by this technology in a way previous generations never experienced and in ways many of us never imagined was possible. in keyways this is the thesis of my book, that might makes millennial different from the rest of us. >> you can watch this and all other booktv programs from the past 20 years. type the author's name and the word book in the search bar at the top of the page. fall is a busy time for bookers and festivals across the country. we are live this weekend from the texas book festival in austin featuring education, journalism, middle-class, me too movement and more. the national book awards in new york city. and wrap up our fall book festival season with live author talks from the miami book fair.

november 17th, and 18th. for more information about upcoming book fairs and festivals and to watch our previous festival coverage quick the book fairs tab on our website, booktv.org. >> i am the general manager here. i would like to welcome you tonight. we are very excited to host bethany mclean, author of "saudi america: the truth about fracking and how it's changing the world," her brand-new book. i want to mention if you don't know much about it, houston's independent booksellers since 1974 and we host 250 events this year. if you are in houston come back and join us for jody period, rich album, a lot happening this fall. all of that is available and

lots of other things on our website. now i would like tonight at soccer, bethany mclean, author of the smartest guys in the room, verizon scandals following and run with peter elkins, her second book she co-authored with joe nocera is all the devil here, the hidden history of the financial crisis. her most recent book, before this one tonight, his shaky ground, the strange saga of the us mortgage giants. she is a contributing editor at vanity fair and lives in chicago. her new book, "saudi america: the truth about fracking and how it's changing the world," reveals the true story of fracking's impact on wall street, the economy and geopolitics, a topic near and dear to our hearts in houston and i'm happy she's here to discuss it with us. please join me in welcoming bethany mclean. [applause] >> thank you all so much for coming.

i am going to talk for half an hour and come back to the probably and open up to questions. the probably is because from a young age in grade school i detested speaking out loud. i trained myself to speak as quickly as i could which means i talk really fast because i can't seem to one train myself so somebody in the audience yells slow down, i will take it is a helpful suggestion, not a root interruption. i will really try. anyway i wrote this book because i was really impressed with two things. one was what i see is a big dichotomy. fracking, getting oil and gas out of shale, is changing the world. we have gone from congressional hearings a decade ago about us shortages of oil and natural gas to literally beating our chests about american energy independence, even energy dominance, donald trump has called it. the economists i spoke to, said shale is one of the top five

things reshaping geopolitics and it is. you have seen how the us is the biggest producer of crude oil topping russia and saudi arabia for the first time since the 1970s and look no further than saudi arabia which has seen a people, the rise of the young prince mohammed bin selman in a power school and in no small measure that is due to the pressure low oil prices are putting on and low oil prices are in many ways a function of the sheer amount of oil being produced as a result of fracking. whether this is a good thing or bad thing i will come back to. as for my second up session, who wouldn't be abscess with aubrey mcclendon, former ceo of chesapeake, love him or hate him, a lot of those sentiments are out there, he is one of those remarkable characters that make business stories read like novels, one of those characters that prove the old adage truth is stranger than fiction over and over again. you couldn't invent a guy like this if you tried. like many of these great

characters in the business world he is a mix of her markable positive attributes with really negative dangerous ones as well. i finished my first story for "vanity fair" with a quote from calvin and hobbes. calvin says you believe in the devil? a supreme evil being dedicated to the temptation, corruption and destruction of man? hobbs replies i'm not sure man needs the help. i always love stories that bring out this complication. i will read a bit from my book. i wrote this about mcclendon. no one was more right or more wrong, bouldering his predictions are more spectacular in his failures, more willing to risk other people's money and his own and aubrey mcclendon is one banker who knew him well puts it, the world moves when people who like risks take action. he was born in 1959 when american oil still ruled the

world two years before opec was created, he died in a fiery car crash four months after president obama lifted the export band. he was the passion, the creativity, the daring, former investment banker told me. he was also the bad face and that duality makes him the perfect personification of america's fracking revolution. his death like his legacy with highly contested subject. on march 2, 2016, just after 9:00 am rv mcclendon slammed his chevrolet into a concrete viaduct, in oklahoma city dying instantly. he wasn't wearing a seatbelt it didn't appear to make any effort to avoid the collision. one day earlier a federal grand jury indicted mcclendon for violating antitrust laws during his time as ceo of chesapeake energy. investigators ruled the crash an accident but rumors of suicide persist to this day. we may never know 100% what happened. in fall of 2008, he was ranked 134 on a list of the 400

