The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters (14 page)

Kent Bowker made about $120,000 the year Mitchell Energy was sold, his usual salary. He cashed in about $20,000 of stock options after the sale but never received any kind of reward for calculating the true size of the Barnett’s gas deposits, an advance that paved the way to a lucrative sale of the company.

A few months after the merger was announced, Bowker was interviewed by a Devon executive charged with helping to decide which Mitchell Energy employees would be retained. As Bowker chatted with the executive, explaining his role at the company, the Devon executive seemed to grow tired. A few minutes later the executive fell asleep right in front of Bowker.

Bowker realized he wouldn’t be given a meaningful role in the new company, so he quit to join a smaller company active in the Barnett.

“It was time to go,” he says.

•   •   •

I
n nearby Oklahoma, two young men watched with special interest what George Mitchell had accomplished. Aubrey McClendon and Tom Ward weren’t convinced a new era of drilling in difficult rock had arrived. They were among those who doubted that Mitchell’s success in the Barnett could be replicated elsewhere.

McClendon and Ward had their own reason to bet on a new era of energy for the nation, however. They were so confident they could strike it rich that they decided to wager it all on that belief, with shocking results.

A
ubrey McClendon and Tom Ward weren’t convinced George Mitchell had discovered anything special. Sure, Mitchell and his crew had figured out how to access large amounts of natural gas from shale deposits over in Texas. But McClendon and Ward ran an energy company in Oklahoma City, one they had founded a few years out of college. It wasn’t clear to them that Mitchell’s water-heavy fracking techniques could be applied to rock elsewhere in the country, at least not at a reasonable cost.

Instead, McClendon and Ward were excited about horizontal drilling and other emerging methods of finding oil and gas. Mitchell’s team hadn’t spent much time experimenting with horizontal drilling, but McClendon and Ward were quick converts. They figured the Oryx team and other early practitioners were on to something really special.

By early 1999, McClendon and Ward were sure that natural gas prices were heading higher. Fewer companies were drilling for gas, reducing supply, even as signs of new demand were emerging. McClendon had been tipped off that a huge utility was ramping up its use of natural gas and that others soon would follow, news that cemented their bullish view.

“It’s a classic supply-demand situation,” Ward told McClendon one day.

McClendon and Ward seized on a plan: If they could lock up wells throughout the country that were already producing natural gas, and then employ horizontal drilling and other newer techniques to extract even more gas from the acreage, a historic fortune could be theirs. They decided to spend some serious cash to buy as much land as they could, all over the United States, as quickly as possible. They were determined to buy like no one before them to take advantage of what seemed like the opportunity of a lifetime.

There was only one problem: Neither McClendon nor Ward had quite as much money as they needed. It was a lifelong problem for the pair.

•   •   •

T
om Ward grew up in Seiling, a town of one thousand residents in northwestern Oklahoma. The Ward family was among those who remained in the state during the Great Depression and the Dust Bowl periods, devastating eras when nearly a half million “Okies” fled for California and elsewhere looking for work. Others sent children to live with families or friends in other states, hoping they’d find a better life.

The Ward family stayed around to farm the state’s often challenging land. Searing memories of those difficult years left a deep impression on the entire clan. Years later, members of the extended family cultivated vegetable gardens near their homes to ensure that they always would have something to eat. Most barely made enough to get by.

Tom Ward’s grandfather William Ward had an especially tough time providing for his family with odd jobs around town. By the time Bill Ward was thirty, he was turning to alcohol for comfort, to the dismay of family and friends. A friendly man when sober, Ward turned belligerent as soon as he began drinking.

On Sundays, Bill Ward often stumbled into church with the service well under way. He’d slump into a seat in a first-row pew as tears fell from his eyes. The young preacher, Orville White, often stopped midsermon to ask if there was anything the congregation could do for him.

“Sing ‘Amazing Grace,’” Bill usually responded, referring to the Christian hymn of forgiveness and redemption. The song had special meaning—it had been sung several years earlier at his mother’s funeral.

The congregation, with abundant sympathy for their struggling neighbor, would launch into a rousing rendition of the hymn, as Bill Ward sat in his seat, listening and crying. Then he’d receive a blessing from White and take his leave, well before the service had concluded.

