Hydraulic fracturing, or fracking, which uses a high-pressure stream of water, chemicals and sand to blast through deep layers of shale rock to extract natural gas and oil, has become one of the most contentious energy issues of our time. But who are the people who made the shale boom happen?
Gregory Zuckerman decided to find out.
Zuckerman, a writer for The Wall Street Journal, spent most of his career covering business and finance and realized that natural gas development was the biggest business story of today. His latest book, The Frackers, profiles six energy tycoons. Among them is Harold Hamm, the oil and gas magnate who advised (and helped fund) Mitt Romney’s presidential campaign and is one of the world's 100 richest people. Another is Aubrey McClendon, the former head of Chesapeake Energy Corp. who has been the subject of a Securities and Exchange Commission probe and who was called “America’s Most Reckless Billionaire” by Forbes magazine.
The book delivers on the color and the characters, with most key players roving a grey area between admirable and abominable. It’s light on environmental investigation and economic analysis, but it goes a long way toward showing how gas grew so quickly, and how some of the industry's missteps made it so controversial. The Huffington Post talked with Zuckerman recently about the book.
What made you decide to take the approach of making this a collection of profiles?
I wanted to get at some important themes in both a dramatic and fun way. I found with my last book about the financial crisis that I wanted to raise some important thoughts about the financial crisis and about our country, but do it through a dramatic narrative where, hopefully, it's entertaining for people. There are a lot of serious, important, great books about energy. I'm a sports guy, I like writing about home runs and strikeouts. There's a lot of drama with that.
The book does make these guys seem almost heroic.
People have had that criticism of me, that I make them into better people than they are. I do think if you're concerned about energy independence, if you're concerned about giving people jobs, if you're concerned about carbon dioxide emissions, that there's a lot to admire about them. I see them as gray characters. I don't think you come away necessarily loving or admiring people like Aubrey [McClendon]. I think there's a lot to admire about them and there's a lot to criticize as well. For Harold Hamm to make $14 billion and still criticize President Obama, I think is too much. And I make that point. But I came at this [with] this stereotypical view of these guys that are in Houston, chomping on cigars and polluting and spilling and not caring as they make a ton of money. When you talk to them, you realize a lot of them are geologists, they like being outside, they hunt and they fish and they all have ranches. They don't see themselves as being callous. And that's not to say they don't make mistakes left and right, but it's really easy for us all to turn on the lights and heat our homes and then go to a rally against fracking.
What do you think it is about these men that allowed them to make the shale boom happen? Is it something about them personally?
I think so. They all are really stubborn, self-confident. Even guys like Aubrey McClendon, Tom Ward. They each were basically kicked out of companies they founded, and yet I get no sense whatsoever that they thought they did anything wrong, that they thought they should have done things differently. It takes a certain personality to ignore the mantra and the conventional wisdom that it's too expensive to produce oil and gas from shale.
These guys were driven. They had these really outsized dreams. They didn't just want to get wealthy, they wanted to get really wealthy, and they didn't just want to change their companies, they wanted to change the country. They had these huge appetites -- and it ended up hurting some of them. But they also changed the country as a result -- for good or for bad. People will debate it for years.
What kept the Exxons and Chevrons from doing this?
Part of it was conventional wisdom. I don't mean that disparagingly. If you talk to geologists, the way they were taught in school is that this is source rock. They thought the shale layer was source rock. Yeah, there's a lot of oil and gas, we don't know how much, but it's too difficult to extract it. In some ways they were like Merrill Lynch in 2008 or Lehman Brothers or Goldman Sachs in that they bought into conventional wisdom. But they were better than those guys because they didn't collapse, obviously. They're doing fine. They just missed what was under their nose.
What sort of impact is the backlash to fracking going to have on the boom? On Election Day, Colorado had four towns that passed bans.
I don't think it'll have a huge impact on total production. We still have so many fields that haven't been fully worked over and they still are coming up with good ideas in new layers. I don't dismiss the concerns and I think that I wouldn't necessarily want it in my backyard, so who am I to tell people and communities that they should have it for the sake of all of us? I get it, that it's dirty, it's messy, it's noisy. It can be ugly.
I think often the concerns are overstated. I talk to scientists -- objective guys -- and they all say it's unlikely that these serious issues people are concerned about are going to be issues. But “unlikely” doesn't mean impossible.
I subscribe to the view that we're sitting on some of the biggest energy deposits -- especially natural gas -- in the world, and we're coming out of the deepest downturn since the Great Depression. To not drill this stuff is just unrealistic, so let's make sure they do it in a proper way.
Do you think there's more the industry could have or should have done on the front end -- better regulations, more disclosure -- that would have allayed those concerns?
If you look at Cabot in Pennsylvania, they made mistake after mistake. Part of it was not paying enough attention, for sure. But part of it also was they weren't really familiar with the geology in that part of the state. They hadn't been drilling much and they screwed up. And they'll say that. It's easy to say now after some people’s water has been ruined. And frankly the whole issue of not sharing what's in the fracking fluid, the chemicals. They still don't share everything -- there are exemptions -- but they're doing a better job. So why couldn't they have done that early on?
It seems like part of the issue is that this was basically the Wild West in the beginning. And now that it's happening in places like Pennsylvania and upstate New York, it's a whole different world.
That's totally true. They're used to Oklahoma and places that aren't as densely populated. Pennsylvania is more densely populated, and the people there also don't have a [modern] history of oil production. It's also the fact that the majors weren't there … So it was smaller guys, independents, and they're not as focused on public relations and community relations.
On the regulatory front, what do you think about the role of the federal government? Should regulators be doing more?
In some areas, like measuring the methane leakage, they historically have not done nearly enough. And I never could figure that out, why don't they just measure the stuff. They could measure it. They're getting more active with that. The argument has always been to defer to the states, as you know. They know the area better. As a reporter, I'm always a little skeptical of that argument because it always feels like the local guys could be at the country club with the producer and they're a little more easily influenced.
Harold Hamm was an adviser and a big donor to Mitt Romney in 2012. Do you think these gas guys are going to play a bigger political role going forward?
I think they're going to play a bigger role in society in general. I mean, you're already seeing -- they own the Texas Rangers, the Buffalo Sabers. There's a guy who's influential in Hollywood. In charities, they're more influential, and in politics. But look at the Koch brothers. Have they really had that much of an impact? On the Republican Party, maybe. Hamm tried to, but didn't have as much of an impact as he wanted. But they will play a bigger role in society for sure. There are new Gettys and new Rockefellers, for good or for bad, like it or not.