The Feds and Fracking: A Chicken or Egg Question

Federal officials like to remind the public that the invention of hydraulic fracturing owes a great debt to government funding and support. Houston oilman George P. Mitchell would have disagreed.
Tue October 29, 2013 11:15 am
George Mitchell, often considered the father of shale gas industry, benefitted from federal tax credits for unconventional drilling, but he shouldered the risk.
AP Photo | DONNA MCWILLIAM

With his own “green jobs” initiative falling short and unemployment remaining stubbornly high, perhaps it wasn’t surprising that President Barack Obama touted the benefits of cheap natural gas in his 2012 State of the Union speech. He predicted that the boom unleashed by hydraulic fracturing would add 600,000 jobs by 2020, then added this aside: “by the way, it was public research dollars, over the course of thirty years, that helped develop the technologies to extract all this natural gas out of shale rock, reminding us that government support is critical in helping businesses get new energy ideas off the ground.”

Listening to the speech from his home in The Woodlands, Dan Steward bristled. Recounting the story more than a year later, it’s still a sore subject for the former Mitchell Energy vice president who oversaw much of the company’s pioneering effort to develop fracking. In 2011, Steward granted an interview to the Breakthrough Institute, an environmental think tank. The post that grew from his comments declared that “Mitchell Energy's first horizontal well was subsidized by the federal government.”

That was the conclusion of the writer, but the post went on to quote Steward as saying the Department of Energy "did a hell of a lot of work, and I can't give them enough credit for that. DOE started it, and other people took the ball and ran with it. You cannot diminish the DOE's involvement."

Steward doesn’t deny the comments, but they took on a life of their own, getting repeated on other blogs. Given the timing, Steward believes Obama’s speech writers picked up on them, although a DOE report from 2007 also credited the government’s funding of research that led to drilling innovations. The attention from Steward’s comments, though, highlighted the government’s role in developing hydraulic fracturing and provided a boost to renewable energy proponents who favor continued government subsidies for their own innovative research projects. At the same time, they seemed to strike a blow for fossil fuel supporters who claim the government should allow the free market to direct energy development rather than “picking winners.”

In all the hoopla, Steward’s point has gotten lost. He is quick to acknowledge that fracking's success came through the hard work of people at Mitchell Energy, building on the advances of others. Fracking technology has existed for more than a century, and the first commercial fracking job was done in 1947. His comment that “the DOE started it” refers to the Eastern Gas Shales Project, a research effort in the Appalachia Basin from 1979 that proved shale rock was rich in natural gas. The DOE-supported project tested the use of nitrogen foam to fracture shale formations, and its analysis led to a deeper understanding of natural shale fractures.

George Mitchell’s team studied those results while developing the Barnett Shale near Fort Worth, the first modern fracking play. The company relied on research from the Sandia National Laboratory to use micro-seismic technology to map the shale fractures in wells, and Mitchell also benefitted from federal tax credits for unconventional drilling, which helped underwrite the cost of developing hydraulic fracturing.

Steward doesn’t deny any of these contributions, and in fact, he was trying to acknowledge them in his interview with the Breakthrough Institute. In hearing the president’s speech, though, he was annoyed that Obama seemed to give the government most of the credit, without mentioning Mitchell. It was, after all, Mitchell’s perseverance and funding that unleashed a new era of American energy and created the jobs Obama touted. 

Yet in the past few years, the government’s share of the credit has been amplified, Steward contends. Just weeks after Mitchell’s death in July, Jim Marston of the Environmental Defense Fund, wrote an op-ed in the Houston Chronicle declaring that while Mitchell changed the world, “he didn’t change it alone.” The feds helped.

Steward believes the government has an important role to play in developing new energy technology, and he believes that applies to renewables just as it once did to fracking. But he also wants to maintain a sense of perspective. Yes, the government encouraged Mitchell’s efforts, but it was Mitchell who invested the capital, shouldered most of the risk, and stuck with the effort for almost two decades when many in the industry though he was wasting time and money. 

“George probably could have done it without the government,” Steward said. “The government would not have done it without George.” 

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