Breakthrough: The Accidental Discovery That Revolutionized American Energy
One day in 1997, while supervising a well in north Texas, a group of geologists made a small mistake that would help change the future of fracking.
The dramatic changes to the nation’s energy outlook are as surprising as they are clear. Seven years ago, oil production was in steep decline and natural gas nearly as hard to find. Today, the United States produces over 7.7 million barrels of oil a day, up over 50% since 2006 and the most in nearly 25 years. The nation could pump more than eleven million barrels a day by 2020. The U.S. is on track to pass Russia as the world’s largest energy producer and should have enough gas to last generations.
The wildcatters responsible for the transformation are as unexpected as the energy surge they produced. These men, operating on the fringes of the oil industry and often without backgrounds in geology or engineering, met success drilling and hydraulic fracturing extremely dense shale, a process that’s become known as fracking.
George Mitchell is the father of the energy revolution. His impact eventually could approach that of Henry Ford. Mitchell and his team weren’t out to change history, though. They just wanted to keep their company alive.
'Time Was Running Out'
It was early 1997 and Mitchell Energy was sending huge amounts of natural gas each day from its Texas fields to a pipeline serving the city of Chicago. For decades, the arrangement provided the company with steady profits, helping George Mitchell, the son of a poor Greek goatherd, become wealthy.
But Mitchell Energy’s gas reserves were declining, its shares were falling and time was running out for the seventy-eight-year-old executive.
Mitchell’s best bet was to unlock gas from shale, a dense rock deep below Mitchell Energy’s acreage in North Texas. Larger rivals, such as Exxon and Chevron, already had shuttered operations drilling in challenging shale, however, all but giving up on the country.
The United States was running on empty, just like Mitchell Energy. A growing dependence on foreign energy pressured the country into costly foreign entanglements, such as the invasion of Iraq seven years earlier. The U.S. would have to rely on foreign energy, it seemed, as Russia and other nations with vast energy resources assumed greater power.
Mitchell had begun to cede control of his company, handing the job of president to a former Exxon veteran, Bill Steven, who was no fan of shale drilling. Stevens told board members that much of the Barnett Shale field, where the company was focusing, was “moose-pasture land” unfit for exploration. Stevens grew visibly frustrated when George Mitchell discussed plans to expand shale drilling.
One day, Kent Bowker, a newly hired senior geologist working on the Barnett project, walked to a break room in the company’s headquarters to buy a can of Coca-Cola. When he saw Stevens, Bowker got excited and began speaking about their plans to drill in shale.
Stevens stuck his hand in Bowker’s face. “Stop right there,” Stevens said, cutting Bowker off. You better find some other area to spend time on, Stevens told him.
Pressure shifted to a soft-spoken engineer named Nicholas Steinsberger, who looked younger than his thirty-one years. Steinsberger, who ran the fracking effort in the Barnett, worked with his colleagues to blast the Texas rock with different liquids and gels, hoping to create pathways for trapped gas to escape.
Nothing worked, though. Once upbeat and optimistic, Mitchell turned frustrated with his team. After another failed well, he cursed and ranted.
One day in 1997, while supervising a well in the Barnett region, 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.
'It's a Stupid Idea. It's Not Going to Work.'
Most everyone thought Steinsberger was out of his mind. You can’t pour so much water on shale, they told him. Shale has clay in it. It’s almost like hardened mud. Adding more water would create an awful mess.
“It’s a stupid idea,” Steven McKetta, a Mitchell petroleum engineer and the company’s fracking guru. “It’s not going to work.”
Steinsberger and his crew experimented with their new liquid, trying to ignore the critics. Gas production wasn’t anything to get excited about, though. Mitchell Energy had spent $250 million drilling in shale over sixteen long years but had little to show for it.
Some Mitchell executives wanted Steinsberger fired for wasting time and money on his absurd idea. Steinsberger grew dejected, deciding he might have to leave the energy business. Coming home at night, he headed upstairs to his bedroom, avoiding his family. His wife, a part-time nurse caring for their two young children, made plans to move.
Steinsberger sat in his Fort Worth office, anxious and impatient. He watched daily results from three wells in the Barnett—the ones they had fracked with his radical, water-based mixture. The wells had been middling performers but Steinsberger held out hope for some good news.
In late 1997, he noticed something strange—there was little drop-off in the wells’ production. Most of his colleagues dismissed the results and rivals at other companies scoffed.
Steinsberger and his colleagues tweaked their methods, using additional horsepower to pump the liquid, creating more fractures in the rock. Their radical idea was to use smaller amounts of sand than usual to create micro-fractures in the shale. Kent Bowker helped by calculating the true size of the Barnett’s huge gas deposits, a discovery that convinced the company to lease even more land.
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!”
In late 1998, shares of Mitchell Energy fell below ten dollars, down by over half in a year. Steinsberger’s wells were showing progress but the overall company wasn’t seeing a meaningful surge in production. It had piled on so much debt to afford all its spending that lenders wouldn’t offer more. When Stevens and Todd Mitchel, George’s son and a fellow board member, argued that the company needed to rein in spending on the Barnett, few at the company’s board meeting disagreed.
As Mitchell Energy shares fell, George Mitchell and his family came felt strain. They had pledged money to a group of charities, using shares as collateral, while borrowing millions of dollars from banks for additional spending. Now they couldn’t’ make their payments. Mitchell was on the verge of foreclosure from the banks. The Mitchells violated the contractual terms of their agreements with the charities and risked being sued by the charities, a move that would surely draw ugly publicity.
Other troubles emerged. George’s wife Cynthia was diagnosed with Alzheimer’s disease while Mitchell, 79-years-old, was diagnosed with prostate cancer and underwent a brutal regimen of treatment.
In 1999, George Mitchell tried to sell his company but elicited little interest. Soon he was throwing temper tantrums around the office, railing about how companies with no assets were getting all the attention. “But we have the Barnett!” he screamed, before giving up on a sale.
Soon, Mitchell Energy’s gas production began to surge, as Steinsberger’s breakthrough was applied to other shale wells. By 2001, production approached a remarkable 365 million cubic feet a day, up 250%t in two years, one of the quickest and most unlikely discoveries in energy history.
The Perfect Mix
Once again, Mitchell reached out to larger companies to sell his company. Most remained skeptical, figuring that drilling in shale layers was a short-term wonder. But in 2001, Devon Energy, another mid-level energy producer, agreed to pay $3.1 billion for Mitchell’s company. Almost overnight, George Mitchell was worth nearly $2 billion.
Texas’s Barnett region would become the nation’s largest onshore natural gas field, representing about 6% of the nation’s energy supply in 2013. Mitchell, who believed natural gas in shale could quench the nation’s desperate thirst for energy, would inspire a group of wildcatters to drill in shale formations around the country and in nations around the world, producing gushers that would put the U.S. on a path to energy independence.
Those responsible for the most important energy breakthrough in nearly a century didn’t fare nearly as well, however. Steinsberger, who had discovered the perfect mix of liquids to extract gas from shale and later saw his methods aped around the country, received a salary of just over $100,000 the year Mitchell was sold. He never received any bonus for his work.
Kent Bowker made about $120,000 the year Mitchell Energy was sold, his usual salary. A few months after the merger, Bowker was interviewed by a Devon executive charged with helping decide which Mitchell Energy employees would be retained. As they chatted, the Devon executive fell asleep.
Bowker realized he wouldn’t be given a meaningful role in the new company, so he quit.
“It was time to go,” he says.
This post is adapted from Gregory Zuckerman's The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters.