Distraction Free Reading

Steadying the Plays: Rhetoric and Risk in the Shale Boom

“Please God, give us another oil boom. We promise not to piss it away this time.”

– Popular bumper sticker in oil producing regions after the 1980s oil markets crashed

In the 1970s, there was much to be celebrated for those involved in the US oil and gas industry. The OPEC oil embargo coupled with events like the Iranian Revolution and the Iran-Iraq War led to a shortage of oil on the world market and precipitated a boom for US producers. This boom, however, was short lived. By 1981, world production had stabilized and oil prices had plummeted, bankrupting a significant number of producers and inspiring the use of “Please God” bumper sticker in places like Texas, Oklahoma, and Alberta.

A tall white drill tower stands on and orange rig, with mountains and a partly cloudy blue sky in the background.

Image: Drilling the Bakken formation in the Williston Basin. By Joshua Doubek (CC BY-SA 3.0).

Throughout much of the 1980s and 1990s, the bumper sticker didn’t seem to help, and the oil and gas industry limped along. Against financial engineering and IT novelties that sent the stock-prices of energy firms like Enron soaring (Zellner 2001)—and, in California’s deregulated energy market, allowed Enron to keep itself afloat at the expense of “Grandma Millie” (C-SPAN interview with B. McLean; Oppel 2002; Roberts 2004)—the capital-intensive technologies of the oil and gas industry seemed dull and unable to capture the general public’s imagination. By 2010, however, this story had almost entirely changed. Where financial and IT services had once seemed to be at the forefront of innovation, two stock-market crashes coupled with the technological advances in oil and gas production that enabled the “Shale Boom” seemed to suggest the reverse. They seemed to suggest that creative accounting and financial engineering may make a company appear healthy— even forward thinking—but they cannot replace tangible contributions to technology and production.

Such thinking underpins recent rallying cry of analysts watching the US shale market (“Fractured Finances,” July 4 2015; Helman 2014). OPEC’s refusal to cut production has flooded world oil markets and caused prices to spiral, and analysts argue that such moves have made shale producers too dependent upon financial services. Where independent shale producers—or wildcatters—once relied on technological advances and their ability to produce and sell oil to stay afloat, they now depend on their companies’ stock valuations. Doing so makes wildcatters, analysts argue, precipitously close to falling off their financially engineered ledges.

At the heart of such critiques is the notion of risk, specifically how risk is perceived, produced and abetted across industries and markets. In my research on the oil and gas industry, I have been consistently surprised by the way in which “risk” is mitigated, assigned to other less tangible industries (like financial services or IT). From conferences to personal communications, there is a constant belief in the idea that the oil and gas industry is conservative yet highly innovative and, therefore, capable of developing the necessary technologies to minimize and potentially eliminate risks posed by current production standards. In other words, rhetoric combines with technology to stabilize the inherent risks in the oil and gas industry.

Rhetorics of a Risk-adverse Industry

This can be seen in the US shale markets. It’s true that, prior to OPEC’s recent move to undercut the global price of oil, the success of the wildcatters in the US “Shale Boom” stemmed from two leaps in production technologies, specifically “wet”* fracking and horizontal drilling. These innovations allowed oil and gas to be extracted from a non-traditional source such as shale (or source) rock.** Moreover, these innovations created opportunities for advances in subsidiary industries. With technological innovation begetting technological innovation, production potential appeared to remain high while risk seemed low.

What makes this story so compelling is that such innovations result in incredibly visceral processes—marked by the particular sites, smells, and sounds of oil and gas production, all of which transform the landscape and signal the production of wealth. Fields and forests are cleared. Roads are constructed. Workers come in. Wells go up, and small towns swell past their planned capacity. Because such transformations of the landscape require extensive construction and demand vast flows of capital, they also enable the rhetoric that the oil and gas industry is risk adverse. This is especially true of the industry “majors” (e.g., BP, Royal-Dutch Shell, Exxon-Mobil), which tend to invest in extraction only when a particular geological formation has proven its ability to produce significant quantities. In this sense, the rhetoric of conservatism stems from the practices of the “majors.” The majors are slow to change because they are slow to risk.

Minimizing Risk on a Wildcat Play

This rhetoric, however, leaves a space for the wildcatters (independent producers) to enter the game. Wildcatters take on the industry’s risk, performing a type of industry-wide geological due diligence by seeking unproven “plays,” or geological formations that have the potential to produce oil and/or gas but have not yet been proven as reserves that can be efficiently tapped. They send “landmen” to quietly lease mineral rights—with terms favoring their status as producers—from area landowners and begin to drill. While there is no guarantee that they will be successful, wildcatters take a calculated risk, entering into the oil and gas game in the sliver of space left by the “conservative” majors.

But even wildcatters position their assumption of risk as conservative. In the recent “Shale Boom,” for example, the vast quantities of oil and gas estimated to be in the various shale plays across the US seemed to suggest not the risky nature of the wildcatters’ pursuits but rather their foresight. Although Continental Energy Corporation struggled throughout much of the mid-2000s, for example, its eventual ability to extract oil from the shale of the Bakken Play made its CEO Harold Hamm—a man from Enid, Oklahoma who possesses only a high school education— an industry revolutionary rather than a wild-eyed dreamer. This idea has been further bolstered by fact that the Bakken Play is estimated to have reserves of 3.6 billion barrels of oil (USGS 2013) and has made Mr. Hamm a billionaire several times over, one of Time’s “100 Most Influential People” in 2012, and a highly successful entrepreneur (but not of the highly educated East-Coast-elite or West-Coast-tech types).

The Gamble at the Heart of the Play

Although stories of success and the sheer physicality of the “Shale Revolution” help promote the idea that it is qualitatively different—more stable, perhaps— than other recent booms (Gold 2015; McEwen 2012) and that rested upon the abstract production of value, this storyline misses the idea that risk is inherently embedded within the oil and gas industry, no matter how much its proponents tout its conservatism.

As evidenced by New York’s ban on fracking, the calamitous contamination of ground water by the improper disposal of wastewater in Pennsylvania, and the USGS’s statement that the recent proliferation of earthquakes in Oklahoma can be attributed to fracking, the most evident risk is environmental. However, there are social and cultural risks as well. The 2014 Quadrennial Energy Review, a series of discussions to determine how to best benefit from the shale market, largely focused on how places like North Dakota can benefit people living in Eastern urban centers like Boston and New York rather than on how to transform the shale revolution and boom into more sustainable economic growth. This raises questions about what happens to these people and places when (not if) the boom goes entirely bust—as analysts predict might happen if the recently reached “Iran Deal” passes both houses of Congresses this September, as is expected (Siddiqui 2015), and sanctions no longer limit the trade of Iranian oil.

In a world increasingly enmeshed in abstraction and virtuality, the “Shale Revolution” and its subsequent boom might appear capable of weathering the extremes of the typical boom-bust cycle in the oil and gas industry. This “Revolution” relies upon innovations in tangible technologies to produce a product (hydrocarbons) that is marked by the way its physical properties assault human senses, building itself slowly into the landscape as a place of prosperity—complete with wildcat saviors like Harold Hamm. As Harold Hamm’s now diminished fortune suggests (“Fractured Finances,” July 4, 2015), however, the stability afforded by such sights is illusory. The “Shale Revolution” is based on risk, depending upon on how lucky one is on the plays and in the global markets. The landscape of former oil boomtowns are littered with abandoned buildings, crumbling infrastructure, and bumper stickers asking for another chance—all serving as reminders of the gamble at the heart of the oil and gas game.

* “Wet” fracking refers simply to a fracking process that uses a fluid in which the ratio of water to sand and chemicals is high. “Wet” fracking’s ratio produces a non-viscous liquid and requires anywhere from 2.7 million to 15.8 million gallons of water to frack one well (USGS).

** Non-traditional sources also refer to sites that use more than vertical drilling to extract oil and/or gas (e.g., Canadian Tar Sands, deep-sea wells).

M.M. Foreman is a Visiting Lecturer at the University of Pittsburgh, where she teaches courses on economic and political anthropology. She won the 2014 Public Anthropology Series International Book Competition with her co-author Phil Kao for “Boomtown and the Culture of American Inequality.”

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