Energy Musings - October 10, 2025
The death of industry icon Oscar Wyatt coincided with articles about developments in the natural gas industry that were reminiscent of the creation of today's domestic petroleum industry.
Oscar Wyatt And The Natural Gas Market
We learned on Thursday morning that Oscar Wyatt, the colorful and controversial oilman, founder of Coastal Corporation, one of the nation’s largest energy companies, and a convicted felon, passed away at the age of 101. Frankly, we were unaware that he was still alive, but we are not surprised. He probably wanted to outlive all his adversaries.
The Wyatt news arrived as we were reading about other developments in the natural gas industry. Two articles posted on LinkedIn outlined these developments. One, by Edmund Knolle, President and Chief Commercial Officer at Gulf Coast Midstream Partners, discussed natural gas sales for behind-the-meter power sales to new data centers. The other addressed the spending plans for new gas pipelines by Doug Sheridan’s CenterPoint Research.
The convergence of these stories took us back to our days as a relatively young energy analyst in Houston, where we were fortunate to interact with many of the oil and gas figures, including Wyatt, who helped shape and dominate the oil and gas business as we know it today. These figures were more than life-like, and they were opinionated, outspoken, and visionary. Over the years, we learned a great deal about the workings of the energy business from our conversations with these leaders.
We enjoyed seeing the photo in the Houston Chronicle’s article about Wyatt, showing him and his fourth wife, Lynn Wyatt (still alive at 90 years old), at a party for the kick-off of the Urban Cowboy movie in Houston held at Gilley’s nightclub in 1980. During that period, the Wyatt River Oaks home was known as the Wyatt Hyatt because it provided rooms for many celebrities, including Elton John, Andy Warhol, Prince Rainier and Princess Grace of Monaco, Liza Minnelli, Johnny Carson, John Travolta, Truman Capote, Mick Jagger, and England’s Princess Margaret, who visited and partied with Houston’s society figures.
The Wyatts kept the Houston gossip columns busy, chronicling the comings and goings of celebrities, as well as the family’s internal battles. Oscar Wyatt was unafraid to speak his mind, regardless of whether his opinions fell outside the mainstream. Several of his friends and business partners were among the most notable and controversial global characters – Saddam Hussein of Iraq and Muammar Gaddafi of Libya. Wyatt did business with Hussein, which ultimately landed him in prison, and he partnered with Gaddafi.
Wyatt was outspoken about Middle East politics. He urged President H.W. Bush and his son, President George W. Bush, not to invade Iraq. However, when Iraq took 21 American oilfield workers hostage, Wyatt flew to Baghdad, negotiated with Saddam for their release, and returned to America as a hero.
Ocsar and Lynn Wyatt celebrate the premiere of Urban Cowboy.
06/05/1980 - Oscar and Lynn Wyatt at Houston movie premiere party for “Urban Cowboy” at Gilley’s club.
Larry Reese/Houston Chronicle staff
Wyatt was born near Beaumont and grew up in Navasota. As a teenager, he learned to fly and performed crop dusting services. He went to Texas A&M, but left in 1942 to become a bomber pilot during the war in the South Pacific. He was wounded twice and decorated. He returned to Texas A&M and received his degree in mechanical engineering. He sold Reed Roller drill bits from the trunk of a car and also worked for Kerr-McGee. He used an $850 loan on his car to found Coastal States Gas Producing Company and purchased gas gathering pipelines.
We dealt with Wyatt in the 1970s and 1980s, as he was building his company, which was renamed Coastal Corporation, into a multifaceted energy player. Wyatt started in natural gas as a gatherer and marketer, expanded into oil refining and marketing (4 refineries and 1,500 branded service stations across 34 states) via an acquisition, oil and gas exploration and production, electric power production, and coal mining. There was little about the global energy business that Wyatt was unfamiliar with or had no experience with.
The current industry developments that stirred our thinking were articles about natural gas-fired power generation behind the meter for the massive data centers being built and energy companies planning to spend $50 billion to build upwards of 8,800 miles of new pipelines across the nation to boost gas supplies for meeting record LNG exports and data center power needs.
Natural gas plants producing power behind the meter are reminiscent of how the Gulf Coast petroleum industry developed in the 1970s. These projects plan to tap local gas supplies, which is similar to what many of the proposed new pipelines will deliver. For readers unfamiliar with this era, a brief history is in order.
Natural gas, once considered a byproduct of crude oil production, was sold at a low price to buyers who gathered, marketed, and shipped it to customers both locally and nationwide. The gas sold for use outside of a state’s borders was regulated by the Federal Power Commission (now the Federal Energy Regulatory Commission) as if it were a utility. That meant applying a cost-of-service pricing structure, in which the price was set to return a predetermined rate of return on the assets employed.
Gas produced and sold by the production departments of pipeline operators was easily regulated. Sales by independent producers were often considered unregulated. However, a 1954 Supreme Court case involving sales by Phillips Petroleum declared that the sales fell under the regulatory oversight of the FPC. Additionally, each sale was considered a separate case. One year, the FPC received over 1,200 cases, yet it was only able to resolve about 240. Each case required the presentation of individual well costs, which often varied widely, making the determination difficult and time-consuming.
Regulated gas prices were tightly controlled and set at a low level. From pennies per thousand cubic feet (mcf), prices rose slowly to $0.25 and ultimately to $0.42/mcf. As the cost of energy grew in the mid-1970s following the Arab Oil Embargo and its fallout, the low FPC-approved price discouraged producers from seeking new gas supplies for interstate sale. The shortage first appeared in 1969 in the Gulf of Mexico. To stimulate exploration, the interstate pipelines offered advance payments for new gas supplies to exploration companies. These payments were made regardless of the explorer’s success, and if he failed to find supplies, the payments did not have to be repaid.
As interstate gas supplies shrank, industrial enterprises that used gas as feedstocks or in their manufacturing process offered explorers higher prices than the FPC-regulated price to fuel them. Gas produced, sold, and used within a state was not regulated because it did not involve interstate commerce. These manufacturers began setting up plants in Texas, Louisiana, and Oklahoma. These plants were willing to pay gas prices that often ranged as high as $5 -$8/mcf, but they were assured of the supply and factored the cost into their products’ selling prices.
In the winters of 1976 and 1977, municipalities and businesses in the Northeast, Midwest, and Southeast frequently experienced shortages of natural gas, prompting them to implement rationing systems. Hospitals and schools were prioritized, while businesses were put at the end of the line. Homeowners were forced to keep their thermostats low, which did lead to people freezing in the dark. Interstate pipeline companies were sued and often sought bankruptcy protection. The nation’s entire natural gas system was in chaos, and Washington stepped in to re-regulate the industry.
The history of this period would require a book, which we don’t have time to write. It is sufficient to say that several attempts at re-regulation were needed before a workable solution was implemented. As often happens, politicians creating regulations attempt to correct past problems, never anticipating the new ones their rules create. It was usually one step forward and two steps back.
What struck us about the articles on the natural gas industry was how similar the search for electric power for new data centers has become to the development of the economies of large natural gas-producing states in the 1970s and 1980s. All of this was sparked by reading about the death of icon Oscar Wyatt and recalling our many conversations about the energy business. To paraphrase what Mark Twain reportedly said, history doesn’t repeat, but it does rhyme.