How Decades Of Federal Support Spurred The Natural Gas Boom: ‘Most Companies Would Have Given Up’

Love it or hate it, there’s no denying that the U.S. is in the midst of a shale gas boom. Armed with a horizontal drilling technique that allows companies to access natural gas trapped in shale formations, the industry’s production has surged and prices have fallen to historic lows.

Supporters often hail shale gas as a miracle of the free market — a product of enterprising risk takers who commercialized fracking techniques without government help.

Except that’s not entirely true.

If we look at the history of how horizontal drilling techniques were commercialized, we find a strong base of government support through R&D, mapping techniques, cost-sharing programs, and billions of dollars in tax credits. The Breakthrough Institute wrote a report on this support last year showing how decades of federal support helped businesses pioneer and commercialize new, risky drilling techniques.

The Associated Press published a follow up story yesterday on the history of government support in shale gas. It illustrates the importance of federal assistance for new energy technologies. Along with establishing a tax credit for drillers in 1980 that amounted to $10 billion through 2002, the Department of Energy provided crucial technical assistance during times of failure:

“There’s no point in mincing words. Some people thought it was stupid,” said Dan Steward, a geologist who began working with the Texas natural gas firm Mitchell Energy in 1981. Steward estimated that in the early years, “probably 90 percent of the people” in the firm didn’t believe shale gas would be profitable.

“Did I know it was going to work? Hell no,” Steward added.

In 1975, the Department of Energy began funding research into fracking and horizontal drilling, where wells go down and then sideways for thousands of feet. But it took more than 20 years to perfect the process.

Alex Crawley, a former Department of Energy employee, recalled that some early tests were spectacular — in a bad way.

A test of fracking explosives in Morgantown, W.Va., “blew the pipe out of the well about 600 feet high” in the 1970s, Crawley said. Luckily, no one was killed. He added that a 1975 test well in Wyoming “produced a lot of water.”

Steward recalled that Mitchell Energy didn’t even cover the cost of fracking on shale tests until the 36th well was drilled.

“There’s not a lot of companies that would stay with something this long. Most companies would have given up,” he said, crediting founder George Mitchell as a visionary who also got support from the government at key points.

“The government has to be involved, to some degree, with new technologies,” Steward said.

This is a hugely important message that we need to keep in mind today. Ever since the bankruptcy of a few clean energy companies that received loan guarantees — most famously Solyndra — some politicians and conservative organizations have called for an end to all government support for clean energy. Some are even calling for an end to the Department of Energy all together. (Oddly enough, many of these opponents fight for preserving billions of dollars in permanent tax credits for the oil and gas industry).

Whether they’ve truly fooled themselves or they’re just blatantly lying, these hypocritical free-marketeers are trying to convince Americans that government investments in clean energy are unique. In fact, all energy technologies — nuclear, coal, oil, and gas — have received generous federal support in order to bring them to scale.

According to an analysis from DBL Investors, federal support for oil and gas was five times greater than federal support for renewables during the first 15 years of available subsidies. The support for nuclear was more than 10 times greater than renewables.

There is a legitimate debate to be had about the extent of government support and the types of mechanisms we should use to deploy and commercialize new technologies. But there shouldn’t be a debate on whether that support should exist at all.

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5 Responses to How Decades Of Federal Support Spurred The Natural Gas Boom: ‘Most Companies Would Have Given Up’

  1. Kim Feil says:

    So lets finish what they started to make this safer (it should be banned actually)….
    Aside from methane leaks that speed up global warming (not climate change which is cyclical), I need investors and stakeholders in shale to “reason” with the industry, and so I need you to help me speak to them as they are not responsive to me.

    I live at ground zero for urban drilling. We have about 60 padsites in our 99 sq mile town here in Arlington TX. The following requests won’t cover public protections on the huge buildout and the associated human errors or accidents (we had a drill spill in Lake Arlington, our drinking source, a couple of years ago and have had maybe a dozen emission events over the last couple of years that I am aware of)….

    Please make it a standard practice to always use electric rigs in urban areas.

    All mud farming (private and commercial) is subject to open records of water and soil test results.

    We need the industry to invent technology to keep the toxic, silica dust on the padsite-those pathetic pillow case looking socks aren’t getting the job done.

    Please add scrubbers to the open hatch flowback tanks during topflow.

    Once the topflow hydrocarbonated flowback is of the “gas to fluid saleable ratio” and ready to connect to a pipline/sales meter, we shouldn’t have to wait 2.5 years for the EPA mandated Green Completions and allow venting or flaring in urban or rural areas….methane losses should be prevented-period.

    The pipeline should be in place FIRST before fracturing so that flowback doesn’t sit in the ground for months festering some unknown, man-made hydrogen sulfide-like stale water flowback.

    The setback away from people should be substantial. Rural method drilling is not acceptable in urban areas. A doctor who is an environmental tester said that the health effects are being seen downwind from about 1,800 – 2,500 feet.

    Lastly, the industry should be able to guarantee that the casings will last “on the majority of them”, and that the injections wells won’t cause regrettable seismic events or migrate their horrid contents eventually into our drinking water.
    Here is a link with more info on injection wells….

  2. Ken Barrows says:

    Aren’t NG rig counts dropping? Maybe all the article is doing is commenting on the recent past.

  3. Leif says:

    A Nation that places NO VALUE on Earth’ life support systems places NO VALUE on LIFE!

  4. Mulga Mumblebrain says:

    None of this will happen, I very much regret to say. Profit maximisation is the Right’s religion, and the health and well-being of others are ‘externalities’ of no import whatsoever. Human communities are devastated by capitalists everywhere, every day. It’s all down to the absence of human empathy and compassion in the Right’s psychological make-up. What you will get, if you prove a nuisance, are harassments of various types. That’s business! I wish you luck, and a miracle.

  5. Solar Jim says:

    Excellent perspective, thanks Stephen. Your point of contention has been raised for years and it needs restating more than ever today.

    RE: “In fact, all energy technologies — nuclear, coal, oil, and gas — have received generous federal support in order to bring them to scale.”

    Another perspective is that these four (uranium and the three phases of fossil substances) are not true “energy” resources at all. If anything, they are resources of matter. The primary historic use of these substances are for explosive ordnance and “delivery systems.” That is, fuels of war.

    A war economy would be one that subsidizes fuels of war, as well as their contamination of public health (including global warming). Perhaps we fool ourselves into thinking we have “an energy system” when we really have a system of explosives.

    Alice might not be surprised, but neither will she find herself in Wonderland.