richest americans with estimated net worth of $3 billion but because he borrowed so much money and secured business loans of personal guarantees, two years after his death lawyers were still wrangling over the remains of his estate trying to figure out which debts would be paid from the $500,000 he owed boy scouts of america to the $465 million he owed a group of wall street creditors including goldman sachs. wall street's vultures, hedge fund that invests buying the debt for $.50 on the dollar. and to make the claims that are not paid in full and was bankrupt. if mcclendon died broke it would not have been out of character. during his years as oil or gas tycoon he was as fearless as he was ruthless. he built an empire that produced more gas than any american company except exxon mobil. once an investor asked on a conference call when is it in

conferences, executives would find themselves speaking to mostly empty seats while people literally fought for space in the room where mcclendon was holding forth. in retrospect it was like camelot, sir henry's general counsel. appear go of time that will never be duplicated with the company that will never be duplicated. one of the first interviews i did for this book was with an investment analyst in new york who covered oil and gas and knows the characters and players and was really skeptical of chesapeake it skeptical of mcclendon and a little skeptical of the fracking revolution. for the reasons we will talk about. he said i never let aubrey mcclendon in the door for a meeting because we would have ended up buying a ton of stock and it would not have ended well. mcclendon tried and in many ways succeeded in reshaping the energy world.

ever since i read daniel juergen's surprise i was fascinated by all things energy and although we don't think about it as much today, it is as critical to national security and human history as it ever was, even world wars have been won and lost by those with the most access to energy and we don't think about it today but even the iphone that is part of our lives, your electric cars powered by electricity which in turn requires energy. when the world has changed in the production of energy at the forefront of our national consciousness, the way it once was particularly in places outside texas it is every bit as important if not more so than it ever has been. i have been fascinated by our brief dating back to 2010, a longtime source of mine, and australian i talked to used to tell me aubrey mcclendon was the most important man in america.

and if mcclendon was right and america could produce this natural gas thanks to the advent of fracking that would reshape our economy here and make us a low cost provider of energy and all sorts of businesses would relocate that otherwise wouldn't be here and it would change geopolitics. if he was wrong the united states would look far different going forward and that stuck in my mind. the most important man in america. mcclendon is not a pioneer, to extract oil and gas from places in the earth that hadn't yielded it. most people agree, with hydraulic fracturing we have come to know as fracking, people doing it for ages. the person who figured out economically making oil and gas out of the world, out of the ground was a guy named george mitchell. for anybody who is curious

about the history of this, greg the common, wall street and a reporter, covers the history of this but mcclendon was a pioneer in another part of the business which was raising money and i quote a guy the book saying oxygen is to life capitalist to the oil and gas business. this industry needs capital to fire on all cylinders and the founder and father of raising capital for shale in the us is aubrey mcclendon. mcclendon himself said to borrow money for ten years and write out boom and bust cycles was almost as important and insight as horizontal drilling he told rolling stone in typical modesty. this industry is a voracious consumer of capital and requires an enormous amount to initially drill a well and keep producing. from 2001-2012, chesapeake sold, these numbers destiny, $16.4 billion, $15.5 billion of debt and paid wall street more

than $1 billion of fees and in less obvious ways chesapeake raised another $30 billion by selling assets and doing and run deals in which the company got loans repaid with future sales of natural gas. that is the number, $1 billion is important, we have to remember wall street can make money if businesses range funding or losing money, what wall street gets regardless of the ultimate success of the business, look no further than subprime mortgages either. these debates with a partner of his would say oil and gas are real and economics don't work and this was true of mcclendon's company before asset sales that produce free cash flow and those who are not finance types in the audience think of cash flow as the key ingredient and truest measure

of what you pay for without having to raise more money from somebody willing to give you fundss. a little like the income you bring from your job after your expenses without having to borrow on your credit card and this turns out to be more probably true of the industry as well, wasn't just mcclendon's company but the entire industry. a friend of mine on wall street that aubrey did what everybody else did just on steroids. in early 2015 a well-known skeptic named david einhorn, the first to call lehman's bankruptcy in 2008 went public and proceeded to lambaste fracking companies as hucksters and made a case for betting against their stock and made a short position in a country called pioneer national resources, and the 16 largest publicly traded fracking companies including pioneer and

from 2006-2014 the fracking, selling oil and gas. this was when oil prices were over $100 a barrel, none of them generated excess cash flow and in 2014 when oil was $100 for part of the year the group burned 3 $20 billion. a short seller named jim, a very bad history of going into it and never coming out and that is true today. the most recent analysis i saw was 2012-2017 the 60 biggest production companies in the us have negative free cash flow $9 billion and the most recent report i saw was in the wall street journal that in the first 1:45,018, only 5 of the fracking companies generated any positive cash flow let alone a return for investors.

