The inside story of the frackers who blasted a hole in the U.S. energy crisis

Those crazy frackers

 
Chesapeake Energy workers at one of the company's Texas oil fracking operations (Photo: Michael Stravato/The New York Times)
Chesapeake Energy workers at one of the company’s Texas oil fracking operations (Photo: Michael Stravato/The New York Times)

Last month, outside the village of Rexton, N.B., dozens of protesters clashed with police. They were there to demonstrate against hydraulic fracturing, a method of drilling for oil and gas better known as fracking. The protesters, many from the nearby Elsipogtog First Nation, had been blocking access to a seismic testing site operated by SWN Resources, the local division of a large Texas-based natural gas company. In one day alone, 40 protesters were arrested at the site, and six police cars were torched amid charges from both sides of escalating violence and brutality.

The battle in Rexton, though unusually nasty, was hardly unique. In the past five years, fracking—which involves breaking up subterranean rock formations using a slurry of water and chemicals—has become a magnet for activist ire. In the U.S., frackers have been blamed for polluting water tables, destroying ranches and even causing earthquakes. In Canada, anti-fracking protesters have pushed for fracking bans across the country.

But while the environmental side of the fracking story has been well told, the business side has not. And no matter what you think of fracking, it is a remarkable business tale. Frackers have, in less than a decade, reversed a generational decline in U.S. fossil-fuel production. They have helped spur a revival in domestic manufacturing by offering a glut of cheap natural gas. And they’ve dramatically reduced America’s dependence on foreign oil.

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In The Frackers, veteran Wall Street Journal writer Gregory Zuckerman tells the story of the entrepreneurs, engineers and small-town players behind this unlikely energy boom. Zuckerman doesn’t exactly ignore the controversy around fracking in his book. But he does do his best to sidestep it. The Frackers, as a result, is pretty much a pure business narrative. And judged by that standard, it’s a spectacular success.

Zuckerman is among the best-connected reporters in the U.S. business world. (He broke the story of JPMorgan’s disastrous London Whale trade last year.) With over 300 hours of interviews with the major players behind the fracking boom—including Aubrey McClendon and Tom Ward from Chesapeake Energy and Harold Hamm from Continental Resources—the book is brimming with juicy details and insider insight. (One great fact: to avoid suspicion while scouting land in North Dakota’s Bakken fields, one company adopted a shell name they hoped would sound Canadian and thus unthreatening to rivals.)

The story Zuckerman tells is in many ways the prototypical narrative of American business success. A group of low-level players, operating in fields the big companies long ago abandoned, bucked all expert opinion to create billions in value out of virtually nothing. McClendon’s co-founding investment in Chesapeake, to cite one example, was just $50,000. By 2008 his stake was worth $3 billion. And he enjoyed spending it. From $10,000 wines to homes all over the world and even his own NBA team (McClendon bought a 19% stake in the Oklahoma City Thunder), the resource player’s lifestyle was especially outlandish. But getting there, for him or the rest of the fracking pioneers, was never easy or guaranteed.

The men Zuckerman profiles, and they are all men, took on enormous debt and sometimes risked ridicule to get ahead of the shale-gas curve. In many cases they were buying up access to land before they even had the technology to profitably drill it. When George Mitchell, the president of Mitchell Energy, a Texas natural gas company, wanted to lease more acreage in the Texas shale in 1998, even his own board scoffed at him.

The breakthroughs that finally made the process profitable didn’t come quickly, or even on purpose. A Mitchell engineer named Nicholas Steinsberger discovered the right mix of fluids to shoot down into fracked wells largely by accident. He then pursued the process despite skepticism and even open mockery from his senior engineers in the company. (He also received no bonus or equity stake for his breakthrough. In the year he helped make fracking profitable, he made about $100,000.)

Success, when it did arrive, was if anything, too great. Chesapeake, Continental, Mitchell and other companies that gambled on shale were betting on two things as they scooped up land: one, that the technology would catch up, which it did; and two, that natural gas prices would keep rising, pushing their businesses into the black. Unfortunately, even the most optimistic frackers underestimated the size of the gas bonanza they were sitting on. There is now so much fracked gas on the North American market that domestic prices remain structurally depressed by global standards. (Hence the push, in B.C. and other jurisdictions, to find new export markets for liquefied natural gas.)

If there’s one area that Zuckerman’s book comes up a little short, it’s on the larger cultural picture. He flicks at the environmental controversy throughout. But he doesn’t really dig into how and why fracking has become such a cultural flashpoint. Sections on the “normal folks” caught up in the fracking boom—a rancher who was rescued from near bankruptcy by fracking royalties; a woman who moved her family to North Dakota to find work in the industry—meanwhile, feel tacked on rather than central to the overall story that Zuckerman is trying to tell.

That story, however, is significant. The fracking boom, Zuckerman believes, “is one of the greatest energy revolutions in history.” Less than a decade ago, business and political leaders were worried about the U.S. running out of fossil fuel. Today, thanks to fracking, the U.S. is the world’s leading producer of natural gas and a growing power in oil. The environmental toll of fracking is, admittedly, hard to calculate. Ecologically speaking, fracking is both boon and boogeyman. It gets blamed, sometimes rightly, for polluting the earth. But thanks to a glut of fracked natural gas on the market, it’s also responsible for a significant decline in the use of coal and other dirty fuels.

Zuckerman could have done more to parse those contradictions. Fracking is so much more than a business story. In Canada, just as in the U.S., it is remaking landscapes and lives, sometimes for the worse, but very often for the better too.

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