The Texas Wildcatter Who Spent Twenty Years Cracking the Shale Code

The giants of the oil business had geologists with doctorates, seismic crews, computer labs and budgets the size of a small country's defense ministry. They looked at a slab of dense black rock near Fort Worth and delivered a unanimous verdict: it will not pay. Then a man from Galveston, whose company was a rounding error next to theirs, said he would keep drilling anyway. He kept drilling for about twenty years.

Think about that for a second. Most of us will not stay with a diet for twenty weeks. George Mitchell stayed with a rock for two decades, and when the rock finally gave way, it rewrote the energy map of the planet. Nobody in Washington planned it. No czar announced it. A stubborn businessman with his own money on the line did it, and the lesson in that story is the one our friends on the other side of the aisle keep forgetting.

Let me tell you the story, and then let me tell you what it proves.

A Galveston engineer builds a company

George Phydias Mitchell was born in 1919 and died in 2013. He was the son of an immigrant from Greece who arrived in this country with next to nothing, and he grew up on Galveston Island. He studied petroleum engineering at Texas A&M and graduated in 1940. After the war he built a Houston oil and gas company, which grew into Mitchell Energy & Development. He was a wildcatter in the old sense of the word, a man who drills where nobody has yet proved there is anything to find.

He was also a developer. In the 1970s his company began building The Woodlands, a planned community north of Houston, on land that had been pine forest. That tells you something about the man: he did not think small, and he did not mind waiting for a return. In his later years he signed the Giving Pledge, promising to give away most of his fortune, and the foundation that bears his and his wife's name has spent heavily on sustainability and science. You can disagree with some of what that money funded and still admit the point. He made the money first, in the private economy, and he made it by solving a problem others had walked away from.

Why the Barnett would not pay

To see why the majors passed, you need to know what shale is. Oil and gas are formed when organic matter is buried and cooked for millions of years. Shale is the kitchen where that cooking happens. The traditional oil business hunts for the pantry, which is a porous sandstone or limestone where the oil and gas have migrated and collected, and where they flow to a well on their own once you punch a hole into it.

Shale is different. It is fine-grained rock, packed tight, and the gas is still trapped in it. The pores are tiny and poorly connected, so the gas barely moves. Drill a vertical well into the Barnett Shale, the formation under the Fort Worth Basin, and you got a trickle. The rock was more than 300 million years old and had been sitting there with a fortune locked inside, and it declined to hand it over.

Here is the plain logic of the objection from the majors. One: the resource is huge, everyone agrees on that. Two: a resource is worth only what you can produce at a profit. Three: nobody had shown how to produce this at a profit. Therefore: leave it alone and go drill somewhere easier. That is a perfectly rational argument. It was also wrong, and the reason it was wrong is that it assumed the technology of the day was the technology of tomorrow.

The long middle: wells that did not work

Mitchell Energy began drilling in the Barnett in the early 1980s. The honest record of the next fifteen years is a lot of wells that were disappointments and a lot of engineers trying one more variation. There were experiments with fracturing the rock using thick gels. Some wells paid, many did not, and the economics hovered at the edge of viability. Mitchell Energy had gas to supply and a business to run, and every year the question around the boardroom table was whether to keep spending on the Barnett or cut the losses.

This is where a private company run by its founder is different from the quarterly machine. A manager who will be judged on this year's earnings has every reason to stop. A man who runs his own company, and who believes the rock holds the answer, can keep the experiment going. I am not saying every private owner has that patience. Most do not. I am saying the system lets someone have it, and for a long stretch, the system let George Mitchell have it.

Be careful about the details of the money, though. I will not make up numbers about how much he spent, because I do not know them with certainty. What the record shows is a long stretch of experimenting with the thing that mattered most: how to crack the rock and keep it cracked.

Hydraulic fracturing, in plain English

Hydraulic fracturing is not complicated to describe. You pump fluid down a well at very high pressure. The pressure breaks the rock and creates cracks. You pump sand along with the fluid, and the sand wedges into the cracks and props them open after the pressure is released, so the gas can flow through. That is it. A crack, held open by sand.

The technique was not new. The first commercial treatments were done in 1949, which means it is older than color television in most American homes. For decades it was used to coax more out of conventional wells. What Mitchell's people worked out was how to use it on shale.

In 1997 the company tried something different in the Barnett. Instead of thick gel, it pumped a thin fluid, mostly water, with small amounts of sand and additives to reduce friction. Hence the name: slickwater. It was cheaper than gel, and it created a wider network of cracks in the brittle rock. The results were better, and then they were better again. Those who followed the result inside the company began to sense that the code had been cracked.

Add the sideways drill and the company that bought him out

The other half of the puzzle was drilling sideways. A vertical well passes through the shale layer in a few dozen feet of rock. A horizontal well turns at depth and runs through the layer for thousands of feet, and you can fracture it in many stages along its length. Directional and horizontal drilling had been developing for years in other parts of the industry.

In 2002 Devon Energy, an Oklahoma City company, bought Mitchell Energy. Devon had experience with horizontal drilling, and it combined that experience with slickwater fracturing in the Barnett. The combination, more than either piece alone, is what unlocked the shale. The output of the Barnett climbed, and engineers elsewhere took notice.

So give credit where it is due. Mitchell did the long, expensive, uncertain work of making fracturing pay in shale. Devon put it together with horizontal wells at scale. Neither was a government agency. Both were companies risking their own capital.

