US War Balloon Corps

Civil War Ballons - Click to enlarge
Civil War balloon sketches, launch from a coal barge.
Civil War Ballons - Click to enlarge
Civil War balloon launch, inflating the Intrepid at the Battle of the Oaks in 1862.

Balloons were used for surveillance and reconnaissance during the Civil War for both sides, the Union side invested heavily in their development. The ability to locate troops and assess their numbers quickly became a very important capability, but it is not known if a photograph from a balloon was ever taken because to date no vertical or oblique aerial photography captured by balloons from the Civil War period have been found.

The initiative for creating the US Army Balloon Corps, under the Bureau of Topographical Engineers, came from one Thaddeus Lowe who championed their development in 1861 to President Lincoln who committed to the project because he recognized the strategic advantage they gave his armies.

In 1863 the Balloon Corps was disbanded. This was due in part to the fact that they drew attention and provided convenient targets, and also those involved, including Lowe, were not exactly honest cooperative gentlemen. Also a factor in discontinuing this endeavor was that to counter the balloon advantage the Confederate side started using deception techniques that caused severe miscalculations on the part of those who had come to rely on balloon observations for planning strategic movements. This technique of reconnaissance deception would continue in all the wars since that relied on aerial surveillance.

More Info
http://www.unknowncivilwar.com/article1004.htm
http://www.centennialofflight.gov/essay/Lighter_than_air/Civil_War_balloons/LTA5.htm