May 23, 2012
CNN Blows Obama SOTU Shale Gas Fact-Check
"They 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 DOE's involvement." So said Dan Steward, former geologist and Vice President for Texas-based gas company Mitchell Energy, in an interview with the Breakthrough Institute.
In a recent edition of their political fact-checking series, CNN makes glaring historical omissions in their claim that the private sector, not the government, was the leading developer of the technologies that led to the modern shale gas boom.
In a reaction to President Obama's statement in this week's State of the Union address that "it was public research dollars, over the course of 30 years, that helped develop the technologies to extract all this natural gas out of shale rock," CNN reporter Matt Smith claims that the President's analysis was "true, but incomplete." In reality, CNN's fact-check is light on the facts and could use a check of its own.
CNN claims that hydraulic fracturing has been around since initial private application in the 1940s, and therefore government investment was inconsequential to the modern gas boom. This is like saying government investment in jet engines was inconsequential because the Wright Brothers pioneered air travel. CNN gets its facts and its history wrong. Here's what really happened:
- All the component technologies and techniques that made the shale revolution possible - massive hydraulic fracturing (MHF), microseismic imaging, and directional drilling among others - are direct products of federal R&D and demonstration.
- At the request of the gas industry, a diverse set of federal labs and agencies spearheaded R&D and demonstration of early shale extraction technologies, including the Morgantown Energy Research Center, the Energy Research and Development Administration, the Bureau of Mines, the Department of Energy, and the national laboratories.
- The Department of Energy first demonstrated MHF in 1977. Slickwater fracturing, Mitchell Energy's technique for Barnett drilling in the late 1990s, was an incremental improvement on this foundational innovation in hydraulic fracturing.
- In a joint DOE-industry venture, the first successful multi-fracture horizontal well was drilled in 1986. The Gas Research Institute (GRI), which was funded partially by a government-imposed surcharge on retail gas bills, subsidized Mitchell's first horizontal well in 1991.
- Sandia National Labs developed microseismic imaging technology and mapping for use in coalbed methane recovery. Data and techniques developed by Sandia were cited as critical contributions to Mitchell Energy's R&D in the 1990s.
- The federal Section 29 tax credit for unconventional gas resources benefitted the gas industry from 1980-2002.
- Using an innovative technique called slickwater fracturing and capitalizing on federal contributions like MHF, directional drilling, and microseismic imaging, Mitchell Energy engineers drilled the first economical well in the Barnett Shale in 1998. This was the first profitable commercial shale drill in history.
Claims that the government was only marginally involved in shale gas are in direct conflict with history, as a recent Breakthrough Institute investigation makes clear.
CNN dates the modern gas boom all the way back to 1947, when they claim (accurately) that hydraulic fracturing was first applied in limestone gas deposits in Kansas. The CNN fact-checkers proceed to draw a direct line between 1947 and today's gas boom, claiming that "while private industry pioneered the practice, far cheaper sources of oil and gas were readily available at the time." In reality, there is a vast discrepency between fracking limestone and penetrating shale deposits, an elemental obstacle to shale gas development that CNN ignores.
CNN also ignores the pertinent dynamics in the gas industry during the 1970s. Amidst years of falling domestic gas production, leaders in the industry issued direct pleas to the federal government for R&D support for shale gas drilling. At the time, the impermeability of shale made economical extraction of natural gas impossible. Indeed, this would remain the case until 1998, when Texas-based Mitchell Energy completed the first successful drill in the Barnett Shale. But where did Mitchell get its tech and its knowhow?
The answer is federal investment in R&D and demonstration of new technologies and drilling techniques. To be sure, the team at Mitchell demonstrated extremely impressive engineering and persistence, and performed significant in-house R&D. But all the component technologies that make shale gas extraction possible - massive hydraulic fracturing (MHF), microseismic imaging, and directional drilling among them - trace their lineage directly to R&D and pilot demonstration performed by federal labs and agencies during the 1970s and 1980s.
Starting with the Eastern Gas Shales Project in 1976, federal agencies like the Morgantown Energy Research Center (MERC) and the Energy Research and Development Agency (ERDA) spearheaded efforts to design and demonstrate technologies that could effectively and efficiently drill and extract gas from shale deposits. In the late 1970s, the brand new Department of Energy (DOE) was the first to demonstrate MHF at scale, and partnered with the American Public Gas Association to form the Commercialization Plan for Recovery of Natural Gas from Unconventional Sources.
If that partnership doesn't tip off CNN's fact-checkers, nothing will. Industry and government at the time were in full agreement: shale gas was not a commercially viable option for large-scale mining and extraction. During the 1980s, the DOE partnered further with industry to achieve the first multi-fracture air-drilled horizontal well in Wayne County, WV, a critical step on the road to full development of economical shale extraction. Not to mention, from 1980-2002, companies working on shale gas deposits benefitted from the Section 29 tax credit for unconventional gas.
It's clear from the history (and accounts from gas industry executives and historians) that the shale gas boom would not have been possible without early and sustained government investment, and that Mitchell Energy would not have had the requisite technologies to successfully tap the Barnett Shale. But was it simply a case of Mitchell taking government technology and running with it? No, actually, it was more than that. In 1991, the Gas Research Institute (GRI), which was funded via a surcharge on retail gas bills levied by the Federal Energy Regulatory Commission, subsidized Mitchell Energy's first horizontal drill. GRI continued to fund Mitchell Energy throughout the 1990s.
Even with the foundational R&D and technology demonstration completed by the federal government over the 1970s and 1980s, Mitchell Energy needed to spend the majority of the 1990s doing their own in-house R&D to finally achieve an economical horizontal well fracture in the Barnett Shale. The decades of investment by federal agencies and the commitment to its purpose applied at Mitchell Energy are revealing - the modern gas boom is not simply a latent application of a 1940s technology. Instead, it is the result of private sector entrepreneurs and engineers capitalizing on substantial federal government R&D and tech demonstration to achieve a novel and profitable drilling technique.
As former Mitchell Energy Vice President Dan Steward said in an interview with the Breakthrough Institute, "Government has to be looking down the road. We really cannot wait to develop those other energies. Industry doesn't look as far down the road as the government should."
CNN's claims otherwise - that hydraulic fracturing has been around for decades and that any government investment was both marginal and wasteful - are an insult to Mitchell Energy engineers and a poor misreading of the history of innovation. As with microchips, nuclear power, and the Internet, it was initial government investment that gave birth to the shale gas industry. Strategic and sustained government investment has been applied over the centuries in the United States, at every phase of technological innovation from basic and applied research to demonstration to procurement to full commercial deployment. As President Obama reiterated in his speech this week, public investment in technology is a fundamental quality of American ambition and achievement.
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