In the dozens of articles and obituaries written about George Mitchell, who died late last month at 94, the Texas oilman, entrepreneur and philanthropist was remembered mostly as the father of the fracking boom, whose innovations led to the shale-gas revolution.
But Mitchell was much more than that. Thanks to his innovative genius, the United States will soon become the worlds leading producer of natural gas and by 2017 could be the leading producer of crude oil as well. In short, Mitchellnot to be confused with the former Senator from Maineshould be remembered as the individual who fulfilled the elusive promise of U.S. energy independence.
The son of an immigrant Greek goat herder who settled in Galveston, Texas, Mitchell studied petroleum engineering at Texas A&M University, where he graduated first in his class and developed an uncanny knack for finding oil.
He eventually established his own energy company and then, over the course of two decades, achieved something in the 1980s that almost no one else in the oil industry thought possible: He developed an innovative way of unlocking vast amounts of natural gas from shale formations. A similar method for extracting shale oil soon followed.
Mitchell opened the floodgates to shale-gas production by combining two decades-old technologies in a new and revolutionary way. Hydraulic fracturing, or fracking, was first employed in natural gas production in Kansas in 1949. Horizontal drilling for gas dates even further back to the 1920s. Until Mitchell came along no one had succeeded in using the two technologies in tandem.
Mitchells innovation was to drill straight down, then make a 90-degree turn thousands of feet underground to penetrate shale formations sideways. A mixture of water, sand and chemicals was then injected under high pressure, releasing the trapped gas.
Using his technique, U.S. energy producers from 2008 to 2012 were able to increase natural gas production by 20 percent and crude oil production by 30 percent, reversing the long downward trend in U.S. energy output. As production rose, prices fell. And today, the price of natural gas in the United States is two-thirds lower than the price in Europe and 80 percent lower than the price in Asia. Production projections for the years ahead are even greater.
None of the benefits of the shale revolutionnot the economic gains from producing energy on a game-changing scale, not the hundreds of thousands of jobs created, not the more secure energy future, not the environmental benefits from dramatically reduced carbon emissions, not the prospect of natural gas displacing coal-burning electric power generation, not the monumental geopolitical consequences for the United Stateswould have been possible had it not been for Mitchell.
While large shale-gas deposits exist in other countriesnotably Argentina, China, France, Mexico, Poland and South Africathe shale revolution in the United States has been facilitated by a number of political and economic factors.
Despite our high corporate income tax rates relative to the rest of the world, the United States still enjoys an attractive investment climate in which individuals, not governments, own the natural resource they find and develop, providing a positive, incentive-driven environment for energy development.
Places where shale oil and gas deposits now are being exploited, such as North Texass Barnett shale formation and the Marcellus shale in Pennsylvania and West Virginia, are not densely populated, a demographic condition distinctively missing in Europe.
Because oil and gas drilling has been ongoing here for more than a century, knowledge about the locations of shale sweet spots is readily available.
The United States already has an extensive pipeline network in place for moving natural gas from producing shale wells to retail markets.
And compared to the rest of the world, domestic energy companies face less of a threat of nationalization by governmental authorities.
The United States also has the management and technical expertise needed to expand energy output to meet the growing demand for oil and natural gas from India, China and the rest of the developing world.
Whether the shale-gas revolution will reach key states with huge shale resources, such as New York and Californiawhich currently ban frackingis a separate question. But it certainly has gotten the attention of Saudi Prince Alwaleed bin Talal, who recently warned that Americas oil jackpot threatens OPECs global market dominance.
If the U.S. shale boom means that oil and gas shortages become a thing of the past, it will be due in large part to George Mitchell, the father of American energy independence.
|William F. Shughart II is Research Director and Senior Fellow at the Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.|
TAXING CHOICE: The Predatory Politics of Fiscal Discrimination
So-called sin taxesthe taxing of certain products, like alcohol and tobacco, that are deemed to be politically incorrecthave long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such sinful products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation?