The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters (10 page)

“The idea was crazy at the time. He had guts, no one else would have even thought of doing it,” says a Mitchell executive. “If the oil business had a gonads-on-the-anvil award, he’d win.”

Mitchell executives let Steinsberger try his new approach on three wells in May 1997. The water-heavy brew reduced costs dramatically, from $300,000 per well to $85,000, just as Steinsberger expected. Production of gas from the wells wasn’t anything to get excited about, though. “Some people thought I was an idiot,” Steinsberger recalls. “They thought it was a one-off thing.”

Some Mitchell executives wanted Steinsberger fired for wasting time and money on his absurd idea. He began to think his days at the company were numbered.

Steinsberger’s wife, Kathleen, became anxious about their future. A part-time nurse, she was caring for their two young children and they were trying to pay a mortgage on their home. Steinsberger told his wife that the energy industry was doing so poorly that if he got fired he’d probably look for a job as an engineer in another industry. Kathleen prepared for a move to another city.

Steinsberger grew dejected. Coming home at night, he headed upstairs to his bedroom, avoiding his family. He began having trouble sleeping, worried about his future. “It was a really low point for me, people weren’t supportive,” he recalls. “We already had gone through four rounds of layoffs in my fifteen years at Mitchell and another one was coming.”

That year, Bill Stevens helped push through the sale of the division that had developed George Mitchell’s beloved community, The Woodlands. The company used proceeds of $460 million to reduce debt, buy back stock, and fund exploration. Investors were thrilled that the real estate division was gone. But now the company was solely an energy provider and all of its eggs were in the Barnett basket, at least until Stevens figured out how to get rid of that, too.

Pressure built to make the drilling a success. At regular Wednesday-morning meetings in 1997 at Mitchell’s headquarters in The Woodlands, George Mitchell told his men he wasn’t satisfied with their results. “Push harder,” he told Steinsberger and his colleagues at one meeting.

They already had spent $250 million on the area over sixteen long years but had little to show for it. Mitchell wasn’t very happy at all. “If you don’t think you’re up to this challenge, I’ll find people who are,” he told Steward, the senior executive, one day. In meetings, he often cursed and ranted.

“He was hard on us all,” Steinsberger recalls. “People were afraid of him.”

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U
nbeknownst to the Mitchell executives, Ray Galvin and Chevron were making progress, even as Mitchell struggled. Galvin’s group began drilling in “tight” rock areas in Michigan. Chevron was also among the first to drill in an area in South Texas called the Eagle Ford that seemed promising.

By 1995, Galvin had assumed the role of president of Chevron’s North American production unit. He now was one of the five most important people at the company and was on its board of directors. His group was spending about $50 million a year, and he was committed to figuring out how to tap shale and other challenging rock around the country. Ray Galvin was in a perfect position to make history by being the first to crack the shale gas code.

Galvin began hearing rumors that George Mitchell was thinking about selling his company, perhaps frustrated at his inability to find the formula to unlock the shale. Galvin considered reaching out to Mitchell, but decided against it, confident that Chevron would succeed with its own approach. Galvin and his team were like sprinters closing in on the finish line, paying little attention to competitors such as Mitchell falling by the wayside.

Not everyone at Chevron believed in what Galvin’s group was doing, however. When they began referring to themselves as the “nonconventional” gas group, others teased that they should be called the “noncommercial” group. Galvin’s gang might have some creative ideas, the jokesters were saying, but they likely wouldn’t generate any actual revenue for Chevron.

In 1996, an executive of the company’s foreign division came for a visit. He met with geologists working for Galvin, including Kent A. Bowker, to try to recruit them for a job in one of Chevron’s hot foreign locales. The executive didn’t mince words; he told Bowker that their efforts to pursue drilling in the United States were pitiful.

“I feel sorry for you,” he told Bowker. “There’s nothing big left to be found” in the United States.

The foreign executive didn’t mean to be insulting. He was trying to lure Bowker to the foreign unit. Bowker burned, though. He was a true believer in the possibilities of shale and other rock in the United States and he was sick of hearing that Galvin’s group was a bunch of losers working on a dead-end project.

