Authors: Lawrence Wright
Texas has been steadily closing the gap in both population and economic growth, however. Texas exports nearly outrank those of California and New York combined. Yes, a lot of that is from petroleum products, but Texas also tops California in exporting technology. Between 2000 and 2016, job growth in Dallas and Houston expanded 31 percent, which is three times the rate of Los Angeles. Austin employment expansion was over 50 percent during the same period.
All that vigorous growth in Texas had a rope thrown around it when oil prices, which had climbed to $145 a barrel in 2008, slumped in 2014, ultimately falling below $30. In 2016, for the first time in twelve years, Texas job growth lagged behind that of the nation as a whole. Houston alone lost as many as 70,000 energy-related jobs. California’s gross domestic product outpaced that of Texas in the first two quarters of 2016. In the third quarter, however, when oil prices began to stabilize, Texas once again leaped ahead. Critics of the Texas economic model would say that’s proof that it’s not magic—it’s oil.
Higgins hired a mining engineer, Captain Anthony F. Lucas, a Croatian American who had studied mining engineering in Austria. Captain Lucas’s first well got to a depth of only 575 feet before the pipe collapsed. Lucas then decided to use a rotary bit, a novelty at the time, which he thought more suitable for penetrating soft layers. His drillers also discovered that by pumping mud down the hole, they could form a kind of cement to buttress the sides. These innovations created the modern drilling industry.
Lucas and his team hoped to bring in a well that could produce 50 barrels a day. On January 10, 1901, at 1,020 feet, almost precisely the depth predicted by Higgins’s wild guess, the well suddenly vomited mud and then ejected six tons of drilling pipe clear over the top of the derrick. No one had ever seen anything like this. It was terrifying. In the unnerved silence that followed, the flabbergasted drilling team, drenched in mud, crept back to the site and began to clean up the debris. Then they heard a roar from deep in the earth, from another era, millions of years earlier. More mud flew up, followed by rocks and gas, and then oil, which shot 150 feet into the air—a black geyser that spewed from the arterial wound that the drillers had made in the greatest oil field ever seen at the time. For the next nine days, until the well was capped, the gusher blasted 100,000 barrels of oil into the air—more than all the wells in America combined. After the first year of production, the well, which Higgins named Spindletop, was producing 17 million barrels a year.
In those days, Texas was almost entirely rural; there were no large cities and practically no industry; cotton and cattle were the bedrock of the economy. Spindletop changed that. Because of native Texas suspicion of outside corporate interests—especially John D. Rockefeller’s Standard Oil—two local companies were formed to develop the new field: Gulf Oil and Texaco (both now merged with Chevron). The boom made some prospectors millionaires, but the sudden surfeit of petroleum was not entirely a blessing for Texas. In the 1930s, prices crashed, to the point that, in some parts of the country, oil was cheaper than water. That would become a familiar pattern of the boom-or-bust Texas economy.
In August 1927, Columbus Marion Joiner, a prospector and beloved con man widely known as Dad, began drilling in East Texas, near Henderson, on the Daisy Bradford lease, named after the widow who owned the land. Joiner had practically no money and even less luck. His first two wells went bust. To entice investors to back yet another well, he drew up fake geological reports indicating the presence of salt domes and oil-bearing anticlines. The phony report predicted that at 3,500 feet the well would tap into the greatest oil field in the world. Once again, a wild prediction would turn out to be absolutely true.
Dad Joiner was targeting the Woodbine sand, which sits above a layer of Buda limestone, thick with fossils of the dinosaurs and crocodiles that had plied the shallow Cretaceous seas. Over millions of years, plankton, algae, and other organic materials buried in the sandy layer transformed into oil or gas. Joiner scraped by for three and a half years, paying his workers with scrip and selling $25 certificates to farmers to raise enough money to complete the rickety well. When Joiner reached 3,456 feet, a core sample showed oil-saturated sand. Thousands gathered to watch the roughnecks drilling and swabbing through the night. Imagine the scene: farmers in bib overalls, women in dresses sewn from patterns out of the Sears catalog, all of them dreaming of a life in which they would be strolling down a grand boulevard in fine clothes, pricing jewels and weighing investments—a dream that was about to come true for many of them. In the late afternoon on October 3, 1930, a gurgling was heard; then, two nights later, oil flew into the air in a great and continuous ejaculation. People danced in the black rain; children painted their faces with it.
