Yesterday, I published this piece about how the energy bill in THE AMERICAN PRESIDENT would not have been a good law in 1995. The bill (“455”) would require a forced transition from coal to gas at a time when gas supply wasn’t what it is now. This would create massive economic pain, but more importantly, it might have prevented the price pressure that led to the technological innovations that produced the shale boom.
We’re going to talk about it on Central Air next week, but Josh had a smart enough objection to my thesis that I want to draw it out in its own post: if 455 spikes demand for natural gas, doesn’t that make innovation in gas extraction more attractive, not less? Higher prices mean more investment. More investment means more innovation. Maybe Steinsberger still gets there.
Good point! But…
The problem is that the slickwater breakthrough wasn’t driven by the promise of high prices. It was driven by desperation to cut costs at low prices. In 1997, crude and gas prices were both falling. Mitchell Energy was bleeding money on a project everyone else had already abandoned. Steinsberger’s pitch wasn’t “this will make us rich.” It was “the gel is too expensive, what if we just used water?” The innovation was about making a marginal, money-losing operation cheaper, not about capturing a booming market. High prices would have meant more investment in conventional wells and offshore drilling—the known, expensive, unsexy stuff. There’s no particular reason they produce slickwater. It also would have led to more gel-based hydraulic fracking. They knew the gas was there, and it would suddenly become economical to go after it—as long as prices are high.
Which is the problem we on Earth-1 got to avoid.
There is a distinction between two very different kinds of energy futures: 1) scarcity management, and 2) accidental abundance.
The world of 455 probably produces the first. Our world accidentally got the second.
If you pass 455 in 1995 and aggressively force utilities away from coal, natural gas prices rise substantially and stay elevated. High prices do bring more supply—but not runaway abundance.
And what ultimately transformed America’s energy system wasn’t merely more gas drilling. It was overproduction.
The shale revolution started with gas, but it eventually became an oil story too. Once horizontal drilling and slickwater fracking improved enough, companies began drilling enormous quantities of oil. When you drill for oil in shale, a lot of natural gas comes up with it as associated gas. Unintentional free gas.
(In places like Texas, it’s sort of easy to pipe it away, but in North Dakota, it is much harder to deal with, so for a long time in the 2010s, they would burn a lot of it off, which is just wasting it. They’re much better about that now, and they were supposed to stop doing it entirely by now, but the EPA just granted an extension for when there is no pipe space.)
But the point is: about a third of the natural gas produced in the United States is unintentional gas. Oil is much more valuable than natural gas so the oil drillers don’t ratchet production up and down based on the price of gas.
That flood of gas helped crush natural gas prices around 2010 and kept them low. Gas-only drillers were and are being undercut by gas nobody even intended to produce. The gas-only drillers cannot do what OPEC does. This sucks for gas-only drillers in Pennsylvania, but it’s great for America!
In the 455 universe, you don’t get that. Aggressive CAFE standards reduce demand for light crude. Without slickwater and horizontal drilling developing the way they did, the oil boom arrives later or differently or not at all. The associated gas never fully materializes. Instead, producers make approximately as much gas as is profitable to make at elevated prices, which means supply is responsive but not transformative. Electricity stays more expensive. America still transitions away from coal, but through scarcity management rather than abundance.
A lot of climate discourse in the 1990s implicitly assumed decarbonization would require permanent sacrifice—higher utility bills, more expensive energy, slower growth, industrial pain. Basically, Europe.
That assumption wasn’t crazy. It just turned out to be wrong, for reasons nobody planned. The shale boom confounded that expectation. Americans got to reduce emissions while still living our best lives.
That outcome was not inevitable. 455 would have foreclosed it.
If you find the history of fracking as interesting as I do, you should read the wonderful book The Boom: How Fracking Ignited the American Energy Revolution and Changed the World by Russell Gold.
Maybe. But I think you're missing a point with respect to volume. Obviously, 455 was going to require a lot more gas. People were not just going to develop new fields, they were going to try and extract gas from much older fields that seemed played out. Even if those marginal fields were now economic to be fracked with gel, there most have been some margin beyond that that was uneconomic when you added in the cost of gel. Eventually, someone would have tried water-based answers to get production from resources so marginal at even the sky-high prices of 455. At which point it would have lowered costs for everybody.
"A lot of climate discourse in the 1990s implicitly assumed decarbonization would require permanent sacrifice—higher utility bills, more expensive energy, slower growth, industrial pain."
Of course there were (and are) many environmental activists who desired the slower growth as much as they did the carbon reductions. They wanted to use environmental regulations to control the economy because they disliked capitalism. Thankfully, for both us and the environment, the free market has a much better record of environmental stewardship than centralized government planning does.