the financial crisis, most people don't think the financial crisis has anything to do with fracking but the two are pretty intimately linked because if it weren't for the federal reserve efforts to boost the economy in the wake of the financial crisis by cutting interest rates there is a real debate whether fracking would have taken off to the degree it did because any industry that needs capital needs cheap capital and fracking firms that had to pay more for their debt, question as to what size and scope this revolution would be. i quote a guy at columbia university ctr. on global energy policy and he wrote in the report the real catalyst of the shale revolution was 2008 financial crisis and the era of unprecedented low interest rates it ushered in. the controversies about fracking, most people think of environment controversies, they don't think of financial controversy. most people think the key ingredient is fracking and

fracking's chemicals, the key ingredient is capital. my book ignores the environment which is caused by fracking not because it isn't critically important but it is a mini book so there's only so much you can cover in 100 pages and just as inspiration a friend of mine told me he read it on the beach with exciting for me. never has anybody called one of my book the beach read. it was exciting. as a result of it being a small book there's only so much you can cover and the best portraits of the environmental side of this come out in a pretty nuanced way and if you're interested i recommend two books, book by another wall street journal reporter named russell gold called the boom and a book called the green and the black and both of these are pretty nuanced attempts to weigh the environmental positives for instance the boom in natural gas and the cheap natural gas we are producing which killed cole and arguably reduced our carbon dioxide

quite a bit. it is a way to weigh positives with negatives. also i have to admit a little bit cynical and there's some truth to the notion that money rules the world and long as we need nonrenewable like oil and natural gas and there's a question about how long that will be i don't think environmental concerns will never stop producing them. what will stop is if the money stops flowing and this industry is fragile more so than people once to remember. in 2014, the attempt to kill it, when opec's annual meeting, saudi arabia refused to cut production. and the refusal to cut production was a way of pushing oil prices still lower. therefore wreaking financial havoc on fracking, but they cautioned -- multiple factors played into the decision.

it was a concerted attempt to kill the fracking industry. american oil production, $1 million a day. dating to the 1970s, resulted in the passing of various laws that culminated in the ban on exports. and it flew in the face of free market economy. and when fracking began to take off oil and gas, it began to be overturned. there might be more opposition

to it and environmentalists might have prevented it from preventing it from being overturned. this industry is going away. i talked to the lobbyists who worked on the bill. many democrats in the obama administration, they can't support it in a vocal way. they don't want to anger environmentalists who are their constituents so it got very quietly tucked into the year end $1.1 trillion spending bill in 2015. a lobbyist told me legislation passed the house and senate in 2015 by the early afternoon, president obama had signed it and everyone raced out of washington for the holiday, this guy was left alone and took himself out by himself

alone in a restaurant and he said i thought this was a big deal and worthy of celebration but it happened amid this bust where everybody thought the fracking boom was over so when aubrey mcclendon died in spring of 2016 it was almost like the punctuation mark underscoring the end of this thing, the absolute bottom but it wasn't. like the phoenix from the ashes shale didn't die, this industry has been more resilient than anyone even its proponents would ever have dreamed. this proves the skeptics were wrong, the mere fact the industry survived means david einhorn was wrong and all the skeptics were wrong and it looks that way, einhorn's for lost a chunk of its assets, pioneer stock price higher than it was when he called for a short. if you had to stack it as a battle between skeptics in the believer, believer is tko. there are a bunch of reasons

shale came back. one big reason is the permian basin which i don't have to defined you guys, no secret oil was in the permian which had its first boom a century ago but they thought it was mostly tapped out until entrepreneurs began to phrack around 2010. the former chief executive of pioneer said the permian could hold 7 billion barrels of oil second only to saudi arabia's legendary scott warfield, technology also a second reason, technology will dramatically reduce the cost of fracking reshaping the financial firms so companies can make money even with low oil prices. and this isn't happening yet. 's companies are losing money. it wasn't just the rediscovery of the permian that helped restart the oil bill and the most important factor that started boom in the first place, it came back because wall street was there and he pointed out that in 2017

