Katalla was on Controller Bay and accessible by water if the weather was right. This was rough country, but planned railroad service from Alaska’s prolific interior copper mines promised new opportunities.
As the Alaska Pacific Railway and Terminal Company started building its line, Katalla promoted the venture by declaring, “Katalla, Where the Rails Meet the Sails!” Drilling on the original patent continued and a number of successful wells continued to produce “Pennsylvania quality” crude oil.
And yet before the year ended, Katalla residents would be reduced to subsisting on salt pork and porcupine after storms cut off supplies from the outside. “Ship After Ship Undertakes to Land Relief but in Vain – Six Weeks of the Roughest of Weather,” reported the The Marshfield, Oregon, newspaper.
Violent storms in late 1907 isolated Katalla and destroyed the breakwater along with an 1,800-foot dock under construction by the Copper River and Northwestern Railroad. The village of Cordova about 50 rugged miles west of Katalla was was chosen to be the new terminus and thereby the Katalla oilfield’s nearest railhead.
Katalla was further isolated when the Army’s Washington to Alaska Military Cable and Telegraph System also changed its destination to Cordova. Without a railroad or telegraph, Katalla’s population dropped from a peak of 5,000 residents to 770 residents. Then prospects for Alaska’s first oil boom town got even worse.
Concerned that over development of oil supplies on federal lands would diminish the United States’ petroleum reserves, President William Howard Taft intervened. On November 2, 1910, he issued an executive order preventing further exploration and drilling in the Alaska Territory. Only Katalla’s privately owned 826-acre patent remained open amidst all of Alaska’s vast petroleum potential of almost 425 million acres.
Despite this setback, the Alaska Oil & Refining Company rebounded by building Alaska’s first refinery.