The Boom (4 page)

To better understand the complex relationship between drillers and homeowners, why it was codified, and how it enabled the birth of fracking in the United States, it helps to go back to where it started.

In March 1919 an itinerant oil driller named Ottis Grimes bought a house for his family in Burkburnett, Texas. Until a year earlier, there were a thousand residents in this town near the Red River in the northern part of the state, along with a bank, hotel, and cotton gin. Then a local farmer drilled a well and found a lot of oil.

Burkburnett’s metamorphosis was sudden and complete. Wildcatters, land speculators, and oil-field workers turned the small prairie community into a bustling hub of humanity. By the time Grimes arrived, the sidewalks were too packed to walk down. Restaurants welcomed patrons around the clock. Several dance halls opened, and then were closed for “immoral” activities. There was even a drug bust. Sheriff’s deputies confiscated $42,000 worth of morphine sulfate—the equivalent of about three-quarters of a million dollars when adjusted for inflation.

The population quintupled in a couple years. It was a quintessential boomtown. The 1940 Hollywood movie
Boom Town,
featuring Clark Gable and Spencer Tracy as wildcatters-turned-tycoons fighting over the same woman, was inspired by Burkburnett.

The transformed city bore all the hallmarks of early oil production. “The air was permeated with a strong smell of petroleum,” a historian noted. Hundreds of ten-story derricks, built from longleaf yellow pine, towered over the city. “Burkburnett is now like a huge pin-cushion,” a visitor remarked. Derricks were often only fifty feet from each other.

Traffic and oil spills turned the city’s dirt roads into a fetid mess. A black-and-white photograph showed a black creek running between homes. “Oil a mile long,” was etched into the print. The month before Grimes bought his home, two British insurance syndicates canceled liability coverage in Burkburnett. Their reason was the town was so low on water that fighting the frequent well fires was impossible. An influenza outbreak was followed by smallpox.

The toll on the town was matched by the opportunity for wealth. In November 1919, the local paper reported an oil company out of Dallas paid a record $100,000 to drill on a single acre. The local school leased its land for $14,000 and built a new high school with the money. The entire city was gripped by oil fever. “To try to talk about anything except oil,” said a journalist, “would create as much consternation as a rebel yell at a spiritual séance.”

The Burkburnett boom was different from other early-twentieth-century discoveries in one important respect: the oil was found in and around—and under—a town that had been platted and subdivided into hundreds of small homesites. The oil field was not on a remote ranch. The oil field was Burkburnett. Many people received leasing payments and royalty checks. It was the first time that energy production had landed, quite literally, in people’s backyards. Or front yards, as was the case with Ottis Grimes.

He bought his home, a four-room frame house on a small lot, but there was a catch: the transaction didn’t include the mineral rights, creating what’s known as a “split estate.” Grimes owned the land and the house. H. L. Bunstine, who worked for Magnolia Petroleum (later Exxon Mobil) and sold him the house, kept the oil underneath.

Within days after the sale, armed Goodman Drilling workers entered the property. They erected a soaring derrick that Grimes said posed a “constant menace” of toppling in the strong winds and flattening his home. The shaft of a several-hundred-pound steam engine spun throughout the night within inches of his stoop, and a steam boiler was deposited behind his home. Workers built a “slush pit” to hold noxious drilling fluid so close to the house that windows were spattered. Grimes and his wife couldn’t sleep. They had to yell to talk inside their living room.

Grimes sued to stop the drilling, claiming that Goodman Drilling had turned his domesticity into a nightmare. The company’s lawyers replied that any delay would allow nearby wells to suck out all the oil. A considerable number of the company’s employees would need to be laid off. Anyway, this was Burkburnett, the lawyers argued, and “the injuries complained of . . . are but those commonly sustained by the inhabitants of the town.” As many as four wells were being drilled on any given day in Burkburnett and if the court granted the requested injunction, they said, the oil-greased wheels of commerce would stop turning.

A nearby judge ruled in favor of the drillers, and Grimes appealed to a court in Fort Worth, where other judges also said he was out of luck. He owned the surface, but not the mineral rights beneath his property. “He is in no position to complain of conditions,” the judges wrote, “such as are usual and customary during the drilling of an oil well.”

After losing his court fight, Grimes and his wife sold their house and left the oil patch. They moved to the Texas-Mexico border and raised dairy cows, according to census data and land records. The legacy of the case, however, outlived his short stay in Burkburnett and influenced the modern energy boom. The Grimes vs. Goodman Drilling ruling set the legal framework in Texas, and for decades turned up as precedent in other oil and gas exploration cases.

“The general rule has been pretty much the same since the Grimes case,” said Barney Fudge, who grew up in Burkburnett in the 1940s and serves as a judge in the 78th District Court, where the Grimes case was originally heard in 1919. “Whoever has the mineral rights is the dominant estate. Texas did that because the hydrocarbons were so valuable. I think it was a policy decision by the courts.”

Other states copied Texas’s legal approach. The oil industry had the right to drill wherever it owned the minerals. And not just drill: build roads, tear down fences, put in pipelines, and use water wells. The dominance of mineral rights was an invaluable boost to the fledgling oil industry. Eager for the benefits of energy production, politicians and judges created favorable conditions for the United States to become a giant oil and gas producer in the twentieth century.

Over the years, Texas and other state courts eased up. By the 1970s, the courts tilted back a bit toward landowners. Oil companies could only use what land was “reasonably necessary” and consistent with typical industry practices. Today’s courts and state regulators are considerably less tolerant of wanton disregard for landowners and the environment than they were in 1919. But the principle remained in place as shale development shifted into high gear in the first years of the twenty-first century. In legal terms, the landowner remains the servant while the mineral owner, and the companies that lease these rights, is the master.