american fracking companies raised $60 billion in debt, 30% since 2016. i'm not smart enough to see how well this ends. one of the humbling realizations in writing this book i set out to figure it out and one of the humbling things is i didn't think i could figure it out. i decided the former math major and we decided shale is like oculus, a complicated form of calculus. it wasn't algebra and there were too many factors that determine whether it works or doesn't work for me to come up and really way the believers versus the skeptics and come up with an answer and the other parties it was humbling that looking at the history of fracking everybody who has tried to predict it has been wrong and looking at the history of oil predicting and trying to predict the future direction of oil prices almost everybody makes a prediction is

wrong dating back to peak oil in the 1970s and 19 oil. in 1980s. i profile another company in my book located here called usa resources which people call harvard of sailor apple of shale and the flip side, the flip counter point to aubrey mcclendon's chesapeake, a company that shows business can be done in a financially sound way but what i would say there's reason to be worried about the industry because the key question is how real would this revolution be of company's had to live within cash flow? if they cannot raise tens of billions in new capital, and on the cash flow, there is no real answer, an investor in this business it to me if companies were forced to live within the cash flow they produce us oil would not be a factor in the rest of the world and would have grown at a quarter to half the rate that it had.

and the concept of energy independence is pretty flawed and energy independence or energy dominance in its miller robust form, we can look at the middle east and say we don't need your oil, we can supply our own, don't have to middle in your affairs, we can change the game with russia and china and have leverage. the reasons are a couple. one is the price of oil is set globally. we can't turn the clock back to the 1970s when the us could control the price of a barrel of oil. it will be out of our hands regardless how much oil we are producing. and those things are going to affect drivers in the us, consumers in the us regardless how much oil we are producing. secondly another thing we can't turn the park back on, we live in a global economy where a lot of the profits of the s&p 500 company's come from europe and

a lot of the products that are companies need come from asia so i found this interesting analysis by a guy named anthony who analyzed the census bureau data and the top us sources of imports for asian states during gulf petroleum exports, 20.5% of us imports game from china and these imports include critical components used by technology companies like apple. to risk asia's economy by having problems in the middle east is to risk our own economy so we can't afford to look away from the rest of the globe no matter how much we might wish we could do so. going back to the beginning, if low oil prices from saudi arabia to venezuela that are powdered eggs already. how, forget about the humanitarian question, how is

that economically good for us, what i was really surprised by, all the smart finance guys, a handful of them are no longer investing in oil and gas and the reason the age of renewal goals is closer, and the hard-core numbers guy, they are not close to competitive and their analysis was the opposite, they are nesting tons of intellectual energy to figure out when this is coming and nobody can arrive at an answer. it is calculus based on the so many things but the way my thinking on this shifted as i worked on this was reflected in what one investor said to me, doesn't have to be the end of the oil age. we have to see when that was. could be 50 years out but when we see it coming the price of oil will go to decline and

investment in this area will dry up. maybe we use oil, we will see what the end is, it is over from an investment standpoint. and beat our test how great we are may give us leverage in the world as it is but if we keep investing in the future we may be losers in the world as it is going to be. i was struck by a conversation i had, still kicking and in his 90s and he weighed in on this issue. i thought his comments were interesting. and he argues for all the eventual certainty of renewables, and several essential aspects of modern life, transportation and agriculture. i had not thought of it this

way before, part of why the us can feed our population is it has increased so dramatically and pesticides, fertilizers and agricultural products made through the use of hydrocarbons and we need to eat as far out as you can see and a feedstock probably irreplaceable and solar will work somehow but we need a new technology but hydrocarbons i like the topsoil of iowa. you wouldn't want to use it as fast as possible you want to use it as slowly as possible. the lovely thing about being a journalist, and i'm not a policy -- and pumping frenetically from the ground in ways that don't make money for shareholders.

plenty of money for executive and private equity firms, plenty of money for wall street but even not money for shareholders, let alone the rest of us and perhaps think more long-term about what is worth conserving and spending now. on that note i will open up to whatever questions you have. i spoke slowly enough for once maybe? [applause] yes, high. >> excellent run down. i can add just a few reinforcing thoughts. i had lunch with a gentleman named george mitchell twice a month for years and years who develop horizontal fracking, i can assure you he be rolling in his grave to see how we have overdosed the market and how prices have stayed very very low.

