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The Shale Revolutionaries

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There are energy deposits all over the world. Yet drilling oil and gas out of once-inaccessible shale was only pursued vigorously in the U.S.

When bombs go off in the U.S. economy, it takes more than an economist to grasp what is really happening. The numbers alone could never fully explain the ugly shenanigans of subprime mortgage lending and securitization leading up to the financial crisis of 2008. Equally, the U.S. shale revolution is not a story just for those capable of reading a geological survey. Its aftershocks have transformed everything from the economy of North Dakota to the power dynamics among America, Russia and the Middle East. Not to mention forecasts about climate change.

It’s a complicated yarn that Gary Sernovitz, a novelist and energy investor, spins in “The Green and the Black” and one that is still revealing fresh plot twists. Just last week, the shale boom’s most Shakespearean figure, Aubrey McClendon, died in a car crash the day after he was indicted on charges that he had rigged bids for oil and gas leases in Oklahoma. McClendon was dazzlingly ambitious and persuasive, if perhaps blithe to humdrum legalities.

Other pioneers of America’s new energy age have been equally vivid. George Mitchell of Mitchell Energy was a Greek immigrant who began wildcatting in the 1950s and fracked the Barnett Shale in Texas for nearly two decades before he could make it work financially. By that time he was 77. Harold Hamm of Continental Resources, the 13th child of Oklahoma sharecroppers, became a multi-billionaire by fracking the Bakken formations across Montana and North Dakota. It was men like these, willing to keep buying land and drilling whether they were nearly bankrupt or billionaires, that Mr. Sernovitz credits for the shale revolution.

One great mystery of economic history is why certain people in certain places show more entrepreneurial vigor than others. We still reach desperately for Keynes’s tired phrase about “animal spirits” guiding economic behavior, ignoring abundant evidence that free people guaranteed by a free society given free rein to chase gold generate the highest returns.

There are energy deposits to be found all over the world. But the opportunity to drill oil and gas out of once-inaccessible shale was pursued with greater vigor in the United States than anywhere else. The financial incentives available in a thriving capitalist economy were significant. But so too was the character of the men and women who led the way. Mr. Sernovitz writes that they showed “a fearlessness in the face of risk, a scrappy creativity in keeping businesses running, a grit to try again after failures, and a sense of fun in getting all the meat off the bone in a market declared spent.”

But the money, some $2 trillion added to the U.S. economy since 2004 by Mr. Sernovitz’s estimate, is only one part of this epic. The dispute over the environmental impact of shale production infects even the name used for the most controversial technique, fracking rather than “hydraulic fracturing.” “Some in the oil industry are comically sensitive about the spelling of the word,” he writes, “suspecting that the ‘k’ is a way for environmentalists . . . to turn it into a cousin of you-know-fricking-what. . . . Others insisted that the shorthand should be spelled fracing or fraccing . . . like a European beauty treatment or an invasive medical procedure.”

Mr. Sernovitz’s book is structured as a series of essays rather than built around a single propulsive narrative. This works especially well as he tiptoes through the arguments linking our consumption of fossil fuels to climate change. He is keen to avoid the theological ravings he hears on both sides, from the energy executives he spends his professional life with to his friends and neighbors who berate him for even the most nuanced defense of fracking and its rewards.

The author applauds Harvard’s President Drew Gilpin Faust for her 2013 rejection of demands that Harvard abandon its investments in fossil fuels. At the time, she wrote that she found “a troubling inconsistency in the notion that, as an investor, we should boycott a whole class of companies at the same time that as individuals and as a community, we are extensively relying on those companies’ products and services for so much of what we do every day.” The scientific accounts of climate change today may be entirely accurate, but the forecasts, like forecasts in any field, tend to get tied up with questionable assumptions.

Shifting from one set of energy sources to another is a complicated business with profound consequences, and Mr. Sernovitz is careful not to over-simplify them. But already the geopolitical effects have been profound. In 2004 the United States produced 15% less oil and gas than Russia, then the world’s largest energy supplier. In 2014 the United States produced 16% more. Such a dramatic shift may create a certain swagger and indifference in Washington toward parts of the world that used to be essential to keeping America’s lights on, notably the Middle East. But a poorer Middle East may not be good for America in the long run.

It is refreshing to have such contentious issues sieved through Mr. Sernovitz’s inquisitive mind, balancing the most pessimistic and optimistic visions of change. He writes: “For those who lament that America no longer makes anything but bond traders, for those who think that ‘maker’ culture only exists in a bearded guy pickling compassionately farmed okra in Austin, spend some time with oil industry engineers to absorb their enthusiasm, empiricism, technical inventiveness, and fearlessness to try and err.” This book is ultimately a call for us to trust our native spirit of enterprise: The very ingenuity that led to America’s shale boom will allow us to meet the challenges that it has thrown up.


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