March 02, 2012
Interview with William Burnett, Formerly of the Gas Research Institute
The Gas Research Institute's Evolving Role in Shale Gas
Continuing Breakthrough Institute’s series of in-depth interviews with pioneers of the shale revolution, Senior Energy Analyst Alex Trembath talked with William Burnett. William worked in energy R&D for the US Energy Research and Development Administration, the Department of Energy, and Gas Research Institute (GRI). He retired from GRI as Executive VP, where he was responsible for R&D planning and management in natural gas supply, transportation, distribution, and utilization.
How did your career in energy start?
I went to the University of Maryland and graduated in physics. Then I went to work in 1966 for the Navy Department at a facility outside Washington, DC. We worked on rocket and gun ballistics and other sorts of things going on during Vietnam. I worked there for almost 10 years. Energy was the next big thing. In the late 1970s I went to work for the Energy Research and Development Administration (ERDA) and participated in the formation of the Department of Energy (DOE) as a member of one of the transition committees. At ERDA I worked for the system administrator for conservation. I also worked for the director of the power system divisions. I worked part of the time as a program manager for fuel cells. We had great expectations for fuel cells.
What was the focus of your work at the Department of Energy?
At DOE I worked in the energy conversion area. We were working on everything from fuel cells to magneto hydro dynamics, coal gasification, gas turbines, and all kinds of energy conversion devices — it all got merged together. During that time my career transitioned from highly technical to planning and analysis. We had a lot of pressure on us to develop a project ranking system. We worked on that at the DOE to prioritize projects. We got a little frustrated by that because Congress will do what Congress will do.
How did you end up at the Gas Research Institute?
I knew about the Electric Power Research Institute (EPRI), so when they were forming Gas Research Institute (GRI) I met those folks and two years later in 1978. GRI started in 1976 but didn’t get approval for the funding until '78 and then they started hiring.
GRI was taking over two programs — coal gasification and utilities operations program. They worked on metering and piping and gas distribution. They had a little bit of research in end-use or utilization, mostly appliance-related.
Why and how was GRI formed?
The whole idea behind GRI was that we ought to be doing what EPRI is doing. In that time frame there was a general belief that we were running out of natural gas and we were going to electrify the country with coal and nuclear. The gas industry formed the GRI and came up with a funding mechanism, which was to have the interstate pipeline companies collect a surcharge, which is the majority of the gas in the United States. FERC set up regulations that allowed GRI to come into existence. We would provide a five-year plan that FERC would make sure benefited gas ratepayers. All the state regulators got involved and became intervenors. We filed a five-year plan every year. FERC required a benefit-cost analysis when they gave the first approval to this funding mechanism. That was one of the reasons I was hired by GRI — I was ready to leave DOE.
What was your role at GRI?
That’s what I did most of the time I was there: cost-benefit analysis for research projects. I got more responsibilities as it went along.
Our president Henry Linden called himself a contrarian — if everybody thought there was no natural gas, he thought there was; if everybody thought coal gasification was the next big thing, he thought differently. Coal gasification set a “price" for unconventional natural gas. That’s when unconventional gas first started being considered, certainly at DOE. They put in place some contracts — all of these resource studies were jointly done with GRI and DOE. We funded a bunch of initial studies to see what the potential was.
I would say, politically, unconventionals was going up against where the money was — the money was in coal gasification and electricity. There were a bunch of believers. There was an organization out of the Colorado School of Mines, the Potential Gas Agency, which formed the Potential Gas Committee, a group of geologists and geophysicists who got together and estimated what the natural gas resource base was. This goes all the way back into the 1960s. We worked closely with them. Those were the early studies that changed things.
We spent a lot of time defending ourselves. We ended up with $250 million, which was a lot for the gas industry. We had a lot of requirements that projects have co-funding from companies like Mitchell Energy and DOE. The PGC started getting way more optimistic about the resource base. Our collection of unconventional included coal seams, tight sands which covers an enormous range, and shales.
How did GRI’s work into unconventionals and shale gas evolve?
Natural gas was a stepchild of oil. It wasn’t until the ‘60s and ‘70s that people started looking for gas on its own. It fell into a category that people started calling conventional natural gas.
Coal seams were a low-hanging fruit of unconventional because it made unminable coal mines minable. Tight sands were a whole different game. They could estimate the resource base. They also knew there were shales in a lot of places. Our funding priorities were mixed between coal seams and tight sands. Our work in shales was the lowest funded of the unconventionals because we thought it was gonna be a lot harder to break those shales apart than sands, which is a good element for natural gas storage.