Bill Ward’s wife, Reva, was a kindhearted and popular waitress at a local restaurant who made easy conversation with customers. Each evening, she came home braced to deal with her inebriated husband. Later, Reva would sit with her grandson Tom and add up her day’s tips, using the coins to teach him how to count. Reva Ward refused to take a day off, even when she felt ill, instilling a strong work ethic in Tom.

“You can be sick at home or sick at work,” she often told her grandson, “so you might as well be at work.”

At an early age, Tom Ward recognized that his father, Jody, also was an alcoholic. For a while, Jody managed to run the family’s horse-training business, even while drinking prodigious amounts of ten-year-old Old Charter bourbon. He got to the point where he was consuming a half gallon in a single day. Jody Ward brought his bottle to work, replacing the cork stopper with each debilitating swig, in full sight of his son.

When he was sober, Jody Ward was kind and good-natured, much like his own father. He just couldn’t manage to quit drinking. Jody Ward’s reputation, and the stories told of other Ward men, were such that at least one local woman was warned not to marry into the troubled family.

“He drank every hour he was alive, straight out of a bottle,” Ward recalls of his father. “It was embarrassing.”

Tom’s mother’s family had a bit more wealth, and they helped the family build a brick home, one of the nicest in town. Nonetheless, the family expected Tom, the youngest of four children, to help his father and his older brothers in their work. At the age of eight, Tom began cleaning stables and doing other chores while his father trained horses for a nearby track.

Over time, Jody Ward’s heavy drinking took a greater toll and he was unable to handle a full workload. At a young age, Tom began helping his older brother Ronnie run the business. On weekends and each day before and after school, Tom cooled down the horses by walking them around a track, a challenging task for the small boy because the racehorses often turned nasty.

“They were some mean horses,” Ward says. “They often tried to hurt me, it was like life and death.”

In his forties, Jody Ward was diagnosed with cirrhosis of the liver, and he died of a heart attack at the age of forty-eight, when Tom was sixteen. The sudden death forced Ronnie to return from college to take full control of the business, even as Tom’s responsibilities grew.

To escape the family dysfunction, Tom began devouring books, finding solace in the tales of Ernest Hemingway, Edgar Allan Poe, and O. Henry. Undersized compared with his schoolmates but quick and ultracompetitive, he excelled at sports, another diversion from his family life. Tom was an outfielder on his high school baseball team and a star point guard on the basketball team, ran track, and starred as a halfback and defensive back on the football team. He sometimes carried several less determined opponents across the goal line, neighbors recall. Decades later, some in Seiling still recount a game late in Tom’s senior year when he somehow scored six touchdowns to lead his team to victory.

As he emerged as a star athlete, Tom became more popular and confident. The Wards weren’t the only local family plagued by alcoholism, and neighbors viewed it as an addiction and a disease, lending ample sympathy and understanding to Tom and his siblings.

Without a father to provide guidance, Tom turned to various coaches or spent afternoons at the home of Orville White, the local preacher. Tom frequently sat with older members of the town at a local diner, drinking coffee and listening to their stories. He relished the attention and respect they accorded him despite his youth and troubled background.

Gasoline was cheap, so most Saturday nights Tom and his friends piled into their cars and drove around town, joining a slow procession of automobiles packed with teenagers who waved and honked at neighbors. They’d head to the local Dairy King for ice cream, much like the classic drag scene in the movie
American Graffiti
.

Tom and his friends dabbled with alcohol, but he steered clear of drugs and serious drinking, worried they might affect his athletic performance. “Sports were my one thing, the one thing I loved, and in my mind drinking would hurt me,” he says.

A visit to Seiling by a charismatic church revival helped transform the young man. Ward watched in awe as a traveling pastor discussed the concept of forgiveness and the support Jesus could provide. As Ward watched the pastor speak in tongues and saw neighbors baptized with the Holy Spirit, he experienced a religious awakening.

He later told friends he had been “humbled” by the experience. Within weeks, he was rethinking his behavior and devoting himself to religion. The pastor “was an instigator, I felt a calling,” recalls Ward. “I made a conscious decision to follow Jesus.”

Seiling was too small to field its own American Legion baseball team, so it formed one with Waynoka, a town thirty miles away. After one game, Ward met a pretty local girl, Sch’ree Ferguson, who was selling tickets for a cake raffle. Ward and Sch’ree began dating and he discovered a sense of security and comfort within the Ferguson family, which showed a warmth and love for one another he had never witnessed.

“My family was more stoic, they were Norwegians,” Ward says. “When you have hard times it’s hard to show love, you just live.”