Overnight, new prospectors arrived, along with major producers. Within nine months of the Daisy Bradford No. 3 strike, a thousand wells were up and running in the East Texas field, accounting for half the total U.S. demand. Saloons and hotels sprang into existence to accommodate the roughnecks, along with the “man camps” that invariably blossom in the booms. Cities such as Tyler, Kilgore, and Longview suddenly found themselves in a forest of towering derricks, which rose out of backyards and loomed over downtown buildings. In one city block in Kilgore, there were forty-four wells. It was said you could walk from derrick to derrick without touching the ground. Texans pumped so much oil out of the Woodbine that prices fell from $1.10 a barrel to thirteen cents. The governor shut down the wells in an attempt to staunch the decline.
Besieged by lawsuits because of his years of reckless promises, Joiner sold his interest in the lease to H. L. Hunt, who would eventually become the richest man in the world. Dad Joiner died broke in Dallas in 1947.
By the mid-nineties, the oil business in the U.S. was lagging. The industry seemed to be on the verge of peak oil—the moment when at least half of all the recoverable petroleum in the world has been exploited. On the other side of that peak lay an unyielding slope of diminishing returns. The major oil companies began concentrating their exploration efforts outside the U.S., whose reserves were deemed to be more or less used up. The end of the fossil-fuel era was not exactly imminent, but it was no longer unimaginable.
The situation was brutally clear to George Mitchell, one of Texas’s most famous wildcatters. His father, Savvas Paraskevopoulos, was a goat-herder from a little village in Greece, who opened up a shoeshine stand in Galveston and changed his name to Mike Mitchell. George worked his way through Texas AM, studying geology and petroleum engineering, graduating at the top of his class. In 1952, he acted on a tip from a bookie and optioned a plot of land in Wise County, an area in North Texas that was known as the “wildcatter’s graveyard.” He soon had thirteen producing wells, the first of the ten thousand he went on to develop in his career.
In 1954, Mitchell secured a lucrative contract to supply 10 percent of Chicago’s natural-gas needs—up to 200 million cubic feet per day. However, as the years passed, the wells operated by Mitchell Energy Development were declining. He needed to discover new sources of petroleum, or else.
Mitchell was under the sway of an influential report, published in 1972, by an international team of scientists, led by Dennis L. Meadows at MIT, titled
The Limits to Growth.
The scientists examined a number of variables—population, food production, industrialization, pollution, and consumption of nonrenewable natural resources—all of which were increasing exponentially. “
Under the assumption of no major change in the present system,
” the authors emphatically warned in the section dealing with declining natural resources, “
population and industrial growth will certainly stop within the next century, at the latest.
” Even under a more optimistic scenario, in which the available natural resources doubled, pollution would overload the capacity of the environment to absorb it, leading to the same dire outcome: “
The basic behavior mode of the world system is exponential growth of population and capital, followed by collapse.
” The only way to halt the march to disaster is to achieve what the authors call “equilibrium.” That would mean sacrificing certain liberties, “such as producing unlimited numbers of children or consuming uncontrolled amounts of resources.”
As the father of ten children, Mitchell certainly hadn’t done much to control population, but he was deeply engaged with the concept of responsible growth and environmental welfare. In 1974, he founded a planned community outside Houston, called The Woodlands, designed to be ecologically mindful. (It is now the home to more than 100,000 residents and a number of corporate campuses.) Mitchell began holding conferences there, inspired by the ideas in
The Limits to Growth.
He and his wife, Cynthia, formed a foundation that is largely dedicated to promoting ideals of sustainability.
In 1980, Mitchell predicted that there were only about thirty-five years of conventional sources of petroleum remaining in the U.S. The obvious alternative was coal, which had dire implications for the environment. Natural gas, on the other hand, was far cleaner, almost an ideal fuel, in Mitchell’s opinion. But was there enough gas remaining to prevent the world from returning to a time when coal-burning fireplaces coated the cities in black ash and smog filled the air with dangerous pollutants?
