Nick Steinsberger for the “Al”

October 8, 2020

(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.

 


USA prepares to sell off half of the Strategic Petroleum Reserve because…why not?

May 24, 2017

(Guest Post by Matthew Ladner)

The legacy of Al Copeland Humanitarian Award winner George P. Mitchell just continues to grow and grow. President’s Trump’s budget proposal aims to sell off half of the United States 688 million barrel Strategic Petroleum Reserve over the next ten years because…well…we don’t need it any more. We kind of don’t import oil these days. Especially if you consider the exchanges between the United States, Canada and Mexico’s integrated energy markets local rather than international. Read details here.

I can think of a few more assets Uncle Sam should sell…like the badly mismanaged great outdoors of the American West for instance.


Do you really think you have a chance against us Mr. Cowboy?

February 8, 2015

(Guest Post by Matthew Ladner)

The late great George P. Mitchell, winner of the Al Coleman Humanitarian Award among various lesser honors has joined the great rodeo in the sky but those who have taken up his legacy have a very interesting fight on their hands.

First of all, you may have noticed that gasoline prices have collapsed. The vast new supply of oil unleashed by Mitchell had a great deal to do with that, although the immediate precipitating event was a decision by OPEC not to attempt to restrict supply in order to keep up the price. By all accounts, the Saudis drove this decision, and explained it as desire to preserve their market share.

The OPEC cartel has had profound difficulties in the past in actually having members keep to their production targets. When the price of oil increases, so too does the incentive for members to cheat by producing over the caps. Historically Saudi Arabia has had vast production and relatively low extraction costs, giving it the role of swing producer.  In the mid 1980s depending upon which story you believe the Saudis tired of making up for the cheating of other OPEC members or wanted to bankrupt the Soviet Union or perhaps both. In any event, the oil market flooded, the price dropped to $9 a barrel. Stateside the Savings and Loan debacle unfolded and oil-producing states like Texas crashed Icarus-like to earth.

The price of oil tumbled after the OPEC decision, inspiring various theories. The Russians think that the Saudis are out to get them, the Iranians think the Saudis are out to get them, and the frackers also think the Saudis are out to get them.  Note however that these things are not mutually exclusive, and the Iranian theory seems more plausible than others to me. In any case, the general thinking was that all three of these competitors needed prices over $100 a barrel, and with their low extraction costs the Saudis were well situated to wring “excess supply” out of the market.

Good ole fashioned American innovation however thus far is winning the day.

No that is not a shot put, but rather a disintegrating frac ball, made of “electrolytic metallic nanoconstructed material.” It eliminates a step in the fracking process, and it was only one of a number of new drilling technologies discussed at a recent conference in the Woodlands in Houston (probably not coincidentally a property development project of George P. Mitchell). The article linked above discusses how American drillers are busy figuring out how to get more oil and gas out of already drilled wells. The number of new wells drilled in the United States has declined, but total production of oil and gas has not followed suit. Other interesting developments include the development of techniques without water, substituting CO2.

Now to be sure there are going to be some highly leveraged American oil firms who are going to go bust because of the decline in prices. Many of them have been through bankruptcy before, and you can expect them to see them back out in the fields soon. Anyone want to bet on OPEC welfare states displaying this same level of flexibility?

Place your bets- I’m all in on the high-tech wildcatters. Yippie kai yay!

 


We Will We Will FRACK You!!!

July 15, 2014

(Guest Post by Matthew Ladner)

The above gif is a 14 year time lapse, putting in tiny red dots for new oil wells (HT Mark J. Perry).  After watching this for a while, a few things spring to mind.

1. The motto of the University of Texas at Austin “We’re Texas. What Happens Here Changes the World” comes to mind.

2. Pennsylvania seems perfectly content to drill New York’s shale formation from just south of the border.  Memo to New York: fracking involves horizontal drilling, so you might want to rethink your ban.

3. Canada is just barely getting in on the action thus far, but western Canada has plenty of shale formations. So…

Hey you hosers! Don’t force us to sell our oil to China eh?

Just for the record I’d rather fill up my tank with gas refined from Canadian oil rather than line the pockets of various anti-American regimes. Pipelines please…

4. I have not heard much about Arkansas, but it looks like a boom going on in the north of the state (?)


Don’t Worry California, Texans will Eventually Figure out How to Get Your Oil

May 23, 2014

 

(Guest Post by Matthew Ladner)

So the bad news for California just keeps rolling in-turns out that the technology is not just there yet to get to more than a fraction of California’s 13.7 billion barrels of tight oil.   Not to worry Keanu, Texas wildcatters are getting better at the drilling techniques all the time.  Meanwhile in Texas, Mark J. Perry notes that in human history there have been 10 oil fields that have produced a million barrels of oil per day, and two of them are operating in Texas right now, largely thanks to the 18 years of visionary effort from the great George P. Mitchell.


Al Winner George P. Mitchell Passes Away

July 29, 2013

(Guest Post by Matthew Ladner)

George P. Mitchell, the Texas wildcatter who revolutionized global energy and (among other things) winner of the last Al Copeland Humanitarian Award, has died at age 94. Rest in Peace big guy- you done good.


George P. Mitchell for the Al Copeland Humanitarian Award

October 18, 2012

(Guest Post by Matthew Ladner)

I nominate Texas oilman George P. Mitchell for the Al Copeland Humanitarian Award.