No thanks, I’m happy where I am, Bowker replied.

After stewing a bit, Bowker began examining earlier estimates of how much gas was in the Barnett formation. Mitchell Energy had shared some details of its work with both the Department of Energy and the Gas Research Institute, a nonprofit organization that helped develop new energy technologies. At first, George Mitchell had resisted revealing any of the details, worried that competitors might catch on to what they were up to. But others at his company managed to persuade him that the groups might be able to lend them some help. Besides, they had to file for various permits and submit reports to the Texas Railroad Commission, so much of the data was already available.

Work from the government and the GRI, building on earlier analysis of Appalachian shale, had confirmed to Mitchell’s men that the Barnett held substantial amounts of natural gas. The data wasn’t enough to drop any jaws, though.

As Bowker pored over the previously published numbers, he made a startling discovery: The work seemed flawed. “This doesn’t look quite right,” he told a colleague at Chevron.

Bowker noted that shale in the Barnett was deeper and under higher pressure than Appalachian rock that was used as a comparison by the government and Mitchell Energy. The techniques and equipment used by Mitchell also seemed faulty or outmoded. Bowker was sure Chevron’s cutting-edge resources could give him a better sense of the true amount of gas in the Barnett Shale.

Bowker and the rest of the team didn’t have much time to make it work, though. Their boss, Ray Galvin, was approaching sixty-five years of age, the mandatory retirement age for Chevron’s managers. Galvin became aware that his slated replacement, Peter Robertson, wasn’t nearly as sure that shale would produce much oil or gas. Galvin could see Chevron was losing patience with the group. Time was ticking away on their efforts.

Galvin loved what he was doing, and he believed that Bowker and his colleagues were close to figuring out a way to drill for gas in shale. But he began to realize it was probably too late for him to do anything about it.

On the last day of February 1997, Ray Galvin retired from Chevron. He worked until his very last day, but then had to vacate his office, removing the biggest supporter of the group’s efforts. Galvin had a prime shot at becoming the first person to discover the perfect way to extract gas from shale. He was born just a few years too early, though.

After Galvin left the company, Kent Bowker and his colleagues at Chevron persevered, conducting their own tests of the Barnett. They discovered the amount of gas stored in rock in the region likely was in fact many times larger than the amount that even Mitchell had estimated. George Mitchell didn’t even realize the size of the gold mine he was sitting on, Bowker told others at Chevron.

“At that point, I knew the Barnett was going to be much more successful than anyone else realized,” Bowker says. “Exploration geologists live for moments like this, knowing where there’s a huge hydrocarbon deposit before anyone else does.”

The Chevron gang was like a group of fortune hunters, getting closer to a buried treasure they knew was much more valuable than even their fiercest rivals imagined. But they had to move fast to get the jewels before the Mitchell crew also figured out how much was in the Barnett—and before their new boss at Chevron closed down their nuisance of a group.

While George Mitchell’s company had locked up virtually all the prime acreage in the Barnett area north of Fort Worth, Chevron acted quickly to gain control of about fifty thousand acres elsewhere in the Barnett area, in Johnson County, south of Fort Worth.

Peter Robertson, Galvin’s replacement, paid little interest to the progress. The group was working on potentially groundbreaking techniques in shale exploration, but it was a long-term investment, one that made Robertson and others at Chevron uncomfortable.

Members of Chevron’s drilling unit sensed that their effort was coming to an end. Some quit the company, discouraged at getting so close to such a major discovery. Eventually, Robertson disbanded the group.

Years earlier, Galvin’s predecessor had handed him the reins and resisted second-guessing his decisions. He chose to do the same. “I didn’t think I should poke my head in too much,” he recalls. “My feelings about nonconventional gas were well known to Peter, and to all his direct reports. Shame on me if I wasn’t able to do a better sales job.”

Galvin also understood that Chevron needed to devote large amounts of money to deepwater spots offshore in the Gulf of Mexico and other areas it was much more excited about. “In Peter’s defense, most of the managers of the company’s business units weren’t in love with a group getting up to $50 million a year to spend on projects that didn’t have a guaranteed payout,” he says.