From Fort Worth to the whole map

Once the technique was proven in the Barnett, it spread the way good ideas spread in a free economy: fast, because everyone could see the profit. Operators carried it to the Bakken in North Dakota and Montana, which turned out to be a major oil play. They carried it to the Eagle Ford in South Texas. They carried it east to the Marcellus in Pennsylvania and West Virginia, one of the great natural gas formations of the world.

The national result was astonishing. Back in the mid-2000s the conventional wisdom was that America was running short of natural gas and would have to import it. The industry built import terminals on the Gulf Coast to receive liquefied natural gas from abroad. A decade later those same terminals were being converted to ship American gas out. The Sabine Pass terminal in Louisiana sent out the first liquefied natural gas cargo from the Lower 48 in February 2016. In December 2015, Congress had lifted the old ban on crude oil exports, a ban that dated to the 1970s energy law that set up the price controls you can read about in Eight Days Into His Term, Reagan Scrapped Oil Price Controls for Good.

Think about how thoroughly the world turned over. The country that had waited in gas lines in the 1970s became a leading exporter of fuel. That did not happen because a federal bureaucrat finally filled out the right form.

The strongest objection: did Washington help?

Here is the best case the other side can make, and I want to state it fairly. The federal government did not sit out this story. The Department of Energy funded research on eastern gas shales beginning in the 1970s, and it supported work on technologies that were later useful. Congress also created a tax credit in 1980 for certain unconventional gas, in the same law that imposed the windfall profit tax, and that credit applied to some Barnett production. So, the argument goes, shale was a public-private partnership and conservatives should stop telling the tale as pure private enterprise.

Some of that is true, and I will not pretend otherwise. The research money and the credit existed. Honest people can argue about how much they mattered, and the specifics deserve careful checking by anyone who wants to cite them.

But look at what the argument does and does not prove. One: public research is not the same as the decision to risk a company's capital on a rock for two decades. Two: a tax credit lowers the price of a risk; it does not choose the risk, drill the well, or accept the dry holes. Three: the majors had access to the same federal research and the same credit, and they walked away. If the credit and the research were enough, they would have been enough for Exxon. They were not. What was different about Mitchell was the willingness to keep going, and that is not something you can appropriate in a federal budget.

The right conclusion is a modest one. Government can nudge. Government cannot supply stubbornness, and it cannot tell you which of ten thousand experiments will work. A system that pays people for being right, and lets them be wrong at their own expense, finds the answer faster than a program that must decide in advance.

The thing that made it possible: who owns the rock

There is one more ingredient, and it is the one that makes the American story different from almost everyone else's. In the United States, a private landowner can own the minerals under the surface. In most of the world, the state owns the subsurface, and the farmer above it gets nothing.

That rule changed the incentives. A Texas ranch owner who signs a lease gets a bonus up front and a royalty on every barrel or cubic foot produced. That means landowners across the Barnett, and later across the Bakken and the Marcellus, had a reason to say yes. It meant operators had thousands of people to negotiate with instead of one ministry. It meant that the wealth of the shale revolution landed in the checking accounts of ordinary families in rural counties, not just in a capital city. If you want to understand how a family should handle that opportunity, Who Owns the Oil Under Your Farm, and Why America Answers Differently walks through leases and royalties line by line.

Property rights are not a footnote in this story. They are the engine. The same logic runs through The Takings Clause in Four Cases Every Landowner Should Know, which covers what the Constitution says when government wants your land. Respect property and people will invest in it. Treat it as a suggestion and they will take their chances somewhere else.

Fair questions about the cost

I would be selling you a bumper sticker if I claimed that shale came without problems. Drilling is heavy industry. It involves trucks, noise, wastewater and, in a few cases, real harm to neighbors when a well is built poorly. The honest conservative position is not that nothing ever goes wrong. It is that these are problems of execution, and that sound rules and prompt enforcement at the state level handle them better than a ban. If you want the myths tested one at a time, read Seven Fracking Horror Stories, Tested Against the Actual Record, which sorts out what is true from what is not.

And do not forget what the cheap gas bought. Natural gas displaced coal in power generation across much of the country. It lowered heating bills. It became the feedstock for a revival in American chemicals and fertilizer. The argument over exactly how much it saved a given family is for another day, but you can trace the dollars yourself with Trace Your Family's Energy Dollar From the Meter and Pump to the Grocery Bill.

What to take from Mitchell's twenty years

First, the next breakthrough will probably look like a bad idea to the experts. The majors were smart, and they were wrong. A policy that assumes the smart people in the room already know the answer will starve the experiment that finds it.

Second, it takes time, and time takes patience, and patience requires someone who owns the result. A government program that must show results by the next budget cycle cannot do what Mitchell did. A private firm with a patient owner can.

Third, protect the rules that let people profit from being right: secure property, a legal system that enforces contracts, and a tax code that does not confiscate the reward. If you are looking for a policy takeaway, it is that simple.

Finally, remember the man. He was a businessman. He did not need a cause, a slogan or a commission to do what he did. He had a hunch, a rock, and a stubborn streak, and the country is richer for it.

The bottom line

• The American shale boom grew out of one company's two-decade effort in the Barnett Shale, and it was driven by private capital and private risk, with Devon adding horizontal drilling after buying Mitchell Energy in 2002.
• Washington did offer some research and a tax credit, but the decision to keep drilling, and the money behind it, were private, and the majors had the same incentives and walked away.
• Private mineral ownership is why landowners shared in the gains. If you own land, find out whether you own the minerals beneath it and read any lease before you sign.
• When you hear that only a federal program can deliver the next energy breakthrough, point to Mitchell and ask who actually picked the winner. Then ask your representatives to protect property rights and keep the barriers to experiment low.