Mitchell studied at Texas A&M University, where he graduated first in his class with a degree in Petroleum Engineering. Born to Greek immigrant parents in Galveston Texas in 1919, George P. Mitchell built a Fortune 500 energy business Mitchell Energy and Development Corporation.

George P. Mitchell’s was both a deliberate and perhaps an inadvertent environmentalist. A philanthropic supporter of environmental causes, Mitchell ironically made a far greater positive impact on the environment through his market activities. More ironic still, many environmentalists somewhere on the ya-hoo to yay-hoo spectrum (a man from Wyoming once tried to explain the difference to me- but it is awfully complex) hate Mitchell’s fantastic environmental triumph.

Mitchell combined and developed the techniques of horizontal drilling and hydraulic fracturing (aka fracking) that is in the process of revolutionizing the energy business.

A biography page of Mr. Mitchell notes just how long and hard Mitchell and company worked to develop this process:

Mitchell Energy sunk a lot of money over a long period into learning how to stimulate the rock so it would flow,” says Potter. Their first attempts were expensive “massive hydraulic frac jobs.” They would pump a very large volume of fluid and sand down a well bore to crack the rock and give it more permeability. At first, they got the gas flowing, but the methods and materials were expensive. So they wondered if they could pump less fluid and get the same effect.

They arrived at something called a light sand frac,” says Potter. “Suddenly it was economical and at the same time-in the mid-1990s-the price of gas was rising. By the late 1990s, they had perfected the technique in vertical wells and started applying it to several hundred wells. That’s when it came to the attention of industry.”

“Then it was realized, oh, if you scale that up to the whole area and then to the whole county and up to the whole Basin, the amounts of gas are really quite prodigious,” says Potter. “People became aware of that in 2002 and 2003 and that really got the ball rolling.”

“It took George Mitchell 18 years to make it work,” notes Larry Brogdon, partner and chief geologist for Four Sevens Oil Company. “He is the father of the Barnett Shale. He was tenacious. He started in 1981 and it really didn’t take off until 1999. And even then, it took a long time to develop it.”

So what have been the benefits of Mitchell’s steadfast pursuit of this technology? Mark J. Perry provides the answers:

Let’s start with oil production in Mitchell’s state of Texas:

Peak what? North Dakota is booming as well:

And the energy sector is close to the only hot thing going in our depressed economy..

Most prominently on the environmental side of things, he has radically increased the supply of Natural Gas in America and a growing number of elsewhere, and this is killing the use of coal.

Natural gas produces less pollution than coal and it is cheap in America, so you see trends like this:

Leading to this:

The United States is going to meet Kyoto carbon emission goals despite the fact that we never signed the treaty. As it turns out, George P. Mitchell took care of things for us.

Casting their credibility out the window of a 100 story building, some environmentalists have gone to political war with Mitchell’s technology. The Washington Post is not confused about the desirability of fracking, blasting New York Governor Andrew Cuomo for delaying the use of the technique in his state in an editorial:

… anti-fracking activists who hope delay begets delay and eventually prohibition are doing the environment no favor. Burning natural gas produces only about half the carbon emissions as burning coal, which produced 42 percent of America’s electricity in 2011. With the increasingly common use of fracking, natural gas prices have plummeted, encouraging a switch from coal to gas, and the country’s emissions trajectory has improved.

A suite of technologies has brought vast supplies of previously unrecoverable shale gas within reach of humans, dramatically expanding natural gas reserves in the U.S. and around the world. Horizontal drilling and hydraulic fracturing have produced a fuel that can at once promote a cooler planet and an expanded economy, essentially eliminating the tradeoff between climate change mitigation and the pursuit of other public projects and, perhaps, economic growth.

Compare all of this to the epic boondoggle of President Obama’s attempt to push solar power before its time (if it is ever going to have a time). The Wall Street Journal gives you the blow-by-blow on that one.

George P. Mitchell’s influence on the world is set to grow ever larger. With the new technologies for instance, Israel now has recoverable fuel reserves comparable to Saudi Arabia. Foreign Policy attempted to forecast the winners and losers of the new energy abundance and on balance, it is looking very good overall.

Mitchell has supported sustainability and even the deeply misguided Club of Rome report as a philanthropist, but in a deeply telling twist of fate, it was his determined entrepreneurial activities that have produced not only environmental benefits but also enormous prosperity and hope for the future. This Texas Wildcatter turns out to have been the ultimate environmentalist, as is implied in the Washington Post’s editorial linked to above:

True, half the emissions does not mean no emissions. But the United States does not have to eliminate its carbon footprint all at once, nor should it. Doing so would cost far too much. Instead, natural gas can play a big role in transitioning to cleaner energy cheaply. A recent analysis from Resources for the Future, a think tank, shows that low, fracking-driven natural gas prices combined with efficiency measures and a serious carbon tax would result in a massive increase in the use of natural gas, nearly eliminating America’s coal dependence by 2035 and cutting emissions from the electricity sector by more than half. Renewable technologies, meanwhile, would have time to lower costs and address other hurdles to widespread deployment before picking up more of the load later in the century.

Environmentalists, in other words, should hope fracking is safe — and permitted.

George P. Mitchell’s triumph proves Milton Friedman’s point perfectly and illustrates that it even applies to environmentalism:

I therefore place Mr, Mitchell’s name in nomination for the Al: an Aggie who has earned an enthusiastic Thumbs Up from this Longhorn and deserves one from  everyone.

Okay, almost everyone…