Father of Fracking Fesses Up to Forbes
Going to see George Phydias Mitchell feels kind of like a pilgrimage. It was Mitchell who in the 1990s, as the wildcatting boss of Mitchell Energy & Development, pioneered the oil and gas drilling techniques now known as “fracking.”
So it was surprising to hear Mitchell say yesterday that he is in favor of more government regulation of fracking. “The administration is trying to tighten up controls,” he told me. “I think It’s a good idea. They should have very strict controls. The Department of Energy should do it.”
Hydraulic fracturing has been around since roughly 1950. But it was Mitchell, drilling in the Barnett Shale near Dallas and Fort Worth, who combined the technique with directional drilling to break free the natural gas — and ultimately set in motion the boom in shale drilling that has spread across the country, and soon, the world.
So why does Mitchell think fracking needs to be controlled? “Because if they don’t do it right there could be trouble,” he says. There’s no excuse not to get it right. “There are good techniques to make it safe that should be followed properly,” he says. But, the smaller, independent drillers, “are wild.”
“It’s tough to control these independents. If they do something wrong and dangerous, they should punish them,” Mitchell says.
This should be grist for the anti-fracking forces who are paranoid that the process threatens groundwater. Mitchell assures me that most drillers are entirely responsible in their drilling and fracking activities. All of them, he says, “know how to set up a proper well and do the proper technology.”
Mitchell dismisses any concern that the costs to drillers of abiding by a barrage of fracking regulations would be egregious. After all, any extra costs associated with best practices—assuming all producers follow them—would be passed on in the price of natural gas.
Mitchell is 93 now. He got one knee replaced last year and says he’s thinking about getting the other one done. He still comes into his office, in downtown Houston, a couple days a week. With a fortune on the order of $2.2 billion, and with 10 children to keep an eye on his interests, Mitchell doesn’t have much to worry about. But he still follows the industry, and especially monitors Devon Energy, to which he sold his company in 2001. Mitchell remains the largest shareholder of Devon, which is today one of the biggest shale gas drillers.
He contrasts Oklahoma City-based Devon’s careful approach to acquiring shale acreage and not outspending cashflow with that of its crosstown rival Chesapeake Energy. Chesapeake CEO Aubrey McClendon has been pretty “wild” in snapping up acreage all over the country, to the ultimate detriment of shareholders. “You have to be sensible,” says Mitchell. “You have to work the economics on these plays.”
Mitchell and his family are still heavily invested in natural gas drilling; his son Todd spearheaded a venture called Alta Resources, which last year formed a $1 billion venture with Blackrock to develop unconventional oil and gas assets. Among other projects, Mitchell says he is has roughly 7,500 acres in the Eagle Ford play of south Texas.
He doesn’t have any say in the operations of Devon these days, but Mitchell still follows the company intently. He says he wasn’t fond of Devon’s move in 2010 to sell off all its deepwater assets to BP, and would have preferred Devon to hold on to half of the assets and let BP take the risk of “proving them up.” Devon at the time was scared off by the high costs of drilling deepwater wildcat wells—upwards of $200 million a pop—and low success rate of one-in-four wells drilled. Mitchell, always a techno-evangelist, is convinced that advances in seismic imaging mean that the risks of deepwater exploration will go way down, and the success rates way up, in the years to come. “In 10 years they’ll regret selling those assets.”
I asked him what he thought about Devon’s $2.5 billion deal with Sinopec earlier this year, which gives the Chinese champion a stake in a handful of promising U.S. plays. The deal seemed unusual at the time, considering that Devon (unlike Chesapeake Energy) was flush with cash and didn’t need foreign capital to make ends meet. But Mitchell sees a rationale: Devon, he says, “is trying to get a deal in China.”
And no wonder. China is thought to have even more prodigious shale gas opportunities than the United States. It’s only fitting that the company representing the legacy of George Mitchell be among the first to bring his innovations to the world.