Mitchell still faced the immediate problem of fulfilling his contract with the city of Chicago. His company’s main assets were the leases that he held on 300,000 acres seventy miles northwest of Dallas, in the region known to oilmen as the Fort Worth Basin. A mile and a half below the surface was a formation called the Barnett Shale. Geologists had speculated that the Barnett, which extends five thousand square miles and spreads through seventeen counties, contained the largest gas reserves of any onshore field in the United States. The problem was that nobody knew how to extract the gas. Porous formations, like the Woodbine sands that Dad Joiner had tapped, allow the flow of liquids and gases, but the Barnett Shale is “tight rock,” meaning that it has very low permeability. In the mid-twentieth century, prospectors attempted to liberate petroleum reserves by pulverizing tight rock. Imaginative techniques—using dynamite, machine guns, bazookas, and napalm—were tried, without success. In 1967, the Atomic Energy Commission, working with the Lawrence Livermore Laboratory and the El Paso Natural Gas Company, exploded a twenty-nine-kiloton nuclear bomb, dubbed Gasbuggy, four thousand feet underground, near Farmington, New Mexico. More than thirty other nuclear explosions followed, in what was called Project Plowshare. Natural gas, it turned out, could be extracted from the atomized rubble, but the gas was radioactive.
A safer and more precise method, developed in the seventies, was to use jets of fluid under intense pressure, to create microcracks in the strata, typically in sandstone or limestone. Expensive gels or foams were typically used to thicken the fluid, and biocide was added to kill the bacteria that can clog the cracks. A granular substance called “proppant,” made of sand or ceramics, was pumped into the cracks, keeping pathways open so that the hydrocarbons could journey to the surface. The process came to be known as hydraulic fracturing, or fracking. It certainly did jostle loose the captured oil or gas molecules, but as far as Mitchell was concerned, it had a fatal flaw: it was too costly to turn a profit in shale. His quest was to find a way to liberate the gas and save his company—and, perhaps, the world.
In 1981, Mitchell drilled his first fracked well in the Barnett Shale, the C. W. Slay No. 1. It lost money. Year after year, Mitchell continued drilling in the Barnett; he sank $250 million into this venture, hoping to formulate a cheaper and more effective fracking formula. Seventeen years later, Mitchell’s company was in real trouble. His shareholders had begun to think he was a crank—the company was heavily in debt, and its share price had plunged from thirty dollars to ten. And yet Mitchell kept drilling one unprofitable well after another.
To cut costs, one of Mitchell’s engineers, Nick Steinsberger, began tinkering with the fracking-fluid formula. He reduced the quantity of gels and chemicals, making the liquid more watery, and added a cheap lubricant, polyacrylamide, which is used in the manufacture of face creams and soft contact lenses. The resulting “slick water”—aided by a dusting of sand for the proppant—worked beautifully. It also cut the cost of fracking by more than two-thirds.
Mitchell combined this new formula with horizontal drilling techniques that had been developed offshore; once you bored deep enough to reach a deposit, you could steer the bit through the oil- or gas-bearing seam, a far more efficient means of recovery than just going straight down. In 1988, after about three hundred attempts, Mitchell’s company finally made a profit on a fracked well in the Barnett, the S. H. Griffin No. 4. The shale revolution was under way. The same fracking innovations that Mitchell had pioneered in gas were almost immediately applied to oil.
For the third time in Texas history, the state transformed the energy business in ways that would shake economies and stir political quarrels all over the globe. In July 2008, oil prices had reached an all-time peak, $145.31, but the frackers were just getting started. By 2010, there were more than fourteen thousand wells in the Barnett alone, and the economic formula of past Texas booms held: a sudden fortune, a glut, a crash in prices. By January 2016, oil had fallen to less than $30 a barrel.
“We’re back where we were in 1931,” Robert Bryce, an author and journalist who writes frequently about the energy business, told me. “Texas drillers are once again determining the price of the marginal barrel in the world market.”
“Two things are going on,” Mack Fowler, an oilman and philanthropist in Houston, told me, as he laid out several graphs for my education. The first showed the U.S. production of crude oil. In 1970 American oil production reached nearly ten million barrels a day; that summit was followed by a long, slow slide, decade after decade, touching bottom in 2008 at little more than five million barrels a day. The decline was marked by oil embargoes, price shocks, gas lines, shifting geopolitical alliances, wars in the Middle East, and the fear of the world economy being held captive to oil states that were often intensely anti-American. Then, around the time Barack Obama was elected president, something startling happened. U.S. production shot back up, approaching its all-time high. On the graph, it looked like a flagpole. “In the span of five years, we go from 5.5 million barrels a day to 9.5 million, almost doubling the U.S. output,” Fowler said. It was the fastest growth in oil production ever seen. The difference was fracking and horizontal drilling techniques.