Harold Hamm, as Gary Sernovitz describes him in The Green and the Black, is a quintessential rags-to-riches American success story. The “shack-raised Hamm ‘talked like a hick’” and also repaired cars and pumped gas before becoming an Oklahoma oilman, with decades of successes and failures that amounted to a fairly unextraordinary career. Then horizontal drilling and hydraulic fracturing—“fracking”—technology arrived. This could unlock the vast oil and gas reserves throughout America that were trapped beneath impermeable shale rocks—in the Bakken, Eagle Ford, Permian, and Marcellus regions—and that had long ago been written off by industry as inaccessible, second-rate. In fact, by the twenty-first century, all the onshore reserves in the lower 48 were thought to be near tapped out. But within less than a decade, the “shale revolution”—or fracking boom—transformed the U.S. into the world’s leading producer of oil and gas.
Hamm, founder and CEO of Continental Resources, understood the potential of this technology before most. Driven by an almost-otherworldly ambition (“I wanted to put myself in a position to find the ancient wealth,” he told the writer Gregory Zuckerman in his book The Frackers), he adopted a “high-risk strategy to secure large amounts of oil” in these foregone regions, and was “relentless in trying techniques until one worked.” Some of his experiments failed, but eventually he succeeded, and by 2015, his fortune amounted to $12.2 billion.
“The more I study Hamm’s career, the more I admire him,” writes Sernovitz, a novelist-turned-Managing Director of an oil-and-gas-focused private equity firm. Assessing the U.S. fracking boom, Sernovitz frames it as the story of “disruptive innovators” who, like Hamm or Jeff Bezos, began by selling scrappy, low-margin products that bigger, more sophisticated companies (like Exxon Mobil) had abandoned. Eventually, through continuous innovation, these products wind up taking over the entire industry, just as shale oil has now flooded the world market. Why, asks Sernovitz, has the concept of “disruptive innovation” been applied only to the tech industry, and not to the fracking boom? Is it because the end product hasn’t changed—it’s still oil and gas, no matter how it gets out of the ground—or because these innovations are seen as “akin to someone replacing leather with performance fabrics on horse saddles: perfectly reasonable but irrelevant to the march of time”?
This is a good question, and one that is surely connected to how we view these end products today: as essentially passé. Fossil fuels, in an era dominated by the climate change debate, seem to belong to a past that we simply don’t know yet how to put behind us. But on Sernovitz’s reading, a thoughtful public discussion about this transition has been forestalled by a massive polarization of the debate—environmentalists against; industry for—which has flattened, in the public eye, the differences within industry, such as between big oil and the little guys, or between oil and what he points out is “cleaner” natural gas. These differences, he claims, might offer a way out of our predicament, but fracking has fallen victim to the broad vilification of big oil—especially Exxon Mobil or Koch Industries—and to misinformation about how the fracking process affects groundwater.
The result has been a disproportionate focus on the local impacts of fracking, including environmental health and the inconveniences to individual landowners, at the same time as the “Keystonization” of energy issues has made automatic targets of any new liquefied natural gas terminals (gas is liquefied so it can be transported by ship), drilling wells, and pipelines. In fact, Sernovitz argues, the story of the shale boom includes both winners and losers in every region and demographic—and big oil, which long ago abandoned these shale reserves, is counted among the losers. (Winners include: shale companies; landowners who got rich by leasing their land to them; and the U.S. manufacturing sector, which has thrived on the low price of petroleum products.) But despite all the noise about fracking, Sernovitz thinks that fracking’s great contribution remains unrecognized. The boom, he argues, has unlocked a plentiful domestic supply of natural gas to bridge the transition from fossil fuels to renewables.
The Green and the Black is an argument for fracking that attempts a middle way between two contradictory but inescapable facts: that global warming demands a shift away from fossil fuels, and that the project of raising living standards for a growing population requires a major increase in energy production. No doubt this is a worthy project—if anything, it is the project for ushering mankind into a sustainable future—and Sernovitz’s attempt is thoughtful and entertaining. But is fracking really the answer?
Sernovitz, a well-meaning supporter of Obama’s environmental program, does not dismiss the many offenses that have tarnished the oil and gas industry’s reputation: their secrecy and deceit in perpetuating climate change denial; the catastrophic spills, including Deepwater Horizon; or the alleged connection between Shell and the killing of Nigerian activists. He also, to his credit, acknowledges the many issues around fracking that have turned off many Americans: air pollution from flaring; the earthquakes in Oklahoma; the accidents and spills (500 to 800 per year in Colorado since 2010); or the water contamination (256 water wells in Pennsylvania from 2008 to 2015)—to name just a few. These should not be downplayed, he argues, but they are also largely the result of lax regulation and a poor understanding of techniques and geology in the early stages of the boom. Things are changing, he claims. “Industry is getting better at minimizing the impact of the boom on air, water, and land through a desire for profits (and avoided lawsuits), an ethic of responsibility, and an awareness that operators are being watched ever more closely by regulators, activists, and the press.”
