“[Free energy] markets tend not only to clear, but to clear faster and at lower prices than anticipated.”

The resignation of Aubrey McClendon as CEO of Chesapeake Energy provides a good case to study in corporate strategic planning. Ignoring his financial side deals, for which he has received a good share of criticism, the wisdom of his primary strategy, the aggressive pursuit of shale resources, is an open question to many. Although he has been hailed as a pioneer and risk taker, clearly those risks have gone bad and should be examined.

Higher Prices: A Bad Bet

The core failing was his decision to bet the firm (essentially) on high natural gas prices. From 1997 to 2005, wellhead prices had increased from $3/Mcf to $8/Mcf (2010$), the highest level historically. This, combined with a neo-Malthusian mentality, convinced him and many others that prices would not be mean-reverting, but remain at levels from two to three times the historical average.…

“We appear to be on the Road to Serfdom, paved with green bricks rather than red bricks…. It is actually likely that the United States is now approaching State ownership of about 50 percent of all its land—a level of socialist land ownership unequalled in the world.”

It is a fabulous honor to receive the Julian Simon Memorial Award. Julian was one of the seminal thinkers of the 20th century—and one of the first to challenge the radical Greens’ attack on freedom and progress.

Simon demolished the limits to growth and the belief that human progress was bound in a Malthusian straitjacket, and limited by the known or presumably known physical supplies of natural resources. He argued that the ultimate resource was the limitless nature of man’s mind—his intelligence, innovation, discovery, and invention, constantly discovering and creating new resources where none had existed before.…

“Onshore development on federal lands – which is roughly estimated at 700 million acres of subsurface mineral estate – is extremely limited and is increasingly so. In 2009, for example, the current administration leased fewer onshore acres for energy development than in any preceding year on record.”

“Offshore development on 1.76 billion acres of mineral lands has suffered from a de-facto administration embargo, with lease plans cancelled, moratoria imposed, and cumbersome regulatory activity that serve to discourage exploration.”

“Today, permitting delays by federal regulators have driven the wait to more than 300 days before drilling can begin on federal lands, about twice as long as it took in 2005. By contrast, states like North Dakota are now turning permits in 10 days; Ohio, 14 days; Colorado, 27 days.”

The United States is an energy-rich country with large quantities of U.S.…

The main thing you need to know about FrackNation is that you should watch it. More importantly, given that this blog’s audience is unusually educated about hydraulic fracturing–frac’ing–you should encourage friends and family to watch it.

The use of hydraulic fracturing and (less-publicized) horizontal drilling to extract oil and gas from shale rock is, to the best of my knowledge, the most important technological revolution of the last decade. The existence of enormous deposits of shale has long been known–some of the earliest experiments with kerosene involved shale–but the ability to affordably get oil and gas from these deposits has been elusive for over a century. In Ayn Rand’s 1957 Atlas Shrugged, one of the heroes manages to solve the problem, and it is rightly regarded as an epic achievement.…