Capitalism, said economist Joseph Schumpeter seven decades ago, is a process of creative destruction. New inventions, new processes, new methods of organization lead to the creation of new profitable and efficient businesses and to the destruction of old ones unable to compete.
There are few accounts of the creative side of Schumpeter’s phrase more vivid than “The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters,” a new book by Wall Street Journal writer Gregory Zuckerman.
For years, politicians, policy experts and corporate executives have tried to reshape American energy policy and development. They have operated on a series of assumptions seemingly based on experience and logic.
One is that oil and gas production in the United States was inevitably in decline. Another is that we can move toward energy independence by increasing use of renewables such as wind and solar energy.
Those assumptions seem to have been refuted in the course of this young century by a group of audacious outsiders who have made great fortunes — and in some cases lost them.
“The Frackers” tells their story. It tells the story of George Mitchell, son of a Greek immigrant, who was convinced that hydraulic fracturing — fracking — could bring in vast amounts of natural gas from the Barnett Shale in north Texas.
It tells the story of Aubrey McClendon and Tom Ward, whose Chesapeake firm bought mineral leases atop vast shale deposits, becoming America’s No. 2 gas producer, but overexpanding disastrously.
It tells the story of Harold Hamm, a sharecropper’s son who rose from picking cotton to having a $12 billion fortune by prying oil out of the Bakken shale of North Dakota.
And it tells the story of Charif Souki, Lebanese immigrant and proprietor of the Los Angeles restaurant where Nicole Simpson ate and Ronald Goldman served their last meals, who charmed others into financing a liquid natural gas export terminal in Louisiana.
This is mostly a story of private enterprise in action. Government studies provided some early support for fracking, but government energy experts lagged far behind these wildcatters in appreciating the potential for extracting gas and oil from shale.
It’s also worth noting that these men were not motivated simply by greed. Mitchell had a vision that America could liberate itself from dependence on foreign energy, and had the satisfaction of seeing the nation on the road there when he died last summer at 94.
McClendon and Ward preached that shale gas could provide a clean alternative to coal and oil, an essential interim step to developing renewables competitive in price.
Each of these men could have paused at some point in their careers and retired with enough wealth to live in luxury, contribute generously to others and leave large inheritances behind.
Instead, they soared ahead, taking enormous risks, borrowing enormous sums. I suspect that most readers will feel queasy, as I did, reading of the enormous debt they carried at times and the breathtaking chances they took.
Nor did everything work out well for them. In 2012, McClendon and Ward were both forced out of the firms they headed because of their insatiable desire to buy ever more mineral leases. Hamm faces loss of half his net worth in divorce.
The fracking revolution has had the effect of not only swelling the domestic supply, but also of slashing the domestic price. Bad news for McClendon and Ward, but good news for Souki, who is retrofitting his terminal to export, rather than import, liquefied natural gas.
Michael Barone is senior political analyst for The Washington Examiner.