I’m not sure Sernovitz’s faith in the goodwill of companies and the regulatory system’s capacity to intervene is warranted. To what extent do attempts to avoid controversy and nuisance actually amount to the same behaviors as acting responsibly? As anyone who has ever admonished a child (or been a child admonished) knows, stricter guidelines around cookies inspire smarter strategies for skirting the rules just as often as they inspire compliance—not because children are evil, but because children ultimately want the cookies. And if the controversies that companies face, such as local resistance based on water safety concerns, fall short of actually threatening their operations or bottom line, will they still be compelled to address them?
However, this is not Sernovitz’s focus; his main defense of fracking is that natural gas can act as a “bridge fuel,” or a cleaner alternative to oil until solar and other renewable technologies are cheap enough to replace fossil fuels in an economically-viable way. Already, the shale boom is helping America transition away from coal, thanks to the low price of natural gas—a result of the over-abundant supply—and the growing momentum of environmental campaigns against coal (which also, not incidentally, received large donations from another pioneer of the shale revolution, the recently-deceased Aubrey McClendon of Chesapeake Energy). These same forces have also rendered dirtier, more carbon-intensive fossil fuels like the Canadian tar sands virtually unprofitable (for now). But in arguing his “bridge fuel” thesis, Sernovitz also provides his own counterargument: that the shale boom, as it exists today, actually produces far more oil than it does natural gas (78 percent of U.S. rigs in 2014 were drilling for oil). This means that fracking is just as likely to slow the transition away from fossil fuels.
“I believe that the difficult (but necessary) global effort to reduce oil and coal demand should be joined by a supply fight to reduce emissions: not a fight against supply but a fight with supply,” writes Sernovitz, critiquing the environmental movement for focusing its energies on divestment from big oil—or in other words, on supply. The only strategy that will work, he claims, is to target consumer demand. But Sernovitz’s story also includes the revival of U.S. manufacturing—one of the winners of the shale revolution—as well as consumers purchasing fewer hybrid cars like the Prius, both because of low gas prices (from 2014 to 2015, U.S. sales of alternative energy cars decreased by 13 percent, while sales of luxury SUVs increased by 37 percent). The suggestion here is that a cheap and abundant supply of oil can also create more demand for it. This begs the question: How are more expensive technologies like solar supposed to compete with natural gas so long as gas remains this cheap? After all, new investment in natural gas (including pipelines and LNG terminals for export, transportation, and distribution) will help keep gas affordable. And will a sense of morality be enough to encourage consumers to switch to the Prius, or convert to solar, if cheap oil and gas will continue to have the market cornered for the foreseeable future?
Markets always exist within a political system—which Sernovitz doesn’t discuss. And Harold Hamm, whose career he admires, also appears as a character in a different story, about the making of a political system that arose at roughly the same time that the shale revolution kicked off.
In Dark Money, the journalist Jane Mayer describes how a network of ultra-wealthy libertarians, centered around the Koch brothers, bankrolled a vast array of organizations to push their radical free-market agenda—for lower taxation and government regulation of businesses—into the mainstream. The most visible manifestation of this program has been the Tea Party, which was widely considered a populist uprising. However, this was just one part of their systematic, three-stage plan to mass-produce a far-right revolution: by training the next generation of libertarian scholars (through research institutes and think tanks like the Cato Institute); mass-marketing their ideas through advocacy groups (like Tea Party-affiliated organizations Americans for Prosperity and Freedom Partners); and by mobilizing those groups to lobby and pressure politicians. As Mayer documents in meticulous, impressive detail, the influence of this “Kochtopus” has been vast, weakening consensus on climate change and blocking meaningful efforts at finance, labor, and environmental reform. And their impact is a reflection on their size, which dwarfs the Republican Party. The Koch network has three times as many staff members as the Republican National Committee and boasts a 2016 budget that is double what the RNC spent in 2012.
The Koch brothers—the backbone of an oil, gas, and commodities conglomerate that controls at least four refineries, the third largest lease-holder in the Canadian tar sands, and 4,000 miles of pipelines throughout the U.S.—have poured millions of their own money into this program. However, their allies include hundreds of other wealthy donors who not only share their ideological beliefs, but whose corporate and personal interests also align with this agenda. The nucleus of this network, as Mayer describes, is formed by coal, oil, and gas magnates, “a Who’s Who of America’s most successful and most conservative fossil fuel barons, the majority of whom were private, independent operators of privately owned companies.”