This decidedly pro-drilling legal framework is one of the reasons fracking was an American invention. The right conditions existed in the United States to encourage oil and gas exploration and the risk taking necessary to propel the industry forward.

There are other reasons as well. From Saudi Arabia to Mexico, in Europe and Africa, oil and gas belong to the state. State-run energy companies, in many parts of the world, administer and exploit these national resources. The governments usually own all the oil and gas, even if they are under private property. The United States chose a different path. It has never had a national oil company. American colonists rejected English common law, which reserved all mineral rights for the monarch. Initially, landowners in the United States owned their minerals and this created an enormous incentive for them to allow oil and gas drilling, because any wealth went into their wallets. If someone other than the landowner held title to the subterranean riches and stood to reap all the profits without any disruptions, the incentive would be even greater. America’s private ownership of mineral rights, conceived while whale blubber, coal, and wood were still the fuels of choice, turned out to be remarkably useful in the petroleum age. It was “a marvelously elegant system that ensures that all natural resources are fully developed,” enthused Rex Tillerson, the chairman and chief executive of Exxon Mobil.

A permissive legal system, large financial incentives for the owners of mineral rights to allow drilling, and a tradition of small, independent energy companies struggling for survival and willing to take risks created an environment where fracking took root and flourished. From the dribble of gas in Mitchell Energy’s 1982 C. W. Slay well, it took twenty-six years for the fracking industry to reach an annual production of 1.84 trillion cubic feet of natural gas from shale. It took two years to double that to 3.68 trillion cubic feet. And it took less than two years to double that again to 7.36 trillion cubic feet.

Like it or not, fracking is here to stay. What began in Texas moved to neighboring states and then across the country. It is now spreading around the world. The sun never sets on a frack crew. Fed by a steady diet of fresh capital from investors, the drilling industry proceeded with abandon, not caution. This headlong rush created a glut of gas and reversed decades of declining oil production. This flush of fuel created new wealth, jobs, and economic opportunity. The phenomenal growth of fracking took everyone by surprise. The energy industry wasn’t prepared, and neither were landowners and government officials. While fracking upended the energy landscape in many ways that are beneficial, it also had its own set of problems. “This came much faster than anticipated,” said Peter Voser, the chief executive of Royal Dutch Shell, in an interview. “And neither the regulator, the legislator, nor the industry was actually prepared to deal with the issues.”

Today’s boomtowns bear only slight resemblance to Burkburnett nearly a century ago. There is still a rush of wealth and jobs, housing shortages, and often a surge in drug use. Landowners with mineral rights are generally ready and willing to sign large leasing bonus checks. Modern-day Ottis Grimeses, who live amid the trucks and diesel-powered compressors but don’t have a share of the prosperity, tend to be the loudest critics. John Tintera, who for twenty-two years worked at the Texas oil and gas regulator and retired in 2012 as executive director, said his biggest mistake was not to recognize the problem of surface owners who had all the nuisances without getting any compensation. In a speech in September 2013, he said he never heard from the people “getting money in their mailbox on a regular basis . . . the real complaints were from surface owners.” There will likely be more latter-day Ottis Grimeses who live with drilling but don’t get checks. Developers and sellers are increasingly holding on to the mineral rights, hoping that drilling may one day begin.

But there are many significant differences between Burkburnett and modern shale communities. Gone are the mile-long creeks of flowing oil. Reckless environmental degradation, at least in the United States, often results in fines and criminal convictions. Energy production near where people live has brought about more community involvement, accountability, and lawsuits. The industry is being scrutinized more closely than ever. States are playing catch-up, struggling to become fleet-footed regulators with the backbone to stand up to industry. Many remain conflicted, however, and want to make sure they don’t choke off the economic gains created by drilling.

Emily Krafjack is trying to find what she calls the “delicate balance” between the benefits and headaches of drilling. She lives with her husband in a rural home in Mehoopany, Pennsylvania. She leased her property, as did her neighbors. Chesapeake Energy chose to build a drilling pad on the edge of her neighbor’s property, which put it right on the edge of her small plot of land. It drilled the first well five hundred feet from her porch in 2010.

“It was a lot louder than we expected. Everyone told us we would hear a hum. I would have loved that. We heard every clang and bang and every worker yelling,” she said. She slept, or tried to, with the television on in a futile attempt to drown out the noise. Her husband, a construction worker, told her it was louder than a pile driver. Once, a convoy of trucks filled with sand backed up in front of her home, filling it with diesel fumes. “I thought I could grin and bear it, but I was coughing my head off,” she said.

Unlike Grimes, she didn’t sue. She appreciated the jobs the companies brought into her community. “I have friends and family who got jobs. Many of us have benefited from bonus payments and royalties. It can be very good for our local economy,” she said. (Her observation is borne out by national statistics. Between 2010 and 2012, the United States added 169,000 fossil fuel–related jobs, a pace ten times quicker than the rest of the economy.)

Krafjack educated herself about drilling and created a nonprofit organization to spread information about how to hold the industry to the highest possible standards. She learned that some companies built sound barriers around their drill pads to muffle the noise, and insisted Chesapeake build one. It did for the second well. “I don’t think I’m being unreasonable. I can’t talk on the phone or watch my television when they are fracking,” she said. When she called Chesapeake and complained about the trucks, they were gone within an hour. “There are times when the delicate balance is reached. When an operator or a pipeline company decides to do something better, they are working towards the balance,” she said.