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The Revival of Big Red The Revival of Big Red

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COVER STORY

The Revival of Big Red

Not long ago, Halliburton was synonymous with inside deals, Dick Cheney, and the war in Iraq. But now, thanks to America’s “fracking” boom, the company’s fortunes have rebounded, and even the Obama administration is taking notice

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(SOURCE PHOTOS (derek) Getty Images/AFP/Mladen Antonov, (Halliburton logo) UPI /Aaron M. Sprecher, (worker) Associated Press/Davi)

Ohio’s governor, John Kasich, stood proudly before nearly 100 local political and business leaders on a windswept day in April to celebrate the arrival of a major new employer in Zanesville, a work-starved town where the unemployment rate rests at 11 percent. The occasion was a groundbreaking ceremony for companies drilling in eastern Ohio’s potentially vast shale-gas reserves.

Kasich had every reason to be bullish. Hydraulic fracturing—a drilling process commonly known as “fracking”—has created thousands of jobs across the country and boosted state and local tax revenues. It has also brought controversy: The technique used to extract oil and gas from shale involves injecting a cocktail of sand and chemicals deep underground to crack open the shale rock and release the fuel. Environmentalists believe that if performed unsafely, fracking can contaminate water supplies and release methane, a potent greenhouse gas, into the air. Fracking has even been linked to a string of small earthquakes.

 

If Kasich was concerned that day about the potential dangers of fracking, he didn’t show it. He effusively praised the company that was bringing the promise of new prosperity to his state.

Standing in front of a banner reading “Jobs Ohio,” the governor told his audience, “If you don’t have a job, come to Halliburton. If you want to have a good career, come to Halliburton…. If you are in college and want to figure out what to do, come to Halliburton.” Shale gas, Kasich added, was a great thing for Ohio. “I am happy Halliburton is here.”

A clutch of local government and company officials donned red hard hats—the deep blush red of the Halliburton logo—and posed with shovels, smiling, in front of a Halliburton banner.

 

It was an astounding moment. Just a few years ago, you would have been hard-pressed to find any politician willing to share a stage with representatives of this company, let alone one willing to sing its praises as a job creator and a community asset. During the Iraq war, Halliburton became so inextricably linked in the public mind with its former CEO, then-Vice President Dick Cheney, that it became a sort of shorthand for the Bush administration’s largesse and overreach.

“If you don’t have a job, come to Halliburton. If you want to have a good career, come to Halliburton.”—Ohio Gov. John Kasich

More recently, the corporation was hit by a criminal probe and a massive civil suit for its role in the 2010 catastrophic oil spill in the Gulf of Mexico. Its very name remains so toxic that the Reputation Institute, an analysis firm that tracks the public perception of the 150 biggest businesses in America, found that Halliburton has the fourth-worst reputation—coming in behind Bank of America, Citigroup, and American International Group, the companies that directly contributed to the 2008 financial meltdown.

Now, Halliburton’s fortunes are back on the rise, and in dramatic fashion. In 2007, corporate leaders sold off KBR, its much-reviled defense-contracting arm that had worked on behalf of the Bush administration in Iraq, and refocused Halliburton purely as an energy-services and technology company. Now, it sits at the heart of an oil and gas technology revolution that has swept across the United States in the past five years, a phenomenon that experts call the “shale gale.”

 

Infographic

For decades, geologists have known that vast reserves of oil and gas were locked in unconventional shale-rock formations beneath the surface of Arkansas, Montana, North Dakota, Ohio, Pennsylvania, and a handful of other states. But the technology didn’t exist to extract it, at least not affordably. That changed over the past decade, when a wave of technological advances finally cracked the code for fracking unconventional shale cheaply.

The breakthrough has had far-reaching repercussions: By some estimates, fracking could allow the U.S. to become the biggest energy producer in the world within the next decade. According to a 2011 study by IHS Global Insight, by 2035 the shale-gas industry will generate more than 1.6 million U.S. jobs, $231 billion in gross domestic product, and $933 billion in tax and royalty revenues; it will also contribute to a 10 percent drop in electricity costs. And while fracking raises plenty of environmental concerns, it also brings a potentially huge benefit. When used to generate electricity, natural gas emits only half the carbon pollution of coal. Fracking could unleash enough cheap natural gas to allow the United States to dramatically slow its contribution to global warming—without pulling a hand brake on the economy.

In the midst of this boom, Halliburton has become the nation’s biggest fracker, and its bottom line is soaring. Last year, the company posted record revenues of $25 billion, based almost entirely on the growth of its U.S. shale explorations, and it is on pace to top that this year, with first-quarter revenue of $6.9 billion. Halliburton’s newest technology initiative, which has quickly become an unofficial company motto, is called “Frac the Future.”

This article appears in the June 2, 2012 edition of National Journal Magazine.

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