George Mitchell: How One Desperate Man Revolutionized American Energy

And we continue with our American Stories and with our own Alex Cortez, bringing us the story of someone who should be known as an American legend, but isn’t. Not yet, anyway. Take it away, Alex. Imagined in the mind of one American sprang The Woodlands, the Houston-area planned community where the woods are kept intact as much as humanly possible, and where one hundred and thirteen thousand humans live in commune with these woods. This same American has impacted all three hundred and thirty-one million of us. His Mitchell Energy pioneered the so-called shale revolution that’s lowered all of our energy costs, carbon emissions, and made the country energy independent. Both legacies coming out of the very same passion you might not expect: sustainability. He was one of the most impactful individuals of the modern era, and yet you probably haven’t heard his name: George Mitchell. Here’s one of his key executives, Dan Stewart. Most people when they think about sustainability, they think about food and water, atmospheric air conditions. George was thinking about, ‘Look, if I don’t have energy, I can have all the food and water in the world. If I can’t get it from point A to point B, all the people point B are going to starve to death.’ He understood that like no other person did. George recognized that gas was going to be a fuel of the future. For instance, we can create all electricity we need with gas to run electric vehicles, and the amount of carbon put out by gas is relatively insignificant compared to oil or coal, and it was much easier to move. You could move it by pipelines. So he had this vision of gas being a primary source for our country above oil. I mean, if you go back and you look at Metro Energy, we were primarily a gas company. In fact, one time I went to the president and I told him that we wanted to look for oil in this one area. And he said, ‘Dan, what about us being a gas company? Don’t you understand?’ And I apologized and I said, ‘I’m sorry, I understand now,’ and I went back to my office. And he recognized that our country was approaching a point that we were about to run out of cheap energy, except for coal, which was very pollutant. People didn’t understand, didn’t know that we were approaching a very bad situation where we were going to have to import gas from anybody who would sell it to us at about any price. And that concerned George. But in nineteen eighty-two, Dan presented him the much more pressing personal problem: that in just ten years their gas supply in the Dallas area would almost be gone, and they wouldn’t be able to fulfill their pipeline contract, which supplied ten percent of Chicago’s gas. And he said, ‘Fine, then we’ve got ten years to look for replacement.’ And he told us, ‘We’ve got all this acreage in the Wise County area. We’ve got all these people up here working, we have all this infrastructure with compressors and loop lines.’ George said, ‘We’ve got all this stuff here, so I want you to find a replacement right here.’ And specifically, he wanted them to drill in the Barnett Shale, which almost everyone in the industry thought was crazy. Shale is a dense rock that oil and gas can’t escape easily, and even when it does, no one thought that there was enough of it in there to make it worthwhile. But George read a single journal article from one of his geologists which hypothesized that all of this could be done hypothetically. And besides, George already owned all that stuff right there, and he says, ‘If y’all don’t think you can do it, tell me. I’ll find people who can.’ I was not too old at the time. I think I was about thirty-three, thirty-four, and I had a wife and four kids, and it was to my benefit to try and keep that job, because, you know, jobs were starting to get hard to find. And I told him, my boss, ‘Start in, we’ll do that. We’ll find something.’ Almost ten years after we did our study, we found that successful Barnett wells would make enough gas to pay for the entire well and make a profit. They were successfully experimenting with something that had never been done before: fracking shale rock. Fracking is where you shoot down a mixture of water, sand, and gels to create more fractures in the rocks so that more oil and gas can flow out of it. But fracking this shale cost a whopping seven hundred and fifty thousand dollars per well. They weren’t making a lot of profit on them, and almost all of George Mitchell’s executive team thought that the Barnett Shale was a complete waste of their time and money. Dismissed it as, quote, ‘a science experiment,’ and they wanted to get rid of it. George Mitchell owned greater than fifty percent share of the stock of Mitchell Energy, and when everybody on his board wanted to sail North Texas, George told them, ‘Look, y’all take a vote, but remember that I had more than fifty percent share, and I follow. Y’all vote to sail, and I vote not to sail. We don’t sail.’ And so there was a point where, as I understand it, the entire board, including his sons, wanted to sail before we had the Barnett proven from an industry standpoint, and all of the board members wanted to sail, and George said, ‘No.’ And yet not much later, George himself was reluctantly thinking about getting rid of the entire energy business. By this point, he had spent hundreds of millions of dollars developing the Barnett and The Woodlands, and he couldn’t afford to keep developing both any longer. So in nineteen ninety-six, fourteen years into the Barnett and twenty-two years into The Woodlands, he had to decide which one to get rid of. And preference was to sell the energy business so that he could keep his greater passion of The Woodlands going. But an outside force would force George’s hand in the opposite direction. I think it was about nineteen ninety-five we got hit with a lawsuit about water contamination. There were people that were trying to imply that we were responsible for methane gas in the shallow waters, and we weren’t. The fact of the matter is that when you have a world-class source rock like the Barnett close to the surface, the gas starts migrating out. Well, we didn’t do any testing to have a pre-Barnett analysis. So we got sued, and they didn’t take it as seriously as they should have, and we lost. And there were several things that came out: that the Joe that was overseeing the suit was a partner in one of the law firms that was involved in the suit, and there were several other things. So we had another suit. They brought in the big guns on that one, and we were able to prove that the methane in the shallow water was natural migration. Because of that lawsuit, even though Mitchell beat it, that basically was kind of ‘hairror’ on the oil and gas side. In other words, people looking at us would say, ‘Man, they got sued on that. What if somebody come back and tries to sue again?’ So George, actually, I think had riddenly thought he would maybe sell the oil and gas side and keep the real estate. But because of that, he couldn’t. And so I’ve told people it was a godsend. It kept us from selling it. It kept us going after things and looking for the answers. If he had sold the on a guess side right then, he would have got pennies on the dollar. The company that would have bought it would have been interested in everything else and probably plugged out the Barnett, saying, ‘We don’t know why they did that.’ In hindsight, it might have been extraordinary for the world, but in that particular moment, it was tragic for George. When the draft press release for the sale of The Woodlands was shared with him for approval, he simply wrote on it, ‘Okay, but sad.’ And you’re listening to the remarkable story of George Mitchell, who single-handedly changed the energy business and actually changed the environment in this country more than any government agency and more than any company. More of our American Stories and the story of George Mitchell after these messages. And we continue with our American Stories and with the story of George Mitchell’s obsession with proving that shale rock could be an abundant source of energy. But fourteen years of this, the pressure was on, and the Mitchell Energy team needed to pull a rabbit out of the Barnett Shale. Let’s return to Alex. The Barnett team had driven their fracking costs from seven hundred fifty to three hundred fifty thousand. But George now told them that it wasn’t good enough, and their gas production wasn’t high enough. And again, he’d told them that he’d find people who could if they couldn’t. And in one of those rich accidents of history, they hired a thirty-one-year-old named Nick Steinsberger, who just so happened to go to a Texas Rangers game and ran into some geologists there who mentioned they’re experimenting with an approach that came to be known as a slickwater fracking. All there wasn’t on shale and wasn’t another part of Texas, but Nick thought, ‘Hey, why not give it a shot on the Barnett Shale?’ and requested to try it on three wells. They started fracking without using any gels and with using essentially no sand. Our concern was that fracking a shale with a freshwater system was considered a no-no within the oil field. What happens is, with a lot of engineers and geologists, because they were told, ‘Don’t frack shales with fresh water,’ they didn’t stop and think, ‘That’s not all shales.’ Okay, the Barnett consisted of a shale that freshwater wouldn’t hurt. And I proved that to my boss because we had taken a piece of the core and put it in a bucket of freshwater and let it set there for a year. It had absolutely no effects on that shale. ‘They said, we’re risking running three good wells.’ That’s the way they saw him. We can afford to do that if it’s going to save us millions of millions of dollars. And none of the three were what he considered to be mechanical successes. In other words, he did not get the entire frac away. But one of them ended up being a commercial success in that he got an initial rate out of that well that was every bit as good as a conventionally fracked well. And the cost of fracking with the water was the drilling cost plus eighty-five thousand for the frac, so he cut the cost down about three hundred thousand dollars. So that was a very substantial decrease in cost. Well, on his, I think it was his fifth frac, he got permission to do two more. On his fifth frac, I believe he got the entire frac away in an area where our best well came on at about a million to me and ten a day. So this light saying fact that he did, he was able to double the amount of water for that fact because the cost was so low. So instead of it being, say, eighty-five thousand dollars a frac, let’s say it was one hundred and fifty thousand dollars a frac. And the well came on at two million cubic feet of gas today, and it stayed at that rate for about somewhere in our neighborhood of six months or longer. And so he considered that to be the first commercial success. Working with shales was a learning process for every one of us in the company. Okay, there were no shale experts by the time we hired Kent Baucher. Of all the people I’d ever met, Kent was the only one that I would classify as being—I don’t believe in experts—but he was the most qualified shale geologist I had ever seen, met, or heard of. Okay, I don’t call him an expert, because experts, in my opinion, know everything, and there’s no one in our industry that knows everything. So Kent knew, at the time, knew more than anybody else on my point, and that’s why I wanted him on the team, and we got him on the team. I’m Kent Bowker, a petroleum geologist. George Mitchell. It was an honor working for him. He could have paid me a lot less. I don’t tell anybody that, but he could have paid me less just to be able to work with a man that had such vision: his tenacity in keeping the Barnett going and keeping it alive in the face of opposition within his own company. He had senior management that were telling him, ‘Look, George, what you’re doing here is really not that economic. It’s not really economic at all. You’re kind of throwing the money at at something that’s really not going to work.’ In fact, when I showed up in nineteen ninety-eight, I was down in the break room going to get get coca of the vending machine, and I ran into the president of the company, a guy named Bill Stevens, and I introduced myself to him. I hadn’t been introduced to him before. And, ‘Hey, Mister Stevens, I’m Kent Bowker. I’m here from Chevron. You know, I’ve been assigned to the Barnett Shale. I’m really excited. That is going to be a heck of a project.’ And he stuck his hand in my face and said, ‘Stop right there. We don’t need any more of that Barnett Shale. We’ve already got enough of that. You know, maybe you should be working on something else.’ And that’s when I realized, ‘Why, whoa!’ You know, George Mitchell is fighting an uphill battle against his own, even his own president of the company. So Kent tried to help George in this battle. He decided to figure out what’s called the ‘gas in place,’ exactly how much gas is in smaller pieces of rock and could give them a better idea of how much potential there is, or not, in the whole enchilada. You actually drill the rock and you core it, which is like taking a core out of an apple, and we measure how much gas comes off. Now we need to transport that to the laboratory. How do we transport it? We put it inside these aluminum cylinders that are about three feet long, and then we put rubber caps over the ends, and we get hose clamps, like radiator hose clamps, so that those pieces of rock are secure in these aluminum cylinders. So we were doing this, and I’m helping the crew, the laboratory guys. They’re measuring how much gas is coming off. This process takes days to measure how much gas comes off. So we’re doing this. We’re stacking them up, and I look over at the stack, and these rubber endcaps are starting to expand, and they’re starting to get to the size of volleyballs, and they’re starting to expand to get to the size of basketballs. And I’m like, ‘Holy moly!’ Well, I didn’t say ‘holy moly,’ but you can imagine what I said. And like, all of a sudden, these pieces of rock in these aluminum tubes have turned into pipe bombs because of all the methane and gas that are coming out of this rock. This rock contains so much gas that it is expanding. It’s under so much pressure that it’s expanding these thick rubber endcaps. You know, I’m like, ‘Wow, that’s a lot of gas!’ In fact, that’s more gas than I’ve ever seen in my life. That’s what told me this rock has more gas in it than anyone can imagine. And I was the only guy that knew it. Anybody that discovers something new, you’re the only one who knows it. You know, how am I going to explain what I’m seeing here? Completely opposite of what I’ve been taught my entire life as a petroleum geologist, that this should be happening. And then we finally got the data back and found that there was almost four times as much gas in there as anyone thought. So, while, you know, we had almost four times more gas in place, and we had a technique that costs half as much that could get more gas out, all of a sudden, a play that was marginal turns into a money-printing machine. And my goodness, what a voice we’re listening to! Our voice is that is because Dan Stewart and my goodness, Dan Stewart, Kent Bowker, George Mitchell, they were about to prove everybody wrong. And when we come back, we’ll hear about the countless ways these innovators, Mitchell Energy, transformed our lives too. This is our American Story, and we continue with our American Stories and with the final portion of George Mitchell’s remarkable story. In two thousand and one, George sold Mitchell Energy to Devon Energy, who took his team’s pioneering in the Barnett Shale a step further with their successful horizontal drilling of the shale rock. And it was the combination of all of these breakthroughs that led to what we all know as the Shale Revolution. Let’s return to Dan Stewart. I was asked to give George Mitchell an update in two thousand and five on what the Barnett was doing. So I went to this meeting. There were about five or six of us there. I was the last one to speak, and as it turned out, I got maybe five minutes to talk, and he had to leave. And so I came away from this meeting thinking, ‘Well, I didn’t need to be here, you know.’ But that was okay. The next day, George Mitchell called me and said, ‘Dan, I would like you to write the history of the Barnett Shale.’ Now, when I first lost my job with Mitchell Energy, I told my wife—and if you would please excuse my anglers—I told my wife, I said, ‘You know, someone needs to write the history of this because this is a definitely unique experience.’ And my wife said, ‘Well, Dan, you were there, you ought to do it.’ And I said, ‘There’s no way. I’m going to write a book.’ Okay, I don’t normally use that kind of English, but that’s what I said to my wife. Every time I’ve said that, God has humbled me. And when George called me and asked me to write the book, I came home and told my wife, ‘Look, apparently God wants me to write this book. He’s the only one that knows. I can’t tell George no.’ He wanted it to be documented what we did. He wanted to prove that Mitchell had done it, but he also wanted other people to understand the process. Well. Because of that, we went from taking seventeen years to develop to