Harold Hamm is one of them, and so is Larry Nichols, head of Devon Energy, former chairman of the American Petroleum Institute (the leading oil industry trade association), and another “founding father” of the shale revolution, as Sernovitz calls him. These two are not people associated with what the industry calls the “majors”—public companies like Exxon Mobil, Shell, or BP—but they have just as much to lose from the threat of tighter environmental regulations or carbon caps: “They were men who had either made or inherited enormous fortunes in ‘extractive’ energy without having to answer to public shareholders or much of anyone else,” writes Mayer.
As late as 2003, over 75 percent of Republicans supported strict environmental regulation, while a 2013 study of published papers found a 97 percent consensus among them about the fact that climate change is caused by humans. This has been the target of a concerted effort, funded by Koch and friends, to confuse voters about the existence of a scientific consensus, including through manufactured scandals like “Climategate” and smear campaigns against scientists. Both the New York and California Attorneys General are currently investigating whether ExxonMobil misled the public about the effect of fossil fuels on global warming, but between 2005 and 2008, the Koch brothers alone spent nearly three times as much as ExxonMobil on the climate denial campaign. And this was just a portion of the half-billion dollars behind climate denial. Most of that money was raised from anonymous donors, through organizations like DonorsTrust, which some evidence suggests has ties to the Koch network.
Then there is
the campaign spending and lobbying. The victory in 2000 of Bush-Cheney over Al
Gore and his environmentalist agenda, which has been attributed to support from the
coal industry, ushered in enormous subsidies and tax breaks for fossil fuel
companies, as well as the exemption of fracking from regulation under the Safe
Drinking Water Act and Clean Water Act, known as the “Halliburton
Loophole.” (Koch Industries also donated $800,000 to the 2000 Bush-Cheney
campaign and to other Republicans.) When the fracking boom took off just a few
years later, Halliburton—the oilfield services company which Cheney previously headed
as CEO—was a “major player,” writes Mayer, “illustrating that free-market
advocates greatly benefited from government favors.” However, the work of the
Kochtopus did not end when Obama entered office. As Mayer describes, in 2010, when the cap-and-trade bill reached
the Senate, the Republican Lindsey Graham pulled his support after being
targeted in another smear campaign by Tea Party activists and a political front
group, American Solutions, whose funders included large fossil fuel interests including
In light of all this, how useful is
Sernovitz’s distinction between “big oil” and the rest of the industry? A
solution could lie in simply recategorizing Nichols and Hamm as the bad apples,
and continuing to celebrate fracking’s underappreciated contributions. (Hamm is
also connected with campaigns vilifying Oklahoma’s wind industry; was accused
the Dean of the University of Oklahoma to fire researchers studying the Oklahoma
quakes; and chaired the energy advisory committee of Mitt Romney’s 2012
campaign, which sought to hand decision-making power about drilling on federal
lands to the states). But Mayer’s investigation suggests a more fundamental problem:
that the rest of the industry, however ethically and responsibly they have
carried out their business, has also benefitted from the work of Koch and
friends. And unfortunately, so have the rest of us—albeit in a less direct way—who
are now enjoying the manifold benefits of cheaper oil and gas.
In effect, this is the problem with Sernovitz’s call to target consumer demand: by influencing the political system, industry has already skewed the entire playing field. On the one hand lax government regulations and increased government subsidies help to reduce costs for producers, while on the other hand the abundance of cheap oil and gas, along with campaigns that confuse consumers about environmental issues, lessens the urgency of switching from the SUV to the Prius—or better yet, of pushing local leaders to fund better public transportation. This ensures a continued demand for oil.
And the Kochtopus is only one part of the story. Lies, Incorporated, authored by radio host Ari Rabin-Havt (with the support of the nonprofit watchdog Media Matters), is a pithy work of media analysis that shows how ideological groups, backed by large sums of money, have been perpetuating lies on key political issues for decades, and not just on climate change (Lies, Incorporated tells a story about climate denial similar to Mayer’s). Beginning with the tobacco industry’s deceit on the health effects of smoking, Rabin-Havt shows how moneyed interests have shaped public discourse on a range of issues in precisely this way, including debt, health care, immigration, and gun control.
And this fact—of the disproportionate influence of big money on American politics and economy—makes clear why targeting big oil producers still matters, whether they are publicly-traded companies like ExxonMobil or private companies like Hamm’s Continental Resources. Not only are they reaping the largest share of profits and reshaping America’s political and economic system to better support their interests, but by injecting their money into the realm of media and public discourse, they are also reshaping the terms of debate.