Ward began studying the Bible and attending church services with his girlfriend and her parents. He became a part of Sch’ree’s family and joined their traditional Protestant church. “They became a stabilizing factor,” he says.

Ward didn’t have much interest in his schoolwork. With graduation a year away, he couldn’t decide whether to stay in town and pursue what he viewed as an attractive opportunity to become a truck driver and make four dollars an hour, or to try to get into a local college. He chose to apply to college, gaining acceptance at the University of Oklahoma in Norman, one of only a handful of students in a high school graduating class of about forty to attend college.

Each weekend, Ward drove a used 1974 Buick Regal back to Waynoka to see Sch’ree, who was a year younger and still in high school. They married after she graduated, when Ward was nineteen. At the time, it wasn’t unusual for couples in the state to marry before their twentieth birthdays, but Ward seemed more eager than most to start adult life.

“I think I may have matured at a younger age than others because of my life circumstances,” he recalls. “I was ready.”

While Ward attended college classes, Sch’ree worked at a local flower shop, helping to pay for her new husband’s education. “Our goal was to have a fireplace,” Sch’ree Ward says. “That was a big deal for us.”
¹

At the University of Oklahoma, Ward majored in petroleum land management, inspired by his mother’s brother, a land broker who was the wealthiest person in the family. School wasn’t much of a thrill for the young man, though. “It was drudgery,” he recalls of his college years. “I was working all the time. . . . I worked at a local horse farm. I had no fun in college, got through in three-and-a-half years and took the last three hours by correspondence.”
²

After graduating in 1981, Ward joined the land brokerage started by his uncle and recently purchased by Ward’s brother as a “landman,” or someone who leases mineral rights from homeowners on behalf of exploration companies hoping to drill for oil or gas under the homeowners’ property. The career move made sense. Ward had studied to be a landman, and the energy business was booming. He and his young wife moved to a town near Seiling to start a new life.

But the business hit a tailspin in the early 1980s, as oil and gas prices plummeted. There wasn’t enough work and Ward found himself out of a job. He tried doing land brokerage work for himself but couldn’t make enough money doing that, either.

In the summer of 1982, at the age of twenty-two, Ward was cutting wheat in a desolate Oklahoma field, the only job he could find. He and his wife had a toddler at home and lived in a 900-square-foot house that Sch’ree also used as a day-care center to make some money. It didn’t seem likely that they could turn things around, and Ward grew dejected.

After several months, he decided that he had had more than enough of cutting wheat and that he wanted to try to make a living in the energy business once again. He just had to figure out a way to do it.

At home at night, Ward recalled that his mother’s father regularly rejected offers from energy companies hoping to lease land he owned in western Oklahoma. His grandfather turned the proposals down in hopes of eliciting better terms. The companies generally refused to sweeten their offers, though. After Ward’s grandfather declined to drill the land himself, he was forced to lease it at the best rates paid to others in the same field.

This forced leasing was legal—the law in Oklahoma was such that a landowner could either lease his land to those wishing to produce oil or gas on it, or drill the acreage himself. To this day, a landowner can’t hold up drilling simply by refusing to lease his land. It’s a common measure shared by many states and aimed at preventing recalcitrant landowners from standing in the way of energy production, something akin to the government’s ability to acquire land by means of eminent domain.

As he recalled his grandfather’s experience, Ward had a brainstorm: He’d find areas in the state where major companies were having luck extracting oil or gas. Then he’d contact local landowners who had rejected lease deals from these companies, like his grandfather had. Ward would offer a bit more for the drilling rights than the landowners had been offered. He and his investors could make a profit, even by paying more for the drilling rights of the holdouts, because this was acreage that was close to wells already pumping oil and gas, making it close to a sure bet.

In the fall of 1982, Ward obtained a list of recalcitrant residents and began making calls. He developed a persuasive pitch and met almost immediate success. Before long, he was coloring in maps of the best drilling areas around the state and wooing nearby holdouts, making $83,000 his first year, more than double what he had made working with his brother in land brokerage.

“It was the one good idea I’ve had in my life,” Ward says.

In time, Ward began doing his own drilling on the acreage he leased instead of selling the drilling rights to others. He continued to focus on areas where big oil companies already had found success. By 1984, he and Sch’ree had enough money to move to Oklahoma City, where Ward hoped to be closer to the real action of the oil and gas business.