Bowker, the geologist, didn’t want to leave Chevron. But he worried that if he stayed around much longer he would be sent overseas to work on one of the company’s core projects with one of the jerks who had been so dismissive of his group’s work. Bowker’s wife had just given birth to a baby boy and he wanted to remain in Texas, where he had dragged his wife from Princeton, New Jersey. He began to look for a new job.

“The handwriting was on the wall, people were starting to move out of the group,” he recalls. “If I stayed at Chevron, I probably would have gone to West Africa.”

For his part, Robertson says he doesn’t regret the decision to disband the group. “Oil was at eleven dollars a barrel, it was a tough time,” he says. “We were more focused on places like oil in Kazakhstan that turned out well, and we were cutting back on the U.S. We thought we could live without” unconventional oil and gas drilling.

Kent Bowker was bitter nonetheless. Chevron had seemed on the precipice of something great and now he was out of a job.

“Chevron didn’t have patience for this,” he says.

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G
eology was all Kent Bowker ever wanted to do, even though he grew up outside Detroit, far from the nation’s oil fields. When he went to college, he expected to play football at Adrian College, a small Michigan liberal arts school. During the first day of practice, however, the brawny young man saw that he probably was better off focusing on his passion for academics. “I realized those guys hit too hard and I should probably stick with the studying stuff,” he recalls.

In early 1998, Bowker got an interview at Mitchell Energy. Mitchell executives had discussed trying to hire him over the years, impressed by the knowledge he had displayed at industry meetings. As he chatted with a human resources executive at Mitchell during his interview, Bowker was asked if he had any questions about the company’s policies.

He didn’t really have any queries and he was uncomfortable making small talk. He knew a lot of the Mitchell geologists, had a good understanding of what they were trying to do in the Barnett, and was eager to get going.

The silence was awkward. Bowker knew he had to come up with something. The only question he could think to ask the human resources manager was one he thought was quite innocent. “Does Mitchell have a fixed workday,” with set start and stop times, “or are there flexible starting times” like at Chevron? he asked.

The manager raised his eyebrows. Bowker knew he was in trouble.

“We don’t have any of that flexible stuff,” the manager said. “This is the kind of job where you’re expected to come in when work is to be done,” no matter the hour.

Bowker assured the manager that he was prepared to come in early or stay late, if needed. He was just being curious. A red flag had been raised, though, and the job was in doubt.

Later, the human resources officer approached Dan Steward, the senior executive in the group pursuing shale drilling in the Barnett, expressing concerns about Bowker. The manager told Steward that Bowker wouldn’t be a good fit for the company because he was asking questions about when the workday started, a sure sign he was lazy. “He won’t amount to anything,” he told Steward.

Steward seemed surprised. He said his experience with Bowker at Chevron suggested he didn’t mind working long hours. Steward recommended that Bowker be hired, despite the flubbed interview. Kent Bowker had his dream job, but just barely.

At first, the fit seemed perfect. Mitchell was searching for gas in the Barnett, just as Bowker had been doing at Chevron. The Mitchell team believed shale could give up huge amounts of gas, also like Bowker. And Bowker lived a few miles from the headquarters of Mitchell Energy in The Woodlands; he was tired of traveling downtown to Chevron and now he had a ten-minute commute.

Best of all, he now worked for George Mitchell, an executive Bowker had long admired, rather than the suits at Chevron, who didn’t get the significance of what they were doing in the Barnett. It seemed a match made in heaven.

Bowker’s mother was disappointed by his move to Mitchell Energy. She and her friends had heard of Chevron, but Mitchell Energy was foreign to them, she kindly noted to her son. And sure, the geologist before him at Mitchell who had focused on the Barnett formation had dragged his feet about working on the region and couldn’t wait to get out of the assignment, creating an opening for Bowker. But he joined the company raring to go. Finally, he would be able to show that substantial amounts of gas could be extracted from the Barnett.