Jay P. Greene's Blog

(Guest Post by Matthew Ladner)

Nick Steinsberger was a subordinate of previous “Al” winner George Mitchell, but after having read Gregory Zuckerman’s excellent book The Frackers it is clear that Steinsberger is worthy of an Al of his own. Mitchell was a driving force behind America’s energy revolution, but the lesser known Steinsberger actually made it happen.Although you may be hearing of Nick Steinsberger for the first time, he fundamentally changed the course of the world. As a young petroleum engineer working for Mitchell Energy in the 1990s, Steinsberger drew what was regarded as the dead-end assignment of working on George Mitchell’s obsession of drilling shale formations. The project had gone nowhere for years, the company was in deep financial trouble and it wasn’t a great time for the oil and gas industry generally. Mitchell considered selling the energy side of the business, but didn’t find much of a market for the company. Mitchell’s chosen successor and the board of the company were restless, and Steinsberger found himself in charge of the least profitable division of a not terribly profitable company in a not currently profitable industry nursing a decades long obsession of an aging and increasingly cantankereous founder. From this grim spot, Nick Steinsberger made the discovery that changed the world.

The technique being used combined horizontal drilling and fracking- blast liquid and sand into a formation in the hopes of releasing hydrocarbons. Mitchell’s obsession was to combine these techniques in order to get at the vast amounts of oil/gas contained in shale formations. Rather than giant collected resevoirs, shale formations contain small amounts of hydrocarbons spread throughout a large underground rock formation. The oil industry had knows about shale oil and gas for years but had large since written it off because it could not be extracted economically. The techniques being overseen by Steinsberger were extracting gas in the Barnett shale- just not nearly enough for Mitchell Energy to remain solvent.

One Steinsberger noticed that a fracking well he was supervising didn’t mix the fluid properly. The normal mix of fluids was thicker than Jell-O, but in this faulty mix the fluid was more like liquid. Strangely enough, the well with the faulty mix produced a surprising amount of gas. Some of Steinsberger’s colleagues thought it was a fluke, but Steinsberger began to suspect that maybe water and sand minus all those expensive chemicals might work just as well.

A few weeks later over beer and bbq at a Texas Rangers baseball game, Steinsberger learned from a friend of a technique used in Kansas called a “river frac.” Almost entirely water and sand, this technique had been used to break up dense rock. Given that Mitchell Energy was in deep financial trouble and that Steinsberger was running what was viewed as a quixotic vanity project, Nick decided to trim chemical expenses on more wells. What did he have to lose?

Many of his coworkers thought Nick was out of his mind. By their understanding of the geology of shale, this technique which had worked on Kansas sand-stone had no chance working in shale. Shale clay would absorb the water, swell up and jam up the fractures. That’s what the chemicals were for after all. One superior allegedly promised to eat his diploma if the technique worked. “It’s a stupid idea,” he was told. “It’s not going to work.”

Despite a great deal of opposition, Steinsberger got the chance to experiment, if only because the company couldn’t afford the chemicals. Steinsberger was acting on a hunch- he thought a mix with few chemicals and less sand would create multiple micro-fissures rather than a single large passageway to the surface.

“The idea was crazy at the time. He had guts, no one else would have thought of doing it,” a company executive later recalled. “If the oil business had a gonads on the anvil award, he’d win.”

In August of 1997, with an anxious wife with two young children making contingency plans regarding a possibly soon to be unemployed husband, Steinsberger anxiously monitored the performance of Barnett wells, three of which had used his new mixture. The initial production from the three wells was nothing special, but then Steinsberger’s luck changed. Fracked wells involve a quick spurt of product followed by a sharp decline. The three Steinsberger wells trailed off at a slower rate.

This was just promising enough to save Nick’s hide and to allow him to experiment further. He altered the sand flow, put more horsepower on the pumps, made adjustments. By the summer of 1998, a Mitchell Energy started producing one and a half million feet of gas per day with the revised techniques, and instead of tailing off, it just kept going, and going. Other wells began to do the same. The slick water frack wasn’t just cheaper, it was also better.

Mitchell, a patron of the arts and many charities, was rewarded for his obsession and saved from personal financial ruin was hardly a moment to spare. The global implications of this innovation however were far more significant. Natural gas became abundant and cheap in the United States, abundant and cheap enough to greatly diminish the use of coal, reducing carbon emissions. Companies converted massive gas import facilities being built in American ports into export facilities. The technique worked on oil, and the United States reversed decades of decline in production and then, incredibly, began to export millions of barrels per day. The economic and political ramifications of this change have yet to fully play out, but they are already profound.

Nick did not become incredibly wealthy as a result of his innovation. Today he is still working as the COO of an energy firm. His influence on the global century however will remain long after the wealth of lesser figures has faded away. Nick’s example contains important lessons about innovation- human progress vitally depends on allowing people to follow hunches, to take gambles and to try new things. The urge require and deny permission, to standardize practice and to avoid risk has a largely hidden but staggeringly large potential cost- you likely never know what you missed out on. A world in which Nick was required to seek permission for each new technique he tried would be both poorer and dirtier. Red tape has been strangling American educators from the local, state and federal levels for decades. We could use more gonads on the anvil wildcatters like Nick Steinsberger.