New York Times Exposes Shale Gas Industry’s Overblown Predictions
Ian Urbina is the New York Times’ star myth-buster when it comes to investigating the shale gas industry. He does it again with “Insiders Sound an Alarm Amid a Natural Gas Rush” (Sunday, June 27th).
In the exposé, Urbina draws upon revealing quotes from hundreds of emails written by industry insiders and hard data from over nine thousand wells. He shows that shale gas extraction — which we already know is inherently contaminating — may ultimately be “inherently unprofitable.”
Urbina writes: “In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves.”
Here is a sampling of insider perspectives voiced in the e-mails, which effectively negates the “miracle gas” image that the industry publicizes daily:
“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”
“The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company, wrote in an e-mail onAug. 28, 2009.
A former Enron executive wrote in 2009 while working at an energy company: “I wonder when they will start telling people these wells are just not what they thought they were going to be?” He added that the behavior of shale gas companies reminded him of what he saw when he worked at Enron.
Urbina reports that actual production from shale gas declines steeply, then keeps declining — instead of leveling off, as the industry claims. His review of over 9,000 producing shale gas wells shows that more than 90 percent of wells studied from 2003 to 2009 hadn’t paid for themselves after 7 years. This is a very different picture from the 20-65 year time frame of valuable production the industry has been painting. Some wells’ productivity could be boosted by re-fracking them, which would mean even more heavy industry, more toxic waste, and no relief from pollution. But Urbina also shows that in three major shale plays, less than 20% of the area heralded by the industry as productive are actually profitable under current market conditions.
Lest we forget, ordinary people are already being hurt by having trusted overblown claims:
“Ruinous, that’s how I’d describe it,” said the Rev. Tatum, president of the Fort Worth chapter of the Southern Christian Leadership Conference. Mr. Tatum explained that dozens of black churches in Fort Worth signed leases on the promise of big money. Instead, some churches were told that their land may no longer be tax exempt even though they had yet to make any royalties on the wells, he said.
Be sure to read the entire New York Times article here. And then check out the interactive guide to the e-mails and reports that were vital to Urbina’s work: Documents: Leaked Industry E-Mails and Reports.
Although Urbina’s focus in this piece is on industry misconduct, he acknowledges that the low production rates for shale gas have significant environmental implications:
“The technology used to get gas flowing out of the ground — called hydraulic fracturing, or hydrofracking — can require over a million gallons of water per well, and some of that water must be disposed of because it becomes contaminated by the process. If shale gas wells fade faster than expected, energy companies will have to drill more wells or hydrofrack them more often, resulting in more toxic waste.”
Finally, although Urbina doesn’t mention it, the connection drawn between the actions of the gas industry and that of Enron is not coincidental. Pennsylvanians remember that the former Enron, now EOG Resources, was responsible for the disastrous 16-hour well blowout on June 3rd – 4th, 2010 that spewed toxic flowback and gas 75 feet into the sky. This deadly fountain polluted land and streams and forced an evacuation of campers from the Moshannon State Forest, where the blowout occurred. Then-DEP Secretary John Hanger said the disaster would have been “catastrophic” had there been a single spark.
Examine the former Enron — EOG Resources’ — disastrous negligence here: “Fuel for Thought: The Problem with Marcellus Shale” or here: “Despite Assurances, Marcellus Shale Gas Well Blowout on Pennsylvania State Lands.”
EOG Resources, formerly Enron Oil and Gas, not only failed to have a backup blowout preventer but also failed to report the incident to PA DEP’s 24-hour emergency hotline at all. Workers waited over three hours, while the dangerous toxic geyser spewed over 75 feet into the air, to call 911.
John Hangar, Secretary of the Pennsylvania Department of Environment stated, “Make no mistake, this could have been a catastrophic incident.” The PADEP hired oil and gas industry Fort Worth, Texas based petroleum engineer John G. Vittitow to assist in the state’s investigation of the blowout. Engineer Vittitow stated, “I don’t know any company that would cut corners like this, on this kind of well.”
Hmm. Cutting corners, failing to report a disaster underway, causing real damage, risking catastrophe, and delaying admitting that something is out of control. This appears to be a widespread pattern of behavior in the shale gas industry, on many levels, and not just by Enron, as Urbina’s reporting skillfully shows.