Is fracking only the result of Department of Energy research?

This is something I submitted to the San Antonio Express-News two weeks ago. But it looks like it will not get in.

Rick Casey does not give the private sector enough credit for the fracking revolution ("Perry at Energy and the price of ignorance," July 29).

 

Casey says corporations won't do the basic research to create technologies like fracking because "the payoff is too uncertain and distant." Also, fracking is "the fruit of research paid for 20 years ago by the Department of Energy (D.O.E.)."

 

That leaves out the essential contributions of Texas natural-gas baron George Mitchell, who died in 2013. According to the New York Times obituary, his company started fracking in 1981 and it kept trying for 15 years until they had success.

 

All those years trying different methods and techniques surely constitute research, especially when other companies weren't interested. Oil expert Daniel Yergin said Mitchell’s fracking technique is so far “the most important, and the biggest, energy innovation of this century.”

 

A 2013 Atlantic Monthly article says "Mitchell Energy had spent $250 million drilling in shale" between 1981-1997. So this is one corporation that was willing to do research by constantly trying different techniques involving different fluids and chemicals until they found one that worked.

 

How well did it work? The company began using the technique in more and more wells. Mitchell sold his firm for $3.1 billion in 2001, evidence that private sector research can pay off.

 

A 2013 Texas Monthly article reports that "fracking technology has existed for more than a century, and the first commercial fracking job was done in 1947," long before Jimmy Carter created the D.O.E. Former Mitchell Energy vice president Dan Steward said that the D.O.E. did perform research "that proved shale rock was rich in natural gas."

 

Mitchell Energy used that research and did get "federal tax credits for unconventional drilling." Steward concluded, however, that "George probably could have done it without the government" but "the government would not have done it without George." 

 

If all it took was the D.O.E. research, other companies would have been fracking. But that is how free markets work and add value. Each company can go their own way. Many entrepreneurs try new products and techniques. That is how we get innovation.

 

Humphrey Davy invented the light bulb in 1802. But Thomas Edison put in all the work to make it practical. No one says his contribution was meaningless.

 

We all want new and better products. We get them through innovation. One requirement is that there is a chance for commercial success. This gives companies, like Mitchell's, the incentive to take risks.

 

The larger issue is how much the government should spend on research. There is no easy answer since we can't know ahead of time which projects will bear fruit and which won't. But some studies suggest that the private sector generally plays a big role.

 

A 2001 OECD study concluded that "research and development (R&D) activities undertaken by the business sector seem to have high social  returns,  while  no  clear-cut  relationship  could  be  established  between  non-business-oriented R&D  activities  and  growth." It also mentions that government spending on R&D can crowd out private spending.

 

British biochemist Terence Kealey wrote a 2013 essay titled "The Case against Public Science." One key point was that "for the 19th and first half of the 20th centuries ... nations whose governments invested least in science did best economically—and they didn’t do so badly in science either."

 

Of course, some research may take too long to pay off for private companies. But that does not tell us how much the government should spend. The issue is not as clear cut as Casey indicates.