The Boom (16 page)

They spent a year looking at well records and found that many of Mitchell’s wells were “short cased.” Mitchell hadn’t spent the time or money to make sure the aquifer was protected, they later contended in court. The protection—cement and extra layers of pipe—didn’t extend below the base of the aquifer. The Texas Railroad Commission had made the same finding in 1977. Miller spent a year gathering more information about Mitchell Energy in Wise County. The most damning evidence was what he came to call “Post-it gate.” Years later, as Miller explained how it worked, his speech grew impassioned and voluble. He moved his head to punctuate his points, his wavy white hair—matched with a cropped white goatee—bouncing along. He had ordered up government documents and received boxes and boxes of photocopies. After spending hundreds of hours reviewing them, he noticed something odd. Someone had affixed pink Post-it notes to the records that had been photocopied along with the rest of the document.

The notes provided evidence of overwhelming mismanagement by the state. When a request was made to drill a well, the state’s water board was consulted and reported back the approximate depth of the freshwater aquifer. If the aquifer is 500 feet deep, the energy company needs to make sure it runs surface casing down to 550 feet. At least, that was how it was supposed to work. On the official documents, the state oil regulators had okayed wells where the casing was deeper than the freshwater. Then a pink Post-it note was affixed showing the true depth of the freshwater. Well after well had been approved without enough protection for the water.

Before the trial, Miller met with Mitchell’s attorney, who offered $70,000 to settle the matter without a trial. Miller balked. What followed was an epic legal fight that spanned two courtroom encounters and went all the way to the Texas Supreme Court, leaving both Miller and Mitchell scarred.

Miller had a massive health scare in the middle of one of the trials. During a weekend break, he went home to Tulsa and collapsed while driving his car, with his thirteen-year-old son in the passenger seat. The car careened off the road, but neither Miller nor his son was badly hurt. Miller’s doctors, however, said he was perilously close to a heart attack and ordered him to take himself out of any stressful situation. A new lawyer was brought in to finish the trial.

Mitchell also suffered. He was accused of exploiting the people of Wise County, extracting millions of dollars’ worth of gas, and leaving behind contaminated water. In 1996 a jury handed up a record-setting $204 million verdict—$200 million for punitive damages—against him for fraudulently concealing information about leaking wells from state regulators. The verdict was extraordinary. It was more than the company had made in the previous four years combined. Carolyn Etheridge said that her fellow jurors felt the company didn’t care about the community and just wanted to make as much money as possible. She said the jury was angry and thought a large fine would get Mitchell’s attention. “We wanted it [the pollution] stopped. It was a small sum of money, in our minds, to fix the problem.”

Mitchell was flabbergasted and furious. He told a reporter at the time that Wise County was a “burned-up, parched, miserable place” before he arrived. His leases and gas development had brought wealth to the county. He hired a raft of top Texas lawyers to handle the appeal. The verdict was so large that it threatened Mitchell Energy’s existence. Mitchell had to sell his beloved Woodlands real estate development to plug the gaping hole in the company’s balance sheet created by the verdict. “I have never believed, nor do I believe now, that Mitchell Energy Corporation is the cause of the problems that the plaintiffs are complaining about,” he said at the time. Years later, he blamed Miller for hoodwinking the jury. “Smart lawyers would convince a jury of anything. That’s what happened. And then we got some of the best attorneys in the country; we had nine of them, at four hundred fifty dollars an hour for three years, to fight it. And we got all the data together, and we beat the hell out of them,” he said.

Miller saw it differently. To Mitchell, Wise County “was a cash register and nothing else,” he said years later in an interview. “It wasn’t his home. It was someone else’s home. It was where he got his wealth from, but it wasn’t where he had to live. He built his wealth there. He had done it in that Wild West manner of rotted casing, falsified records, drilling, and cheating the locals and politicking administrative agencies—he had played that rough old game, and by the time it had got out of hand, he wasn’t about to own up to it. Neither was that company. We made them own up to it in front of that jury.”

In November 1997 an appeals court reversed the lower-court ruling, concluding that the statute of limitations on bringing the case had expired and that the landowners’ experts didn’t present conclusive evidence that Mitchell was responsible for the gas in the Trinity Aquifer. The higher court took the uncommon step of rendering a new verdict. Mitchell owed nothing to the landowners. It erased the $204 million verdict, a decision later upheld by the Texas Supreme Court.

The Trinity is one of the largest underground bodies of water in Texas and one of the most important. A century ago, wells drilled into the Trinity supplied fast-flowing water. An entrepreneur in Waco, Texas, created the Artesian Manufacturing and Bottling Company to sell Trinity water. He soon realized that adding sugar and coloring to the water made better business sense and created Dr Pepper soda. But decades of drilling drew down the Trinity. “Water used to squirt out of the ground in Dallas and Fort Worth. It is now 1,110 feet below land surface,” said Robert E. Mace, a state hydrogeologist. The deepest drawdown occurred in and around Fort Worth, including Wise County.

According to Mace, as the Trinity emptied, the underground map was completely redrawn. Water that had moved through the rocks in one direction was now heading in the opposite direction. “The aquifer is different now,” he said. Pressure in the Trinity also dropped over time. There were fewer water molecules occupying the same geological container. This change created the potential for natural gas, underneath the Trinity, to get slowly sucked up into the aquifer, Mace explained. This gas had migrated up from the Barnett Shale over millions of years. When Mitchell started drilling in Wise County, his wells penetrated an aquifer already in the midst of a millennial change. And when residents started noticing that their water wells were gassy, who was to blame? Was it Mitchell and other companies drilling gas wells straight through the aquifer? Or had a few generations drawing down the Trinity and lowering the pressure enough that gas could now move upward into the depleted aquifer? Mace said he couldn’t be sure.