the other thing i mentioned is the oil and gas business is a negative cash flow business, very from end loaded business with costs going up front and negative for the first two or three years and hopefully prices will bail you out. the third thing i mentioned is the way the stock market has been restructured by computerization and commoditization, what happens is you have algorithmic traders known as algorithmic traders survive 400 to 800 every day. .. you see a major recovery regardless of the economics or the value that you impute to these companies. it's become kind of a crazy

quilt of pewter isaac guys who are trading their brains out when you get very false signals as to what companies are really worth. i knew that wall street was playing a huge role in this industry. any more questions? have you got any thoughts about that. to precipitate another crisis.

they ran an op-ed based on my book a couple of weeks ago. they overstated that they don't get to see headlines. i think if you read the piece is a little bit more nuance. i would not make an argument. i think the issues are far more severe. that said i do think there is a potential. it is just part of a larger pileup of debt.

and skeptics are looking at all sorts of ways in which that could unwind. the only good news on that front is that usually where everyone is looking actually isn't one. if we all keep talking about it we will push it off. and make sure it doesn't happen. the second issue i do worry about. in this era of pension rates and funds. they had been investing in riskier assets including private equity and distressed debt. on the credit hedge funds. i worry if the returns aren't we could the battery the financial crisis.

i think there could be larger financial repercussions with this. if you take all of the excess dollars. and then you divide those by the extra barrels of oil that came out have you ever run that math on what is that look like. i think could be a really interesting analysis hard to get at. and the problem with that sort of thing as is it is changing constantly. it's changing the economics of this industry change every minute of every day. and that's why i realize it was so complicated.

we have additional profit opportunity at the same time. i think it's very hard to arrive . why the issue industry will never work. you invest a lot of money upfront and then you get cash flow in later years. the decline rates are so steep. they are much steeper than on vertical rales. when can you ever stop.

when you need to show growth in your production numbers. that growth comes at an increasingly higher cost. if technology brought there ever starts to reduce the decline rates. they are definitely increase. it's another important question. it is still unanswered. we don't know that much.

one of the big lessons you have. i write about this. in the 1990s. with how great all of the wells have been. it was an anomaly. you see something in the same dynamics happening today. they will show investors 80% returns on one wall. you go from the investor to show in showing the 80% return on the while.

my happen. part of the answer is obviously heavy corporate expenses but the other part of the answers are that all wells are not created alike. not all the other wells that didn't do as well. it's an interesting idea. it started a mini book format couple years ago. under no circumstances. columbia was gonna provide an alternative way for authors to

take on. it is a challenging topic for this format. there is so much i ended up having to leave out. i think whether you see more of it or not i hope it works. i hope we see more of it. i guess it depends on whether you all think that. i would mention if i may. he was a great land man. he was a land player.

a very good guy. but he hit the overpass at 75 miles per hour. and you do the math. if you ever want to get an interesting perspective on it. there is a gentleman in town who might have run circles around that. he is the home run hitter. interesting. there are so many multiple facets. it's hard to find a character who encapsulates it all. it does have a larger

indications of the industry. as you been out talking about the book. if you've got questions or comments maybe i missed that. that you might think about anything a little bit differently. not yet. i'm sure that will happen. even after spending a lot of time on this. i don't know everything i could. and that was another humbling thing about working on this book. everywhere you turn as a rabbit hole and never go down. there's nothing about this industry that's even simple.

what the real impact on ash -- on it will be. are the differences in various types of oil that are produced. or other characters that have been instrumental. there was so much more to this. i think that was humbling. and is still humbling today. i by no means feel like i know it all. but that financial facts of the industry are pretty indisputable. numbers our numbers. they have started to push back and say you need to produce returns. were tired of this. if i were less nuance.

it's a great negative. this is all a giant scam that's can blow that can blow up and everybody's faces. this is the future of america. it's either a strength or weakness. open to arguments about why it might change. i think it's hard for people to say that i'm wrong. in that way. that makes sense. the headline opened me up to the most criticism. i get headlines. i got a lot of attention for sure.

and not to mention another humbling kind of area of all of this. every single renewable could be its own book. you could spend years of your life trying to figure this out. when it's can be cost competitive. people think it's closer than i would have expected. i would've thought financial types with a just thought that renewables were that product. and they wanted nothing to do with it. it is so beyond not true. it was interesting.

thank you. a round of applause. we want to thank you so much for coming out. starting today at 11:00 a.m. eastern. josé antonio vargas. a memoir of working hard and being broke in the richest country on earth. th