Dot Earth Blog: The Silent Partner Behind the Shale Energy Boom – Taxpayers

Written By Unknown on Kamis, 01 Agustus 2013 | 15.50

Since 2011, Alex Trembath, a tireless and talented energy analyst at nonprofit The Breakthrough Institute, has been digging into the complicated history of public and private initiatives and investments that unlocked the vast gas and oil resource contained in layers of shale rock.

He charted evidence that investments in basic research, testing and development by the federal government lay behind the private-sector initiatives that have since fundamentally reshaped global forecasts for energy, economies and geopolitics.

After I ran Daniel Yergin's reflection on the pivotal role played in the shale boom by George P. Mitchell, the Texas energy entrepreneur and philanthropist who died last Friday, Trembath and the leaders of Breakthrough, Michael Shellenberger and Ted Nordhaus, sent a reaction focused on the silent partner in this energy revolution — the American taxpayer. Here's their post:

George Mitchell, Champion of Public-Private Innovation

Alex Trembath, Michael Shellenberger and Ted Nordhaus

George Mitchell, celebrated father of the American shale fracking revolution, died last week, leaving behind a strong reputation as innovator-philanthropist and the legacy of cheap and abundant energy in the United States. His vision and persistence are not to be understated.

But some admirers, who paint George Mitchell as a lone innovator experimenting in his backyard, do him a disservice by ignoring the full history of the shale gas revolution. The richer and more complete story reveals that George Mitchell did not act alone, but rather was the beneficiary of decades of U.S. federal investments in fossil energy innovation.

The U.S. federal government spent billions of dollars over three decades to make today's shale gas revolution a reality. Our investigations and interviews at the Breakthrough Institute made this history abundantly clear, and the story has been underscored by independent reports by the American Energy Innovation Council, Resources for the Future, the New York Times, and the Associated Press.

The entire shale fracking endeavor began as a somewhat quixotic, patriotic ambition within fledgling federal energy research programs. Scientists had long understood the geology of shales and knew there was gas to be had. But everyone assumed it was unreachable. There's a reason that the shale gas, tight sands gas, and other natural gas deposits that now make up half of U.S. gas production are still called "unconventional." With domestic gas production on the decline in the 1970s and policymakers eager for alternatives to imported oil, shale gas was one of several such radical resource bases that federal geologists tried to tap.

So much of the innovative work on shale gas was underwritten or led by federal agencies and laboratories, who later proved eager to share their results with George Mitchell in his quest to crack the Barnett shale in Texas. The energy industry, known as markedly less innovative than other sectors like health and IT, lived up to this reputation over the several decades. Fred Julander of the National Petroleum Council remembers "the Department of Energy was there with research funding when no one else was interested."

What were the taxpayer subsidies for the shale gas revolution? They included:

  • The Eastern Gas Shales Project, a series of public-private shale drilling demonstration projects in the early 1970s in response to the energy crisis;
  • Collaboration  with the Gas Research Institute (GRI), an industry research consortia that received partial funding and R&D oversight from the Federal Energy Regulatory Commission;
  • Early shale fracturing and directional drilling technologies developed by the Energy Research and Development Administration (ERDA, later the Department of Energy), the Bureau of Mines, and the Morgantown Energy Research Center (later the National Energy Technology Laboratory);
  • The Section 29 tax credit for unconventional gas production, in effect from 1980-2002;
  • Public subsidization and cost-sharing for demonstration projects, including the first successful multi-fracture horizontal drilling play 1986 and Mitchell Energy's first horizontal well in 1991;
  • Three-dimensional microseismic imaging, a geologic mapping technology developed by Sandia National Laboratories.

Few companies pursued shale plays, often drilling past shale minerals to reach sandstone deposits underneath. Public researchers considered shale gas a moonshot at best. Alex Crawley, one of the leading engineers working on shale gas for the Department of Energy, recalls his efforts derided as "Crawley's folly." Mitchell Energy engineers encountered numerous obstacles to successful shale plays before partnering with federal agencies, which bore some of the costs for novel horizontal drilling techniques and hand-delivered crucial three-dimensional mapping technologies developed at Sandia National Laboratories. Even with this partnership, Mitchell Energy endured years of experimentation and dozens of failed test wells before producing shale gas for a profit.

Where George Mitchell proved invaluable was engaging the work of government researchers and piecing together different federally-developed technologies to develop a commercial product. Mitchell himself spent much of the 1980s lobbying for sustained federal fossil energy research at the Department of Energy, defending "Crawley's folly" in front of a hostile Congress. And according to Dan Steward, former Vice President at Mitchell Energy, the real breakthroughs in shale fracking proved elusive before Mitchell invited in partners from the Department of Energy and the Gas Research Institute. As Steward told us, "By the early 1990s, we had a good position, acceptable but lacking knowledge base, and then Mitchell said 'Okay, I'm open to bringing in DOE and GRI' in 1991."

While Mitchell was himself unique, his story is not. From Thomas Edison to Steve Jobs, the history of technology innovation is littered with visionary entrepreneurs whose individual initiative is celebrated while critical public technology development and commercialization investments are ignored. For every George Mitchell, there are dozens of policymakers and civil servants who — like Alex Crawley, who devoted his career to energy innovation — receive much less fanfare. Disregarding the role of the public sector in the U.S. shale revolution erases Mitchell's crucial strengths as a collaborator, scholar, and champion of public innovation efforts.


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