As Mitchell’s appeals moved through the courts, the publicity around the lawsuit triggered another state investigation. The results were damning. There were 112 Mitchell Energy wells in Wise and three other nearby counties that had been short cased. The protective cement wasn’t deep enough to protect groundwater. In a report issued in March 1998, a Railroad Commission staff attorney stated that Mitchell Energy “deliberately misreported” the actual depth of protective casing for all but two of these wells. At least eight wells weren’t plugged properly. The company was ordered to pay a $2.24 million fine to fix its wells. The fine was the largest in the history of the agency, but just 1 percent of the penalty that the jury felt was deserved.

This proposed fine wasn’t enough to calm Wise County landowners, including the plaintiffs who felt that their $204 million victory had been snatched from them because the fix was in. In mid-July 1998 Governor George Bush visited Wise County, stopping first at the historic county courthouse, which had been restored with a grant from his office, and then at Decatur City Hall. Carrie Baran, whose call to lawyer Bill Keffer had launched the legal attack on Mitchell Energy, decided to confront Governor Bush at his second stop. There is no record of what she said or his response. Several days later, she wrote a letter to him apologizing for what she called her “outburst.”

“I am also pro business,” she wrote. “But Sir I also believe that what Mitchell Energy Corporation has done to us is despicable . . . George P. Mitchell and his vast empire has all but ruined many of us all for the almighty dollar. He has used his power and money to fight us, call us the ‘Beverly Hillbillies,’ intimidate and beat us. He is not even man enough to apologize for the irreparable damage his company has caused . . . I suppose the right amount of money can buy just about anything.”

In November Mitchell offered to settle the state’s proposed $2.24 million fine for $100,000, arguing in a letter to the Railroad Commission that its own investigation had determined that “the poor quality water was naturally occurring, but exacerbated by poor water well construction.” The company letter pointed out that a jury in a second legal case had returned a verdict finding that Mitchell Energy was not responsible and that the company had found a witness who testified that he saw a water well set on fire because of natural gas in the aquifer—in the 1920s. The letter also argued that Mitchell had already spent a lot of money on Wise County water problems: $2.8 million to repair poorly cased wells; $3.6 million to install a new pipe from Lake Bridgeport to provide connections so that residents could get rid of their wells and access municipal water; and $450,000 for water treatment systems for other residents who couldn’t be connected to the new pipelines. The Railroad Commission backed down. On January 8, 1999, Mitchell sent two checks to the Railroad Commission. One check, for $100,000, was to pay a fine to settle the investigation. The other, also for $100,000, was for the state’s Oil Field Cleanup Fund, used to plug wells left orphaned by companies that went out of business.

Whether Mitchell’s inadequate cementing practices contributed to the gassy wells is inconclusive. Was there more gas in the Trinity Aquifer because generations of dewatering allowed gas naturally present in shallow rocks to push up into the water? Or had some of Mitchell Energy’s poorly built wells created a pathway for gas from thousands of feet below to leak into the shallow water zone? Two state investigations turned up evidence of more than one hundred improperly constructed wells, and it had looked at only a fraction of 3,700 drilled by Mitchell since the 1950s. The investigation focused on a relatively small area in southern Wise County. How many more poorly cemented wells—if any—would have been discovered had the state conducted a more thorough review is unknowable. The evidence is overwhelming, however, that the state did a poor job policing Mitchell Energy.

The lawsuit had a lasting impact on the oil business. The $204 million verdict got the attention of the executive suites and prompted a new focus on cementing wells. But many oil companies also responded by supporting tort reforms to cap future damage awards. Overturning the jury award and slashing the administrative penalty also sent a message to companies that Texas still had a favorable legal and regulatory environment for drilling oil and gas wells. It set the stage for the coming boom in the Barnett Shale.

George Mitchell was happy to share what he remembered about the scene at the Esperson Building and his company’s work to break open the Barnett Shale. But the sun had set on his willingness—or maybe capacity—to talk about the Wise County lawsuit. A couple blocks from his hotel, Mitchell ate dinner two or three times a week at Olympia Grill, a Greek restaurant looking over Galveston Bay. The waiters and manager greeted him by name. Even on a hot and humid day, he preferred to sit outside. Pelicans glided above the narrow water passage that separates tourist Galveston from a shipyard where giant offshore drilling rigs and platforms are being repaired and built.

One summer evening, he ordered the Greek salad and a plate of fish with French fries. His son, Todd, and I ordered moussaka, a baked eggplant dish. Toward the end of the dinner, I asked Mitchell about the Wise County lawsuit. What did it feel like to have landowners in Wise County suing him for contaminating their water? He looked up from his plate and started talking about a pipeline company that was active in the 1950s. His son cut in, trying to direct his father back to the lawsuit. Mitchell insisted that somehow the pipeline company was at fault. The answer didn’t make any sense. I looked beseechingly at Todd, who shrugged.

After a couple more unsuccessful attempts to get him to talk about the lawsuit, I gave up. He didn’t want to answer or had deeply buried his memories of his hours-long deposition and the embarrassing verdict. And I didn’t want to seem like I was berating this elderly man in front of two of his preteen grandchildren, who were also at dinner. Hoping to get a few more answers before dinner ended, I asked for his opinion on the role that government should play in regulating natural gas drilling.

“It has to play a more active role. The independents won’t do it right. The government has to help keep them under control. The government needs to oversee wells for all kinds of problems,” he said. Left unchecked, independent producers are too single-mindedly focused on getting the oil and gas out of the ground. “They go wild.” Was Mitchell Energy one of those independents that could have used more government supervision?