The technological revolution allowing for the cheap extraction of natural gas from shale occurred thanks to more than three decades of government subsidies for research, demonstration, and production, a new Breakthrough Institute investigation finds.
Both directly and indirectly, the government was behind the critical moments and tools in the shale gas revolution –– massive hydraulic fracking (MHF), 3-D mapping, horizontal drilling, and horizontal wells. Here are responses to Breakthrough's critics:
CNN reported that hydraulic fracturing was first used in 1947 and that "the technology has led to a boom in gas exploration in states like Pennsylvania and Ohio, which sit atop extensive shale rock formations." In a recent TED session, T. Boone Pickens related his experience with fracking: "I witnessed my first frack job in 1953. I hear the President say the DOE invented it 30 years ago and I don't know what he's talking about." If fracking has been around since the 1940s, then why did the government invest in it in the 1970s and 1980s?
It's true that hydraulic fracturing was utilized before the federal government began research on shale gas in the 1970s, but for entirely different applications. Fracking was first applied to limestone deposits in 1947. But drilling in limestone is fundamentally different from drilling in shale. Key innovations were needed to effectively and commercially tap shale deposits, including the use of diamond-studded drill bits, microseismic imaging, and horizontal drilling. Until these and other crucial innovations were developed, gas industry experts remember drilling through shale to get to limestone deposits, unable to successfully permeate the porous shale rock.
Domestic natural gas production was declining in the 1970s. The gas industry collaborated with the Federal Power Commission (now the Federal Energy Regulatory Commission) to open the Gas Research Institute to develop new drilling and extraction methods, but more work was needed. The Eastern Gas Shales Project, an initiative of the federal Energy Research and Development Administration, began in 1976. The Project set up dozens of pilot demonstration projects with universities and private gas companies testing drilling and fracturing methods to commercially extract natural gas from shale. Massive hydraulic fracturing (MHF) was developed by the nascent Department of Energy in the late 1970s, a technique that would be improved upon later to spark the modern gas boom.
The combination of high porosity, low permeability, and natural fractures in large shale formations made imaging and drilling extremely difficult. Microseismic imaging, originally developed by Sandia National Laboratory for application in coalbeds, proved absolutely essential for drillers to navigate and site their boreholes. The optimal combination of water, sand, propants and other chemical lubricants took several decades to calibrate, up until 1998 when Nick Steinsberger and other engineers at Mitchell Energy developed a technique called "slickwater fracking." Federal researchers and private industry engineers had been trying for decades to access the hundreds of trillions of cubic feet of natural gas beneath their feet in shale; the fact that it took over 25 years to successfully and economically extract gas out of shale is a testament to the ingenuity and innovation of public and private engineers, and an indication of the difficulty of the projects.
William O'Keefe at FuelFix says it is "unclear" the extent to which government investment "displaced private funding." Was it simply a matter of the government introducing early iterations of shale fracking technology and then private companies perfecting them?
Yes and no. It's true that private gas companies, particularly Mitchell Energy in Texas, performed substantial in-house R&D to successfully drill in shale. But the federal government supported shale innovations well beyond the 1970s. The Section 29 tax credit for unconventional gas incentivized shale gas drilling from 1980 until 2000, right after George Mitchell successfully cracked the Barnett in Texas. The first successful multi-fracture directional drill was completed by a joint DOE-private venture in 1986. The Gas Research Institute, funded partially by a FERC-approved surcharge on gas prices and overseen by federal regulators, subsidized Mitchell Energy's first horizontal well in 1991. George Mitchell himself spent the 1980s lobbying on behalf of federal fossil energy research in an era of low energy prices and suppressed appetite in Congress for R&D.
William Tucker asked at the American Spectator if the shale gas revolution is "a case of victory having a thousand fathers." Michael Giberson wrote that "possibly the whole of the federal government's involvement in the industry...could reasonably be counted as delaying technological advancement when compared against what would have happened under some more rational regime." Who's to say that the private sector wouldn't have developed the tools it needed faster and at lower cost than federal researchers?
Gas industry executives, including former Mitchell Energy Vice President Dan Steward, have lauded the federal government's role in the shale gas revolution as essential. "You cannot diminish DOE's involvement," Steward said in an interview. But even without the testimony of gas industry executives and engineers, it's also difficult to see the path from 1970 to today's shale gas boom without the guiding support of the federal government. Industry officials agree that shale fracking would be impossible without microseismic imaging, a technique developed for entirely different purposes by researchers at Sandia National Laboratories. If the private sector expected to achieve the shale revolution on its own, why did gas companies in the 1970s initiate the Gas Research Institute and submit R&D proposals to FERC for review? Dozens of private gas companies partnered with federal agencies in pilot demonstration projects during the Eastern Gas Shales Project, testing new methods for shale gas extraction. George Mitchell, widely credited with single-handedly sparking the shale boom, lobbied for federal research and development while Congress was attempting to zero out the Department of Energy's fossil energy research budgets. There's every reason to suspect that private industry R&D in the 1980s and 1990s would have been seriously jeopardized without the federal Section 29 tax credit for unconventional gas.
The lesson from the shale gas history is that government investment in innovation can, over time, commercialize and deploy technologies that make yesterday's less-efficient, dirtier, and more expensive technologies obsolete. The successes achieved by federal agencies partnering with private industry to design, demonstrate, and commercialize shale fracking should tell us something about the ongoing federal support for solar, wind, nuclear, and other zero-carbon energy technologies. Just as it did with personal computers, cell phones, jet turbines, and nuclear power, federal investment in innovation can lead the way towards American technological leadership, international economic competitiveness, and a cleaner energy future.