Obama Exaggerates Role of Federal Government in Natural Gas Boom

Reliable, affordable energy comes from the private sector, not from government subsidies to politically favored companies.

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Daniel Kish is the senior vice president for policy at the Institute for Energy Research.

In the State of the Union, President Obama argued that government-enabled oil and natural gas technology was responsible for the oil and gas drilling doom sweeping the United States. The president's claim that the federal government helped create the hydraulic fracturing boom is specious at best. After all hydraulic fracturing is more than 60 years old and predates the creation of the Department of Energy by 30 years.

In the State of the Union, the president touted national gas and the government's role in the natural gas boom. The president said:

The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don't have to choose between our environment and our economy. And by the way, it was public research dollars, over the course of thirty years, that helped develop the technologies to extract all this natural gas out of shale rock—reminding us that Government support is critical in helping businesses get new energy ideas off the ground.

[ See a collection of political cartoons on energy policy.]

This is a strange claim. The validity of the claim all depends on what the president means by the word "helped." If he means that federally-funded scientists discussed geology and technology with the man most regarded as responsible for proving that hydraulic fracturing could economically produce large amounts of oil and natural gas—George Mitchell —the claim could be true. If, however, the president is suggesting that the "help" of the federal government was essential to develop and deploy hydraulic fracturing technologies, then his claim lacks merit.

Michael Giberson, a professor at Texas Tech specializing in energy, argues that the federal government might have sped up hydraulic fracturing by a few years, but certainly didn't create the hydraulic fracturing boom. Giberson explains the background to hydraulic fracturing:

A sketch of technology developments may be helpful. Note that fracturing as a well-stimulation technology started in Pennsylvania in the early 1860s. A few clever folk discovered dropping gunpowder down a well, later liquid nitroglycerin, often brought marvelous returns. Edward A. L. Roberts submitted a patent application for the process in 1864. Hydraulic fracturing technology was first developed by Standard Oil (Indiana) in the late 1940s. In the 1960s, Project Gasbuggy had the federal government collaborating with the oil and gas industry to test a nuclear-weapon based fracturing technology on federal land in New Mexico. The Breakthrough Institute's story picks up in the 1970s, but what the backstory reveals is a history of efforts to develop fracturing technology, funded privately in some cases and publicly in others. Department of Energy involvement may have shaped the direction of research, but I suspect its pool of research funds was merely convenient to technological advancement and not necessary. (More recently, GasFrac Energy Services of Alberta has pioneered a propane-based fracturing technology.)

Directional drilling, a precursor to horizontal drilling, first became practiced in the industry in the 1920s – well before "two government engineers … patented an early-stage directional drilling technology" [as claimed by the Breakthrough Institute] in 1976. (See "Slanted Oil Wells," published in Popular Science magazine in 1931.) As with hydraulic fracturing, the industry found the technology quite useful in application and companies pursued technological advancements. Taxpayer funding may have been convenient support for the oil and gas industry, government research involvement may have shaped the direction of directional-drilling research, but the industry would have pursued the technology in any case.

So possibly the federal government's involvement advanced by a few years the technologies that were finally blended in a sufficiently promising mix by George Mitchell. Even if we grant as much, it isn't the whole of the shale gas boom that federal involvement gains credit for, just the added value that comes from shifting shale gas production forward by a few years.

[ Read the U.S. News debate: Is Fracking a Good Idea?]

The reality is that the federal government might have "helped" to advance the technology an incremental amount, but the government didn't create the shale gas and oil boom. The boom was the result of innovation and experimentation by regular Americans, not the government.

Clearly, when it comes to our energy innovations, Americans have relied on the private sector to create the technologies that improve our lives. Recently, however, a new trend has emerged—with President Obama as its lead advocate. This trend relies on heavy government subsidies, grants, and loan guarantees to fund unproven and underfunded renewable technologies with taxpayer dollars. The list of the companies that have been receiving handouts since President Obama took office is long. The list of those companies that are filing for bankruptcy—even with billions of stimulus dollars—is getting longer. Just today, another company, Ener1 joined the list of companies that received government money and are now bankrupt.

The federal government has a poor record as a venture capitalist as companies like Solyndra and now Ener1attest. President Obama cannot erase that stain by pointing out that the instigator of the shale gas and oil boom might have received some incremental help from government scientists. In fact, the shale boom shows us the opposite of what the president has been promoting—reliable, affordable energy comes from the private sector, not from government subsidies to politically favored companies.