Texas Oilman Created The Fracking Boom, Ignited Energy Startups

7/28/13Follow @angelashah

Texas billionaire oilman George Mitchell, who spawned a modern-day gold rush as the “father of fracking,” died Friday in Galveston. He was 94.

Fracking, or hydraulic fracturing, refers to a procedure that injects fluids under pressure to increase the yield of underground oil and gas formations. Mitchell’s innovation set off an entrepreneurial boom in the development of new oil and gas sites throughout North America, and fostered a wave of new startups that found their niches in the new industry.

Mitchell’s discovery came late in his life, in the 1990s, after a career in oil, real estate development, and philanthropy for more than five decades had made him a prized Texas son. His use of hydraulic fracturing in horizontal wells dramatically increased oil and gas yields from formations, including the Barnett shale near Fort Worth, which had been exhausted using existing technology. Mitchell’s innovative technology, which he never patented, has been used to tap oil and gas fields around the world, including Australia and Poland.

“Natural gas would not be as inexpensive or as readily available without the use or horizontal drilling and fracking,” says Walter Ulrich, president and chief executive officer at the Houston Technology Center (HTC). “He has created new jobs and expanded the energy industry here in Texas and beyond.”

Fracking spawned a new generation of innovative startups, such as Texas Energy Network, which sells systems to improve communications to drilling sites in far-flung parts of the world, where conventional Internet and cell service can be sketchy. Oxane Materials, another startup using nanotechnology developed at Rice University, creates what is essentially customized sand particles, or nanoshells, to extract natural gas more thoroughly and efficiently. Neohydro uses a high-voltage electrolysis process to recycle industrial wastewater. Lured by half a million dollars in funding from local investors, Neohydro moved to the west Houston suburb of Sugar Land in 2009 from Salt Lake City.

“None of this would exist without George Mitchell,” says HTC’s Ulrich.

Like many entrepreneurs, Mitchell said he was told to abandon his idea; that it wouldn’t work. “My engineers kept telling me, ‘You are wasting your money, Mitchell,’ ” he said in a 2009 Forbes article, when he was 90. “And I said, ‘Well, damn it, let’s figure this thing out because there is no question there is a tremendous source bed that’s about 250-feet thick.’  We made it to be the hottest thing going.”

Fracking has become controversial, however. Many, including those who have benefited from mineral rights from drilling wells on their land, oppose fracking for environmental concerns, including the large quantities of water needed to be transported to fracking sites, the fear that carcinogenic chemicals used in fracking could contaminate groundwater, and worries that it could cause small earth tremors.

Still, in obituaries from The New York Times to the Galveston County Daily News, Mitchell was eulogized as the son of a Greek immigrant whose family immigrated to the United States, and who rose in wealth and prominence.

He founded Mitchell Energy and Development in the 1950s and built it into a Fortune 500 company. (In 2001, he sold his company to Oklahoma City-based Devon Energy for $3.5 billion.)

“He was a pioneer and entrepreneur who strived for technological advancements in cleaner energy sources,” says Kirk Coburn, an Xconomist and founder and managing director of Surge, a Houston-based cleantech accelerator. “It was this balance of belief and action that has opened up this country as the future of the world’s energy solutions both old and new.”

In the 1970s, he turned to real estate, developing The Woodlands in 25,000 acres in the Piney Woods north of Houston. The development is now one of the nation’s most thriving master-planned communities. He was partly driven by a desire to solve urban problems, and traveled to Brooklyn’s Stuyvesant and Watts in Los Angeles, researching these areas in planning The Woodlands. In 2001, he said he regretted that his creation failed to achieve the racial mix he had sought and recommended that it be annexed by Houston, according to The Times.

In the early 1990s, Mitchell expressed his disappointment that the U.S. Congress cancelled the Superconducting Supercollider project, which was based in a south Dallas suburb. That criticism developed into a somewhat unexpected friendship between an 80-something Texas oilman and Stephen Hawking, the famed astrophysicist. Mitchell ensured that the 182-seat lecture hall at the George P. and Cynthia Woods Mitchell Institute for Fundamental Physics and Astronomy at Texas A&M was named after Hawking.

Mitchell’s first lessons in entrepreneurship came from his parents, Mike and Katina Mitchell, who ran a shoeshine parlor and drycleaners in Galveston in the early years of the 20th century. Mike Mitchell changed his name from Savvas Paraskevopoulos, after an employer with the last name of Mitchell complained that he couldn’t say or spell the Greek surname on his paycheck, according to the Houston Chronicle.

Mitchell’s wife, Cynthia, died in 2006.

“His vision and the persistent pragmatism leading to the small steady pace of innovation changed the landscape,” says Russ Conser, program manager at Shell Game Changer. “He got people to take a risk on unproven land. If I were a young entrepreneur and wanted to build a business, I would read the George Mitchell playbook.”

Angela Shah is the editor of Xconomy Texas. She can be reached at ashah@xconomy.com or (214) 793-5763. Follow @angelashah