Hydraulic fracturing and directional drilling became the technologies that everyone was talking about at GRI and became slowly but surely more effective. We found that they were going to be more cost-effective — all the economic studies we did — less costly and less use of land space than coal gasification. It would have been politically impossible to stop working on coal gasification.
Conservation was the highest priority in end-use, so we had to keep the appliances competitive with electric. We wanted to make end-uses more efficient so people would use gas instead of electricity. We also worked on new processes for using natural gas, including natural gas vehicles.
What was the relationship between industry and the government?
We had a lot of advisory committees as had EPRI over its history. You have to have the support of the industry. The industry drove the split of the budget.
Requirement for co-funding came from FERC. There was a fundamental skepticism among the regulators and not among the commissioners, who really bought into economic analysis. We had a lot of support. The general skepticism was, “Do these people know what’s best to do? Industry should know what’s best to do, therefore if they can’t attract industry funding to a project then it might not be a good project."
Our own feeling was that industry doesn’t always create the innovations. A lot of this stuff comes from basic research, universities. When we needed to have co-funding from industry, commercialization was always a big deal: How do you get something commercialized that government or nonprofit R&D org has funded? You get industry involved and get them to budget for it.
When it comes to EPRI and GRI, these are regulated industries. It’s not that they don’t have any incentives for developing and deploying new technologies, but they don’t have anywhere near the economic incentives.
Was industry supportive?
One of the strongest intervenors we called The Industrials: America Iron & Steel Institute, Processed Gas Consumers. These companies were paying and not feeling like they were gonna get their money’s worth out of it. We had to constantly convince the regulators that we were right and they were wrong.
Industry became even more interested in the program when they became part of the process that would end GRI. They started deregulating aspects of the pipelines and made the pipelines companies common carriers instead of owners of the gas. This suddenly made the producers realize that they were paying some of this. Producers realized that if carriers couldn’t carry the price of the end-user, then the price came out of the producers’ project. At some point we added producers to the Board of Directors, which had previously just been downstream gas operators. George Mitchell was on our Board for probably at least six or eight years in the late ‘80s and ‘90s. We had members of all the major gas producers –– Marathon, Amaco, Shell –– which was a good thing because they gave us access to co-funding.
We started much lower than $250 million, but it grew fairly quickly. It stayed in the $200-million range through the mid-to-late ‘80s. We really weren’t growing because of the pressure on the funding. Starting in the mid-90s, funding started to decline. We tried to fill the gap with co-funding but it wasn’t so successful. In the early 1990s the first pipeline quit; we got them to change their minds but it was the beginning of a tough time where they started cutting back. By then it was only about a penny and a half per million cubic feet, but it was enough to make a big issue out of it. EPRI thought we had the greatest funding mechanism, whereas EPRI had to convince every utility in the country to pay. But their method ended up working. The Gas Technology Institute, which proceeded the GRI, started using EPRI’s method. Gas distribution companies didn’t want to fund anywhere near the range of operations that GRI was working on. EPRI was jealous that GRI could appeal directly to FERC which would require surcharge on all gas distribution companies, but deregulation changed the dynamics.
What was activity in unconventional gas in the 1990s?
By the 1990s, gas producers were definitely into the tight sands –– the Texas sands –– and very active in coal seams in Wyoming.
The eastern shales, which had a lot of strong proponents in the gas industry, were the hardest to crack. It’s very exciting to see all the activity there today.
I know we funded quite a bit of work with Mitchell Energy. They were very interested. It was an innovative company and George Mitchell was an innovator. He wanted to have his people involved in any of these areas that he thought made sense for his company. Certainly production from unconventional resources was high on his list. We were involved with him probably in the early 1980s. He was on our board and was a vocal supporter of GRI and DOE.
The split between majors and independents was an ongoing discussion. The majors thought they had all the technology they needed; they spent it on the easiest targets to get to. The independents became supporters; I would say we catered to them. In the long run, by the early ‘90s, we directly paid the Texas Independent Oil and Gas Association, Rocky Mountain, and Oklahoma, to hire a technology transfer agent so they could work with new information and new technology. We did this principally because those companies are small. Most of the majors were fighting us, but many of the independents would come in our support — both in implementing technologies and in vocal support for GRI. Small independents really did rely on these regional associations.
We were also involved in working on microseismic, but I don’t recall the level of involvement. We were a small player in that area. We worked with Sandia, the Morgantown Energy Research Center, and a lot of the DOE facilities. We also had a basic research program that got involved in unconventionals.
Read other interviews with shale pioneeers: