A Primer on
the Shale Bonanza
For more than a century, from the Wil-
liams well through the 1980s, energy
companies drilled vertically into pockets
of oil and gas called reservoirs, or strati-
graphic traps. Those had accumulated
over millions of years in voids and
porous formations like sandstone as the
hydrocarbons flowed molecule by mol-
ecule from their kerogenic source rock.
Those shales are the remains of ancient
swamps, where eons of organic matter
were transformed by heat and pressure.
Three separate developments were
brought together by a company called
Mitchell Energy in the 1980s: three-
dimensional seismic surveys to assess
source rock, direction drilling that
allowed the bore to be turned sideways
through the shale layers and hydraulic
stimulation where sand and water were
used to open micro-channels in the
source rock allowing economic flow. That
is also known as hydraulic fracturing, or
fracking. Together the technologies are
known as unconventional development,
or resource development, in contrast to
conventional or reservoir development.
Fracking has become highly controversial.
It has been wildly successful, and now the
United States is among the top oil and gas
producing nations. There have also been
spills and leaks, as well as industrialization
of previously rural farmland.
There have also been many myths and
misreprentations. Most wells go about
two miles deep and then two miles later-
ally. For the record, it is not physically or
geologically possible for fractures from
the well to propagate anywhere near the
surface or even to aquifers. Most frac-
tures run about 500 feet from the bore-
hole. That said, there have been surface
spills of chemicals and hydrocarbons, as
well as casing leaks.
In the boom days of the shale bonanza,
state and local regulatory oversight was
poor, as was the industry’s willingness
to police its less-than-diligent members.
Those realities are now changing, but
the controversy remains.
It had never been economically feasible
to drill source rock. The strata could be
as thin as a few dozen feet top to bot-
tom. Also the rock was too dense, the
pores too small to allow economic flow.
Sign marking the site of the first commercial oil well in North America.
John Henry Fairbank expanded into the
grocery business, the same sector where
young John D. Rockefeller got his start in
Cleveland. At the time, most kerosene and
other petroleum derivatives were sold in
tins and drums at hardware and grocery
stores. He and Miller operated a refinery,
and Fairbank also dabbled in banking.
Parts of Fairbank’s operations were
acquired by another company that ulti-
mately became part of the Standard Oil
colossus. But Fairbank Oil Properties
is a going concern today, according to
Sydorko. It is still family held, with the
third generation now running the show.
It is the oldest documented continuously
operating oil company in the world. Cur-
rent production has been estimated at
24,000 barrels a year. Standard barrels,
not whiskey barrels.
The man who took Canadian oil exper-
tise to the world was William H. McGarvey.
According to the Canadian Petroleum Hall
of Fame, “McGarvey was from Hunting-
don, Quebec. He moved to the booming
Ontario oil region of Oil Springs and
Petrolia in 1860 and formed his own mer-
cantile and oil business. In 1874, McGar-
vey and other oilmen took a commission
from the Geological Survey of Canada and
explored the Swan River Valley near Fort
Pelly in eastern Saskatchewan.
“Exploration opportunities further
afield took him away in 1879 when he
moved to Oelheim, Germany to look for
oil. McGarvey hired drillers from Ontario
32 FINANCIAL HISTORY | Fall 2018 | www.MoAF.org
and drilled the first big well near Krakow
[now in Poland]. He also built the first
refinery in the area. In 1882, McGarvey
moved his family to Austria, and, upon
the marriage of his daughter to Count
Von Zeppelin in 1895, he gave the couple
a 700 acre estate and castle.
“The expanding oil company, Galzische
Karpathen-Petroleum Aktien Gessel-
schaft, eventually made McGarvey one of
the world’s leading petroleum technolo-
gists with more than 2,000 men working
in his operations. Russians set fire to his
wells and blew up his refineries in 1914,
and on his birthday that year William
McGarvey, Canadian foreign driller, suf-
fered a stroke and died.”
As indicated by the invention of the
jerker-line system, all of the oil produc-
tion in the early days was from wells, really
pits, dug with cable tools. Those were
heavy chisels suspended by long wires
from flexible poles that were braced at the
other end. The rig resembled a fishing rod
and line with a heavy chisel rather than a
hook. The pole was flexed, dropping the
weight onto the rock and pulling it back
up again. Oil flowed or seeped into the
hole and was pumped out.
The pole-drilling technique persisted
even after Drake established the value of a
rotary bit on a metal shaft, usually driven
by a chain attached to a steam engine.
Drake also pioneered the use of large-
diameter pipe to line the bore, now called
casing. The sticky clay and gum beds of the