The Energy Department also pioneered better drill bits and air-based drilling, which better protected the gas assets of geological formations. And in 1991, the publicly funded Gas Research Institute recommended that Mitchell experiment with horizontal drilling and even subsidized his first horizontal well.
Ultimately, Mitchell and other gas developers’ decision to spend millions of dollars and nearly two decades pioneering techniques that few thought would result in commercially viable extraction is less quixotic than it might have appeared. The federal government generously subsidized drilling for non-conventional gas throughout the 1980s and 1990s, when oil and gas were cheap. While the rise in natural gas prices in the late 1990s sparked the shale gas revolution, it was the federal non-conventional gas tax credit that made Mitchell’s experimenting possible in the early years, when there was no market for more expensive shale gas.
Giving the federal government credit where it is due takes nothing away from Mitchell, who was determined and tenacious. But the lesson of the shale gas revolution is that we should not be so quick to judge government investments in energy technology. Between 1978 and 2007, the Energy Department spent $24 billion on fossil energy research. Billions more were spent through the Gas Research Institute and non-conventional gas tax credits. Those investments were widely panned as a failure during the ’80s and early ’90s, when gas was plentiful and cheap.
Whatever one thinks about shale gas today — we worry about its environmental consequences — there’s no denying the extraordinary economic return on taxpayer investments. Shale gas is likely to allow the United States to go from net gas importer to a net gas exporter over the next decade.
While details vary, the story is basically the same for nuclear power, natural gas turbines, solar panels, and wind turbines — pretty much every significant energy technology since World War II. That’s because the private sector alone cannot sustain the kind of long-term investments necessary for big technological breakthroughs in the midst of volatile energy markets and short-term pressure to produce profits.
No doubt, government energy innovation investments could be made more efficiently and effectively. But it would be a mistake to imagine that we’d be better off without them.
Michael Shellenberger is president and Ted Nordhaus is chairman of the Breakthrough Institute, an Oakland-based, nonpartisan public policy think tank focused on progressive politics.
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