corbet and was then kept locked in a Colorado Springs apartment until her guardian could find and extricate her from the situation. Several people were said to be involved in the scheme but no one was ever charged or, except for Corbet, exposed.

Congress barred the inheritance of headright interests by non-Osages in 1978. That same year Congress also extended the mineral estate in perpetuity. Previously, the estate had to be renewed periodically by Congress.

Today, Osages control about 75% of their original mineral rights, compared to about 10% of their original land allotments, officials say. The tribe would like to reacquire the roughly 560 headrights that have left the tribe through inheritance, gift or sale, but there is no legal means of doing so.

Today, the oil and gas production in Osage County is limited mostly to marginally producing stripper wells. Because the mineral rights are owned by an Indian tribe, oil and gas activity in the county is regulated by the federal government instead of the Oklahoma Corporation Commission, which oversees the rest of the state.

Minerals Council Chairman Everett Waller says the stricter federal regulations makes new production in the Osage too expensive.

“I’m non-competitive,” he said.

Tribal officials say about 5,000 Osages, or only about 20% of tribal members, have headright interests. Understandably, that is a point of some contention within the nation, even if a headright is considerably less valuable than during the time the movie depicts.

According to the Osage Nation website, September quarterly payments for each full headright were $4,655 — a fraction of their value on the night in 1923 when a nitroglycerin explosion ripping through a house in Fairfax brought to national attention to the Osage Reign of Terror.

Coming Wednesday: Although many Osages had multiple friends and relatives killed in the early 20th century over oil revenue, one survivor in particular has drawn additional attention due to “Killers of the Flower Moon.”