Shale Energy’s Success is a Story of Free Enterprise in Action

Nov 11, 2013

An oil rig outside Watford City, ND. Photographer: Daniel Acker/Bloomberg.

How has shale energy altered the world energy landscape? In its latest World Oil Outlook, OPEC estimates that member countries “could lose almost 8 percent of its oil market share in the next five years as the shale energy boom and other competing sources boost rival supply,” according to a Reuters report.

This shake up has come from a group of plucky American entrepreneurs taking full advantage of the opportunities of American free enterprise. The Atlantic ran an excerpt from The Frackers, Gregory Zuckerman's new book about innovation and risk-taking that has resulted in greater American energy security.

The story begins in the late 1990s, when George Mitchell, the late head of Mitchell Energy, invested in hydraulic fracturing to develop shale rock formations that previous companies had little luck in tapping for natural gas. Besides stubborn determination, his company’s success came about almost by accident:

One day in 1997, while supervising a well in the Barnett [Shale] region, [Nicholas] Steinsberger noticed that the gel and chemicals that were part of their fracking fluid weren’t mixing properly. A contractor was pumping a substance that was more of a liquid than the thicker, Jell-O-like substance normally used to fracture the rock and open its pores so gas could flow.

The well’s results were surprisingly good, though. Steinsberger began to wonder if a watery mix might be able to fracture this tough, compressed rock.

A few weeks later, Steinsberger went to an industry outing at a Texas Rangers baseball game. Over barbecue and beer, he chatted with Mike Mayerhofer, a friend who worked for a rival called Union Pacific Resources. Mayerhofer told Steinsberger that his company was drilling in a different kind of rock using a frack­ing mix composed mainly of water. They had added a small amount of polymers to reduce the water’s surface friction and act as a lubricant so it moved faster.

Steinsberger was intrigued; Meyerhofer’s company wasn’t drilling in shale, which was extra-tough rock. But their concoction reminded Steinsberger of Mitchell’s earlier well that produced some gas relying on that faulty, extra-watery fracking fluid. Steinsberger returned to Mitchell’s headquarters determined to use more water on Mitchell’s shale wells. Because the fluid was mostly water that was slickened with some polymers, Steinsberger and his colleagues named the new method “slick water” fracturing.

A few months later, Steinsberger saw how well this new method was working:

One day in 1998, as Steinsberger examined results from a well called S.H. Griffin No. 3, he was taken aback. After ninety days, the Griffin was churning out natural gas at a remarkable pace. No Barnett well had ever produced even one million cubic feet of gas after ninety days; this one was doing much more.

Steinsberger tried to distract himself with other work, worried the results might tail off. When he checked back after another thirty days, though, the Griffin well was still at it, producing huge amounts of natural gas, like an ever-flowing river.

This is unbelievable, Steinsberger thought.

Finally, the Mitchell team had discovered the right fluid to fracture rock, the secret sauce for drilling in shale. The water-based liquid seemed to go out in every direction in the rock, creating complex mini-networks of cracks, enabling gas to flow to the surface.

“This was the ‘aha moment’ for us, it was our best well ever in the Barnett, and it was a slick-water frack,” Steinsberger says. “And it was my baby!”

Eventually hydraulic fracturing was combined with horizontal drilling and applied to oil production. As a result, we have the oil booms in North Dakota and Texas' Eagle Ford Shale. The shale boom had delivered job and economic growth in and otherwise sluggish economy.

The Washington Examiner’s Michael Barone calls this success story one of “private enterprise in action”:

Government studies provided some early support for fracking, but government energy experts lagged far behind these wildcatters in appreciating the potential for extracting gas and oil from shale.

In his review in The New Republic, Gary Sernovitz, notes that the success of those who brought about the shale energy boom is deeply rooted in America:

Every country has stubborn optimists, gamblers, scientists, and engineers—the essential parts of an oil executive—but few probably have so many of them, or a business culture that sees risk as part of the fun.

As Zuckerman writes in an excerpt quoted by the American Enterprise Institute’s Mark Perry:

For all of the criticism the country has fielded for losing its edge in innovation, surging American energy production is a reminder of the deep pools of ingenuity, risk taking, and entrepreneurship that remain in the country.

We’ll need continued innovation and risk-taking for continued success in developing America’s energy abundance.

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